Who Do You Trust?
There are many crimes that turn my stomach. Being a father, perhaps most of all it's crimes against children. But a close second is crimes against the elderly. Both involve the vulnerable being preyed upon and usually occur in private, with the effects often showing up only after the fact.
kElder abuse, physical, emotional, and financial, is a large and growing problem in our country, impacting about 1 in 10 Americans over 60, according to the National Council on Aging.
Family members, friends, close associates, caregivers – they can all attempt to profit from the perceived weakness of an elderly person. It's terrible to hear about but it happens more often than the numbers indicate. The Council estimates only 1 in 14 cases are reported to authorities and a family member is the perpetrator almost 60% of the time.
This issue has garnered more attention recently due to the legal issues of Stan Lee, age 95, creator of Marvel Comics characters like Spider Man, Iron Man, and Black Panther. Lee is assumed to possess about $50mil in assets and supposedly earns an annual salary of $1mil, which seems fitting for a prolific creator and comic icon. (Full disclosure – I'm not really into comic books but can still appreciate Lee's lifetime of work and contribution to popular culture.)
Unfortunately, Mr. Lee seems beset by vultures, according to numerous articles and, specifically, one from The Daily Beast referenced below. After losing his wife of 67 years last year, there have been stories coming out that should serve as a warning for anyone who hasn't done meaningful longer-term planning.
Here are a host of planning issues everyone should be aware of:
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Complexity is not your friend. For some, diversification means having cash and investments at lots of different banks and brokerage firms. They have some money over here, some over there, and so forth. This can be hard to keep track of and important details can be overlooked. Old checks can float around. Money can go missing. Account beneficiaries can get stale.
Try to simplify your holdings as much as possible as you age. This helps with monitoring transactions, balances, account ownership and beneficiaries. If you can't go through all your statements at least monthly, you have too many accounts.
Mr. Lee apparently has a variety of trusts, business deals, and accounts in his name. His deceased wife (and her trusted advisors) seems to have been the person who managed all the complexity for decades. Her passing created a knowledge and capability gap that others are trying to fill.
Assuming the surviving spouse has enough financial knowledge. Couples often assume the surviving spouse knows about the household's financial matters, the details, the how's and the why's. When they don't the surviving spouse usually has a steep learning curve and tends to lean on others for advice.
In the weeks after her passing, Mrs. Lee's decades-long trusted advisors were fired and replaced by some of the vultures in Mr. Lee's orbit. Sudden changes like this are on the Council on Aging's symptoms list indicating possible elder abuse or financial exploitation.
Checks and balances are critical. When his wife was alive, Mr. Lee's household reportedly had the benefit of long relationships with regulated investment advisors and a quality CPA firm. Regulation provides at least minimum internal controls and transparency that helps ensure safety of assets, which probably (and ironically) led to the advisors' firing.
It's all too common for seniors to get involved with unregulated "advisors" who gain access to bank and investment accounts, get signing authority, and usually end up "investing" money for the victim. These folks often start slowly, maybe as a caregiver or smaller-scale advisor, building trust over time only to move in quickly when they sense an opening.
I have a will, so I don't need a trust. This is a common refrain that I think mostly stems from a lack of knowledge about estate planning. The bottom line is that placing your assets in a revocable trust with you and (presumably) your spouse as co-trustees allows you planning flexibility. A will is a stopgap measure, not a longer-term planning solution. For example, trusts allow you to help a spendthrift adult child (as Mr. Lee's daughter is reported to be), whereas a will could just give them a chunk of spending money with no restrictions.
The Lee's apparently had trusts to hold some of their assets, but they didn't plan for Mr. Lee's needs as he aged alone. The Lee's could have created irrevocable trusts to hold certain assets for Mr. Lee's benefit. These trusts could have been managed by prudent third parties, who would likely have stood between the assets and the vultures circling.
My adult child is the best person to serve as my successor. Adult children are the people most often selected as successor trustees and most of the time this works well. But when it doesn't work, it really doesn't work. The adult child could be incapable of serving as successor. Frankly, this is understandable because most people aren't financially savvy and don't have the time to learn.
For this and other reasons, it's wise to consider appointing a second successor trustee to help the first. This could be a sibling, other family member or, ideally, a professional, like a CPA, advisor, or even a bank trust department.
Unfortunately for the Lee's, their only child is reported to be incapable of managing her parent's estate (or her own, for that matter). In this vacuum other "trusted advisors" seem to be vying for the job. Trustees have complete authority over trust assets, so proper selection is critical. They are supposed to act as fiduciaries for the trust beneficiary, but that may not stop them from self-dealing or even just being stupid.
From my perspective, or the perspective of any reasonable outsider, Mr. Lee seems to be a victim of financial elder abuse. The authorities are getting involved, but I wonder how much longer the situation will be allowed to continue. I also wonder how long it would have taken the authorities to show up if it wasn't Stan Lee, but just another senior being taken advantage of by a family member or trusted friend.
The moral of the story is to plan for the eventuality that you could be living alone and may not be capable of controlling your finances. Work with trusted and professional advisors who are accountable to others and where checks and balances exist. Deviate too far from that structure and potential problems are hugely magnified.
Here are some links to read more about these issues:
https://www.ncoa.org/public-policy-action/elder-justice/elder-abuse-facts/
https://www.thedailybeast.com/picked-apart-by-vultures-the-last-days-of-stan-lee
Have questions? Ask me. I can help.
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