IT PAYS TO KNOW: Caregivers Are Fiduciaries!!!

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Judd new 3.14By JUDD MATSUNAGA, ESQ.

In my last article, “Granny Scams are Back,” we discussed how many seniors become victims of financial scammers because research studies show that “financial literacy declines and investment skills deteriorate sharply around age 70.” We ended the article suggesting that family members do what they can to protect their elder from being “scammed.”

However, I would feel remiss if I didn’t write this follow-up article since “two-thirds of elder abuse cases are committed by a family member” (2003 study by the National Center on Elder Abuse). Moreover, according to an investigation by Consumer Reports, “theft and fraud by loved ones is on the rise.”

Seniors are vulnerable to crime since they may be dependent on other people for their care or because they are not capable of fully understanding their financial situation. Elder financial abuse is “the ultimate betrayal,” says Colleen Toy White, a superior court judge in Ventura County, who sees roughly 40 cases of such abuse each month. “It’s shocking to see how vulnerable the elder person is.”

Furthermore, experts agree that financial elder abuse is likely to increase because of a stalled economy and the aging population. Yet, because seniors might not recognize when it happens to them or may be too ashamed to speak out, the crime lurks largely out of sight. One study estimated that only one in 44 incidents of financial elder abuse is officially documented.

“Say, Judd, it sounds like you’re talking through both sides of your mouth. First you say to ‘get some help with my finances,’ and then you say that the person who helps me manage my finances might steal my money. Which is it?” Actually, it is both. That’s why I wanted to make sure that caregivers know they are fiduciaries.

What is a fiduciary? In the financial-services world, being a fiduciary essentially means that you must act in your client’s best interest; in the caregiving context, it means you have to do the same for your aging relative. For example, the law requires you to manage Mom’s money and property for her benefit, not yours. And you must keep Mom’s property separate from your own, i.e., don’t “commingle” Mom’s money with yours.

Since you might be one of the 42 million Americans who are taking responsibility for your relative(s), let’s make sure you realize that you fall into this category. Maybe you have a power of attorney or you’ve been named as the trustee under a revocable living trust. These are the two most likely situations where you’ll likely need to follow the rules that govern fiduciaries.

The Consumer Financial Protection Bureau (CFPB) warns that anyone who is in a position of trust, control or authority and uses that position to profit may be guilty of financial elder abuse. In other words, “If you do not meet these standards, you could be removed as a fiduciary, sued, or have to repay money. It is even possible that the police or sheriff could investigate you and you could go to jail.”

“We know that millions of non-professionals manage someone’s money because their family member or friend trusted them and appointed them as a fiduciary in a legal document such as a power of attorney or trustee,” said Nora Eisenhower, assistant director for the CFPB’s Office of Older Americans. “These ‘lay fiduciaries’ take on the task with the best of intentions. But without the knowledge of what this task actually entails, they may not be able to do a good job.”

In fact, many senior citizens are victimized by their children, grandchildren, spouses, siblings or caregivers. According to Tobie Stanger, senior editor of  Money, “This can be as obvious as forging signatures on checks, begging for loans that are never paid back, or abusing power of attorney.” In addition, many seniors are threatened that they won’t be cared for unless they sign over money or property.

Dr. Carolyn McClanahan, a physician and director of financial planning at the Life Planning Partners firm in Jacksonville, Fla., said that helping your parents consolidate their accounts can prevent them from becoming victims of financial fraud. “Consolidate as much as possible,” she said, “because the more accounts that are floating out there, the easier it is for someone to get their fingers on one.”

She suggested that if you notice your parents beginning to have trouble managing their money, to try to assist them gradually. “Start by setting up a bill-payment schedule and automatic bill paying. Then, become a co-signer for one of their small financial accounts. Then, find out where there important financial papers are,” she states.

Anyone with elderly parents or relatives needs to take precautionary measures to help their loved ones avoid financial tragedies. Holly Deni, a financial gerontologist who runs ElderLife, spoke at a seminar from experience: In 2006, Deni became the court-appointed guardian for her 99-year-old aunt Carolyn.

Aunt Carolyn was struggling with cognitive decline and needed aid and assistance. Sadly, none of Carolyn’s relatives had power of attorney, the legal document that would have let them manage her finances due to her incapacity. Deni said it cost $15,000 to have the guardianship papers drawn up compared to the $300 to $600 it would have cost for power of attorney.

“It’s ironic that my aunt spent money to create a will, but did nothing to protect herself while she was alive,” she told us. Her advice: Get a power of attorney drawn up for your parents, elderly single relatives and — perhaps most importantly — yourself. “Anyone who doesn’t have a power of attorney should get one because any of us can fall into incapacity at any time,” said Deni.

Another tip to protect your parents with financial capacity challenges is to meet with someone who works at your parents’ bank. “If your loved one frequents one bank, they get to be known there,” said Deni. The bank employee can then let you know if he or she has noticed anything of concern — a pattern of unusually large withdrawals, for instance.

“When I take my dad to his bank occasionally, I always get a personal greeting from an employee who assisted us with assorted financial matters after my mom died last year and helped with the power-of-attorney documents for my father. I think of it as our subtle signal to each other that we’re both looking out for my dad.”

To be continued….

Judd Matsunaga, Esq., is the founding partner of the Law Offices of Matsunaga & Associates, specializing in estate/Medi-Cal planning, probate, personal injury and real estate law. With offices in Torrance, Hollywood, Sherman Oaks, Pasadena and Fountain Valley, he can be reached at (800) 411-0546. Opinions expressed in this column are not necessarily those of The Rafu Shimpo.

 

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