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Your Financial Plan Minus You?



April 08, 2013 – Comments (0)

Board: Macro Economics

Author: yodaorange

File this under the “it can’t happen to me” category. High on the list of certainties is that we will lose some mental acuity before we pass on. It doesn’t matter if you were a charter member of Mensa or not, age has a way of deteriorating mental function.

I recently came across the case of an elderly lady that that was writing $5,000 checks each month to an individual. One or two checks would not be unusual for this lady, who is well off. After it went on for five months, her financial adviser decided he should inquire further. He called the lady and asked who this person was. The answer:

“You can’t tell anyone, but I have won the Publisher’s Clearing House Sweepstakes. They are going to announce it shortly, but in the meantime I had to pay some taxes on the prize.”

I do not know when/how this lady lost her ability to make rational financial decisions. In all other financial areas, everything seemed to be in perfect order. It was not like she was forgetting payments and/or bouncing checks. It was probably a case of slight mental impairment and a very slick con artist. At this point, the financial adviser called in the FBI. I have not heard how the situation was resolved.

In a perfect world, someone responsible would have been reviewing her financial transactions more closely and spotted this earlier, instead of after $25k was out the door. The financial adviser did NOT have the responsibility to monitor her transactions. Possibly a family member could have been tasked with this, but OTOH, the number one way for seniors to fraudulently lose financial resources IS through family members.

Different Case of Elder Fraud

An elderly man had been a successful investor for his whole life. He had owned stocks, bonds, funds etc. and done well. Somehow he found an exciting new investment. It is some kind of business that is going to go public. And the investor only needed to pay a few thousand dollars to participate. It didn’t quite go public after the first month, so he had to pay a few thousand more dollars the next month. And the next month. After about one year, it is still close to going public.

What is different about this case is that his family DOES know about the situation. One family member is CFO of a large, multi-billion dollar, multinational company. The CFO clearly recognizes this as a fraud. Yet, he is NOT able to convince the elder that it is a fraud. In all other areas, the elder is doing a good job of managing his finances. Not missed bills, no bounced checks.

The dollar outflow is more of a nuisance level, given this man’s net worth. This is as opposed to him sending out his social security check that he needs to buy food with.

In lieu of being able to convince the elder that this is a scam, the only other option is to have a court declare him mentally incompetent to manage his finances. That is a difficult path, fraught with ill will and no guaranteed outcome. Since the elder is managing all of his other finances properly, the judge might rule him competent. From my casual conversations with this man, I would NOT think he is incompetent. I have NOT discussed this particular “investment” with him.

BOTTOM LINE is that if we are lucky to live long enough, there is a high likelihood our mental faculties will deteriorate. We might be more susceptible to hucksters. It is a good idea to have a plan for someone else to watch over our finances. They would need to have the legal authority to step in if they see fraud. One approach is to use a living trust which grants the trustee the right to act in the case of mental disability. These are difficult situations and one size does not fit all. Yoda’s recommendation is that you consult a legal professional to determine the best approach for your family.



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