It’s Not For Kids Anymore….or at least as much”

I wanted to start this essay by reference to history and so I grabbed my bedside copy of Sir William Blackstone’s Commentaries on the Laws of England (1765) to show that guardianship had ancient traditions. In one sense the Oxford professor did not disappoint as he traced guardianship to the Athenian legal system. But, his commentary was confined almost entirely to the roles of parents superintending children.

            We have come along way in 258 years. Yes, we still have children and there are some interesting debates going on today about when their rights to work, marry, carry guns or drop out of school “attach.” But the debate going on in the Pennsylvania General Assembly today has to do with guardianship for those on “the other side of life.”

            In 1960 the average life expectancy in the U.S. was 70 years of age. Today it is 77. What is hidden in that data is that the average 70 year old can expect to live to age 85. And the average 85 year old can expect to get to 91. In 1960 people were typically forced to retire at age 65 and, on average, they were expected to collect social security and enjoy retirement for five years. Very few of these people had assets beyond the house they lived in. Some did have a private pension of a few dollars a month.

            Today, the world has turned upside down. A 2017 study by the Federal Reserve in St. Louis looked at median real household incomes for families by age bracket. Looking back 16 years to 2000, the study found that “real” income had fallen 2-4% for adults 25-54 years of age and risen 24% for people age 65 and up. Please read that last sentence again. We read a lot today about wealth disparity and it turns out a significant part of that disparity can be between generations of the same family.

            As we noted in a recent article, the flesh often outlasts the mind so we are also reading about how older people can fall prey to a variety of scams. What is not so much discussed is the fact that an increasing number of these scams are committed by the children of the victims. We are not talking about the 40 year old who asks his parents to pay for granddaughter’s private school or “help” with a summer beach rental. The topic of today is the 60 year old who just took $20,000 out of his mother’s IRA because “Mom doesn’t need it” and “It’s my inheritance anyway.”

            As the St. Louis Fed report tells us, older Americans have done well. They live longer and since 1965 the Medicare system has underwritten a lot of the medical costs that used to consume a large part of elder income. They have estates to plan where once they might have been asking their kids for financial help. The typical estate plan today is not just a will but a power of attorney; a license to act on behalf of the person signing it including the power to remove money or sell assets “on behalf of” that person.

            These documents are fairly standard and confer very broad powers with the “expectation” that they will be used only in dire circumstances and for the sole benefit of the person who conferred them. Unfortunately, the appointed guardians are resorting to self help for their own benefit for the reasons mentioned a moment ago. They need the money and their elderly relatives do not.

            The Courts are seeing this, and the legislature is evaluating whether stricter laws are necessary. The challenge here is that elderly parents assume their kids are and always will do the right thing. They also tend to pay less attention to financial affairs as they age and many seem to live in fear that should they confront a child about misappropriation of what is undeniably their savings for retirement they will be rejected by the adult child they trusted to help manage the funds. There is a geographic element to this as well. Ma and Pa had three kids, two of whom live far away. The one child who remained local perceives herself (perhaps rightly) as stuck with getting parents to the medical appointments, helping to pay bills and make certain the tax returns are filed. Ma and Pa have an estate plan dividing their assets equally among the kids. It’s only fair, right? But then ask the daughter doing the driving and dealing with the roof leak in the house where everyone grew up while Ma and Pa stubbornly resist moving to assisted living. Meanwhile, the local child is hearing from the two siblings who are not going to medical appointments or dealing with the roof that it’s nice to see Ma and Pa are happily living in the leaky ancestral home that just went up $100,000 in value since 2019. They like to come home to visit once or twice a year and to suggest to their sister that the roof repair bid seems a little high; might cut into their third of their parent’s estate. “Oh, and by the way sis, Pa seems to be drinking more than he should for 83.”

            The first result is seething resentment on the part of the child caring for Ma and Pa. She is the one who gets the call when Pa has a few too many beers and falls down. So, she decides that perhaps her parents should help subsidize the vehicle she uses to drive them to appointments. Perhaps, something spacious like a Porsche Cayenne.

            The guardianship laws in Pennsylvania reflect a time when the elderly were also the poor relatives. Many still are but the data show that much has changed. Even where a guardianship is established by judicial order rather than use of powers of attorney, the law requires little more than an annual report on the person’s condition and changes in finances. That report is filed with the court but almost never inspected and most courts don’t want these records to become public. Thus, you might be living across the street from elderly neighbors who go to the doctor in a Porsche and who complain about their leaky roof while wondering why their house now has a jacuzzi and an exercise room. “Our daughter says it will make the house sell faster when our time to move comes.”

            Candidly, there needs to be more regulation here, especially over powers of attorney. And regulation is going to cost money. Powers should be registered before they are used and fellow family members should be notified that they are being used. Otherwise, one family member has the “powers” to gut a family estate while the people who created the estate or might otherwise benefit from it may someday find out that Ma and Pa own the Porsche as well as the jacuzzi they can’t climb into but no longer have enough money to live in assisted living. Also, shouldn’t the sibling who provides the driving and oversees the roof repair get some compensation? That certainly would reduce incentives for self-help.

            There is a lot to be concerned about as the challenge of elder and infirm adults is growing. Unfortunately, as we noted recently, the potential victims don’t see themselves as such and have not taken care to protect themselves from people who will take advantage. The writer sees some of the problems, but bright minds need to come forward with practical and affordable solutions.

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