When Adult Children Fear an Elderly Parent is Being Taken Advantage Of:
By Jonathan Reed
Most parents tell their children that most or all of what the parents leave when they die will go them.
Unfortunately, we often get calls like this: "My mother (or father) seems to be getting a bit senile or crazy. She is taking strangers into her house. She has substantial money, but my sister and I are afraid someone is going to take advantage of her."
If the Parent has a Trust:
In a situation like this I try to figure out if the adult child talking to me has good objective evidence that the parent is probably not mentally competent to look after his or her own financial affairs. If the answer is yes, then I ask if the parent has his or her assets in a trust. This is because most trusts are set up with the person who sets up the trust being trustee. Most trusts also have provisions for removing the original trustee upon evidence of incompetency to be a trustee. These provisions vary from being in the sole discretion of some relative such as one or more children to requiring medical affidavits. Most trusts also provide that the original trustee may resign in favor of the successor trustee, which in our example would mean Mom allowing one of her children to take over her financial affairs.
If there is an existing trust, then the question is whether all of the assets are in that trust. If not, can the parent be talked into transferring the assets outside of the trust into the trust?
Now, if all of the assets are in the trust, the adult child can ask the parent to voluntarily resign as trustee and to allow the successor trustee, usually one of the children to take over. This sometimes works. If it doesn't the children can invoke the provisions in the trust providing for the original trustee becoming mentally disabled and announce that the new (successor) trustee is taking over.
Then the successor trustee advises any banking or other institutions holding the parent's money that the parent is no longer trustee and has been replaced by the successor trustee. If the parent agrees or confirms this, there is no problem. But if the parent claims he or she is still competent and is still the trustee, the institution holding the money will probably freeze the account and advise all concerned that nothing is leaving the account without a court order.
Here in Las Vegas, Clark County, Nevada, the probate court handles this sort of trust dispute. If both sides hire competent attorneys and both sides produce conflicting medical affidavits, the legal contest can be very unpleasant, expensive, and lengthy.
If the Parent Does Not Have a Trust:
If the parent does not have a trust, (or has significant assets outside the trust) the only way the concerned children can obtain control over the parent's finances is for the children to Petition the Court to appoint one of them Guardian over the Estate (Property) of the Parent. This procedure, even if the parent doesn't object, is not simple. The Guardian must be a state resident so if none of the children are Nevada residents, but the parent is, a Nevada resident co-Guardian will have to be appointed. Periodic accountings will have to be made to the Court.
Again, if the parent objects and hires a competent attorney and obtains favorable medical affidavits, the procedure can be bitter, expensive and lengthy.
What Does it Mean to be Competent?
There is no one definition of competence. If the adult children are concerned because Dad is losing money speculating in commodity futures, the Court will probably want proof that Dad is a sophisticated investor and quite sharp mentally. On the other hand if Dad is spending his money on a young woman and Dad tells the Court, "Yes, I understand that my children want me to leave the money to them, and I love them, but I put them through college, did my duty by them, it's my money, and I'd like to spend it as I like," the Court might agree, even if the Court has its suspicions about how young woman really feels about Dad.
How do the Attorneys Get Paid?
Courts generally approve reasonable attorney fees when the attorney is hired by a trustee of a trust or by a court appointed guardian. In the situations discussed on this page the parent's attorney is almost always going to get paid out of the parent's money even if the parent's attorney loses and a successor trustee is appointed or a guardian is appointed.
However, if the adult child hires an attorney to try and take control away from the parent and the child loses the legal battle, the Court is likely going to take the position that since adult child was wrong, the adult child has to pay for his or her own attorney.
For this reason, a trustee of a trust with assets, can get good attorneys to work on a legal battle without paying all of the attorney fees upfront or as the case goes along. On the other hand, a lawyer working for an adult child challenging the parents control of the parent's own property is going to want to get paid upfront or as the case goes along because if the child loses, there is no reason why the parent's money should go to paying for what turned out be an justisfied challenge.
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(c) Jonathan Reed 2010