high net worth
Anthony Marshall (above), son of famed philanthropist Brooke
Astor, was convicted of stealing tens of millions of dollars from her.
As the case against Brooke Astor’s son illus-
trated, even clients with reputable advisors
can be vulnerable to predators.
By Martin M. Shenkman
You may be the strictest adher- ent to a fiduciary standard — but that doesn’t mean your clients aren’t at risk of fraud
on other fronts. Financial abuse, often
aimed at the elderly and those in declining health, is more widespread than
is generally assumed. As illustrated in
these recent cases, the consequences
can be devastating:
• A couple in their late 70s was persuaded to invest nearly 90% of their net
worth in an annuity, a wildly inappropriate high-commission product that
had no reasonable place in their plan.
• Under the guise of helping an
elderly client whose competency was
beginning to wane, a lawyer met with
her weekly. At the end of each meeting,
he had her write a substantial check,
ostensibly to cover the costs of the session. To obscure his trail, each meeting
was followed up by a memorandum
that included a detailed bill.
• A social worker serving as a care
manager gradually became her client’s
confidante and inserted herself into
all meetings with the client’s advisors.
She ultimately influenced, and in some
cases even directed, personal estate
planning decisions, while billing for
multiple meetings each week.
• A caregiver who assisted an elderly
woman for the last 18 months of her life
took his charge to a new lawyer, who
drafted a will leaving him the entire
estate. The nieces and nephews who
had been beneficiaries under prior wills
ended up receiving nothing. The prospective cost of a legal challenge was
beyond what they could afford.
• A daughter was part of her father’s
CPA practice for many years. When her
father was ailing, she took him to a new
estate planning attorney, who drafted a
will bequeathing the per capita exemption amount to trusts for each of his
grandchildren. Since the daughter has
five children and her brother has only
one child, this effectively shifted most
of the exemption amount to her own
family. She also had herself named sole
trustee of all of the trusts. This plan also
cut her mother out of a large portion of
the estate that was to have been available for her later years.
• An elderly couple consulted their
CPA for a referral to an estate planning
attorney. Their goal was to provide for
each other and then for their children
equally. But the attorney proposed
a charitable lead trust to minimize
estate taxes. The referring CPA was
named executor and sole trustee. He
was vested with total discretion to distribute each year’s annuity amount to
whatever charities he chose. The annuity rate was set at 10%, with the effect
that little, if anything, would be left for
the heirs. Meanwhile, the CPA as trustee
would effectively be spending down the
entire estate in donations to charities he
chose, all while earning fees.
dIFFICUL T RECOVER Y
Financial abuse is difficult to challenge,
and recovering what was stolen is even
harder. The victims are often aging or
suffering from a progressive disease.
By the time the abuse is discovered, if it
ever is, the victim’s cognitive and physical condition may have deteriorated.
Frequently, abuse is committed by
someone who is in a position of trust:
November 2012 Financial Planning 51