I’m publishing this information after years of watching wealthy parents be brainwashed by one spoiled child to the detriment of other siblings. My hope is to provide simple tricks and insights I have observed as a retail banker for many years to help you navigate a messed up system for protecting an elderly person’s money from wasteful siblings and other types of parasites. It works on the principle of capitalism you will be motivated to help (your parents) protect their money so you can eventually inherit it and not have to pay for their retirement or waste time with medicaid paperwork. Skip down to EXECUTING THE ATTACK IF YOU DON’T FEEL LIKE READING ALL MY BACKGROUND INFORMATION.
When Does the Train Run Off the Tracks (fault dynamics)
The fight over money begins in adolescence with sibling rivalries that if left unchecked by the parents can extend into adulthood. In reality parents do not treat the children fairly. For example, in the old days boys were the favored child and were often spoiled by the mom. This is probably where the term “Bad Boy Trust” came from. This spoiled child will grow into a useless entitled adult. We are reminded of entitlement kids when we read about Patrick Kennedy raping girls or in extreme cases killing their parents to get money like the Menendez brothers. Parents usually do not want to spoil one kid over the others, but it happens.
In the period of time when the baby boomers were coming of age society did not have self help books or talk shows with Dr. Phil.
Section 2 Years of Learning to Squander Money
As the bad boy grows up further reinforcement of bad behavior takes place. The parents usually the mother in the case of a boy will continue to spoil the child into adulthood. The mother cannot just tell the Baby Boy no and she is probably aware the whole time this kid needs to grow up. After she gives him the gift she will usually follow-up by saying this is the last time. These gifts are the purchase of new cars, houses, consumer electronics and funding stupid business ideas in hopes junior will find what he’s good at. These purchases can also extend to the children of the bad boy as well. Meanwhile the other sibling usually a sister or stepchild are like the spectators at a bullfight watching the matador bleed the bull for every drop of blood. This behavior will not stop on its own. Trying to discuss the spending with the Bad Boy or the parent is usually futile and will lead to more animosity. This is when laying down the ground work to pull the safety net out from under the bad boy should begin.
Section 3 Realizing You Need a Plan
Now that a pattern of bad behavior has been established well into adulthood everyone realizes this ship will not change direction on its own. This is when the responsible sibling has to quit feeling sorry for themselves about all the years they were neglected and TAKE ACTION to stop the financial bleeding. THE GOVERNMENT WILL NOT HELP YOU. The care of the elderly person will fall on the responsible siblings so they will need what ever investments and income is available to fund Nurses (long term care, homecare etc) and have some inheritance left over for the family. This requires the realization that you are playing a long game and will have to make difficult choices to preserve what money is left. If you do nothing then you will be one of those people writing to financial experts How do I get my mom’s money back after my brother stole it and spent it all on drugs and women? Don’t wait for this to happen! I know you are thinking this is insane how can someone keep throwing money away on one child.
Section 4 Planning Your Attack
Since the mother cannot say no to the Baby Boy you have to persuade her to add your name to the bank and investment accounts (danger of a gift here). On investment accounts the titling is set up in way that you each have to sign to withdraw funds. So this will help the mother tell her Baby Boy I cannot give you the money anymore I do not have access to it unless your sister signs too. The Baby Boy will probably try to have his name added to the account but you will have to agree at this point, and of course you will not. Under no circumstance can it be beneficial to have to negotiate with a spoiled child with no real world business/life experience. As you will see, you will have to make all future decisions regarding your mother’s (father’s) care and that will be difficult enough, you do not want to be seeking co-approval from an adult spoiled child.
Visiting a lawyer for guidance with estate planning is basically useless in this scenario. They represent your mother and will likely view you as the person trying to steal the money, even if you show them proof it’s the other sibling. Additionally their advice will not help you they will likely recommend an irrevocable trust to move the assets into. Basically recommending services they can bill you for.
Executing the Attack
Retitling Accounts
You should have your parent’s investment and bank accounts accounts retitle to Sister Responsible (your name) and Mommie Enabler (parent name). You should also have yourself added on as a POA to the accounts too. When and if dementia sets in you will need to have your name removed from the assets but retain control over them via the POA. The reason for not owning the assets is very complex when the parent dies you want to receive a step up in basis at death. This is to avoid capital gains tax. The only way to do this is to not have an ownership interest at death. If you have have an ownership interest at death you may be responsible for hefty capital gains taxes. This is a risky strategy to play because the person could die unexpectedly or the IRS may decide since your name was on the account at one time there is no step -up in basis and you will owe taxes. I am going to open this topic up to a discussion in a blog. However, if you do nothing one thing you can be certain of the other sibling will spend the money down to zero.
Trusts
I believe an Irrevocable Trust is complete waste of time when you put money into it s taxable at the corporate tax rate. Consult with a lawyer or CPA.
Be careful of revocable types of trusts that attorneys charge big fees for. They write them up then don’t tell the client they need to be funded or have assets retitled. This is why it’s important to review your parents estate planning documents. If they tell you, “oh don’t worry I have a Trust” you should worry. Well you should worry because they might not have retitled the assets into the name of the trust so it’s worthless. Or their step kids may have taken it and other documents so look at the docs and make copies.
Retitling the Primary Residence
Put the house in a Life Estate with you as the Remainder and the parent/s get the life estate. Check in both types of life estates have a qualified lawyer explain the difference to you and have the lawyer prepare the documents. You will need to file the documents with the county or Parrish and you will receive back a stamped official document. Here’s what the lawyers do not tell you or likely don’t know: you must reapply for a the homestead exemption or you will get a bigger tax bill and it’s a pain in the ass to fix.
I am not real experienced on how to handle rental properties if that’s your parent’s source of income. but I would suggest getting an assignment of rents and leases, or a POA so you can collect rents on the properties. Ask a Real Estate Lawyer the best way to proceed.
Car (Gone in 60 Seconds)
Also make sure to get the person’s car retitled to your name or joint ownership. Most baby boomers drive SUV’s. its difficult for granny to get in an out of those when you are taking her to doctor appointments. Additionally she probably would rather ride in her car, old people like familiarity. i saw a situation where the Baby Boy was cut off and he needed a car. since the old lady could not give him money she signed over the car to him. So the daughter who was caring for her mother had to buy a new car because it was too difficult for the old lady to climb in and out of the SUV.
Guardianship Classes
Since you are going to be taking care of the elder you should also enroll in a guardian class so you are following an established set of convention providing the care. I can promise you your sibling will file Elder Abuse charges against you and the State will send out an Elder Abuse Investigator. So you should have medication logs, and a journal of what the money is being spent on down to the penny. ig you can demonstrate that you know what you are doing and document where the money is going and show adequate care of the Elder you should be good
Make sure you have a medical POA and other items like a living will and other documents associated with end of life care. If you need to take money from the elder for personal use I would recommend claiming it as income and paying taxes on it. Then if you are ever sued you will have records that you did not arbitrarily take money for whatever.
Dispersion of Assets
The benefit of getting all the assets retitled prior to death is they should just pass to you and your siblings automatically. I would definitely recommend having a lawyer draw up the documents and have a second expert review them for holes. i would additionally recommend annual check – ups of strategy in place from a financial planner or lawyer because laws change circumstances change etc. don’t be cheap or lazy with staying ahead of the curve. You did all this work to get here there’s no smooth sailing across the finish line.