You may have recently seen a news story featuring actor Mickey Rooney and his challenges in protecting his assets from his family. Below is a link to an article that speaks to the issue of elder abuse by children and includes a video clip of his testimony before Congress. I would like to address the issue of financial dealings between parents and adult children, both abusive and otherwise. Let’s look at the non-abusive first.
When I meet with people the first time and am gathering information on their situation, I ask “Do you have any accounts or assets on which your children are joint owners?” Why this question? The reasons include:
- If you put one or more of your adult children as joint owners of your financial accounts or other assets (your house for example), you cannot remove them without their written consent. So, if an issue develops later with that child, your are stuck with the joint ownership unless they agree to remove themselves.
- If an adult child who is a joint owner is sued, declares bankruptcy or gets divorced, the court may attach some or all of your account to pay for your child’s problem. I have seen cases where the courts took 100% of an account to address a problem of one owner.
Given the above, I recommend that you avoid joint ownership of any accounts with your children. Your children can help you manage your affairs if there is a valid Durable Power of Attorney in place; you can also name an adult child as an additional authorized signer on a checking account. Just avoid joint ownership despite what the teller at the bank says. If you choose to give your principal residence to your children, consider using a Life Estate Deed that permits you to live there as long as you wish provided you maintain the property, pay the property taxes and cause no liens to be placed against the property. Again, I have seen cases where parents have been threatened with eviction due to the actions of their children. Don’t let that happen to you!
As for abusive behavior, it can take many forms. I have seen too many cases where an adult child continually borrows money from his/her parents to support a lifestyle beyond their means, to subsidize an addiction or to permit them the luxury of not working to support themselves. I have seen parents virtually bankrupt themselves helping kids who were, in my view, taking advantage of their parents. Also, children can put pressure on parents to distribute their estate now rather than waiting until death. The argument is that “you can see all the good that your money will do”. The problem here is that people are living longer and often need every penny they have to support themselves and pay for healthcare needed in their older years. If you give the money away now, will your children support you later?
Finally we have the intentionally abusive or fraudulent actions. These take the form of stealing the parents’ funds, investing in bogus financial schemes, pledging the parents assets as collateral for loans taken out by the children, etc. These actions occur more frequently than we realize and are rarely prosecuted as the parents are often ashamed to admit their children would behave that way. Given the reality that many baby boomers are coming into retirement with far less in savings than they need, I believe we will see a sharp increase in these instances of financial abuse of parents in the future.
I have helped many people evaluate their situation before committing to transfer money or other assets; I have also reviewed many financial and legal documents to make sure the interests of the parents are protected. Finally, I have worked with a variety of attorneys to develop legal and estate plans that pass funds on at death in an appropriate manner. If you are being pressured to part with your resources or just want to be sure that your accounts are set up correctly, give me a call and let’s find a time to meet.