RECENT HUMBLEDOLLAR articles have addressed issues of aging, including defrauding the elderly, end-of-life considerations and preparing our homes to age in place. It must be the season for worrying about the elderly because I’ve also had their welfare on my mind, thanks to several recent events.
First, a friend’s 93-year-old mother fell down a flight of steps in her home. A faulty handle came loose from a door at the top of a staircase, and her momentum propelled her backward. My friend’s mom is still spry, mentally sharp, pays all her bills on time and lives independently. Luckily, she suffered no serious injuries, but she was badly bruised.
In discussing the event with my friend, I asked about the status of his mother’s estate documents, such as her will, and financial and medical powers of attorney. He said that his mom came from a generation that didn’t discuss money with their children, and that she was reluctant to involve him.
Later that same day, at my local volunteer tax preparation site, I came across two returns that raised concerns. Both were for clients in their 80s who had modest incomes comprised of Social Security, small pensions and required minimum distributions from their IRAs. Both had statements from major financial institutions that showed complex portfolios and dozens of transactions.
The first client, a widow, had more than three dozen short-term capital gain sales, about 40 long-term capital gain transactions and 10 pages of dividend details. Her portfolio had dozens of mutual funds, individual stocks, and environmental, social and governance (ESG) funds.
There also were several single-country emerging market funds and seemingly duplicate municipal bond funds. Many of them had high annual fees and front-end loads. The statement showed she paid approximately $2,000 in fees. This seemed to me and my tax prep colleagues to be an expensive and complex portfolio, not at all consistent with the widow’s modest income.
The other older client, a widower, had a consolidated statement detailing the proceeds of a Section 1256 contract. None of us knew what a 1256 contract was or what to do with it. The IRS defines it as covering such esoteric investments as a regulated futures contract, foreign currency contract, non-equity option, dealer equity option or dealer securities futures contract.
An unusual attribute of 1256 contracts is that they’re “mark to market.” Any contract held at the end of the year is treated as if it was sold for its fair market value, with any loss or gain treated as a short- or long-term capital gain in that year. The client was unaware that he owned such an arcane investment.
As a volunteer tax preparer, I see all kinds of financial situations. The majority of our clients are elderly, and many are widows or widowers. When I see this kind of inappropriate wealth management “help,” it makes me wonder who is looking after these seniors.
For the elderly in our lives, what warning signs should we stay alert to? A fall is a big red flag. It may be an accident, but it can result in physical or mental health issues. If you have an elderly person for whom you feel responsible, here are some other warning signs that indicate that you should perhaps get more involved:
What tangible steps can we take to help our parents and loved ones? Here are six suggestions based on my and my wife’s experience:
Caring for aging relatives can be challenging. Your concern and desire to help may not be welcomed at first, or at all. You may have to show patience and persistence—and take solace in knowing that you’re doing the right thing.
Richard Connor is a semi-retired aerospace engineer with a keen interest in finance. He enjoys a wide variety of other interests, including chasing grandkids, space, sports, travel, winemaking and reading. Follow Rick on Twitter @RConnor609 and check out his earlier articles.