TORONTO — A “perfect storm” of financial abuse is brewing and the potential victims are among the country’s most vulnerable individuals.
Senior citizens who have accumulated some wealth are increasingly facing elder abuse in financial matters, according to a recent report of the parliamentary committee on palliative and compassionate care.
Baby boomers are the wealthiest generation in history and the largest group of seniors ever. As they begin to retire, “their children with some of the highest debt loads in history and a generalized sense of entitlement, can be tempted to look at their parents’ nest egg as a potential source of capital,” the parliamentary report states.
Financial abuse causes stress and leads to psychological and medical effects. The committee recommended co-ordinating a multilevel response involving public guardians and trustee offices across the country, along with police and the financial sector.
As a lawyer specializing in wills, Les Kotzer has witnessed instances of elder financial abuse up close. He’s seen families at odds over the disposition of parental assets. He’s advised seniors afraid to talk to their children about money. And he’s seen middle-aged “waiters” running up debt in anticipation of a big payday when they inherit their parents’ estates.
“I’m seeing it and hearing it,” he told The CJN.
A public figure who appears regularly on radio and television programs, he often hears after the show from distraught families about the bad blood engendered by fights over wealth.
Greed, a sense of entitlement and financial illiteracy all contribute to the coming “tsunami of financial abuse,” he said. And parents who love their children often don’t expect to be let down by those closest to them. As a result, they get into situations in which trusting in others puts them into dire financial straits.
“Beware” those who could take advantage of you, he cautions, and “be aware” of your financial situation.
One common pitfall is the move to put parents’ assets into joint ownership with their children. Those doing so are hoping to avoid probate fees, since joint assets on death immediately vest in the survivor. Probate fees, as a result, are avoided.
But the savings are relatively modest on even valuable properties – about $15,000 on a $1 million property, he said. And there’s a danger attached to joint ownership, one that parents may not be considering. If their child gets into debt, a creditor can force sale of the property to recover the amount owing.
One unhappy mom called him after she received a creditor’s letter saying they wanted to put up her house for sale.
Another hazard occurs when a parent, trusting their child, lends them money without documenting the loan. After appearing on a television show warning about the practice, Kotzer received a call from a 70-year-old woman who was working at two jobs. Her late husband had loaned their two children $100,000 and $150,000, respectively, and when she asked her daughter for the money, she was told that if she asked her husband to pay it back, he might divorce her. Her son told her the money wasn’t a loan, but a gift, and he wouldn’t return it. He even told his mom she’d have to take him to court if she disputed that, Kotzer related.
His advice: “You must get it in writing.”
Giving up control of their finances is another problem for seniors, Kotzer continued. He recounted a story told to him by a woman who was standing behind an elderly lady in a supermarket checkout counter. The woman was frantically searching through her purse for nickels and dimes to pay a bill and customers in the line were getting agitated. The woman offered the elderly lady some money, and later, when they were outside, the senior offered to send her a cheque the next month for the sum.
But why wait until next month for such a trifling amount? The senior had turned over all her money to her children to avoid taxes. She received a monthly allowance from her kids, and she feared they would yell at her if she asked for more.
Kotzer’s advice: “Be very careful when you give up control of your assets to your children to save taxes or probate.” The unfortunate reality is that “children won’t always give you your money back.”
Many seniors make a mistake in relying exclusively on their children to draw up their wills, he continued. In one case, a senior told him that only one of his children was named as an executor of his estate, which allowed him to bill the estate for work he did. On another occasion, the child gave himself plum assets, allocating less-desirable properties to siblings.
Kotzer offers clients free review of their wills and will consult with parents only if the beneficiaries are absent.
Kotzer believes the parliamentary committee hit the nail on the head when it said highly indebted baby boomers see their parents’ assets as an easy way to pay off their bills. Many feel the money will be coming to them anyway, so they might as well spend it now, he said.
To illustrate the point, he tells of a middle-aged couple that drove up to his office in a fancy car, wore expensive watches and lived in a pricey part of town. Their jobs could not have afforded them their lavish lifestyle, especially when the wife said her husband was a “waiter.” Not the kind that works in restaurants, she said. “‘He’s waiting for his mom to die to get the house and pay off all his debts.’”
Not all the stories end badly, though. Kotzer recalled one incident in which a mom had turned over her house to her daughter after she’d been threatened that she’d die in her own urine and filth if she refused.
Later, the mother visited Kotzer’s office by herself and had him “make a new will and cut her daughter out.”