The Straw That Broke the Camels Back

By Mark Folgmann

“The Free Lunch Seminar”

I work with an elderly widow downstate and meet with both her and her grown children at least three times per year. A little over a year ago her husband of 50 years passed and she lives pretty much on her own since her daughter is about two hours away. While completing her taxes for 2008 we noticed multiple transactions that we were not familiar with that generated excess taxes for my client. I immediately called a family meeting with the intent of taking an updated inventory and bring everyone up to speed. We got the children involved about 3 years ago because we were becoming more and more aware of my clients aging process and her memory loss and believed they needed their family to help in the decision making process. We set up trust and put the daughter in charge of most of her assets but like any independent individual she was not willing to give full control of her assets to her family.

Anyway, as we completed an inventory of assets and changes made for the year my client mentioned the name of the individual that she had been working with for about 3 months whom she met when she attended a “Free Lunch Seminar”. As we worked our way through the transactions we learned that IRAs were cashed with no regard for taxes and CDs were surrendered with multiple surrender charges. Annuities were liquidated and transferred again without attention to taxes or surrender charges. All told this individual sold my client 4 annuities, LTC policy, life insurance and a prepaid funeral policy. Now remember this was all going on while her daughter and I was meeting with her on a regular basis and when we asked if she wrote any checks to this individual or his company she said “I don’t remember”. After reviewing her check register we discovered checks written for hundreds of thousands of dollars and many checks were written within days of our meetings. All told we estimated the insurance agent made over $30,000 in commissions and tied her money up to age 95 with surrender charges. Have you ever wondered how they can afford to buy lunch for a room full of senior citizens? After this episode my client’s daughter took a full day off work and they visited all the banks where money was left and moved everything into the trust for safekeeping. The lesson I learned from this episode is we must have open communication with professional oversight. Your family’s professionals should communicate with each other as a form of checks and balance for the safety and security of your family.