Many families face the issue of a once powerful head of the family, in charge of all finances, now showing signs of dementia. Whether it is diagnosed or not, it is an issue that must be addressed. The family’s financial security can be in jeopardy.
It typically starts with an aging parent who has some short term memory problems. If it’s the patriarch, he forgets you were coming to visit. Or he misses payments on basic things like utilities. He seems to get lost in a conversation now and then. Confusion emerges. Everyone wants to ignore it or dismiss it as “he’s just getting old”. But the memory issues continue and begin to interfere with daily life. He has to be reminded and then he forgets the reminder. This is the person still in charge of the family trust, investments, assets, taxes and important decisions about money. Let any of the problems I’ve described above be red flags. Money safety is threatened. Dementia, even in its early stages, does not mix well with finances.
Here at AgingParents.com, the picture I present of an impaired aging person in a family is not at all unusual. I see it all too often. The adult child, spouse or other concerned family want to know what to do as these red flags show up. They see that the aging parent is slipping cognitively, but he or she thinks they’re just fine. They may even be in good physical health for their age. Except for that brain of theirs, which is not fine. You can’t see that brain but you can see what it’s not able to do anymore by the forgetting, the confusion, the changes in behavior in the elder.
What can a family do when it happens to you?
First it is important to get ahold of the family trust and look carefully at the section that describes “incapacity” of the trustee. The patriarch in this scenario is likely the trustee, the person who “owns” the trust. If there is a spouse, they are likely to be co-trustees. It is not unusual for one of them to be in the habit of being in charge of things and the other to be less capable or experienced. Regardless, lawyers often give them equal power as co-trustees on the typically worded family trust. Let’s say it’s the patriarch who is impaired and his wife has no idea about the finances. The Dad is going downhill cognitively, in the view of the other family members. The Mom is just not able to manage investments and doesn’t want to.
The wording in the trust details what the family, specifically the person or persons named as “successor trustees” (next in line after Dad), need to do if the trustee is losing capability for finances. The successor trustees can ask Dad to resign as trustee. Sometimes this happens. But with those stubborn, in-charge, no-one’s-going-to-tell me-what-to-do folks, they don’t resign when asked. They refuse. This can put the family’s assets in danger. Poor memory and loss of financial judgment go together. Can the impaired person be removed even if he doesn’t want to step down as trustee? Yes.
Normally the trust will require that a doctor sign a letter and verify that Dad is no longer capable of managing finances. The hard part is getting a reluctant person to even see a doctor. (How we do this at AgingParents.com is another discussion). When it can be accomplished by way of doctor’s letter(s), the successor trustee then goes to the estate lawyer and obtains a paper showing that he/she is certified as the new trustee over that family trust. That gives the successor trustee the right and the responsibility to remove power over the investment accounts, other assets such as real estate, and credit cards from the impaired aging parent. It’s difficult! There is pushback, and hostility and threats can follow. But this is necessary when a person has dementia and you want to keep the finances safe. Unfortunately, if family sees the red flags and does nothing, disastrous results can follow. Predators find demented elders as if they are sharks smelling blood in the water. Entire fortunes have been lost and lesser ripoffs abound among cognitively impaired elders who are left unchecked.
The Takeaways
- If your aging loved one is showing signs of memory loss, confusion or poor decisions about finances, do not ignore it. This is serious.
- Review the family trust, assuming there is one. Look for the section that describes “incapacity” of the trustee(s) and what it says to do when the trustee must be removed.
- Always try asking the impaired person first if he/she will resign as trustee, being respectful and choosing a right time. Do this with other family present, when feasible.
- If the aging loved one refuses to give up this power, move ahead with the steps spelled out in the trust to remove the impaired loved one as trustee. Sometimes the attorney who drafted the trust will advise you, but sometimes they are loyal to their impaired client and refuse to help. In that case, get legal advice from your own estate planning attorney.
Loss of money by cognitively impaired elders is rampant. If you are a family member, these losses can significantly affect your inheritance. As unpleasant as it is to deal with a stubborn aging parent, the steps to remove the person as trustee are laid out for you in any competently written trust. You’ll need courage to do what you must. When you succeed, you will feel a great relief even though you must then take on new responsibilities. Consider this for your aging loved one’s sake, and their protection as well as your own.