Trusts: A Tool to Protect Against Elder Financial Abuse
by Stephan J. Lipskis, Esq
For many the word “trust”, when used in the context of estate planning, conjures images of well-heeled aristocrats, oil tycoons, and other stereotypically wealthy individuals. While trusts may be used to preserve wealth for the already wealthy, there are features of trusts that offer significant benefit to those without exorbitant bank accounts.
A conventional estate plan will include at least a Power of Attorney (“POA”), an Advance Medical Directive (“AMD”), and a Last Will and Testament (“Will”). While these documents offer great flexibility, they do have their limitations. An AMD only operates with regard to healthcare decision-making. A POA only operates during the life of an individual and creates an authority to act without creating an affirmative duty to do so. A Will only becomes effective upon the testator’s death.
The aforementioned limitations create some practical difficulties. For instance, agents under a power of attorney may act inappropriately after the death of the principal, may refuse to act because they are unsure, or may lack sufficient power to adequately protect the person granting the power of attorney when necessary. An executor under a Will may attempt to perform actions prior to the death of the testator or be delayed in acting because qualification is required for certain actions. Many of these limitations may be addressed by incorporating a trust into an estate plan.
In order to explain how the issues are resolved using a trust, a brief discussion of how a trust operates is helpful. A trust is created during the life of an individual and provides instructions for the disposition of the property held in the trust by the trustee. The trust lasts until it is either revoked or terminated. Accordingly, a trust may continue in existence from its creation until well after the death of its creator. This means that a trust, unlike a Will or POA, can operate during the life of the creator and after the creator’s death.
Importantly, the trust property is controlled and managed by a trustee, who is required by law to act in the interest of the beneficiary of the trust. The trustee is further subject to guidance and restrictions stated in the trust. Generally, the trust’s creator serves as the initial trustee and beneficiary of the trust. The trustee changes in the event of the creator’s resignation, death, or incapacity. Changes in the event of incapacity are particularly helpful for several reasons. Such changes bring to bear the successor trustee’s duty to spend funds for the benefit of the trust’s creator, because the creator is sole beneficiary of the trust, generally. Further, the successor trustee (or trustees) has access to the trust funds in a manner that they must be used for the incapacitated creator of the trust but the creator cannot withdraw the funds.
The use of a successor trustee in the event of the creator’s incapacity proves to be particularly useful in cases where the creator of the trust has limited capacity, and is being preyed upon by financial abusers. Financial abusers of the elderly often convince the elderly individual to turn over funds or use a fraudulent POA to withdraw funds themselves. Funds titled in the name of the elderly individual are relatively unprotected from attacks by fraudulent POAs. Furthermore, an individual of diminished capacity who has not been declared incapacitated has full rights to withdraw funds from an account bearing their name. Funds titled in a trust may only be reached by the current trustee. Furthermore, a power of attorney fraudulently exercised by a financial abuser cannot easily be used to access a trust account, and the trust account is not directly accessible by the incapacitated individual after the successor trustee has been appointed. Accordingly, use of a simple trust takes away two commonly used tactics of those who attempt to elicit money from elderly individuals with diminished capacity.
This method is not necessarily unavailable if such abuse is already occurring. The elderly individual is likely incapable of executing a trust (due to diminished capacity) but may be able to have their agent under a previous POA execute such a trust if the POA authorizes the creation and funding of a trust. Alternatively, appointment of a conservator would be required to take control of the individual’s funds and prevent further abuse. If you fear financial abuse or know someone who is being taken advantage of, the Hook Law Center’s attorneys are available to assist in planning that limits the ability of elder financial abusers to reach assets.
Ask Kit Kat: Mourn Cecil
Hook Law Center: Kit Kat, what can you tell us about Cecil, the beautiful lion from Zimbabwe, who was lured from the sanctuary of a national park to be killed by an American hunter?
Kit Kat: Well, it’s regrettably true that Cecil, a majestic lion known for his black mane, was lured by an American hunter, Dr. Walter J. Palmer, a dentist from Minnesota, out of a national park to be shot by bow and arrow on non-park property. So, technically the kill was legal, but only in the narrowest of senses. This is how it happened. In early July (2015), Dr. Palmer’s hunting party tied a dead animal to a car and drove it to an area just outside of the park. This caused Cecil to wander off park property. Cecil was then shot by a crossbow. When that did not completely do the job, he was tracked for almost 2 days before being shot by a gun. To add more horror to the story, Cecil was then beheaded; his carcass left to decay in the blazing sun.
Dr. Palmer paid $54,000 for the opportunity to hunt a lion, according to the Telegraph of Britain. While he has apologized saying he was guided by locals, this is not the first time he has had problems related to hunting. He had been placed on probation in 2008 after pleading guilty to making false statements to US officials about where a black bear was killed in Wisconsin.
Now Dr. Palmer may finally receive his just desserts—his dentistry practice has closed for the time being. According the Minneapolis Star Tribune, it closed as of July 28, 2015.He’s become a pariah. Zimbabwean officials are considering charging him with poaching. Sad that Cecil had to be part of the story. (Katie Rogers, “American Hunter Killed Cecil, Beloved Lion That Was Lured Out of Its Sanctuary,” The New York Times, July 28, 2015)
- August 5, 2015 – Andrew H. Hook will present to the staff of Personal Touch Home Health Services in Newport News, VA.
- August 6 – 8, 2015 – Andrew H. Hook will attend a 3-day financial planning conference in Tyson’s Corner, VA.
- August 12, 2015 – Andrew H. Hook will be speaking to a group at Maryview Hospital in Portsmouth, Virginia.
- August 20, 2015 – Andrew H. Hook will be speaking on Veterans Benefits at The Chesapeake Assisted Living Facility in Chesapeake, Virginia.
- August 21, 2015 – Andrew H. Hook will be speaking to a group at DePaul Hospital in Norfolk, Virginia.
- August 22, 2015 – Hook Law Center is sponsoring “Shred with a Purpose” to be held at our Virginia Beach office, 295 Bendix Road, from 9am until 12Noon. Donations to the Alzheimer’s Association for the “Walk to End Alzheimer’s” will also be accepted. For more information, please call 757-399-7506 or click the following link to view the event flyer: Shred With A Purpose Flyer.
- August 25 & 26, 2015 – Hook Law Center Seminar Series: Topic: “My Father Has Been Diagnosed With Alzheimer’s… Now What?” Click Here for Locations and Registration.
- August 27, 2015 – Andrew H. Hook will be speaking to a group at Mary Immaculate Hospital in Newport News, Virginia.
- September 9, 2015 – Andrew H. Hook will be speaking at a Virginia Continuing Legal Education seminar.
- October 9, 2015 – Andrew H. Hook will be part of a panel discussion at the 2015 Art of Healthy Aging Forum & Expo on Friday, October 9, 2015, at the Virginia Beach Convention Center, 100 19th Street, Virginia Beach, VA 23451. The forum & expo runs from 9 a.m. – 2 p.m. Tickets are $15 until September 30th (limited seating). $25 at the door. To register for this event, please click registration.
- October 26, 2015 – Shannon Laymon-Pecoraro will be speaking at the National Business Institute’s seminar on The Probate Process from Start to Finish in Virginia Beach, Virginia.
Distribution of This Newsletter
Hook Law Center encourages you to share this newsletter with anyone who is interested in issues pertaining to the elderly, the disabled and their advocates. The information in this newsletter may be copied and distributed, without charge and without permission, but with appropriate citation to Hook Law Center, P.C. If you are interested in a free subscription to the Hook Law Center News, then please telephone us at 757-399-7506, e-mail us at email@example.com or fax us at 757-397-1267.