Issues involving seniors and their guardians can sometimes present problems for financial advisors and their elderly clients.
“We are seeing financial exploitation of the elderly by court-appointed third-party guardians where there is little oversight,” said Debby Valdez, president of Guardianship Reform Advocates for the Disabled and Elderly in San Antonio.
The problem is exacerbated by a reported rise in guardianship cases. In a survey conducted by the Center for Elders and the Courts, 37% of judges, court managers and clerks who responded said guardianship filings have increased over the past three years.
Often it is a child or other relative who is appointed as a guardian when an elderly person can no longer manage his or her own financial affairs. However, 78% of abusers of the elderly are a spouse, child or another relative, and almost one in four victims is age 86 or older, according to a 2013 Department of Aging report. “When dementia comes into the picture, it further complicates the situation,” said Stephen Moses, president of the Center for Long-Term Care Reform in Seattle.
“I can see the conflict of interest with the financial advisor when a guardian is appointed because they are managing a substantial amount of money and they are being crowded out by way of a third-party guardian,” Moses said.
Guardianship is a fiduciary relationship created by state law in which a court gives one person or entity the duty and power to make decisions for another person. Guardian duties can include arranging care for a person, as well as managing and investing her assets in her best interests, and using the income and principal to pay for her comfort.
The powers a guardian has can vary among states. “In Illinois, the Probate Act governs what investments can be made for an elderly person who is found to be incompetent,” said Kerry Peck, a Chicago-based elder law attorney.
Financial advisors may find guardianship employment opportunities themselves or through a bank or estate planning attorney.
Guardianships may represent an opportunity for advisors, but they are not without risks. “This is an area that financial advisors could expand into; however, the whole area of guardianship is fraught with potential problems, ethical and otherwise,” Moses said.
That said, advisors may be well-suited for the task. “Financial advisors have a specialized knowledge in managing a ward’s livelihood, and there is a lot of trust and confidence put upon them to carry out the financial wishes of the individual,” Peck said.
“We work with stand-alone financial advisors who are often engaged to manage the assets of a guardianship,” he continued. “They have the experience and resources to provide a clear financial outlook and run a budget analysis to prevent the depletion of assets. Financial advisors play an integral role in assessing the projected return on investment, which will be used in a very important manner—i.e., a determination as to the resources available for the care and housing of the disabled ward.”
Advisors As Guardians
January 2015
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" .... the duty and power to make decisions for another person." The above statement is an incorrect statement of law, period ----- guardians are not appointed to "make" decisions for another person --- guardians are appointed to ascertain what decision the person would make were they capable of expressing for themselves their wishes desires, choices and preferences. Guardians who "make" decisions as they see fit are discriminating against the disabled person and denying that person of their right to personal autonomy. I sure wish just once I would read an article that made this distinction clear and accurate instead of perpetuating the misnomer that guardians "make" decisions ... guardianship is practiced wrong, taught wrong and promoted wrong ... which is how and why the exploitation and financial rape is so prevalent.
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No doubt family members using Durable Power of Attorney to steal is a terrible problem. But, appointing financial planners as guardians will not make it better. In fact, it may make it worse. “78% of abusers of the elderly are a spouse, child or other relative†doesn’t tell the whole story. The National Center for Elder Abuse did a three month study of national news feeds and found that family members stole $11 million. Professionals stole over $200 million from elders. The MetLife surveys have always been the most widely accepted yardsticks for measuring financial exploitation of the elderly. The 2010 MetLife survey states family (along with caregivers) is the #2 abuser of the elderly; #1 is the “professionals†such as lawyers, financial planners, etc. Join the national movement for reform of unlawful and abusive guardianships and conservatorships. Join NASGA!