Jewish World Review March 30, 2004 /8 Nissan, 5764
Jan L. Warner & Jan Collins
Poor financial planning leaves Dad cash-strapped
Q: Our mother died last year. Since then, our 78-year-old father has been obsessed with staying out of a nursing home, keeping assets out of probate, and not wanting to use up his resources. I told Dad to go to a lawyer, but he balked at spending the money.
So Dad went to the bank and transferred all of his CDs $80,000 to my sister and I, then went to a lawyer and signed a deed allowing him to live in his home for his life; after he dies, it goes to us. But I only learned about these plans when the bank called and wanted me to sign the $40,000 CD that was under my name, which I reluctantly did at Dad's insistence. All he asked was that we send him a little bit of income to add to his Social Security and small pension when he needed it.
A month ago, Dad needed some money to make roof repairs to his home. He went to the bank to get a loan, only to be told that he no longer owned the home and could not get any money. He panicked and called me. I told him I would gladly sign anything he needed and give the money back, but my sister insists that Dad should have thought about that before, and she refused. I told Dad to hire a lawyer to get my sister to reconsider, and I gave him my $40,000 back. Did I do the right thing?
A: You did the right thing by giving the money back, but we don't know if hiring a lawyer to take your sister to court is a worthwhile investment.
Obviously, your Dad was of sound mind when he made the transfers and was not influenced by anyone who had a fiduciary relationship to him. Therefore, the transfers were valid. He thought that by "self-lawyering," he had solved what he perceived to be a problem by 1) having the continued use of the home and income from the CDs for his lifetime, and 2) making sure these assets passed to his children at death. But when he finally realized that his grand plan included a loss of control over what had been his, he, as you say, "panicked" and rightly so.
As to the CDs: We assume that your father intended to create "pay on death" (POD) or "transfer on death" (TOD) accounts with his CDs, meaning that he would control the accounts until his death, then the accounts would pass to you and your sister automatically without going through the probate process. Instead, he made an absolute transfer.
As to his Home: Dad retained a life interest in his home without realizing that during his life, he would be responsible for taxes, repairs and maintenance, but had given up the ability of taking out a loan unless you and your sister, as holders of the "remainder interest," agreed.
If you can't reason with your sister and get her to at least return the money, going to a lawyer will be a waste of resources and will perpetuate your father's agony. In our view, this is a case that can't be won. Your father made a mistake, and he will have to live with it. The courts can't remedy bad judgment.
His self-planning left him without money and without the ability to borrow or take out a reverse mortgage on his home to get funds that might be required to keep him afloat a sad state of affairs for a 78-year-old man who has worked all of his life.
Unfortunately, ill-informed and unduly influenced seniors engage in transactions like this every day. We take this opportunity to warn seniors not to transfer assets or engage in transactions until they fully understand the consequences. As your Dad has learned, the cost of getting advice from a competent lawyer pales in comparison to self-inflicted losses.
'THE WILL' UPDATE
In a recent column about "The Will," a planned new reality show on CBS that we believe will encourage unscrupulous viewers to prey on wealthy seniors, we listed an e-mail address where comments could be sent. That address has since become invalid. Readers wishing to voice their concerns to CBS should telephone the network at 212-975-4321 and ask for the "Comment Line."
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JAN L. WARNER received his A.B. and J.D. degrees from the University of South Carolina and earned a Master of Legal Letters (L.L.M.) in Taxation from the Emory University School of Law in Atlanta, Georgia. He is a frequent lecturer at legal education and public information programs throughout the United States. His articles have been published in national and state legal publications. Jan Collins began co-authoring Flying SoloŽ in 1989. She has more than 27 years of experience as a journalist, writer, and editor. To comment or ask a question, please click here.
Bad 'Will' makes seniors prey
Bad 'Will' makes seniors prey