By Dan Harkey
Real Estate & Private Money Finance Consultant
m: 949 533-8315 | e: [email protected]
1) Introduction:
The mental health of any society requires honesty and forthrightness in personal relationships and business transactions. In business transactions, the intent should be to act in one’s on best interest and to negotiate the best deal possible that results in acceptable mutual benefits for the principals.
Many deviates from this hypothesis and are pathologically self-absorbed. Older people who engage in financial transactions are sometimes victims of this group. They may experience misappropriation of money or stolen personal or real property. These acts are an unconscionable violation and degradation for that individual. Actions relating to any misuse or misrepresentation are a breach of a fiduciary by an agent. Unfortunately, a few agents are involved, even if they think they skirted the issue.
2) Fraudulent actions perpetrated by a related party or a close relationship.
Many third-party persons have daily contact and access to an elderly person, which should instill confidence and trust. Most types of elder abuse are committed by trusted individuals, like family members or nursing home staff members. We hear about these incidents daily.
Typical examples are as follows:
a) Modification of a family trust, personal will, power of attorney, bank account, or insurance policy to miniplate themselves into a position of personal gain.
b) Forging legal documents.
c) Forging signatures on checks or bank statements.
d) Misappropriating proceeds from social security checks.
e) Using another person’s credit cards or bank accounts for personal gain.
f) Making large bank withdrawals or transfers between accounts.
g) Defrauding another by misrepresenting that you are the signatory on real property encumbrances.
h) Skimming rents and inflating expenses while managing property.
i) Modifying real estate ownership documents.
j) Requesting a personal loan from an elder with the proverbial “I will pay you back.” There is always a sense of urgency attached.
k) Encumbering financial assets and property that do not belong to you.
https://www.justice.gov/file/1098056/download
Statistics suggest that only 1 in 44 cases of financial abuse is reported, according to the National Adult Protective Services Association (NAPSA). NAPAA also notes that elder victims of financial abuse are three times more likely to die and four times ore likely to enter a nursing home.
3) Third party-total strangers: I can help you. It would be best if you trusted me. I am the messiah only, and I am here to take advantage of you. Hopefully, you are naive enough to let me get away with this fraud. Maybe you need people interaction. I am here to stick it to you.
a) Telemarketing and phone solicitation scams.
b) Lottery scams.
c) Homeowner/reverse mortgage scams.
d) Email/phishing scams.
e) An Imposter acts as a relative, such as a grandson or a granddaughter who urgently needs money and is willing to perpetrate a fraud to get it, as stated above.
f) Frequently induced Loved one or companion attempting to get close to an elder to exploit them.
https://www.ncoa.org/article/get-the-facts-on-elder-abuse
4) Family members or caregivers are frequently instrumental in non-financial elder abuse cases.
a) Neglect and or failure to administer required medicines, protect from danger, provide proper food & water, or skip hygiene if the person is unable to do it themselves.
b) Intentional infliction of physical harm is referred to as physical abuse.
c) Abandonment and isolation, force a person to stay alone, without interaction with another living person or even a pet dog, cat, bird, or hamster. How many remember the story “Flowers for Algernon” by E.B. White. Even a laboratory mouse could become a friend. Anything that a person can hold on to as a comforting sole can become an emotional support mechanism. My cat carries a small pillow around the house. I never see her, but she must move her close friend with her in the middle of the night. “Flowers, for Mitzie’s Pillow!”
https://www.heartandsoulhospice.org/2021/10/isolation-is-debilitating-for-many-near-the-end-of-life/
https://pubmed.ncbi.nlm.nih.gov/20440564/
https://www.uptodate.com/contents/palliative-care-the-last-hours-and-days-of-life
d) Psychological or emotional torment or physical violence.
e) Sexual abuse.
f) Failure to engage as a crisis intermediary when necessary.
All forms of misappropriations of financial interest, personal abuse, or intentional negligence are frauds that will result in the prosecution of the perpetrators. Unfortunately, too many get away with the abuse.
All involved parties should be vigilant at first notice that a person cannot take care of themselves. The aware person is the one who notices through personal interaction that something is not right, will notify related parties, and take the necessary action to remedy the situation, whether temporary or permanent. This person is a hero and a star! There are millions these people do not get credit for their efforts.
5) The coming titanic wealth transfer:
A titanic transfer of capital is coming from the baby boomer generation to its descendants. Effective estate planning is necessary to manage the process and minimize the tax consequences.
Approximately $71 trillion in boomer wealth will be transferred to the next generation. The financial assets of this group include securities, real estate, businesses, collectibles, etc.
My generation, the baby boomers, born between 1946 and 1964, all 73,000,000 of us, now older folks, are poised to be victims of dishonest dealings from family, friends, and caregivers. The Consumer Financial Protection Bureau reports that one-in-five or 20% of all elders are victims of financial exploitation.
https://www.insiderintelligence.com/charts/united-states-population-by-generation/
https://www.census.gov/library/stories/2019/12/by-2030-all-baby-boomers-will-be-age-65-or-older.html
Elders will be victims of financial crimes perpetrated against them for about 20% of $73 trillion or $14,600,000,000,000 (trillion with a capital ‘T’ and 12 zeros) assets that otherwise should go to future beneficiaries will be misappropriated or stolen.
An estimate of the average baby boomer family wealth might be $2,000,000. This means there would be an estimated 20% of wealth (14,600,000,000,000/2,000,000=7,300,000) separate incident of financial elder abuse. For creating this estimate lets assume that this is over a 10-year period. This would suggest 730,000 elder abuse incidence per year or 2,000 per day.
We have restructured the world in which we live to encourage entitlement and parasitic behavior, where acts of parasitic exploitation have no consequences. Any act of eroding a person’s lifetime earnings and financial stability is an unheard-of-terrible act. Any involvement by a fiduciary is a fraud.
6) Wealth accumulation of baby boomers vs. millennials:
When the baby boomer cohort was roughly the same age as millennials are today, they owned about 21% of all U.S. wealth. Today, the single largest asset of most baby boomers is the significant equity in their owner-occupied homes. Also, their descendent generation, millennials totaling 73 million, own 4.6% of all U.S. wealth. There may be many reasons for the fall-out of wealth accumulation by millennials:
a) Recessions.
b) Student loans.
c) Non-financial selfish reasons.
d) Education majors that are irrelevant to creating financial wealth.
e) Lack of financially prioritized tenacity.
https://trustandwill.com/learn/generational-wealth-gap
https://www.cnbc.com/2020/10/09/millennials-own-less-than-5percent-of-all-us-wealth.html
7) Third Parties, unrelated, may have access to vulnerable elderly folks.
The real estate lending industry should teach awareness programs to Identify potentially vulnerable individuals where circumstances may result in financial elder abuse. Teach agents how to recognize, respond to immediate needs, and employ remedies. Also, we should teach to elderly how to avoid allowing themselves to become a subject of a breach of fiduciary. Teaching the elderly with diminishing capacity is a complicated process. However, the system will is always blame an agent or fiduciary who may have something to sue for and get a judgment on.
8) Classic California-based Litigation: Home Budget Home Loans vs. Jacoby Meyers Law Offices.
Home Budget Loans vs. Jacoby Meyers Law Offices is a must-read for the technical-minded.
A Court of Appeals ruled in favor of a mortgage broker approached by an elder borrower to make a real estate loan and completed the loan process to the closing that distributed funds to the borrower.
An astute mortgage broker showed caution by requiring that the borrower seek out legal counsel to review the documents and issue a statement that the documents were acceptable and that the loan terms were acceptable and appropriate in the borrower’s circumstance.
https://caselaw.findlaw.com/ca-court-of-appeal/1770764.html
To satisfy the mortgage broker’s disclosure requirements, the borrower approached Jacoby & Meyers law firm to review and advise her appropriately. The attorney submitted a letter to the mortgage broker on behalf of the borrower stating that the loan terms were both acceptable and appropriate. The borrower wished to proceed.
After the closing, distribution of proceeds, and subsequent default, as could be expected, the borrower filed suit against the mortgage broker. The mortgage broker cross complained against Jacoby & Meyers for indemnification, claiming that representations by the law firm were false. Of course, the American way is not to take responsibility for your actions but blame someone else.
Whether true or not, elderly folks are a protected class. In the trial, the elderly borrower stated that she did not understand that a lien was to be placed on her residence; the borrower did not understand the proposed loan terms and was “unable to read and write English.” She stated that she did not give consent to proceed with the transaction.
The mortgage broker prevailed at the appeals court level, but Jacoby & Meyers was found to be negligent. J & M had to pay the damages to the borrower and pay the mortgage broker’s attorney fees and expenses. It is rare to find a rational outcome in a court of law.
9) Financial elder abuse – true classic example. One real example is enough!
A mortgage broker received a referral to obtain a loan for a 94-year-old lady in a retirement home. The husband had passed away. The property title was held in a family trust with the grandson as successor trustee. There were multiple beneficiaries. When grandma passes away, the estate is to be settled and proceeds distributed to the numerous beneficiaries.
During the next few years, the successor trustee (grandson) possessed the authority to convey title in a sale, borrow or hypothecate the property.
The single-family property was valued at $800,000 and free and clear. The grandson desired to sell the property with an option to purchase it back in 24 months for maximum cash-out to purchase a franchise business for himself as a 100% owner. His chosen method to obtain capital for his business franchise purchase was quickly selling the property at a steep discount to get his greedy hands on the proceeds. The grandson also planned to borrow quick money and use the property as collateral while waiting for a sale and closing.
The remaining beneficiaries did not know that their (inheritance) future financial benefits would to be misappropriated and permanently lost by one greedy relative. The grandson must have lived in a very sociopathic self-absorbed dreamland.
A separate mortgage broker who represented trust deed investors to originate this loan asked the procuring mortgage broker if the elder had legal counsel to represent her. Would the borrower’s counsel provide a letter stated that grandma understood this transaction’s material facts and ramifications? Did the transaction constitute an appropriate financial decision? The mortgage broker who represented the grandson responded, “yes, there is a lawyer involved who represented the grandson.” Major red flag! The lawyer who represents the greedy grandson has no obligation to act in his elderly grandmother’s (seller’s) best interest. The lawyer only represents the grandson who plans to misappropriate unearned benefits from the estate. His plan was personal gain and unearned benefits to the detriment of grandma and all the other beneficiaries.
Any equity or proceeds from a sale of the property or loan proceeds should be reserved to pay for grandma’s housing and care until she dies.
Any prudent and knowledgeable real estate broker or mortgage broker representing private money trust deed investors will decline to get involved. The procuring mortgage broker who represented the greedy grandson will likely, continue dialing for dollars to find another sucker mortgage broker/lender who is dumb enough to arrange this transaction.
A bonified scoundrel is a low-integrity real estate broker or mortgage broker who would agree to arrange this transaction. Equity has gone, grandson takes money for personal use, other beneficiaries are screwed, and there is no money to care for grandma’s retirement expenses. Could a parasitic scoundrel be waiting for grandma to die to cover up this fraud?
Yes, fraud, elder abuse, and negligent misrepresentation will all be brought to the surface when the beneficiaries who were left out of their rightful inheritance file a lawsuit against the grandson, mortgage brokers, and investor(s) who purchased the property from the vulnerable elderly adult.
10) Older people are also capable of being business and financial predators:
How about a reversal and unexpected twist in exploitation and abuse? How about a highly sophisticated older person who portrays themselves as a simple investor who is somewhat naive to the business world but is indeed a predator looking to extract financial gains from other people. The older person’s daily activity may even be a hustle exercise while networking with neighborhood social clubs and golf clubs to locate his next victim.
In the U.S., we have many “protected classes” of folks. Sixty-five years of age is the magic age for those classified as elderly. Many are legitimately special needs folks with disabilities that warrant protection and advocacy, while many in the age subset of the older are phony.
The hole in the bucket allows some in the protected class to engage in nefarious acts exploiting the system and get away with lies and deceptions simply because they are protected.
There are instances where elders may be extraordinarily sharp, with a keen business skill for transactional negotiating and a mile-long history of success. On the front end of their business transactions, they will represent that they possess the background of knowledge and experience to make an informed decision. They will read and affirm approval of all documents that disclose material facts and risks associated with the proposed transaction.
But when things go wrong, they are first to remove their “shark facade” and replace it with a “poor unsophisticated victim facade.” The change in posture is particularly shown when they show up in court demanding to be protected from their own dire financial risk-based decisions. They are willing participants to successfully play the court system to their advantage and claim elder abuse when they may be the predator looking for the next sting.
Some people learn to play the “protected class system” like a finely tuned Stradivarius violin. For those who don’t relate to this instrument, how about a Les Paul guitar, now owned by Gibson, who was the primary driver behind the invention of the electric guitar. How about an eloquent recital of the Shakespearean play Romeo and Juliet?
The senior folks are brilliant actors, all while orchestrating and maneuvering for self-gain and playing the system. They will prepare with props by showing up to court wearing old clothes, fold-up chair walkers with wheels, and appearing distraught and disheveled.
Many judges will gobble up the performance bait, hook, line, and sinker, as those poor simple folks could only have been taken advantage of by the ferocious businessperson. So much for theatrics in court. In many cases, it works. I have personally witnessed the above example in court litigation.
This article is intended for educational purposes only and is not a solicitation.
© Dan Harkey. This material’s unauthorized use or duplication without express and written permission from this author or owner is strictly prohibited. The article may be used in marketing efforts, provided that full and clear credit is given to Dan Harkey. The credit displayed when you forward any article must include Dan Harkey, Business & Finance consultant. You are not authorized to modify the articles title or the content.
This article is an overview for a general educational purpose only. The information presented should not be relied upon without the advice of counsel.
Dan Harkey is a contributing author to Weekly Real Estate News and is a Business & Financial Consultant. He can be contacted at 949-533-8315 or [email protected].
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