Carolyn Rosenblatt, R.N., Elder Law Attorney, Forbes Blogger, easily breaks down the benefits for Seniors since the ACA became law. Ms. Rosenblatt also describes and the most important benefit that got left out of Obama Care.
Elder Law Attorney and author Carolyn Rosenblatt, describes the latest financial scams that specifically targeting elders, and other aging vulnerable people. Watch video BELOW.
When your aging client has contact with you, consider it an opportunity to educate them about more than the status of their portfolio you manage. Your client’s efforts to maintain financial safety can be thwarted by clever scammers who are constantly devising new ways to take advantage of them. You are in a perfect position to help keep them informed about financial abuse and the latest information on tactics scammers use. Don’t make it someone else’s problem. Make it part of your services.
When Medicare started, most of us thought it would take care of our medical costs when we got to be 65. Right away, we learned that we have to get supplemental insurance to pay for the 20% of those costs Medicare doesn’t cover. And on top of that, we have to buy a prescription drug plan (Part D). Oh, well. That’s what we do. But here’s the other truth. Even with all that, American seniors are spending an average of another $4000 a year on medical expenses not covered by traditional Medicare.
We know that abuse of seniors is a growing problem. Based on information from the National Center on Elder Abuse, the majority of abusers are family members. However, only 44 out of 1000 instances of abuse are reported to authorities. Why aren’t more cases reported to the very authorities capable of stopping the abusers?
It seems to me that most family members are simply unwilling to “rat out” another family member even when they know that abuse is going on. When it comes to the seniors themselves, there is shame and embarrassment associated with being taken advantage of by someone close, especially someone they surely trusted. There is hesitation and fear. They want to talk about it but not do anything about it. The reluctance to report the abuse to Adult Protective Services is not limited to the seniors who can’t bear to call the authorities about a son, daughter or other relative.
I recently received a call from a distressed sister of a brother that she was convinced was stealing from their parents. He had total control over their parents, one of whom had dementia. His parents had appointed him as the agent on both the Durable Power of Attorney and the Advance Healthcare Directive. This gave him the legal authority to make both financial decisions without being accountable to anyone else and all healthcare decisions as well. I listened patiently to all the reasons she thought her brother was taking her parents’ money and using it for himself. I asked her if she had called Adult Protective Services.” No”, she said. When I asked why not she said “I don’t want to get my brother in trouble”. Where is the logic in that?
In another case, the elder herself had called. “I gave my grandson a big loan and he hasn’t paid it back,” she said. “But now I need the money to live on”. She described how her favorite grandson had taken title to her mobile home and gotten a loan, even after she had “loaned” him most of her savings. I explained that her chances of getting paid back were probably not very good, but the least she could do was to report what had happened to authorities. I advised her that taking a “loan” from an 80 year old and not paying it back would likely be considered elder abuse and it should be reported to APS. “Would my grandson go to jail?” she asked. I told her I didn’t know but it can happen when someone has committed this crime of elder abuse. She said, “I don’t want my grandson to go to jail”. Unfortunately, I am sure she did not follow up or do anything more about the problem.
Seniors like the 80-year-old woman are typical of why elder abuse does not get reported and therefore prosecuted more often, even when a family member is well aware of what is going on and knows that it is wrong. They would rather suffer impoverishment than be the one to report abuse. In fact, these same victims may refuse to testify against a relative who has abused them, even when these cases are prosecuted. Charges may not stick when the victim is unwilling to testify, unless there are independent records to prove the case in court.
It is as much a problem of our emotions and fears as it is of the wrongdoing itself. We somehow justify the actions, we look the other way or we fear what justice will do to our abusive relative.
I wonder, where is the anger at a crime against a person who is easily taken advantage of by the abuser? Where is the advocacy for the vulnerable person who is also our relative? Why are we remaining silent in this growing, $2.9 billion dollar a year problem?
I would be willing to guess that there is someone reading this whose client has a financial abuser in a their family or knows of a family where this has taken place. I urge you to speak up. To my knowledge, you can remain anonymous in your reporting, just as you can with any crime. Whether or not the criminal justice system can prove the crime is not your problem. It is your problem to carry the knowledge of financial abuse with you and to do nothing to protect the elder. One day it could be you who is victimized.
We are all encountering an aging population and the crime of opportunity of abusing elders is not going away. I am hopeful that we will show enough concern, enough responsibility and enough guts to do the right thing when we see a wrong that needs our attention.
Financial advisors can protect their clients from financial ruin – and their financial firms from legal and compliance risk
Four critical things a smart and ethical financial advisor can do to make the client’s transition of power more likely to succeed
By Marie Swift for Guidevine.com
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It’s a fact of life. None of us are getting any younger. Life marches on and cognitive disabilities can set in. Financial advisors can spot dementia if properly trained. In addition, they can stop their older clients from harming themselves financially – and from claiming the advisor (or others close them in their personal life) had something to do with their undoing.
The legal and compliance risks to an advisor’s practice are very real. Forward-thinking advisors will ramp up their skills now.
Here are some tips from Carolyn L. Rosenblatt and Dr. Mikol Davis who together develop educational materials for financial advisors and speak at financial services industry conferences in a attempt to reduce elder abuse, and to also reduce legal / compliance risks for financial advisory firms and allied institutions. Rosenblatt is an RN, an attorney and a consultant on aging issues. Dr. Davis is a licensed, clinical psychologist with thirty-seven years of experience in the mental health field. More information about their work can be found at AgingInvestor.com and AgingParents.com.
WHAT TO DO IN THE EVENT OF THE CLIENT’S COGNITIVE DECLINE
Financial advisors may notice the warning signs ofcognitive decline in a client for some time. When they conclude that their aging client is getting to the point when he or she is unable to safely manage financial decisions any longer, the time will come when someone must take over for the client. Typically a responsible client has an estate plan and someone is appointed as the client’s successor.
One important step for the advisor is to find out if the client has indeed created an estate plan with a provision for a successor. It may be a successor trustee for a family trust or it may be an agent on a Durable Power of Attorney. Sometimes, for many reasons, even otherwise responsible people just don’t get their estate planning done. If the client has not accomplished the estate planing needed, this is a step the advisor can take that will protect both the client and the advisory firm. The advisor, with the help of their legal and compliance department can develop an institution-specific document that allows the client to appoint the appropriate successor to take his or her place for management decisions over the funds the advisor controls and to waive his or her right to privacy with that appointed agent. This is essential. The advisor can’t do the job of protecting the client without it.
Once the advisor is informed about the agent the client has appointed to take the reins in the event of his or her incapacity, the advisor needs to take the initiative for the next steps.
FOUR CRITICAL THINGS TO DO WHEN A TRANSITION OF POWER IS NEAR
Here are four critical things a smart and ethical financial advisor can do to make the transition more likely to succeed:
“If the client, whom you may have known over decades, has been a powerful person in his or her life, and has been “the boss” in one way or another, giving up the status and position of being in charge will never be easy. Let the client know that you understand this,” said Rosenblatt.
“Communicate that your effort is to protect his hard work and the prudent decisions he has made over the time you have known him,” said Dr. Davis. “This acknowledgement lets him know that you respect that this is emotionally trying for him. The trust he has in you will help you both.”
“The time should be chosen carefully,” warns Dr. Davis. “Be sure that there are no immediately stressful life events going on with your client that might distract from the importance of the meeting. An illness, loss of a spouse or family member, a divorce or other traumatic incident will absorb your client’s attention and could interfere with your effort to succeed.”
“Find out how your client is doing in general, and select the right time accordingly,” underscores Rosenblatt.
“Your aging client is already dealing with loss of control, probably in more ways than financially,” Rosenblatt continued. “If you have observed obvious changes in your client over time, there are likely other parts of his life that are a problem too.”
“Let him choose where to meet. Do what you can to ensure that he is comfortable and that there is privacy. Encourage him to tell you about his concerns and fears in arranging the meeting. Be an excellent listener,” advises Dr. Davis.
“No one wants to think of herself as being too old to do what she has always done,” Rosenblatt said.
“No one will relish the idea of a difficult meeting in which she must acknowledge that she has to yield control over finances,” echoes Dr. Davis. “Vulnerability is the result.”
“If your client pushes back at the suggestion of a meeting, let her know that you understand why she might not want to have it but that it is going to be necessary, and soon. Set a date for follow up. Don’t push too hard, but gently persist,” Rosenblatt emphasized.
IN CONCLUSION
Aging clients will very likely need someone to assist with financial management eventually. This is something to plan for as an expected development, rather than a “maybe” or unlikely possibility. Financial advisors who are prepared for how to handle the potential transition of control can help to ensure their clients are protected from dangerous money decisions that arise from cognitive impairment. Astute financial advisors will be prepared to manage any transition as gracefully as possible.
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As a financial professional, you may not be aware of what is going on in your elderly clients’ daily lives, but families sometimes find out about scammers who have victimized their loved ones. You could come across them too. An adult child of your client may mention a situation that is alarming or your clients may tell you themselves about this “great product” they’ve gotten. If it sounds odd, start asking questions.
Two ruthless swindlers were arrested in New York for tricking an elderly woman out of her multi-million-dollar property in Harlem she had owned for over 40 years.
A home care worker bilked a frail elder out of her life’s savings of $350,000.
These stories keep coming up. Family members do it. Salesmen touting unsuitable annuities do it. Realtors collude with thieves and they do it. Even lawyers do it. They prey on unsuspecting or impaired elders to rip them off.
Financial elder abuse is a problem all across the world and it’s growing. We need to be aware.
My mother in law, Alice, is 90 and still very sharp. She would be hard to fool, but I know the right thief could probably do some harm if we weren’t watching closely all that goes on financially. At least she has the good sense to question something that sounds too good to be true. Here’s an example.
She got a check in the mail for $3800, legitimate looking, advising that she was the second place winner of a sweepstakes in Canada. She does play various sweepstakes. All she had to do, of course, was to deposit it and “pay the taxes” on her “winnings”. She was advised to contact her “claims agent”. No doubt, that professional thief would have done a great job convincing someone unsuspecting to deposit the check and send “taxes”. Of course the check is rubber and the money is gone before the elder finds out that the check has bounced.
Classic scam. Alice called the number and said, “How do I know you’re legitimate?’ The thief told her if she was suspicious, she should hang up. She did. She then called my husband, Dr. Mikol Davis, who did an internet search for the phony address and told her she had just thwarted a thief. Alice is with it enough to question the check. Millions of seniors with any cognitive impairment are not so able to question things like this.
What we know from research into Alzheimer’s Disease is that one’s judgment about financial transactions may be the first thing to become impaired when the disease is in the earliest stages. “Mild cognitive impairment” as doctors may call it, is not so mild when you think about the financial damage that can result. And the elder with this early warning sign of dementia may be living independently, paying taxes on time and otherwise appearing socially normal. For a time.
Professional thieves have certainly studied what makes elders vulnerable. They buy names of people who have entered contests like sweepstakes, and troll for the isolated and lonely ones who will talk to someone on the phone. The sweepstakes officials get paid for selling the lists and no one cares what the buyer does with them.
Elders are truly sitting ducks, easy prey. Isolation, confusion, forgetfulness, and fears about running out of money can all drive the susceptibility to entering into a “deal” with a clever scammer.
If you have an aging parent or loved one with any form of mild cognitive impairment, early dementia or other disease that affects thinking and judgment, here are seven basic things family can do to reduce the risks of ripoff.
1. Check in often. If your aging parent lives alone this is crucial. One of my clients at AgingParents.com emails her dad every day to check in. Others call every day or close to it. Aging parents may not think they need this but they do.
2. Ask to be a co-signer on the main bank account in case of emergency. Some aging parents will agree and some will resist, but ask regardless. It will allow you to do online monitoring of the account activity. A “new friend” who gets money from them is a huge red flag.
3. Have your parent sign a Durable Power of Attorney appointing a competent and ethical agent, which could be you, a sibling or trusted other. If cognitive decline happens, the agent can at least get the money out of the account and put into another safer one that the impaired elder can’t access. This is one way to stop the thieves who are looking for impaired elders. Nothing in the account, no gain for them.
4. Suggest having your parent use a licensed fiduciary to handle money if they don’t want you to do it. If there are issues of not trusting you, an objective professional can protect them from abuse. You might do research to find a reputable one for them. This is also a safe bet for elders you know with no adult kids.
5. Provide and encourage parents’ connection to others. Think of isolation and loneliness as two big risk factors in why elders get financially abused. If you can provide encouragement for them to get involved in activities, it will make them less likely to want to talk to a smooth, slick “friendly” con artist on the phone.
6. Monitor who comes into your parents’ home regularly. Even the most trusted housekeeper, gardener, caregiver or bookkeeper can be tempted beyond reason when their own financial circumstances change for the worse. Your parents are all the more at risk when they trust the familiar person, who can use trust to exploit them.
7. Do background checks on any home care helpers who are hired to work for Mom or Dad. The cost is modest, and you can find out a lot: bankruptcies, poor driving records, and of course, criminal convictions and civil cases. Licensed home care agencies may do background checks, but ask to be sure.
The ripoff artists out there are both clever and relentless, but we can stop many of their opportunities. Please don’t take your aging parents’ financial judgment for granted. It can erode almost without notice, even in the brightest and most accomplished elders.
Until next time,
Carolyn Rosenblatt
Most days at I get a call from an adult child of an elder, asking me about shady dealings over a parent’s finances. Sometimes it’s the niece, grandson, or other family member the caller is worried about. Sometimes it’s the caller’s sibling whose actions are in question. And all the cases I hear about have something in common: red flags of elder abuse are present, but no one is taking any action to stop them.
For example, a 62 year old woman whose mother is 90 called and said she is worried because she lives at a distance from her mother and her niece who is caring for the mother won’t return her calls or emails. And she also told me that a step-brother is a stockbroker and has financial power of attorney over her mother.
That’s 2 red flags, and she was just warming up.
Most abusers are family members. Caregivers are next and professionals, like stockbrokers, lawyers, financial advisers and insurance brokers are next in line for frequency of abuse. I do all I can to educate and urge action by family members to stop abuse when it happens and when it’s suspected to get a closer look.
I recently saw a new publication from our government, designed to raise people’s awareness about financial abuse and what an agent should and should not do when acting as agent on a financial power of attorney document.
Elder abuse is a huge international problem, and it’s finally getting more attention from the Federal government, thanks in part to the Consumer Financial Protection Bureau. They came out with an excellent free little booklet to help folks understand how to handle someone else’s money when they get appointed as a Power of Attorney. It’s called Managing Someone Else’s Money: Help for agents under a power of attorney.
You can get it here: http://files.consumerfinance.gov/f/201310_cfpb_lay_fiduciary_guides_agents.pdf.
Here’s what I like about this booklet.
It’s clear. It tells you what you can and can’t do as an agent. If you’re interested in being honest, it gives your guidelines to keep it that way. On the other side of the question, unscrupulous agents use the paper as a license to steal. Unfortunately, no court is involved and no one is watching. They help themselves to an elder’s money, house, investments, and anything else of value and some seniors are left destitute. I believe that sometimes, education can help family members stop other family members from committing this abuse. They can also warn the elder who is living independently about the sneaky thieves who devise ways to get elders’ money that are not so obvious. The booklet warns about some common scams. Not everyone knows about these and they keep getting victims to give up money.
The booklet lists 10 scams. I’ve picked a few to reiterate here for you. Would you know about these if they were going on with your elder right now?
1. Relative in need. Someone pretending to be a family member or friend calls or emails and says they are in trouble and need the elder to wire money right away. And by the way, you don’t have to be frail and isolated to get one of these pitches. I got one myself recently. Someone had hijacked my sister’s email address and sent emails to all of her like named contacts asking to wire money to her in a foreign country. Didn’t work with me, but it does get people to wire money to thieves. If no one fell for the scam they would stop, but it goes on.
2. Fake government funding. The recipient gets an official looking letter from a pretend government agency offering help with housing, home repairs, utilities or taxes. Just give them your credit card info and you get the help. Vulnerable and low income seniors fall for these scams because they are worried about the very things the ripoff artists offer them.
3. Home improvement. Targeted elders who own their homes (can be easily found in public records) are approached with an offer to fix something. It can be a roof, a fence or in my mother in law’s case it was to clean the air ducts. They take money in advance, overcharge and do shoddy work, or don’t do the work at all. The trusting elder doesn’t have a way to pursue them, as they disappear.
The booklet is 23 pages and has two pages of resources listed a the back. Among them are Adult Protective Services, and where to get free legal help for seniors. I think they did a fine job on this. Maybe that’s not the way I would comment on a lot of other confusing or poorly written government efforts at educating the public. And they don’t teach you this stuff in school. My hat’s off to the CFPB.
If you have an aging parent or other loved one, or you’re curious because your aging loved one put YOU on the documents that will one day cause you to have to handle their money, check out the booklet for yourself. I’m happy to share the good resource with you. Yep, your tax dollars at work.
Until next time,
Carolyn Rosenblatt
Dr. Mikol Davis
AgingParents.com and AgingInvestor.com
Financial advisors can spot and do something to prevent financial elder abuse. Advisors are in a unique position to observe their clients over years, sometimes decades. Knowing a client well gives them the vantage point to understand their clients’ normal general life situations as well as their patterns of using their accounts, which can make them well positioned to spot red flags and any unusual activity.
As part of the national legal community dedicating time to the protection of vulnerable elders I see communications from lawyers all over the U.S. with complaints that Adult Protective Services are not taking financial elder abuse seriously enough in many places. When it is reported, APS may dismiss it as “a civil matter” in which they have no interest. APS is essentially an investigative help to the criminal justice system. It can intervene when an elder is in physical danger. Social workers and investigators from APS look into reports of abuse and help the DA determine whether there is evidence sufficient to prosecute a crime. If the matter involves the undue influence of a family member and the elder seems willing to give away money, even if duped into doing so, APS is unlikely to take any action.
Financial advisors cannot rely on the their local community’s APS to protect their clients when abuse is suspected. Particularly in the case of family, close associates, and caregivers, APS may not wish to interfere unless or until an obvious crime has been committed. Many of these abusive situations are not so obvious, or the elder appears to be willing to give away his assets, and he may not see that anything is wrong. it is up to others to work to stop the abuse, including financial advisors, who may be in a highly trusted position with the elder.
The financial services industry, generally, has avoided certain kinds of communication with family of aging investors due to privacy laws, concerns which they interpret as precluding them from sharing financial information. I do not agree that privacy should stop advisors from communication with family when an elder clearly needs protective action. There is a way around the privacy question. Policy can be created to obtain permission from every client to communicate with a family member or trusted other appointed to step in when the advisor (and compliance) have reasonably concluded that the elder is being taken advantage of financially or otherwise.
If you see something, say something is what we are supposed to do to stop terrorist attacks. It is also what we need to do to stop elder financial abuse. The financial industry needs to develop new, forward looking, senior specific policies to address the rampant problem of elder abuse.
Here at Aging Investor, we are doing our part to help by developing educational materials for industry professionals. We want every professional to recognize the red flags warnings of potential abuse, to understand diminished financial capacity and to how to get the necessary document in place around the issue of privacy. Aging expertise from outside the financial services field is needed for all of these points. I hope all advisors, their compliance departments and organizational heads will pursue what FINRA has urged on you since 2008: that senior-specific policies be put in place to stem the rising tide of elder financial abuse of their own aging clients. We offer resources such as our CE courses and have written a book to help you better understand and manage your aging clients.
Until next time,
Carolyn Rosenblatt
AgingInvestor.com
Doesn’t every financial advisor want to stand out from the crowd? Be better at delivering services? Somehow get a reputation as a cut above the average guy or gal in the biz?
There is a buzz going on about the problems financial professionals are having with clients who are aging and losing capacity for financial decisions. It directly affected Kathleen Pritchard, head of business development at Legg Mason.
Her father-in-law was diagnosed with Alzheimer’s disease at 73 and she and her husband approached the father’s financial advisor for help. He had been managing an estate worth over 8 million dollars. He said,
“I basically don’t do any of that. I just manage your dad’s money.”
(more…)
Your elderly clients are ripe for scammers to pick. How is it that these clients, some very intelligent and accomplished, fall for these obvious ripoffs?
In a typical example the U.S. Attorney’s office charged six defendants in a fraud scheme targeting the elderly .This time it was a lottery scam involving theft of a total of $400,000 from various victims. . We see these reports often in the news, to the point that they seem very repetitive. The characters and the amount of money stolen from elders changes but the methods are the same over and over. Other scams bring in millions from their vulnerable victims. The thieves in this case were caught. Most are not.
Why do elders fall for these things? Why don’t they get that the “Nigerian prince” or the “Jamaican Lottery” are clearly bogus and not to be trusted? Isn’t it obvious?
There are various reasons why elders are such easy prey for these thieves. One root cause is isolation and loneliness, a fact of life for many seniors who are not closely monitored by loved ones. A pleasant, slick professional calls on the phone in a friendly and engaging manner and traps the vulnerable elder with kind words, attention and a feeling of connection. The thieves are trained and smart. They smell the kill. They know exactly what to say to get the elder to trust them.
Another very important factor is diminished cognition in the elder.The crooks know that if they have a thousand names purchased from magazine subscribers, U.S. lottery or state contests and they know the ages of those on the list, that their chances of finding victims are excellent. Some of the elderly on the lists will be just impaired enough that they can’t see a scam coming. At least a third of those aged 85 and above have dementia in some form. Scammers simply buy the lists and start calling. And there are no restrictions against selling the names and personal information such as ages, phone numbers, addresses, etc.to the highest bidder. They can acquire the name and age of every subscriber to The Reader’s Digest, for example, providing fertile ground for seeking victims. Research into the impairments of Alzheimer’s Disease tells us that financial judgment may be the first kind of judgment to erode, and it is not obvious at the beginning stages, though the impairment is significant.
Another reason why seniors fall for these ripoff schemes is that they feel financially insecure. If there is a downturn in the market or whatever investments an aging client holds, he may feel a need to get easy money or a high return, and when a con artist offers that, he’s likely to fall for it. The right combination of loneliness, isolation, early dementia and fear make him an easy target.
Can you do anything about the problem?
I think you can. If you do care about your aging clients and want to remain a trusted advisor, a first protective step is to be aware of the risk of scams targeting the elderly. At AgingInvestor.com, we recommend developing a policy for all aging clients that includes staying in more frequent contact with them than you are required to do. Here are 3 things that sort of policy might include:
1. Schedule monitoring of how the elderly client is doing in general on a regular basis, the frequency of which you determine by thoughtful planning. (Quarterly? less often?) Check in by phone. Reassure your client when investment losses happen, and ask how he’s feeling and what he’s doing in his personal life. This does take time, but it can be very helpful to renew the client’s trust in you and remedy somewhat the feelings of isolation that can accompany aging.
2. Pay particular attention to recently widowed aging clients. The aftermath of loss of a spouse can be a dangerous time because of grief. That makes people vulnerable to begin with and when you add some cognitive impairment to the mix you can see that thieves love the opportunity to cultivate these elders. Consider that deaths are public records and that scammers can easily collect lists of the recently widowed to pursue with their bogus offers. They may start the conversation by expressing their phony empathy for the person’s loss and work on a relationship after that.
3. Educate your client. She may have heard of scams and have a vague understanding of how they work, but not be ready to spot one when the phone rings with any scheme to defraud her. If you provide a respectful reminder, using a recent story of elder abuse by scammers published in news reports, which you can easily find any time, you just might cause your client to think twice before becoming engaged in conversation with a stranger who seems so nice and friendly. You can do your part to help your aging clients to beware of phone calls, contests and unknown people asking for personal information or money.
My mother in law, Alice is still quite sharp at age 91. Someone tried the “lottery winner” scam with her too. She called the number on the letter from the “Lottery Authority” and asked how she would know if they were legitimate. The accented voice on the other end of the call said “well if you think this is fake, you can hang up.” So she did. End of scam. Not all 91 year olds are so alert. Given that, the financial advisor may be one of the few trusted people in a position to help them create a line of defense.
Would you like to develop a policy specifically geared toward keeping your aging clients and keeping them safe from abuse? Get expert help with policy development and implement it with training at AgingInvestor.com.
Until next time,
Carolyn Rosenblatt
As just about everyone was outraged and offended by Donald Sterling’s racist comments, you might wonder how there could be anything to learn from what he said and did in the time that has passed since his story first broke.
Posted by Richard Eisenberg, July 29, 2014
Not-so-funny thing: For years, when I got together with my boomer friends and relatives, our kids would be Topic One. These days, it’s our aging parents. And, mostly, the conversation isn’t cheery.
Typically, we talk about how our moms and dads are growing frailer and about the caregiving they need (my father will soon turn 92 and has a full-time caregiver). But what’s often left unsaid is our nagging fear that our parents — living longer than they or we anticipated — will run out of money.
Then what?
Talking about this worry is generally taboo. We don’t want to come off sounding as though we’re wishing our parents’ lives will end soon to avoid a potential financial crisis for them and for us. Frankly, I’m a little jittery even writing about the subject.
(MORE: What Do We ‘Owe’ Our Parents?)
As New Yorker cartoonist Roz Chast put it in her poignant new graphic memoir about caring for her elderly parents, Can’t We Talk About Something More Pleasant?: “I felt like a disgusting person, worrying about the money.”
But the truth is: Longevity in the abstract is wonderful; in reality, it can be wonderful but can also be expensive and produce high anxiety for boomers. Ken Dychtwald, President and CEO of Age Wave, a consultant specializing in aging and boomers, calls it “the Caregiving Crunch.”
Virginia Morris, author of the excellent book, How to Care for Aging Parents, told me: “This is an enormous issue. If you’re not worried about it, you probably should be.”
(MORE: Checklist for Helping Parents With Their Finances)
A Ballooning Problem in America
With 6 million Americans now 85+, a number expected to hit 14 million by 2040, “this issue is just going to balloon tremendously. We’re just on the cusp,” said Stein Olavsrud, a certified financial planner at FBB Capital Partners in Easton, Md.
To pull together advice for people in their 50s and 60s who worry their parents’ money may run out, I turned to five experts: Morris; Olavsrud; Dychtwald; Cynthia Hutchins, Director of Gerontology at Merrill Lynch and Carolyn Rosenblatt, co-founder of AgingParents.com and a Forbes columnist.
First, a caveat: “This is a severe problem with not a lot of great answers,” said Olavsrud. As Dychtwald told me: “There’s no magic solution; there’s no button on the wall where a million dollars will come down a funnel.”
What’s especially vexing, Dychtwald added, is that the timing and size of the problem is often unknown. “If you have a nine-year-old, you can predict when they’ll go to college and plan for it,” he said. “But how does one know when one’s parents will need money or a nursing home?”
Put Yourself First
One point all the pros I spoke with agreed on: Don’t assume you’ll need to urgently tap your own savings to deal with this problem.
“People’s first reaction is often: ‘I have to pay for this myself,’” said Morris. “I’d urge you to be extraordinarily cautious about jumping into that. You have your own retirement, and possibly your kids’ college, to think about.”
(MORE: Has Your Elderly Parent Become Your Midlife Crisis?)
Added Olavsrud: “Put yourself first, even if that feels like a selfish decision.”
6 Tips For Fearful Boomers
Here are six recommendations from my team of experts:
1. First, talk with your parents about your concerns — the earlier the better. “The sooner you start talking about these issues, the more options you’ll have,” said Morris.
Yes, raising the subject is uncomfortable. A 2013 Merrill Lynch survey of people 50+ found that 70 percent of them haven’t had in-depth discussions with their parents about topics such as their net worth or how to pay for long-term care.
“People need to expect their parents will become infirm before they die and they’ll have to have a conversation on how everyone is going to manage that,” said Rosenblatt.
Once you begin talking candidly with your parents, “you’ll discover their wishes and can then weigh them against your own financial situation,” said Hutchins.
2. Meet with one or more professionals who can offer strategic advice. It could be an eldercare attorney for Medicaid planning (you can find one through the National Academy of Elder Law Attorneys or National Elder Law Foundation site). In most states, Rosenblatt noted, Medicaid will pay for a nursing home but not for a caregiver in your parent’s home.
Alternatively, you might consult a financial planner or, if you want advice on caregiving costs and choices, a geriatric care manager (visit the National Association of Professional Geriatric Care Managers site).
Rosenblatt advised also getting “the medical part of the picture” by speaking with your parents’ doctors about their diagnoses. “Then, you’ll have a clue whether your parent will need full-time care down the road,” she said.
3. Scour for money-saving benefits your parents may be entitled to receive. Three useful sites to dig up this information: The National Council on Aging’s BenefitsCheckUp; the federal collaborative, Benefits.gov and The U.S. Administration on Aging’s Eldercare.gov.
4. See what your parents could do to improve their financial situation. “Think of creative solutions,” said Morris. “Maybe your parent can have a renter move in and help with household chores. Or two elderly friends could move in together to save on housing costs.”
Your mother and father might be able to reduce their costs and add to their savings by downsizing or — said Olavsrud — selling assets (such as jewelry or antiques).
If they’ve lived in their house for many years, they could look into tapping their home equity with a reverse mortgage. The money would be repaid when they sell the house or upon their death. Just bear in mind that a reverse mortgage is a complicated financial product, so your parents will want to get objective counseling about it before committing.
5. If your mom or dad will need to move into a long-term care facility, look into whether the cost is negotiable. Bear in mind that some nursing homes won’t even accept people on Medicaid (let alone negotiate the expense) because of the government’s low reimbursement rate.
That said, I know someone who met with the management of a nonprofit assisted living complex and worked out a “scholarship” arrangement for his mother. He demonstrated that there’d be enough cash to pay for three years’ worth of care there and the staffer said the facility wouldn’t evict her if the money ran out after that.
6. Instead of paying for your parent’s care outright, make it a loan. You could structure the loan so you’ll be repaid upon your mother or father’s death or from proceeds of the sale of their house. A longtime friend of mine did this, loaning $40,000 to his parents with the proviso that he’d get the money back when their house sold (figuring he’d then use that money to help pay for their long-term care).
His dad died a year ago and the house is now on the market. He recently moved his financially-strapped 84-year-old mother from her Washington, D.C. suburb into a $6,600-a-month assisted living facility 45 miles away from him in northern California.
But his money concerns about his mom are hardly over. “I still have sleepless nights about the ‘what if’s,’” he told me.
So do many of us.
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Alice, The Unsophisticated Investor
Alice, my mother in law, is blessed with a great memory and pretty good health for a woman of her age. She works at it. She’s been a widow for 6 years now. Dad always handled their finances. Since she’s been on her own, she relies on her two adult children and an accountant friend to guide her about her investments. She was referred to a financial advisor known by a family member. She thought things were fine until a year went by, the market was doing well and she had no gains at all in her portfolio. She’s comfortable, but not wealthy by most measures. There is enough to take care of her, though full time care would eat up a lot of what she has. Luckily at this time, she is able to remain independent.
When She Discovered The Truth
Alice decided to change financial advisors. It was then that she learned, to her dismay, that her other advisor had done something that really got her angry. He had taken 10% of her investable assets and put them into a real estate investment trust (REIT) that could not be liquidated without a substantial financial penalty to her. She is not savvy about complex investments and relies on others for advice. She relied on her advisor a lot. She is clear that she needs to watch out for herself. She says the advisor never told her what he was doing with this investment and never explained that she would not be able to access the funds if she needed them unless she suffered a loss, in the form of a penalty. He, of course says he told her all about it and she agreed. She doesn’t believe him. My husband, Mikol, interviewed her about this and put it on YouTube. Here’s what Alice has to say. http://tinyurl.com/pmqf3j2
In the July 14, 2013 InvestmentNews, Dan Jamieson reported that the Financial Industry Regulatory Authority and the state regulator in MA are cracking down on exactly the kind of nontraditional, illiquid investment the financial advisor chose for Alice. Mr. Jamieson reports that In February, Massachusetts settled a case against LPL, which agreed to pay at least $2 million in restitution and $500,000 in fines related to the sale of nontraded REITs.
State regulators in Massachusetts settled their cases against five high profile firms who agreed to pay a total of $6.1 million in restitution to investors, and fines totaling $975,000.
FINRA CRACKDOWN
State regulators aren’t the only ones cracking down on alternatives.
FINRA also warned members in 2012 in its annual exam priorities letter that it was “particularly concerned about sales practice abuses [and] yield-chasing behaviors” that might lead investors into unsuitable complex products.
Products under scrutiny by FINRA in 2013 included business development companies, structured products, nontraded REITs and private placements.
“Finra grinds us on structured notes and commodity-linked notes,” said the president of a broker-dealer organization, who asked not to be identified.
The regulators are reported to have found out that in the REIT cases, people didn’t know what they were investing in. We think that is true for Alice. We also think her advisor, knowing her lack of sophistication, took advantage of her for the sake of his commission. His justification is that “she didn’t need the money” and that “she was investing for the benefit of her heirs”. Her family, particularly her son, thinks that is rather arrogant of him. How does he know whether she’ll live to be 100 and whether she will need the money? Furthermore, Alice is not investing “for the benefit of her heirs” when she is relying on her funds to take care of her own needs for the rest of her life.
What We Did
As soon as we found out about the REIT sold to Alice, then 90, and how illiquid it was and for how long, we confronted the advisor with a letter and sent him a copy of the Investment News article. He called shortly afterwards. He tried to justify his actions, but was told very politely by my husband that Alice was to get full restitution or a FINRA complaint would be promptly filed.
Permission of various kinds had to be obtained. The advisor had left his firm and gone with a large bank. This messed things up for him for a time, but I thought he deserved it. This was the threat of a claim. Two lawyers called and argued how great the investment was. We held our own and continued to insist on full restitution for Alice. More excuses. Months of lawyering and letters later, she got full restitution. You’ve never seen more butt-covering letters from them.
The lesson here is to be smarter than this guy was. It’s not that the investment itself was bad. It paid a decent return. It’s that at her age it was clearly unsuitable. So keep the age of your client in mind and don’t make dumb assumptions like, “she didn’t need the money”. That is a foolish statement for anyone to make about a 90 year old with a relatively modest portfolio who could need hundreds of thousands of dollars of care as some seniors do before the ends of their lives.
If you need private advice about any aging client whose behavior makes you question the client’s financial capacity for decisions, call us. We have the expertise to help you assess the client’s abillity and we can guide you.
Don’t wait for FINRA to come knocking.
Until next time,
Carolyn Rosenblatt, RN, Attorney, Mediator
AgingInvestor.com
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When Competence Is Neither Black Nor White
Anyone who has spent time around older adults, whether they be family members, friends or your clients, probably knows someone who seems “with it” sometimes and “not with it” at other times. They can change from making sense to not making sense in a matter of minutes or hours. Do you think of this person as competent? Do you overlook all the little “slips” and signs of their not being able to track the conversation? Do you treat the person as if everything were fine and normal? Here at AgingInvestor.com, we refer to the in-between state of mind as the grey zone. It describes a person in a way that is neither black nor white, neither completely without decision-making ability nor completely safe in decision making. It is a variable problem and one nearly all of us are going to witness sooner or later. Why?
A Red Flag For Financial Advisors With Aging Clients
Hello there. I’m Carolyn Rosenblatt, RN, Attorney and family mediator for those with aging loved ones. My passion is working with older adults and their families, as well as those who serve them.
AgingInvestor.com is dedicated to helping those in the financial services industry learn more about aging from those of us with expertise in aging. Our purpose is to help you better serve your clients, keep your business as they age and serve them more competently as their aging begins to create issues for you.
Most of us, in general, do not have any specific knowledge about aging itself, much less how it can affect the brain and decision making ability. We base what we know on our family experience or what we have learned from friends. That’s fine, but it can really limit our perspective.
The fields of gerontology, medicine, healthcare, and other related disciplines have produced a great deal of research that can be helpful to all of us in a society where longevity is increasing so significantly. We are indeed in a changing environment when it comes to aging. Many of us are going to encounter or are already encountering issues with which we have no experience but which we have to face. Our parents, grandparents and our clients are living longer and having more problems related to aging. We may be unprepared. (more…)
The client who called us was in great distress. Her name is changed to protect her identity.
Deanne had just been in contact with her mother’s financial advisor. Score one for the advisor for remembering that his client had a family and for having enough information to even contact the daughter. BUT, what the advisor told the daughter was very distressing.
“Your mother is going to run out of money in about 24 months”, he said. Deanne’s heart almost stopped! She is 52 years old and has had enough trouble supporting herself, much less worrying about her mother. She felt sick and panicked. What was she going to do?
Deanne’s mother is 84. She is in generally good health and may be around for quite a while. What might the advisor have done in this case?
Most financial services professionals work very hard to grow a client’s assets and to protect them against running out of money. But let’s face it: many factors are in play and when you start with a modest amount, there might not be a way to make it last to the end of a person’s life. How much notice do you have? Should you warn the family of a potential coming disaster? (more…)
And I’m Dr. Mikol Davis, psychologist. This is a true story about my Mom, Alice who was age 90 when this happened.
This is so hard to believe, isn’t it Carolyn?
CAROLYN:
It’s so ironic. Here we are, always trying to give folks a heads up about preventing financial abuse. And then, something abusive happens to Mom! It’s amazing.
This situation came up when Mikol’s Mom decided to change financial advisors. The guy she was using for financial advice had talked to her about her investments a year before this happened. He thought he had explained this particular thing he put her in, but I doubt it. In any case, he never told her that he wanted to take a large sum and put it into something where she couldn’t access her money for 12 years!
Does that make sense to you? 12 years of not being able to take out your cash for a 90 year old?? (more…)
AgingInvestor