WEALTH PROTECTION AND TRANSFER UPDATE: Good Marketable and (Elder) Abuse Free Title

The Elderly Population is Increasing in the USA and Globally. The Problem, a Case Study and Concrete Steps Title Companies Can Take. (This article was originally published in the June 2021 Edition of Title News.)

The UN General Assembly designated June 15 as World Elder Abuse Awareness Day. New initiatives will enable title professionals to go a step beyond awareness/to prevention. We will discuss the scope of the problem, a renowned case and tools that can be applied to protect seniors and their real estate.

What Is Elder Financial Exploitation?

We often rely on labels, sometimes without a shared understanding of their meaning. Let’s make sure we’re on the same page when referencing elder financial exploitation. An elder, as we’re using the term, is an adult 60 years or older, and elder financial exploitation is the illegal or improper use of an elderly adult’s money, property or other resources.

How Common is Elder Financial Exploitation?

Each year, as many as one in 10 Americans aged 60 and older falls prey to elder financial exploitation. With about 57 million Americans aged 60 and older, up to 5.7 million seniors are victimized annually.

It Can Happen to Anyone: The Brooke Astor Story

In one notable case, wealthy socialite, philanthropist and writer Brooke Astor was victimized by her son, Anthony Marshall. Brooke’s plight underscores the fact that approximately 60% of elder financial exploitation is perpetrated by a family member.

Fortunately, Astor’s story has a hero and a happy ending. Professor Philip Marshall intervened to protect his grandmother. Wanting to do more, Philip Marshall subsequently embarked on a mission, creating the Beyond Brooke awareness campaign to help others fight elder financial exploitation. Philip Marshall notes that Astor’s abuse began and ended with real estate. Anthony Marshall transferred an estate in Maine to himself, then promptly transferred the estate again, this time to his wife.

Big Data

Philip Marshall introduces big data as a shield against elder abuse.

The following will underscore big data’s potential. Recently, a senior testified that she had been hospitalized six times during the preceding six-month period. Incredibly, the victim (a recovering alcoholic) was initially injured after her abuser took her to a bar. Moreover, the senior testified that her cognition had declined precipitously, reaching the point where she needed help with tasks such as managing mail.

Despite such acknowledgment in open court, the senior’s testimony was not discovered until after the disposition of a multi-million-dollar property she oversaw in a fiduciary capacity. The application of big data could have brought the testimony to light, ensuring appropriate vetting for cognition and related issues prior to conveyance. What actually transpired was the transfer of a valuable property, with no consideration for the senior’s exposure to undue influence or cognition.

Perpetrators Impact Seniors, Their Families and the Community

In many cases of elder abuse, the senior may be acting in a fiduciary capacity for a family office and/or trust. When predators strike, they may not only be stealing from the senior, but also from shareholders, family members, beneficiaries and others.

Perpetrators can be vicious. In one instance, the perpetrator stole so much his mother was unable to satisfy her federal and state tax obligations. As a result, the senior became a debtor to the IRS and the state of California.

When a large estate is depleted by financial exploitation charities, museums, nonprofits and other civic-minded institutions can be deprived of endowments and other bequests. For example, Astor had promised to give one of her favorite paintings, “Flags, Fifth Avenue” by Childe Hassam, to the New York City Metropolitan Museum of Art (MMA). Instead, Anthony Marshall sold the painting for $10 million, seizing a $2 million commission for himself. The painting was quickly flipped, with the final price reaching up to $25 million.

Perpetrators are often not concerned with optimizing proceeds from divestitures. Instead, they may be singularly focused with what finds its way into their pockets—their ill-gotten gains. In Anthony Marshall’s case, his solitary concern was the “commission,” not his mother Brooke’s wishes, and not maximizing proceeds from the sale. As a result, Astor was deprived of her right to bequeath “Flags, Fifth Avenue” to the MMA. Moreover, Astor’s charities were deprived of $17 million, the $2 million commission and the $15 million Anthony Marshall left on the table by selling at a steep discount to fair market value.

Perpetrators Are Greedy, Making Repeated Grabs for Cash

In Astor’s case, Anthony Marshall utilized various means of diverting resources away from their rightful owner. Real estate is rife with opportunities for such diversion. For example, one set of perpetrators established a sham management company, subsequently diverting rental revenue and sales proceeds away from the owner and its shareholders. The perpetrators adopted a dual strategy, wrongfully diverting income, while charging personal expenses to the elder-managed company. One of the perpetrators put his girlfriend on the payroll and paid for her plastic surgery, continuing to steal to subsidize his child support obligations once the relationship soured. At the same time, legitimate business expenses such as insurance premiums were ignored. This came to light when a building burnt down, with no insurance available to rebuild.

With the substantial equity in senior-owned properties, real estate is a prime target for elder financial exploitation. Philip Marshall emphasizes the importance of prevention. As title professionals know, it is much more difficult to unravel an exploitative transaction than it is to head off the transaction. Litigation is time consuming, costly and uncertain. Lawsuits rarely make the elder, beneficiaries, shareholders or heirs whole.

Philip Marshall believes that, “if we’re complacent we’re complicit.” Moreover, he feels strongly that we have a collective responsibility to stop the exploitation. Through the application of various tools, title companies are uniquely positioned to do just that.

Concrete Steps Title Companies Can Take

So far, we’ve learned about the scale of the problem and how it impacted one prominent family. Let’s turn our attention to steps title companies can take to thwart this pernicious scourge. With this in mind, I’d like to introduce Dr. Mark Lachs (MD, MPH) and Dr. Peter Lichtenberg, prominent experts in elder financial exploitation.

Lach’s credentials include his position as distinguished professor of medicine at the Weill Cornell Medical College, co-chief of geriatrics and palliative medicine and the director of geriatrics for the New York Presbyterian Health Care System.

Now would be a good time to consider an issue of overriding importance:

Should real estate be transferred by seniors without first ascertaining cognition?

Lachs posits that: “Fifty years from now we’ll look back, shocked that real estate transactions were undertaken without measuring cognition.”

At one point in time 8-year-olds worked 16-hour days in factories. Today, that is inconceivable. Lachs believes people will look back, incredulous that real estate was transferred without first ascertaining the transferor’s cognition. He is a strong proponent of elder rights and therefore adopts a nuanced, contextual and respectful approach—mindful of the autonomy of elders.

One Size Does Not Fit All

According to experts, the degree of testing should mirror the level of cognition required to appreciate the transaction being contemplated. So, for example, one level of cognition is needed to recognize that if you don’t have your appendix removed, you could die in hours. An entirely different level of cognition is needed to grapple with decisions about stage IV lung cancer with a variety of treatment options, varying likelihood of metastasis and disparate side effects. Similarly, the sale of a single-family home does not require the same level of cognition as that needed to appreciate the implications in the divestiture of an investment property with varying obligations to shareholders, trust beneficiaries and charitable institutions.

Benchmarking Cognition Against Other Conditions We Test For

The prevalence of cognitive impairment in 85-yearolds is as high as 50%.

Yet, people this age are generally not screened before they enter into listing agreements, sign offers or execute deeds. In sharp contrast, we screen for diseases in cohorts/populations with a 5% incidence. Today, a senior can generally sign away her most valuable asset without any safeguards; equity carefully stewarded over a lifetime can be forfeited with the stroke of a pen.

For many elders, the ramifications of a financial setback can be as profound as they are irreversible. There just isn’t enough time to rebuild the equity, with potentially devastating consequences to quality of life. Society can also suffer, with increased pressure on resources such as Medicaid.

In one instance, the exploited senior withdrew approximately $400,000 from retirement accounts, yet didn’t have enough left to pay taxes on the withdrawals or to have an attorney represent her in litigation with the IRS. Ironically, her abuser, the perpetrator, stole enough to fund a lavish lifestyle, including a Mercedes G class vehicle valued at $157,000.

Balancing Protective Measures and Autonomy

Of course, we must strike the correct balance between protective measures and autonomy. As Lachs emphasizes, we want to treat the person and not their age. People have the right to make their own decisions, including bad decisions.

And Now Comes … IDA?

With this in mind, Lachs is developing an assessment tool that can be used by non-physicians. The goal is to produce a basic screening, an initial determination that something just isn’t right. Doctors screen for cancer before it metastasizes. Similarly, Lachs believes we will be screening for declines in cognition, with the goal of diagnosing before exploitation.

Results of the screening will aid in determining whether a more extensive examination is warranted. The tool is called the Interview for Decisional Abilities (IDA). This is being used by some Adult Protective Services (APS) workers to evaluate their clients’ cognitive abilities. Lachs anticipates that the test instrument will be used by groups such as those in social and financial services, as well as others.

The Eponymous Lichtenberg Assessments

Dr. Peter Lichtenberg joins Lachs as one of our cognition sherpas. Lichtenberg’s credentials include serving as the director of the Merrill Palmer Skillman Institute, founding director of the Wayne State University Lifespan Alliance and a distinguished university service professor of psychology.

Lichtenberg is nationally recognized, with a particular expertise in the intersection of cognitive capacity and financial exploitation.

Assessment/Screening Tools

Lichtenberg has led the development of various screening and assessment tools to evaluate financial decisions by older adults. These include the 2015 Lichtenberg Financial Decision Making Rating Scale and the Lichtenberg Financial Decision Screening Scale.

Both tools are easily administered and provide front-line professionals with the means to evaluate the decision-making capabilities of adults aged 60 and over. In addition, each tool assesses susceptibility to abuse.

Who Administers the Assessment?

Lichtenberg believes that an independent person administering a test could be a strong positive for producing objective results. On the other hand, Lichtenberg suggests that an ethical professional who knows the examinee also brings a lot of value to the screening.

Of course, the surrounding circumstances can impact determination of who performs the screening. There are situations where an interested party should not administer the assessment. Real estate agents, lawyers, lenders and title companies are all interested parties. The inherent conflict of interest, as well as possible allegations of bias, carry the potential to undermine the results.

Lichtenberg balances the protection of seniors with the right of capable older adults to remain financially autonomous.

Undue Influence

Unfortunately, older adults can retain their cognitive skills yet remain vulnerable to financial exploitation. For example, many seniors are subject to the undue influence of abusers because they may be dependent on them for physical assistance or emotional support.

Undue influence is the loss of free will by the adult. As Lichtenberg points out, we all influence each other, and that’s OK. However, it isn’t acceptable when abusers prioritize their wants and needs over the senior’s free will. With enough access, an abuser can break down an older adult—even a resilient senior with a high level of cognition. Lichtenberg’s tests attempt to uncover undue influence, if it present.

Conclusion

Title and settlement companies are embedded at critical junctures: when property is purchased, financed and sold. These events are also when a senior’s real estate-based wealth may be in the greatest jeopardy. Title companies can work in conjunction with lending and real estate professionals, and others, to help prevent seniors’ real estate equity from being wrongfully diverted. The introduction of new tools may be coupled with a deeper bench of advocates to protect and preserve elder equity.

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Exceedant provides Wealth Management and Transfer Solutions which serve to protect individuals, families, shareholders, as well as the entities that provide services for them.  These services and products include: Financial Decision-Making and Cognitive Assessment Tools, Online Training and more. Our Solutions can be used by Title Companies, Family Offices, Banks, Institutional Investors and other entities involved in the transfer of substantial assets including real property. Contact us today to learn more about how we can assist you. 

The author of this article (originally published in Title News) is the CEO of Exceedant,
Mr. Randy Airst. For more about Mr. Airst, see his LinkedIn profile. 

Copyright 2021 Exceedant, Randy Airst, Exceedant ownership and authorized representatives. All rights reserved.