Estate planning can be used to protect an aging parent. Here is an approach I recently recommended to a client whose mother had been conned out of $300,000.
Here's the backstory:
Jim and Shannon were married for over 35 years. They had one son name Matthew. Jim was a big time executive who generally handled all the money and most financial decisions. Shannon, while certainly involved, generally handled other aspects of their life together. Jim passed away suddenly from a heart attack leaving Shannon with about $800,000 in investments and a fully paid off house worth about $500,000. With that kind of nest egg, Shannon was relatively comfortable as she didn't lead an extravagant lifestyle. They had a living trust together which owned most of their assets. Their trust provided that upon Jim's death, Shannon would remain sole trustee over the entire trust. Indeed, that is a very common scenario.
Two years after Jim's passing, Shannon met a guy named Bill on Match.com (a dating website). He too had lost his spouse a few years ago but never had children of his own. They started talking on the phone once a week, and then soon every other day. Then they met for lunches and dinners. Soon after, they were a full fledged couple. Shannon couldn't believe she met someone who shared so many of her same interests. He met her family, and she met his. They even imagined a future together.
After nearly a year of courting, Bill gathered the courage to tell Shannon about a special project he'd been working on for nearly 3 years. He explained that he and several other philanthropists were building a school in Ghana for underprivileged children. Shannon was so proud of him and wondered why he never brought it up before. He explained he was embarrassed because they were about $300,000 short and the project had stalled. She exclaimed, "I want to help you! Let me give you the money..." He resisted and explained he could never accept such a gift from her. Notwithstanding Bill's objections, Shannon wired the money to Ghana the next morning. Then she called Bill to tell him the great news. Bill's phone rang, and rang, and rang.....
Where did Bill go? He was off to the next widow for his next big score!
So what happened after that?
Shannon's son Matthew called me several days later to tell me his mother had been conned out of $300,000. The authorities told the family they had little chance of recovering the money. Matthew asked me what could be done to help reduce the chance of this (or something like it) from happening again. Since Shannon was the remaining sole trustee of her living trust (since Jim had passed away), she was totally in charge of the entire estate. I recommended she consider appointing Matthew as her co-Trustee on the trust and provide that all trust transactions would now require 2 signatures. Therefore, in the future, Matthew's consent and cooperation (and signature) would be required to conduct transactions involving the living trust.
At first Shannon was concerned this would hamper her ability to manage her estate. I explained this was for her protection, and she ultimately agreed. To provide Shannon with some peace of mind, Matthew set up a small account for his mom at the bank. It was only in her name, and they agreed to keep about $2000 in that account at all times. This was going to be her "fun money." She could write checks, use an ATM, etc. without needing Matthew as her co-Trustee. This was entirely her account to do with as she pleased. By creating this account, we limited her exposure from future con artists and others who might try to influence her. Matthew would be able to keep tabs on this account and worst case scenario, she'd be out $2000 versus $300,000. The rest of the estate remains in the family living trust with Shannon AND her son Matthew as co-Trustees. Now, we had two "gate keepers" instead of one, making things much more secure and less susceptible to the influence of outsiders.
This kind of arrangement might work well for your family if you similar concerns. Don't wait for someone to take advantage of a parent. Living trusts aren't fool proof. After the death of a spouse, visit an attorney to discuss how to best protect yourself and your ultimate beneficiaries. There are a few measures you can take to minimize the chances you will be bamboozled by con artists.
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