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.
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Nice article, Rick. My parents are in early 70s, and I am starting to pay more and more attention to those things as they are getting older. Thank you for sharing.
We are in the midst of this with my in-laws. My husband’s stepfather was in some denial for years about my mother-in-law’s clearly increasing dementia and wouldn’t even make sure she got to a doctor. (“We’re fine and it is what it is—nothing they can do.”) We pointed out that he’d been paying on a long-term care policy for her for over 20 years but that he couldn’t access the benefits without a doctor’s diagnosis. That got through to him. As you said, it took several attempts at conversations to get him to lower his walls and to focus, even after a terrifying episode in early 2020 where she went missing for four hours.
We also, as I wrote recently, updated our own estate plan, in part motivated by the kind of chaos in my in-laws’ plan that you describe here with your clients—and yes, now we’re saying things like, “Well, our attorney recommended…” Our estate attorney also offered to help my husband with any questions about his folks’ estate when the time comes, and we’ve also met their estate attorney (who to our astonishment is 90 years old—a spry and alert 90, but still!).
Thanks for writing the excellent article Rick. It should be distributed to every senior center in America. I also volunteered as a TaxAide tax preparer for six years until it interfered with my travels. I too observed old people being taken advantage of by so-called financial advisors, mostly stock brokers. The most common abuse was churning accounts or selling inappropriate products. The most common victims were widows where their deceased husband always managed the finances and the widows turned their accounts over to the nice person who said they would take care of everything. They would even send them a birthday card. It would break my heart. Keep up the good work.
Scary situation for both clients. Seems like they should have had a CPA or PFS (Professional Financial Specialist) overseeing their investments. I have a neighbor (age 79) who tells me he owns every single Vanguard fund. Oh, and his financial advisor is a Vanguard representative.
I do really like Vanguard but owning every single Vanguard fund does seem like overkill, seeing as there are around 381 of them. (Around 80 or so of which are actively managed—yes even at index-heaven Vanguard.)
Being a Vanguard customer, you might let them know that VTWAX is all they need to own the entire world of stocks (Or, the ETF named VT for anyone not at Vanguard.) Also, BNDW is the entire world bond ETF. Beyond those two, there would be very few other things that owning every single Vanguard fund would own. (Perhaps some commodities or something.)
Nate, my neighbor is one of those that knows everything. When he told me about owning all the VG funds, he also mentioned, percentage wise, how much his portfolio was still down…roughly 20%, when the average at the time was 8-10%. I think he may be way over diversified and it’s hurting his performance.
Great column! This was my first year doing tax preparation for AARP and it was enlightening. Some of the issues you mentioned I observed first hand. Many seniors had not been able to use our service during COVID and were just happy for the socialization. You still find seniors that have not prepared a will or titled their assets appropriately. I just recall the discussion I had with my dad. He told there was no need to worry as I was an only child. After trying to convince him of the value of a will he still would not budge. I asked a lawyer I knew to call him and explain to him the process and cost to die in his state without a will and what it would cost with a will. That won him over. I used a similar process with an elderly uncle with one son. It worked on him as well. He passed away a year ago and the process was simple for his son.
Harold, thanks for reading and commenting. And thanks for volunteering to AARP TaxAide – it sounds like you are an asset to the program. Working with our parents can be very challenging, but I’m sure you won’t regret helping them.
Good topic and suggestions Rick. Thanks.
I particularity like the suggestion to talk about beneficiary designations. Back when I was in public accounting I would typically end a face to face annual 1040 interview with the question ” Do you have your beneficiary and contingent beneficiary designations named as you currently intend for your retirement accounts and insurance policies?” Many of the larger/better (IMO) IRA custodians do list the beneficiaries on the year end tax statements. If there are no contingent beneficiary(s) listed the default contingent beneficiary is usually your estate if the primary beneficiary has pre-deceased you. Because processing taxable inherited money through an estate takes time it is not uncommon for tax deferred money going through an estate not to get distributed to the final beneficiary(s) in the same tax year as the estate resulting in the taxation at the estate level with high tax rates due to those brackets being very compressed compared to individual brackets. I have not met anyone who wants their remaining IRA assets taxed sooner at higher tax rates.
In my personal planning I favor passing assets through beneficiary designation, joint ownership or transfer upon death ownership designations. About thirty states allow real property deeds to include a transfer on death provision, I wish my state did.
Additional suggestion – For those people who have a special needs dependent and will leave substantial assets for their benefit I strongly encourage seeking the assistance of an attorney that practice in that area every day. The attorney can be expensive but mistakes may be even more expensive as the additional income can adversely impact their other benefits.
I also find it inconsistent that someone using a free volunteer tax preparer would also have $2K in broker fees. I noted that after the Tax Cuts and Jobs Act became effective many broker year end tax statements quit listing their fees as they had become nondeductible on federal returns if you itemized. If in doubt about if high fees are being are being charged you may find the fee information by referring to the non-tax year end statement. If a person has high fees it may be time to consolidate investment accounts with a low cost broker using broad based index funds at your favorite low cost broker.
Final suggestion – I also recommend a recent blog interview with Mike Piper CPA regarding steps to take after the death of your spouse.
Willian, thanks for reading and commenting. As always, you provide tremendous comments and content. I have seen first-hand some of the horrible results of incorrect beneficiaries. I think a yearly review is a great idea. And thanks for the link to the Mike Piper interview – he is one of my favorite financial writers.
I have read many informative articles on Humble Dollar dealing with this topic, and this latest addition is excellent, Richard. My wife and I just turned 70 this year. I retired 5 years ago, my wife 9. Sadly for us, we have lost our parents and all other elderly relatives. While I’m with Dick Quinn in staying engaged with others, including young people, I reluctantly must also admit that my wife and I are on the way to becoming those elderly folks you write about. We have had all the appropriate legal papers drawn up, and have ensured all beneficiary information is updated, but haven’t discussed any details with our children. Since we have always tried to be proactive when dealing with our elderly, and now deceased loved ones, perhaps now is a good time to discuss these matters with our children. Thanks for the suggestions!
Jack, thanks for reading and commenting. I encourage you to have that conversation with your children. You can decide what level of detail to provide at this time, and get into more detail as you and your wife feel more comfortable.
I also do volunteer income tax work for elderly and low income people, and I have run across plenty of folks with overly complex portfolios with high expenses. I ran into a similar situation when assisting an older (but only 75) friend with his taxes. His Fidelity statement showed losses in 41 different mutual funds, many of which had similar holdings, and all had high fees, some as large as 1.75%. He was paying an advising fee on all that, and I pointed out that if he had 40 different losing funds (and no telling how many others) and they were not pointing him to the low- and zero-expense Fidelity funds, they were not advising well. He explained that he bought each one of those funds for a particular reason and was unwilling to discuss it further. You can take a horse to water…
Brian, thanks for volunteering your time helping with income taxes. It’s frustrating that we can’t do more sometimes. Thanks for reading and commenting.
I maintain one of the secrets of avoiding the senior syndrome is to avoid seniors. Never join a seniors club. Think young. Go to a coffee shop and engage the young folks in conversation, ask them questions, just have a discussion and perhaps give out harmless advice.
I had a delightful conversation yesterday with an 8 year old and her mother. She was fascinated when I explained we had rabbit ears on our TV and that we didn’t need a phone to play games with friends. When we talked about phones in the old days – you mean a land line she said.
Her grandmother from Egypt was there too and had fun hearing what her granddaughter had to say, including no concept of clothes drying on the line in the sun.
‘’What a great way to stay young and maybe sharper.
Dick, I agree with engaging with young folks. My wife and I love kids of all ages (basically anyone younger than me), and get great pleasure from those engagements.
But there are also many interesting, active, and fun seniors in our town. I’m sure you fit into that category!
Right, a good mix is important IMO. I play golf with a group all but one upper 70s and 80s, dinner out regularly with friends our age, but you won’t find me attending a senior citizens club luncheon.
Important article. Thanks, Rick.
I’ve always handled our finances and investments and have happily avoided both the high fees and the lack of control that come with hiring an advisor. But at some point I know it will likely be necessary and I struggle with that.
Thanks Andrew. My wife and I are very blessed with two sons who are very capable, and we trust them implicitly. They married wonderful, smart, and caring women, so we are doubly blessed.
Timely article Rick, seniors seem to either lose comprehension on financial matters or lose interest, in either case it can be a mess to try and straighten it out.
Based on the financial state of many American families and the abysmal state of saving for the future it seems such affliction is far from unique to “seniors”
Lots of sensible advice. One big problem for which I have yet to find a good answer is “solo aging”: people who have neither spouse, children nor siblings living in close proximity. I am in that category, and although, as I have written, I expect to move to a CCRC late this year, I still need a better solution for a financial POA than a former step daughter in Oregon or a sister in England (I am in NC).
Kathy..I can appreciate your dilemma. While financial acumen and attention to detail are important factors to consider, there is one key factor that is primary—trustworthiness. Perhaps a trusted financial adviser could help you with making a decision in naming an agent. Good luck.
Since I am not willing to pay an AUM fee I don’t have a regular advisor. I might check with the fee-for-service guy I used for a one-off a couple of years back, but I am also waiting until I move to the CCRC. I’m sure I won’t be the only person there with this problem.
You make a great point. I have a good friend in a similar situation. He has some local nieces he trusts and has been very deliberate in his planning.
Timely article Rick, my 91 year old Dutch father in law is unknowingly expierencing financial abuse from his 58 year old perfectly cabable son who continually asks his father for money each month. Over the last 3 years alone my father in law has given him close to $45,000 euros. My wife has access to her dad’s accounts here and in the Netherlands so she can see what has been going on and since my father in law can’t see well anymore my wife has to transfer the euros to her estranged brother from her father’s account. Her father believes that my wife’s estranged brother will “settle up” the amounts he has received over the years after her dad’s passing…its become a mess to try and handle this situation. So, you are 100% right, helping elderly seniors who don’t necessarily make the right financial decions is daunting.
Thanks Mark. Good luck with your father-in-law.
Let’s hope we learn from our parents and the difficulties we had and do not put our kids through the same. This same advice applies to accepting help from caregivers when it’s time.
We expect our plans to age in place will expire at some point. Moving to a CCRC requires advance planning. Not sure exactly where or when, but we are starting to look.
Thanks for the comments, Richard. I completely agree that a well structured and communicated estate plan is a gift we give to our children and heirs.
Good article, Rick. When I see those warning signs in elderly patients, I try to have a conversation with the patient about who is available to help them. Sometimes I know the family, or surrogate family and can contact them directly. It’s touchy. Dick is right, the age of onset of our final decline varies, but it’s coming.
Thanks Edmund. It’s good to know there are caring health professionals looking out for their patients.
Good article Richard and good advice. A word of caution though. Let’s not assign numbers to “seniors” or “elderly.” The general assumption that seniors decline by age is not universally accurate.
In other words the issues described can occur at age 65 with some people and 95 in others. Some 80 year olds require assistance while others write for Humble Dollar.
As you note it’s the warning signs that count not the number of candles on a cake.
I prefer seasoned citizen thank you 😎
Thanks Dick. I agree that the need for help.can come at any age. My wife and I recently volunteered at a regional Special Olympics event. It was a great experience. The athletes varied in age from 9 years old to folks in their 60s. I also have friends with special needs children, and I’m aware of the tremendous responsibility they have, and the need for significant planning.
Even those of us who think we are still in great shape, especially the brilliant writers for HD, have a responsibility to model good behavior, and put a solid plan in place.