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How an IRA Trust can help avert disaster

A father designated his son and daughter as the beneficiaries of his large retirement account. The daughter’s husband was physically abusive and the couple had been considering divorce. The father was adamant that his son-in-law receive nothing from his estate.

After a very healthy life, the daughter was diagnosed with stage four cancer. The father was so distressed about his daughter’s illness that his health failed and he passed away two months later. The daughter, weakened by her illness and her grief following her father’s death, passed away four days later.

The son received 50% of the retirement account. The daughter was supposed to receive the other 50%, but she did not have an opportunity to claim the account before she passed away. She also did not have a chance to name a beneficiary of the retirement account if she should pass away. The retirement account terms and conditions provide if an account owner does not name a beneficiary to receive the retirement account, the spouse becomes the default beneficiary. The daughter’s abusive husband became the beneficiary of his wife’s interest in the retirement account. In an unthinkable but fairly common twist of fate, the abusive son-in-law received 50% of the father’s retirement account!!

An IRA Trust could have completely avoided this situation. The father could have created an IRA Trust and named the Trust as the beneficiary of his retirement accounts. The father would have chosen all future beneficiaries in the Trust, certainly excluding his son-in-law. When the daughter passed away, the funds would not have gone to her abusive husband, but rather to provide college education for our client’s grandchildren.

If you have a retirement account, you need to contact our office to discuss whether an IRA Trust is right for you. The bank has rules defining default beneficiaries if an account beneficiary is not properly named. Don’t let the bank’s plan become your plan.

Home Care and Financial Abuse

Over 8 million older Americans receive care at home or in facilities by strangers. Some caregivers are trained and managed by home health care agencies. Others are hired privately in an effort to save money. Privately hired caregivers may charge as little as $12 or $14 per hour. Caregivers hired through an agency may be as much as $18 to $30 per hour. The difference is very real.

Even more real is the danger posed by many caregivers who seek to take financial advantage. Retired emeritus professor John Wilson (not his real name) needed supplemental care in his life care community. He came to rely upon and trust a caregiver who was with him 40 hours per week. His trust was misplaced.

Over the period of two months, she used his credit card, had him sign checks made out to her for thousands of dollars, and forged his signature on other checks to pay for items that she purchased. In a short time, losses exceeded $60,000.

Professor Wilson was fortunate in that his care and finances were being monitored. The caregiver was fired, the agency reimbursed a portion of the funds, and other funds were recovered by other means. All estimates are that millions of dependent older Americans are victimized by this form of financial abuse every year.

To address, to reduce the possibility of financial elder abuse, much greater care must be taken when older Americans identify “attorneys in fact” when they sign Durable Powers of Attorney and when they choose successor trustees for their revocable trusts. Too few understand that individuals given such powers are in a position to misappropriate finances and otherwise take financial advantage. “A great disservice is done by online trust creators, such as LegalZoom,” warns Palo Alto attorney Mark Gerson Gilfix, “because they offer no counseling or effectively conveyed warnings about the need for an extremely conscientious and responsible person to serve in these roles.

Financial elder abuse is a plague that shows no signs of abating. Great care must be taken in choosing private caregivers, in particular, and carefully monitoring the financial affairs of vulnerable elders.

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