The client's children asked Levin if he saw anything peculiar in their father's behavior, but without the client's permission, there was little he could say. He had a meeting with the client to discuss the issue, and suggested the man get a doctor's opinion about the state of his mental health. He also suggested holding a family meeting after the appointment.
The doctor said the client was in the early stages of memory loss. The family held their meeting, and Levin went over the portfolio with the client and his children. The man's banking relationship was changed so his daughter could have access to his accounts.
"This is such an emotionally charged area for both families and advisors," Levin says. "It's often a difficult minefield with successful clients, who are faced with a loss of control and are either unwilling to accept it or want a gradual transition to the next stage."
Gregory J. Welborn, a partner at First Financial Consulting in Pasadena, Calif., says he's noticed that those with early signs of dementia or memory loss try to resist it by making "to-do" lists. But these efforts can sometimes obscure the issue.
"They start to double and triple up on their lists, figuring so long as I don't show I'm forgetting things, I won't be put in a home, or the disease won't get to me," Welborn says.
He would know. His father began showing signs of dementia about five years ago, at 82.
Those who can't mask the disease sometimes become frustrated and angry, though the family usually bears the strain, not the advisor. There's often a problem finding things, and it's the advisor's job to know where things are. Welborn had to take mail duties away from his father and turn them over to his mother. Over the course of a year, she received notices from just about every financial institution that held any of the couple's assets, including a bill from the bank that held the safety deposit box.
"My dad's onset took us through this, in a real-life situation," Welborn says. "We're better at dealing with this than we ever were before. I'm not sure we even anticipated this kind of issue prior to my dad getting it."
Once the assets are identified, the person with dementia may have to be moved out of any oversight or managerial role. If it is a couple and they have their assets in a living trust, the healthy spouse is automatically a trustee, so the one grappling with dementia can simply be moved out of his or her role and the other can take over. If the ailing spouse is resistant-or if there isn't a living trust-the family may have to get a medical analysis of his condition, saying he is no longer capable of managing his financial affairs, and then go to court where a judge would appoint a conservator or a power of attorney.
Some of the saddest cases occur when the advisor sees something is wrong and there are no children to alert. Ivan Illan, an advisor with Michel Financial Group in Los Angeles, had a client whose wife had died years earlier. The man was living with a home health-care worker. Over the course of 12 months, the client began to decline fairly quickly, and the last time Illan visited him, there were seven people living in the man's house-all relatives of the home health aide.
The trust did not specify how much money should be spent on the man's home health care, though Illan says a typical amount is about $3,000 to $4,000. In this case, about $10,000 to $15,000 a month was being spent.
"He was still communicating, but his rational thinking was gone," Illan says of the client. Illan had no way of getting in touch with the man's daughter, who was the successor trustee, and who had 100% of the authority over the distributions. Illan manages living trusts or family trust assets, but as an agent, his job is simply to verify that the trust is making the distributions, nothing more.
"I can't make calls as to mental capacity. That's done by a successor trustee, who was the daughter," Illan says. "But if the family is not around and not seeing what's going on, they will not make that call."
By the time the man passed away, his trust had been whittled down from $2 million to about $400,000.
"It's a very difficult situation when you see this. You can't freeze the account, because you know he needs care, and needs to be eating and living and all of that. It puts us in a very, very difficult bind," Illan says.
The daughter finally contacted Illan when her father passed, and asked, "How much money does he have, and how much am I getting?" She then told him where to wire the money.
"When you're dealing with anyone old and losing capacity, it's really about planning ahead," says Jeffrey Powell, the CEO of Polaris Equity Management, a San Francisco-based investment advisory.
Powell had a client who wrote into the trust documents that if something happened to him or his wife and a doctor saw there was a serious decline in their mental capacity, a child could be added as trustee or a spouse could be removed. For those who don't specify things like this beforehand, family members seeing a parent failing mentally must ask the court to intervene.
One of Powell's clients began showing signs of dementia in his mid-80s, and his daughters went before a judge and successfully gained conservatorship of their father's assets. The father retains ownership of the account, and Powell's firm oversees its day-to-day management, but the daughters are now conservators. The client calls the firm from time to time to talk to someone about his account-having gotten the firm name and number from an old statement. He's politely told he needs to speak to his daughters.
Powell actually turned away somebody else who was referred to him because the man didn't seem to be of sound mind from the outset. On their first meeting, the man said he'd been really hurt by Charles Schwab and wanted to move his account. He acknowledged having had a stroke and said his memory was not great. He then asked why Powell's firm had lost him money. His wife didn't intervene, Powell says.
"It was a circular conversation, and I had to re-explain to him that we were talking about taking over the account, and that we'd never lost him anything," Powell says.
Powell says the prospective client's tone was so accusatory and nonsensical that if he did take the account on, he probably would have made sure the man had no legal authority over it. But because the man's wife didn't step in during the conversation, Powell says he felt uncomfortable about the liability.
Heather R. Chubb, a life transitions lawyer with the Chubb Law Firm in Sacramento, Calif., says that at the first sign of trouble, families should make sure they have a durable power of attorney and a trust document that details who should take over as trustee if a parent becomes incapacitated. But those are just tools. Actually proving that someone is incapacitated is more arduous. She's going through the situation right now with her own father-in-law.
Recently, after spending a week away from home on vacation and attending a wedding, her father-in-law arrived home and couldn't figure out how to turn on his own television set. His son had to walk him through which remote to use, and which buttons to press.
The father-in-law was willing to go to a doctor. He was put through an extensive physical examination and then sent to a neurologist for evaluation. An MRI was also done. Once the family receives the doctor's recommendation, they will use it to remove the man as trustee over his finances. Either he can resign, or they will force his hand, Chubb said.
"It's not fun either way, and I'll probably be the one to have the conversation with him," Chubb said.