Assisting our Elders – A Cautionary Tale

This is a story that’s personal and a bit troubling to share, mostly because it involves some miscues and errors that I would think, as a financial professional, I might have been able to foresee and avoid.   Since I didn’t, I’m going to share my experience in hopes that it will highlight some steps you can take to make a difficult life transition go more smoothly.

For some years now I have been managing my parents’ investments at their request.  I offered to help with paying bills also, but they cherished their independence.  A year and a half ago my Mom had a stroke, which necessitated a move to assisted living.  At that point they added me to their checking account so I could assist in managing their day-to-day finances while Mom recovered.  We began preparations to sell the family home, which could not be adapted for wheelchair access.  I took over all the bills, insurance and paperwork, and we moved them three times in eight months.  It was hectic.

In May Mom had a catastrophic stroke and passed away.  We had just entered into a contract with a realtor to sell their home, but my parents had yet to grant me power of attorney to manage the transaction.  As we were burying my Mom, we discovered that my father had already been diagnosed with dementia several months prior.  Mom hadn’t shared this information, as she was concerned he’d be moved to memory care and they would be separated.   This left us in an extraordinary situation:  I was successor trustee, but my father was “incapacitated,” not qualified to sign any legal documents, including to resign as trustee in order to let me take over.  He was a legal non-entity.

My parents had given me a copy of their trust years ago when they asked me to be successor trustee.  Mom told me they were planning to add my brother as an additional successor trustee, to take the pressure off me, but I didn’t receive copies of that amendment.  It was in the binder with their original trust, but in the chaos of preparing their house for sale, someone put the binder in a box and took it to storage.  I contacted my own attorney to begin the process of assuming my role as successor trustee, based on the trust copy that I had.  Unfortunately, their attorney had not included a definition of incapacity in the trust, so we had to abide by the strictest interpretation possible:  two medical doctors needed to evaluate my father and declare him incapacitated.  For a grieving 92 year old man who knows he’s losing his memory, going through hours of frustrating testing was a hardship that could have been mitigated by a sensibly written trust. 

We were weeks into the process of having my father declared incapacitated when I found the binder with the amendments making my brother and I co-successor trustees.   Unfortunately, my parents’ attorney had written it as me “and” my brother rather than me “or” him.  So instead of making it easier because there are two of us, this means I can do nothing without the signature of my brother, who lives in another state.  This was not my parents’ intention.  A competent attorney who asked better questions could have saved us a good deal of frustration.

Because of these events, we had weeks where my father’s investment account was inaccessible because there was no trustee.  My Dad’s monthly bills in assisted living are well over $12k.  In addition, he still had carrying costs for their home in Santa Rosa, which couldn’t be listed for sale yet because we didn’t have a competent trustee to complete a sale.  We were fortunate that I keep a good cash cushion in the checking account, and that I had access to those funds outside of the trust.  This situation could easily have caused a significant cash-flow problem.

My parents had their investment accounts at a large and respected firm.   While I’ve been through the death claims process with many clients, each firm has their own procedures, and this firm’s process was challenging.  We were given wrong information initially, which caused delays.  When we finally got the account into the name of my brother and myself as trustees, I needed to send funds to Dad’s checking account from his trust investment account.  I’ve done this many times before as his agent.  His trust account had been linked to his checking account for several years.  However, when I logged in as trustee to move Dad’s money, the only available destination account was – my own personal account.  They explained that Dad’s account was now linked to my “profile,” and since I’d had an account at this firm, Dad’s trust was now linked to it, and not to his own account.  Sending funds from Dad’s trust to my personal account is not something I should be doing as trustee.  There were other issues, but you get the picture:  Many things went wrong on the road from Mom and Dad as trustees to my brother and me as trustees.  In the meantime, we had bills to pay, parents to care for, and our own grief to manage. 

Here are some suggestions for making it easier.

For Successor Trustees:

-If you’re asked to serve as successor trustee, request a review of the trust with the trustors and their attorney.  Go over trust language to ensure that terms like incapacity are defined clearly.  If you have a co-trustee, ask if the language can be “or” instead of “and,” so that you won’t have to have two signatures on everything you do as successor trustees.

-Make sure you understand all the terms of the trust.

-Ask to be apprised in writing of any amendments added later.  Have them sent to you directly.

-Learn the procedures for succession at any firms with accounts held in the trust name.

-If there are also IRA’s and 529 plans, you’ll need power of attorney to manage those.

For those with living trusts:

-Invite your successor trustee(s) to meet with you and your estate attorney to ensure that everyone understands what’s expected of them.

-Consolidate your accounts.  Trust conversions require a lot of paperwork.  It will be much easier for your successor trustees to go through it two or three times rather than twenty. 

-Review your trust on a regular basis – every 5-10 years, or whenever something changes. This can be changes in estate law, or changes or additions to your beneficiaries.

-Consult with your estate attorney about the best way to give your successor trustee access to funds that can be used during a period of incapacity. 

-Establish Power of Attorney for health care and financial affairs.  Don’t wait until there’s an emergency.

In retrospect, it’s not hard to understand why things happened the way they did.  My parents loved their home and didn’t want to leave it, even as it became unsafe for them.  They valued their independence.  When their health situation made it necessary for me to take more control, we were all very preoccupied with managing their moves to assisted living, arranging for their care and navigating a difficult transition.  When your Mom’s in the hospital, you just want to rub her feet and make her feel better.  It’s not the right time to say “about that trust paperwork…” 

Schedule a time to put your estate (or your parents’ estate) documents in order now, while everyone is in good health.  I know they are hard conversations for any family, but it’s worth being proactive about this.  Do it because you love each other, and want this difficult transition to go as well as it might