About the Author: Attorney Douglas G. Chalgian is both certified in elder law by the National Elder Law Foundation and a Fellow with the American College of Trust and Estate Counsel. He is also the only attorney in Michigan who has served as Chair of both the Probate and Estate Planning and Elder Law and Disability Rights Sections of the State Bar. Mr. Chalgian was appointed by the Governor to the Commission on Services to the Aging. He was one of about a dozen attorneys on the Michigan Trust Code Drafting Committee, and has been selected five times as one of the top 100 lawyers in Michigan by Super Lawyers Magazine. Mr. Chalgian writes and speaks regularly on the topics of estate planning, elder law, and probate court litigation.
Protecting Your Inheritance
The focus of estate planning and elder law is typically on preparing documents and taking other steps to implement the wishes of the person establishing the plan and leaving the estate. But what about the people who look forward to their inheritance? What can they do to make sure they actually receive what they expect when their parents die? Crass? Maybe, but something nearly everyone thinks about.
The reality is that for people who are looking forward to an inheritance, these are dangerous times. The economy being what it is, and with more and more older folks becoming vulnerable to financial exploitation, well-behaved and patient children often find out too late that activities have occurred that cause them to be in a position where their expectations are not going to be realized.
So let’s put those guilty thoughts out of our minds for a minute and look at some common scenarios when these types of surprises occur, the warning signs, and what steps might be taken now, so that it doesn’t happen to you.
1. Professional Exploiters
Every time your parents go to the mailbox, read the local paper or answer the phone, there is a risk that they are being targeted for financial exploitation. An entire industry is dedicated to finding elderly people, typically with some level of cognitive impairment, and either selling them things they don’t need or fleecing them outright.
Invitations to “educational seminars” are among the most common first efforts in drawing the elder into the trap. Invitations in the mail or newspaper often claim some important change in the law has occurred, or that there is some other development that they need to get the information about in order to protect their estates. Commonly the invitation includes the promise of a free meal.
Once at the seminar, a person holding themselves out as a professional will claim that there are pitfalls that the attendees have not been told about by their current advisors—either because these advisors are simply unaware or because they are a part of a larger conspiracy. Then the scare tactics and high-pressure sales begin. Common come-ons include avoiding taxes, especially the so-called “death tax;” avoiding probate administration and exaggerated expenses, delays and fees associated with probate court; and qualifying for veterans’ benefits, Medicaid assistance, and other government programs that may assist with the costs of long term care. Attendees are encouraged (pushed) to sign up now, or at least to provide personal information and to schedule appointments so that a follow-up meeting, often at their home, can be arranged.
The people who put on these programs understand that most elders are polite and accommodating. They play on these attributes to make attendees who resist feel ignorant or ungrateful. Most commonly, the seminars are designed to sell high-commission financial products (often annuities and reverse mortgages) or legal products (typically “living” trusts or other “asset protection” trusts).
Your parents are moving their investments from a long-time trusted advisor to someone whom they met at a seminar.
Your parents are working with a new attorney they heard about or met at a seminar.
Your parents are overly concerned with threats to their estate, using terms that seem ominous but which they are unable to clearly explain.
What You Can Do
Communicate with your parents about their estate plan and investments, and get to know their advisors. Ask your parents to give their attorney and financial advisors permission to talk to you directly, and then ask those advisors to contact you if your parents engage in any unusual behavior.
Attend seminars with your parents, and show up if any in-home meetings are arranged. Nothing makes a bad actor sweat more than showing up for a sales call and finding that an adult child is present.
2. Charities and Jackpots
Children with parents who are vulnerable to exploitation often find out too late that their parents have been giving money to so-called charities, or have been giving money to (or buying products from) organizations that offer them a chance at winning jackpots. These types of operators typically use the phone or mail to identify and latch onto their victims.
Often the names of the so-called charities suggest patriotism or religious causes. These scams often start out with smaller donations, but then increase over time in amount and frequency. Jackpot scams often require the elder to send in money, or purchase a certain type of product, in order to assure them of receiving their prize.
Numerous checks or credit card charges to the same organization, which organization is not local, and not an organization your parents have been affiliated with in the past.
While you are visiting their home, they receive phone calls from organizations seeking contributions.
Excessive subscriptions to magazines, or other similar purchases.
What You Can Do
Take a peek at your parents’ mail as it comes in. If necessary, forward their mail to your house.
Look at their checkbook register and credit card statements.
Take note if your parents receive phone solicitations while you are visiting their home. If necessary, change their phone number.
If problems persist, create a trust and make you or your siblings the trustee, or go to court and obtain conservatorship.
3. Overreaching Siblings
Sadly, a significant portion of cases in which inheritances disappear arise out of situations in which one sibling becomes too involved in their parents’ finances, and diverts their parents’ resources for their personal benefit. Frequently, the “bad” sibling does not start out with the intent to exploit their parents, but once in a position where they have access, and perhaps struggling with their own economic troubles, the temptation proves too great.
One child with financial woes is “helping” parents with their finances.
One child is providing caregiving to frail parents, and there is no clear understanding regarding the manner in which that child will be compensated for their assistance.
What You Can Do
When a child is “helping” a parent with their finances, sharing information about those finances is the best way to keep everything above board. This can often be accomplished by establishing good estate planning documents, such as trusts and power of attorneys.
Caregiver agreements – When one child is doing more than the others to keep frail parents in their homes, it is often fair that they receive some financial compensation. That compensation could be free room and board, or a weekly stipend. Such arrangements should be spelled out, defined and monitored by other children.
Memorialize loans and advances – Sometimes adult children need help with their finances, and parents may desire to provide that help. Such arrangements are best put in writing, with a clear understanding about when and how they will be paid back; whether that repayment is to be made while the parents are alive or out of the share that the borrowing child would receive after the parents are deceased.
4. Gold Diggers
Another reality of living longer is that many elders outlive their mates. For some widows and widowers, finding a new mate is important to maintaining a positive outlook, or, said another way, provides a reason to keep living. Many times such relationships are beneficial to all parties involved, including the children. The problem is that marriage can also be an opportunity for financial exploitation.
From a legal perspective, remarriage is serious business; it implicates all sorts of financial obligations. Prenuptial agreements are almost always advisable in second marriage situations, especially where the partners are of advanced years. It is also best that such couples maintain segregated accounts, and have agreements regarding how living expenses will be shared.
Too often, however, elders who are depressed after losing a long-term spouse become easy targets for people with financial problems looking for someone to pay the bills, and more.
A new, often younger, love interest, especially shortly after the death of a long-term spouse.
A love interest that has creditor problems and little means of support.
Efforts by the new love interest to monitor communications between parent and children, and/or to alienate the parent from his/her children.
What You Can Do
Gold diggers are best thwarted early in the process. Dicey though it may be, talk to your single parent about their relationships. Try to spot trouble coming down the road.
If a parent is getting serious, ask them about prenuptial agreements, and what their understandings are about how the financial obligations will be shared if they choose to get hitched.
Still concerned, hire a private investigator to research potential partners. Many gold diggers have been down the road before. Such information, if discovered, could help the parent wise up before it is too late.
Obviously parents who are fully competent, and who want to donate to charities, get married, or loan money to a needy child, are free to do so. The problems addressed in this article arise most commonly in situations where the parents are becoming impaired cognitively, lonely or depressed, and/or are being misled by someone with an ulterior and inappropriate motive.
Helping parents avoid being taken advantage of, and, by doing so, protecting your inheritance, can be difficult. Many older folks are private and resist allowing their children to become involved in their financial affairs. In fact, children who push too hard may find themselves being distrusted and even cut out of the estate plan. That said, many children open their eyes too late to situations in which their parents have been exploited, and miss opportunities to take preventive steps.