Elder Care and Guardianship Abuse
Here are some tips to help you protect your parents when other family members try to take advantage of them.
This is especially true if the family members have joint investments or bank accounts with their parents. Elder care for seniors is a necessary but easily abused role, and it can sometimes be tricky when it is a family member committing the abuse.
Some will borrow money from their parents with no paperwork to back up the transactions or even move money out of their parents’ accounts without telling their parents what they are doing.
Listen and observe
In talking to your parents, listen to what they are saying about family members who have stopped to see them or have taken them on errands to their bank or investment broker.
Review any paperwork or mail in the house for bank statements, loan statements, or investment statements and review the title on the statements. Is the title only in the name of your parents or does a family member also appear?
Review copies of the checks to make sure a family member isn’t writing checks out to themselves but recording the payee differently in the check register.
Another way to do this is to buy a workbook to help your parents organize their assets, family history and final wishes. Asking the questions from that type of book and recording your parents’ answers can give you much information as to what is going on currently in their life and their finances. It can also be great quality time with your parents.
Business and family
Family members who own their own business may be looking for a quick loan to cover a short-term cash shortage. If that cash shortage continues, the loans get bigger, and, usually, none of the loans are documented.
Help your parents treat these loans as a bank would. They should be asking questions about what the loan would be used for and how the family member expects to pay it back. There should be a promissory note, personal guarantees, and even a lien put on real estate. Call in an advisor to help with implementing the proper documents.
Home buys, school tuition
Parents who lend their kids money to make a down payment on a new house or to pay for college tuition should also use common sense before agreeing to lend the money. Again, the promissory note and the lien are important.
Even if the intention is to forgive the loan eventually, your parents should consider:
- They may need the money back someday to take care of themselves.
- The child might have creditor issues, get divorced, become gravely ill or die and the lien put on the house might protect the amount still owed on the promissory note from creditors or an ex-spouse.
Sometimes family members run into financial problems, then look for a place to live. It’s easy for them to ask to “borrow” your rental house until they get back on their financial feet. Suggest to your parents that this transaction be treated as any other real estate transaction with an outside person.
There should be a lease at an amount that is based on the rental rate for the neighborhood. The lease should establish the landlord-tenant relationship and should list the consequences if payments are not made. It should also spell out who is in charge of making the property tax and insurance payments.
Ideally, your parents would hire a management company to deal with the family members. The management company is less likely to bend the rules for the family members, and a private fiduciary role is less easily abused and provides better recourse for families.
Moving back home
If a family member asks to move back into the family home for a short period of time, also treat it as a business transaction. You may not be able to get them to sign a lease or a promissory note. You should, however, be able to set boundaries and conditions for living there. For instance:
- Is the family member going to pay rent?
- If not, are they willing to do chores, wash clothes, fix meals, etc., to compensate the parents for letting them live there?
- If they are paying rent, what part of the everyday chores are they willing to share as part of being a family member?
- How are they going to share the cost of the living there such as utilities and food?
- What happens if the family member doesn’t live up to their promises?
Take time with your parents on the above topics to help protect them from family members who may want to take advantage of them.
By MARCIA CAMPBELL | Contributing columnist with THE PRESS ENTERPRISE
PUBLISHED: March 10, 2018
Marcia L. Campbell, has worked as a CPA for over 25 years specializing in seniors, trusts, estates, court accountings and probate litigation support. Reach her at Marcia@MCampbellCPA.com