Brooke Astor, the famous New York City socialite and philanthropist, reportedly suffers from Alzheimer’s and no longer can comprehend anything of a financial nature, according to news reports.
As a result, a family feud has broken out over how to care for the 104-year-old Astor, both physically and financially. Astor’s situation illustrates just how ugly things can get when there is a large estate at stake. The high-profile custody battle between son and grandson over the famously wealthy centenarian should serve as a wake-up call for some wealthy individuals—and their financial advisors. As one advisor puts it, “It makes people think about the situation and, hopefully, causes them to say what if that were to happen to me.”
The elderly are an easy mark for financial mistreatment—even by their own family members and other fiduciaries. Astor’s son Anthony Marshall has allegedly neglected caring for Astor’s physical ailments and enriched himself with her assets, according to a petition filed by Marshall’s son, and Astor’s grandson, Phillip. The petition says that Marshall skimped on her medical needs while using her money for his own purposes. (Marshall denies the charges but a court appointed a third party as temporary custodian while J.P. Morgan Chase examines her finances.) Further, the New York Post reports that Astor’s lawyer Francis Morrissey Jr., an estate attorney and business partner of the elder Marshall, “has a history of becoming close with elderly millionaires and snagging large chunks of their estates” and has hired a lawyer for himself.
So, as a wealth manager, is there anything that can be done to protect your elderly clients against such people? Fortunately, yes. As Bernard Krooks, founding partner of New York-based Littman Krooks, explains, “There’s no guarantee. Sometimes when you do everything right it still ends up in a Brooke Astor situation.” Still, he and other estate-planning experts offer a few financial tools and strategies to prevent this from happening to your wealthy, elderly clients.
Power of Attorney
The power of attorney gives one individual—called an “agent” or “attorney-in-fact”—full control over the finances of the elderly or sick person (the principal) in case he becomes incapable of making those decisions himself. Choosing the right individual is obviously crucial to avoiding future problems, say planners, because the power of attorney grants such broad powers to that person.
Advance Directives
Advance directives are legal documents with directions from the client about how to handle his health care in case he becomes unable to speak for himself. There are two types of advance directives. A durable power of attorney for health care—which must be separate from a financial power of attorney—allows you to name a “patient advocate” to act on your behalf and carry out your wishes; a living will allows you to state your wishes regarding your health care in writing, but does not name a patient advocate. Laura Twomey, partner at Fulbright & Jaworski in New York, says these documents can include directions that are very detailed, like “wanting to be checked on daily or weekly by a particular person,” and can indicate, for instance, that the client doesn’t want to be put in a nursing home.
Irrevocable Trust
David McCabe, partner at Willkie Farr & Gallagher in New York, says that he recommends irrevocable trusts that cannot be changed or retracted once they are set up. Because they are so rigid, these trusts can help avert squabbles over who did or did not manipulate the elderly estate-holder into changing his or her will.
Document Everything
In situations where litigation is a possibility, be sure to document every conversation and form of communication with the client, advises David Handler, partner in the Trusts and Estates Practice Group of Kirkland & Ellis in Chicago. “If the will is being modified late in the client’s life, make sure you demonstrate to the witnesses that the client is competent.” He even suggests videotaping the signing and changing of the will.
Avoid Conflicts of Interest
Paul Frimmer, a partner at Irell & Manella in Los Angeles, points out the importance of putting your client first, even when the children’s requests appear to be genuine. “Your client may be starting to lose it and the children are saying we want to make sure she doesn’t buy property in the desert, but your first obligation is to the mother, your client,” he says.
Frimmer points out that estate planning for the very elderly is inherently fraught. “One of the hardest things for people in our profession is determining when the client’s interests are best served by not having the client involved at all.”