Trust Worthy?

Cognitive impairment claims challenge real estate plans

Back Longreads Feb 1, 2011 By Christine Calvin

Lesli Pletcher’s parents were not extravagantly wealthy by any stretch of the imagination.

However, true to form of a couple raised during the Great Depression, they were frugal and financially cautious so that, by the end of their lives, they had amassed a substantial estate capable of easily sustaining Pletcher’s father in his $9,000-a-month Alzheimer’s care facility.

The ailing couple owned properties and some sophisticated insurance policies. Nothing audacious. But still, as Pletcher’s father reached the end of his life, her mother’s cognitive aptitude declined, rendering her unable to pay bills and manage her finances. Mistakes were made, as were some mildly regrettable decisions regarding one of the properties.

Had Pletcher not stepped in, the estate might have looked much different in the end.

Estate disputes involving cognitive impairment claims are on the rise, and for the next six decades — at least — that trend will continue. More than 10,000 baby boomers a day are turning 65 and will continue to do so for the next 19 years, nearly 13 million will live to see their centennial, they will acquire vast wealth and, eventually, nearly half will succumb to some form of cognitive impairment.

Jeff Galvin is noticing the trend already. Galvin practiced general business litigation at Downey Brand LLP for more than a decade before refocusing his practice on estate and trust disputes. It was there that he began to see an uptick in the number of his cases involving arguments over the cognitive capacity of the trustee.

“Often times one of the kids doesn’t like the new outcome — whomever is on the short end of a change made to the will or trust,” he says. “Usually that is presented in an argument about the parents not being in their right mind. Usually there is an economic aspect to it, but very often there is also an argument about what Mom or Dad ‘really wanted’ and that someone was putting pressure on them.”

The takeaway?

“Get your planning done now before any cognitive impairment occurs. The longer you wait, the more opportunity there is to challenge your capacity,” Galvin says. “And it’s not only getting your house in order, but looking out for your family and friends as well.”

But just because a person has Alzheimer’s doesn’t mean he or she is disqualified from creating or amending a will or trust; the law presumes everyone has the capacity to do so. It falls on the shoulders of attorneys — be they trustworthy or not — to determine whether the client really understands what he or she is doing and whether the decision is being made because of undue influence.

“Dementia in particular can be especially tricky to work with because over time it can offer varying spectrums of cognitive impairment not always identifiable at the onset of the disease,” Galvin says. “That person probably still knows what they own and who their family is and has some ability to conceptualize a will or a trust. But as it progresses over time, it becomes more and more of a problem.”

That’s the way it happened with Pletcher and her mother.

“She would call me and say ‘I can’t get my checkbook to balance.’ And then she would call me two days later in tears telling me ‘I still can’t get my checkbook to balance.’ Those are telltale signs,” Pletcher says.

Galvin, too, referred to a dispute in which he represented the 90 percent beneficiary of a trust belonging to the client’s stepfather who, while only in his 50s, had begun displaying signs of cognitive impairment. The trustor’s next of kin, a brother, claimed the trustor was not of sound mind when he amended the estate plan to strongly favor Galvin’s client.

A neurologist diagnosed the trustor with “possible Alzheimer’s,” and documented the diagnosis with a series of questions he asked the man, including whether he knew who won the Super Bowl or the name of the current president.

“Lots of times kids don’t agree with the estate plan, but that’s just too damn bad. An inheritance is a gift, not an entitlement, and if they want to leave all the money for the care of the dog, well then too bad for you, sweetheart.”

Trudy Nearn, founding attorney, Generations law firm

“We started litigating after the [trustor’s] death and were able to see the neurologist’s notes,” Galvin says. “Never did he ask if the patient knew who his kids were or if he owned his house — the questions a lawyer would ask. It was less than a trail of bread crumbs through the forest.”

Dr. Charles Schaffer serves as an expert witness providing legal and medical evaluations for the court system. He is often asked to assess clients’ competency to make or change a will.

In order for the creation or amendment of a will or trust to be valid, Schaffer says, the client must be able to articulate what a will or trust is, know the value of his or her estate, understand familial relationships and be absent of delusions. These are questions caregivers should ask and have legally documented periodically.

If you are concerned about the mental health of a spouse or parent, let that physician know to be asking these questions and detailing the answers. If there is a question down the road about whether the creation or amendment of estate documents occurred when a client was cognitively impaired, this documentation can serve as important proof of the person’s mental health at a given time.

“It’s difficult to get the information we need from medical providers because they’re worried about violating [privacy]. But when the attorney or the kids are concerned, it would be great if doctors could take the responsibility for asking those things,” says Trudy Nearn, founding attorney of Generations law firm in Sacramento.

In a situation where a person’s mental capacity is too far deteriorated to create or amend an estate plan, a conservatorship is often the only option, says Nearn, who remembers needing one for one client in particular: “I asked her why she wanted to meet. She didn’t know, but the daughter said, ‘Mom was diagnosed with Alzheimer’s 10 years ago, so we thought we had better get this taken care of.’ How crazy is that?”

Conservators are court-appointed trustees, and the court stays involved to protect the client from financial abuse. Conservatorship can be awarded to whomever applies, unless someone else files an objection and can convince the judge otherwise.

If the trustee still has his or her wits about them and simply needs assistance, a co-trustee can be named, which was the case in Pletcher’s scenario.

“My mom knew she was losing her memory, and it frightened her. My mother was very overwhelmed. … She came to me at that point and said she needed help,” Pletcher says. “That was really hard for her, particularly because they were Depression babies, and management of money was a very big deal.”

Nearn says most of the estate disputes she sees are related to which child a parent chooses as survivor trustee or co-trustee.

“Whether it was a good decision or a bad decision, it’s just the way it is. But the trustee can really impact the estate plan,” she says. “Can you look at your kids and know that one of them is going to do right by you and their siblings? I’ve had several situations where clients have told me they named one child and now they’re mad at that child and they want to name a different one. It’s very scary to me.”

If naming a child or close family member as survivor trustee or co-trustee is not an option, Galvin says to select a private professional fiduciary such as your banker or attorney. For those clients who choose to name a child or relative, communication is the No. 1 factor in whether the handoff will go smoothly.

“Mom wasn’t laying it out there for me. And my dad, before his Alzheimer’s kicked in, was very secretive about money,” Pletcher says. “I didn’t know anything until my mom took over. There were a few surprises, and there were a few [documents] I had trouble finding. If my mother had passed first, it would have been a nightmare. It would have become clear very quickly that [my dad] was incompetent, but I would have had to have him declared incompetent, and that could have been a very heartbreaking situation.” 

Knowing what she does now, Pletcher says she and her husband are open with their son, who could someday be responsible for the management of their will and trust. He is privy to the general contents of the estate, where important documents are kept, who the Pletchers bank with and how to access the couple’s Quicken files.

“Get your planning done now before any cognitive impairment occurs. The longer you wait, the more opportunity there is to challenge your capacity.”  —Jeff Galvin, partner, Downey Brand LLP

“I have several girlfriends going through this with their parents,” Pletcher says, “and the biggest issue is nondisclosure to the person who is going to be successor trustee. It is very hard to help if you don’t know the whole picture. You need to find somebody who you can disclose that to. If your child is a derelict, there has to be someone you can share that information with. Bank officials can act as a successor trustee, and you pay a fee for that, but there may be piece of mind in it.”

Dr. Irving Hellman is a geropsychologist who advises and assists elders in just these sorts of situations. He says that, in his experience, the most successful trust handoffs occur in families where the trustee, no matter how impaired, is involved in the process from the beginning.

“They will meet multiple times, address problems and try to put together a game plan,” Hellman says. “Usually that also involves distribution of assistance and specialization.  Maybe one child is more comfortable with the finances and another is more comfortable assisting with health needs or in-home support.”

Still, as helpful as co-trustees want to be, Nearn often has to reiterate that they are not in a position to overhaul the estate. “Lots of times kids don’t agree with the estate plan, but that’s just too damn bad,” she says. “An inheritance is a gift, not an entitlement, and if they want to leave all the money for the care of the dog, well then too bad for you, sweetheart.”

Nearn says she not only has to keep her eye out for co-trustees who may be acting against the best interests of her elder clients, but she also has to stay in tune with people in her clients’ inner circle who might unjustly influence a cognitively impaired client into making poor financial decisions.

“If the person you’re leaving money to drives you to my office and wants to sit in on the meeting, that’s a red flag,” Nearn says. “I always kick the kid out before the meeting starts, and if the parent doesn’t know why we’re there, the chances I’m going to change something is miniscule.”

The moral is to get your estate docs in order, revise them periodically and get a good lawyer.

“People change their views for valid reasons; situations and relationships change. If you die unexpectedly, you could end up with beneficiaries that are no longer the ones you want,” Schaffer says.

Regular updates to the estate plan also leaves a paper trail that can protect against unjust claims down the road.  

“When I do these evaluations, I like to see all the estate documents the person has ever made because it’s not just about the change, it’s about the pattern,” Schaffer says, explaining that out-of-character changes to the will or trust will be easier to identify if there is extensive documentation.

Plus, you might need it as backup.

“If the kids think Mom and Dad’s estate plan is legitimately weird, they can bring an action in probate court to get the document thrown out,” Nearn says. “If they succeed, it will revert to the prior document if there is one. If there is no prior document, it would be treated as if there is no estate plan, which in California equates to equal distribution among heirs.”

No matter how much or little estate planning you or your parents have done to this point, the experts say to move quickly to button down loose ends and make updates.

“It’s a very high standard to get to a place where you don’t have cognitive capacity. Even with the beginning signs, a person can still, with time and explanation, understand the pertinent issues and their ramifications and make a choice,” Hellman says. “If you do start to experience diminishment in functional capacity, the sooner you act, the better.”

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