Not your average "How do I protect my investment" thread - Elderly care/Fraud

Hi everyone,

Unfortunately, I need to be somewhat vague with this post because of recent items that came to light. The names/relationships/assets have been rearranged in this question to protect those involved. The underlying question is true.

My cousin was recently involved in a horrific car accident and for the rest of his life will require care to get through daily duties. He's receiving a small sum as insurance proceeds from the at-fault driver (call it ~$150k). However small, this is actually a pretty major deal for my cousin as he was already in a retirement home that was quickly depleting his retirement savings. The new cost for the in home caretaker+retirement home is going to be around $5k a month. Of that social security will cover $3k of this. The rest of his assets are pretty much gone.

With the proceeds, I was planning on investing in Vanguards VTINX with a small amount in emergency funds. $150k isn't going to get him through the rest of his retirement but I'm not sure investing more in stocks is such a fine idea either.

Here is the plot twist. My cousin's niece is a piece of work. We're not sure when this started but we can reasonably estimate that she has somehow smooth talked her way into "borrowing" upwards of $700k from my cousin over a period of 5 years around 15 years ago. She basically departed from the family around that time and basically had no contact with us since then. Funny thing is about a week ago when this windfall became "public" on facebook the cousin came out of the woodwork asking for forgiveness etc. It could be a coincidence but we are all highly skeptical.

What we're worried about is not so much preservation of the windfall from stock losses (though I am open to investment suggestions) but fraud from this niece. We think the cousin could be easily influenced into signing documents loaning funds,changing wills, or outright disbursing funds to the niece. Granted this would all have legal recourse but it's a whole lot harder to get the funds back after they're spent.

Any ideas? A trust? The cousin's son was going to put the funds in his account but this seems like a sticky situation regarding taxes/the cousin's will.

Signed- A person whom my whole family thinks is a financial genius but really I just put all my funds in VTSAX.'

Is your cousin mentally/legally competent? If no someone else can run his finances. If competent, he can choose what to do with his money whether I'll-advised or not. You could have a heart to heart though along with a reality check on what happens when the funds run out.

oldtin wrote: Is your cousin mentally/legally competent? If no someone else can run his finances. If competent, he can choose what to do with his money whether I'll-advised or not. You could have a heart to heart though along with a reality check on what happens when the funds run out.

I'm well aware that the funds are going to run out, the rest of the family not so much. I'm not 100% on her legal status other than that his kids have POAs and have been acting on his behalf. They've just tasked me with figuring out what to do with the proceeds.

It sounds like you're looking for something called a special needs trust.

I don't know the specifics of how they work, but a family member makes him the beneficiary of the special needs trust. That money is only to go to keeping up his care of life. It won't count as income or when the retirement home evaluates his finances, but it could also be too late if he is already in one.

It also had the fringe benefits of keeping the niece away from the money. Go ahead, ask me about the 1.8 million reasons I know how that works.

I'm not a lawyer, so my first suggestion is that you should talk to one. :) If you work for a big corp, you might check with your benefits department, because a lot of them offer a "free one-hour consultation" with an attorney and that sounds like a good idea to get an idea of what's available.

On the investment front, I'm also a fan of Vanguard's funds, and a retirement income-oriented one seems like a good choice for a conservative investment like this.

There really should be an elder care or estate planning attorney involved to protect your cousin.

One other thing to keep in mind if he receives any sort of medicare/medicaid benefits, is if his personally owned assets exceed a certain amount, he may no longer be eligible for those benefits. Having his assets held in trust helps to avoid that pitfall.

Yep, going to need to see if a special needs or other trust can be implemented. The problem with most assets is you can't own them, or have recently (in the past 2 years) have placed them in trust, otherwise social security and other assistance will come after the assets to recoup some of the cost of benefits such as nursing home care.

There may be a workaround if the assets WILL be used for medical or personal care and the trust is just being used to limit any non medical access to the funds. It will be important to nominate the trustee carefully and specifically limit the manner in which the funds can be used - here, strictly for the trustor's medical care.

Thanks folks, I'll investigate down this path.

we did that same thing with my 95 y/o Grandmother. My one uncle, the youngest of her three sons was draining her dry until my Father stepped in and put all her assets into a trust