Valerie Rind's Blog

Beware the Nursing Home Bandit

I’ve never met anyone who was a victim of elder financial abuse.

That’s the nature of the problem.

I heard you got stiffed after a $500 loan to your nephew.

I’ve heard about the blended families where everyone thought they were “entitled” to an inheritance.

But a senior citizen might not realize that they’re being swindled. Or if they know, they might be powerless or too terrified to stop it.

Elder financial abuse

A typical example of elder finance abuse is when a family member pressures an aging person to change his will to benefit them. Or a new “friend” with no prior close connection with a widow suddenly gains power of attorney over her personal affairs.

When you expose older people and their money to friends, acquaintances, caregivers, and family members, it can be unclear how to distinguish a coerced victim from a generous giver.

Linda told me about her Aunt Beth who has made a career of systematically befriending elders and stealing from them.

It started when Aunt Beth volunteered to help out her elderly neighbors by doing errands like grocery shopping or taking them to medical appointments. Aunt Beth behaved as if she were a devoted, selfless grandchild. She was rewarded when these grateful elders told her to “buy a little something for yourself.” They often gave her gifts, sometimes their old gold jewelry or other valuable possessions.

Or did Aunt Beth help herself to the riches at their homes? Linda thinks so.

Preying on the elderly

Linda told me that her aunt was a pro. She became overly friendly, used persuasive tactics, and latched onto these people who were “not in good shape mentally,” as Linda described it.

In one extreme case, a disabled man in his 80s gave Aunt Beth a new SUV even though she had known him only a few months. In his mental state, he couldn’t leave his own apartment, never mind make logical decisions about his assets.

Aunt Beth ran a tight operation. She found a vulnerable person, wormed her way into their daily life, gained their trust, and then ripped them off.

Next, she used that fledgling relationship for access to the victim’s family members or other people in their social circles. For example, the generous gentleman who gifted a car was a relative of another poor soul who gave her jewelry.

Once a relative or lawyer figured out Aunt Beth’s scams, she moved on to other victims.

Financial abuse at elderly living facilities

Nursing homes, assisted living facilities, and retirement communities were a treasure trove of opportunities for Aunt Beth. She quickly made herself a fixture by starting as a volunteer and becoming “friends” with the women residents despite the age gap of 40 years.

Aunt Beth became more brazen. Rather then working her way up from volunteer status, she boldly strode into nursing homes and claimed she was a resident’s beloved niece. Her act was convincing and the staff wasn’t suspicious. She had full access to the resident’s valuables and no one knew that items were disappearing.

Eventually, a bona fide niece would show up, exposing Aunt Beth, and she’d be banned from the facility. The nursing home sent alerts to other facilities to warn them of the Nursing Home Bandit masquerading as a caring and thoughtful relative.

Linda lamented to me, “If only my aunt could use her creativity and smarts for a good purpose, she could make lots of money honestly. Clearly she isn’t dumb because she gets away with these scams so many times.”

Lesson?

Experts agree that elder abuse happens to senior citizens who become vulnerable because of their social isolation.

If your friends or relatives live alone or in retirement facilities, please visit them on a regular basis to check in and maintain personal contact.

Protect yourself from elder financial abuse

As for yourself? Avoid dependency on a single person in your life. Develop and maintain a network of close friends and relatives. Stay connected.

I’ve only scratched the surface about the issue of financial exploitation and abuse of our senior citizens. It’s a problem that will only get worse as we all get older. There is so much more we need to learn in order to prevent, recognize, and stop it.

Please help our senior citizens live their final years with the dignity and the respect they deserve.

One day it will be your turn.

 

Do you know anyone who has been a victim of elder financial abuse?

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Get a whole book of stories! Read the award-winning  Gold Diggers and Deadbeat Dads: True Stories of Friends, Family, and Financial Ruin . 

Related posts:

Your Rich Aunt Dies and Leaves You a Fortune – Now What?

Why I Refuse to be Co-executor of Your Will

Too Much Power in Your Power of Attorney?

Update – Powerful Power of Attorney

When You Die, You’re No Longer a Person

Wife Insurance

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The 7-year-old Who Supported Her Dad

(Story is about a girl)

Here’s a twist on the usual theme of kids of any age who borrow from their parents.

Mei is an attractive, petite woman in her late twenties who works in the advertising department of a large retail store. A first generation American-born Asian, she told me about her regular loans to her father over the course of nearly her entire life.

Her mother was the primary breadwinner and worked as an administrative assistant; dad was a construction worker. She had a happy childhood, she thought; she was good at school and always had nice clothes and food. Her parents divorced when Mei was almost seven. She understood the concept and it wasn’t a devastating life event.

Saving money

Mei’s mother enforced good personal finance habits. “Save your birthday and Christmas gift money,” she instructed her only child. Mei saved diligently and at the tender age of seven had amassed a small fortune of $200.

Her dad humbly asked to borrow $100. He was short on cash but vague about the details. She didn’t know why he didn’t explain it. Perhaps he thought it’d be too much information for his young daughter. Or maybe he didn’t have to justify it simply because he was The Parent. This was typical of her father’s personality, Mei told me. He did things on the fly, rolled with the punches, and so she attributed his request for cash as “Dad being Dad.” She reasoned that if her dad needed help, she’d help him. Dad said he’d pay Mei back when he got his next paycheck, which he did.

Regular loans from daughter to father

Borrowing money from Mei became a predictable pattern. About once a month, he’d hit her up for $100 or $75 but he always ponied up the cash to repay her. Each time, he was apologetic and ashamed.

“If he were a jerk or abusive, it would have been easier to say no, ” she explained to me. “And it’s a cultural thing. Asians have strong loyalty to family. You don’t turn your back.”

Her mother knew about this odd arrangement; in fact, Mei asked for her permission each time before she loaned any money. Mom was upset with her ex-husband the first time it happened. She told Mei’s dad, “She’s just a kid. Pull yourself together and don’t rely on her.” When precocious Mei was eight or nine years old, she no longer needed her mother’s blessing but she still mentioned the recurrent loans.

At nine years old, Mei was a keen observer of how each parent handled their finances. Her mother was deliberate and compared prices when she grocery shopped for the best buys. In contrast, Dad just grabbed anything from the shelves and threw it in the cart. He bought brand name items without glancing at the prices of their generic equivalents. It was obvious that he was horrible at budgeting.

By the time Mei was in high school, Dad proudly told her that he wouldn’t need to borrow any more money from her. Had he finally learned from his mistakes, she hoped?

No.

Borrow from the 401(k)

Dad’s bright idea was to borrow against his 401(k) fund. Mei’s mother had taught her about saving for retirement so she understood the basic concept: you put money in, it earns more money, and when you stop working, you’ve accumulated a tidy sum. But you’re not supposed to touch those funds earlier. Her father was blasé about it and told Mei not to worry.

Mei was the first in her family to go to college. She held a part-time job and had to say no when her dad asked to borrow money. After graduation, she got a full-time job and the loans promptly resumed.

Her dad always shrugged everything off and rationalized, “Everybody makes mistakes.” Each time, she wearily responded, “You’re supposed to learn from your mistakes. But you’re not learning.”

Buying a car with bad credit

A few years ago, her father’s old car broke down. Do you think he bought a replacement that was within his budget? Of course not; he didn’t have a budget.

The “pre-owned” car salesman fit the profile of the sleezy used car hawker. He sold Dad a car he couldn’t afford at an astronomical interest rate because his credit score scraped the bottom of the range. Her uncle stepped in to co-sign. The expense of the monthly payment of $500 forced her father to ask Mei for frequent, larger loans to cover everyday expenses such as gas, food, and lunch money.

When Dad figured out that he couldn’t afford the car, his father told him to give the car back to the salesman. Just like that. As if he were returning an unworn suit that he bought but later didn’t like. It was a misunderstanding because Mei’s grandfather had a leased car, and didn’t know that Dad purchased his on credit. Dad dropped the car off, told the salesman he didn’t want it, and walked away. The salesman threatened to sue, but dad didn’t care. He heard nothing more about it and thought he got out of his obligation without any consequences.

Default judgment

Six months later, her dad called and was devastated. The car dealership got a default judgment against him and now they ‘d garnish his wages. Dad tried to contest it, but he had no defense. The garnishment gouged his paycheck by 20%. Eventually he paid off the debt but then was fired after yelling at his boss about something trivial.

Dad had no emergency fund or savings, of course. He took the predictable but disastrous route of cashing in the entire 401(k) account balance of $20,000, which quickly diminished to $12,000 after taxes and early withdrawal penalties. He paid $2,500 that he owed his landlord and bought a used car at a reasonable price, but spent $5,000 on non-essential extras. Mei’s father asked her to front him $300.

She noticed that the numbers didn’t add up and she quizzed him about where the rest of the 401(k) proceeds went.

Gambling losses

The last $4,000 was wasted when he gambled it away. Mei patiently told him that it wasn’t such a good move, but inside she was fuming. She lamented to me, “If he had told me sooner, I could have tried to talk some sense into him.”

What she failed to acknowledge, even now, was that her father was stuck in his irresponsible ways and there wasn’t anything she could have done. He’s operated the same way for over two decades and there’s no reason to think he’d change now.

Fed up, Mei started crying after her father told her about losing what little cash he had left at the blackjack table.

“Why can’t you learn from your past mistakes?” she asked him, knowing he’d have no logical answer. “I can’t always be here to bail you out. I may not be able to. ”

She expected her dad to apologize and act humbly as always.

Instead, his response shocked Mei: “Be thankful you have the ability to help your parents.”

What?

She didn’t know what to say. She told her mother, who said Mei shouldn’t have said anything to her father about the gambling losses. Double shock. She thought Mom would have her back on this one.

Present tense

Today’s status: Mei’s father is still unemployed and his benefits expire this month. She loaned him $300 for his car insurance, cell phone, and other bills. He won’t be able to pay his rent next month, and she figures he’ll ask to borrow from her. Again. She’ll say yes. “I don’t have it in me to fight,” she said wearily. “I don’t want to see him not be able to get to work.”

I asked Mei how much her dad owned her. She didn’t know the exact figure but thought it was about $500. “I’ve grown numb to it. It’s been going on for over twenty years now. Nothing is new.”

And why should anything be different? The pattern has repeated for two decades. Over the course of her entire adult life, and most of her childhood.

But Mei sees an end in sight. She has her own additional expenses because she and her fiancé are saving up to pay for their wedding. After they get married, they’ll have a family. New priorities. And that’s where she’ll draw the line. It will be easier to say no to dad.

Maybe.

Rely on yourself only

Mei was excited when she told me about her wedding plans. She and her fiancé will foot the entire bill themselves. His family offered to help them with the expenses, but they didn’t want to have other people influence their important day. She told me, “We don’t want to rely on others.”

What a contrast to her own family, where her dad has heavily leaned on her since she was a child.

Cultural differences

I’m not Asian so this family dynamic — where kids support the older generation —is foreign to me. I can appreciate those working adults who help their elder parents. Yet somehow the idea of a 7-year-old being compelled to fund her able-bodied father’s daily expenses is disturbing.

What do you think? How young is too young to help your parents with their finances?

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Get a whole book of stories! Buy the award-winning Gold Diggers and Deadbeat Dads: True Stories of Friends, Family, and Financial Ruin. 

Related posts:

My Dad Borrowed $50,00 and Paid Me Back. Why Was it a Complete Disaster?

Would You Loan Your Family Money, Even if You Knew They Lied to You?

Would You Lie to Help Your Family Avoid Foreclosure?

I Loaned and Lost $5,000. I’m Not Rich. Why Was it No Big Deal?

Gambling Losses and Financial Infidelity are No Big Deal

They Filed for Bankruptcy After He Gambled All Their Money Away

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Would You Lie to Help Your Family Avoid Foreclosure?

Here’s a recent email I received from Linda in St. Louis (not her real name or homeland, of course):

I bought your book last month and have given it to a friend, who will share it with her sister. My best friend could have used it ten years ago. Amazing how many stories there are.

She shared her own tale and later we spoke at length about how her close family relationships were destroyed by money.

Linda and her husband Lyle lived frugally yet were generous when extended family hit them up for financial assistance. A few years ago, they helped out Lyle’s step-brother Dan and his wife Debbie when they needed a $6,000 loan. The two couples were close friends, not just family members by default, she told me.

Livin’ life to the max

Dan and Debbie lived life to the max. That is, credit card max and mortgage max. They used their home equity line of credit to buy a condo in Florida where they planned to retire. However, retirement was elusive because they were mired in debt. Linda and Lyle knew their siblings-in-law were livin’ large, but didn’t know the extent of their financial problems.

Bad became worse. Dan lost his job and at age 62, he was considered unemployable in his profession. By then, their home that carried $420,000 in debt was worth only about $275,000. The next step was inevitable: Foreclosure.

Dan and Debbie thought they had one last card up their sleeves. The Florida condo was owned by Debbie’s family trust. They hoped the bank wouldn’t uncover this asset and force them to sell it to cover the debt on their home.

Few options remained.

Linda and Lyle didn’t find out the complete backstory until they were invited to dinner “to discuss something important.” They both had the same initial reaction: their family had financial troubles and needed help. Again. Most of the previous $6,000 loan was still outstanding.

Dan fixed drinks for everyone and laughed nervously, “Relax, we aren’t asking you for money.”

OK, then what? An organ transplant?

Illegal short sale.

“We thought you might buy our house in a short sale for about $250,000 and rent it back to us for two years until we move to Florida. It’s a good deal for all of us. You’ll get an investment at a good price by paying less than the outstanding debt. We’ll have a place to live until we get back on our feet.”

Lyle was savvy enough to know instantly that this scheme would be illegal. He explained that a short sale must be an “arms-length” transaction — not between relatives — or else it might be fraudulent.

Lie about it.

Dan cavalierly said, “So, lie about it.”

He and Lyle were step-brothers with different last names. Easy. The bank might never know, right? It’s possible Dan and Debbie wouldn’t get a better offer on the open real estate market. Was it fraud if no one got hurt?

Linda told me, “Lyle questioned Dan and Debbie about their personal finances, which clearly annoyed them. And he gently tried to dole out some practical advice, which really pissed them off.”

Linda and her husband carefully considered the deal for a week.

Helping out close family members might save them from financial collapse. However, they thought Dan and Debbie were so mired in the immediate crisis that they weren’t looking at the bigger, uglier picture. They might incur tax liabilities on the forgiven mortgage debt. Perhaps bankruptcy. The couple probably never stopped to consider the myriad ways this arrangement might affect their social relationships with Linda and Lyle.

And there were practical considerations. Linda and Lyle weren’t the types to rush into an investment, no matter how good it looked. They were renovating their own house and didn’t have that kind of cash on hand.

Ultimately, Linda and her husband couldn’t get past that part of the scheme that implicated all of them in an illegal transaction.

No.

Dan and Debbie became furious and said they didn’t want to have anything more to do with them. Abruptly they cut off all contact.

It felt like a divorce.

Linda and I spoke just a few weeks after the blow up. She was still in shock and said it felt like a divorce. Linda thought she and her husband made the right decision, she told me. But she was devastated by the loss of the relationships. “And I’m sure, even if we had caved, they would have stopped talking to us later,” she reasoned.

I’ll check in with Linda later to find out if it was truly the end of the road for the two couples, and how Dan and Debbie dealt with their predicament.

Would you lie if a close relative begged you to help them out of a desperate situation?

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Related reading:

I Lied About Money and Got Away With It

6 Money Lies That Can Destroy Your Relationship

Would You Loan Your Family Money, Even if You Knew They Lied?

How to Loan Money to a Friend

Image © iStock.com/mandygodbehear

 

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Too Much Power in Your Power of Attorney?

A divorced, unemployed auto mechanic in his mid-fifties, Daniel told me a whopping combination of inheritance and elder abuse stories. He uncovered the disturbing details when he moved back home to Baltimore after losing his job in Atlanta.

Who’s got the power of attorney?

Daniel’s 93 year old mother suffers from a combination of dementia and mental illness. She lives alone, but her two children visit almost every day. Daniel’s sister Amy is their mother’s primary caretaker and she claims their mother gave her a durable power of attorney. Daniel hasn’t seen it. If valid, Amy can control their mother’s finances and make healthcare-related decisions for her. Now.

Amy told him she instituted a “do not resuscitate” order. If their mother has a heart attack or a stroke, the paramedics and doctors will make no heroic medical efforts to save her. He was horrified and angry that Amy didn’t consult him when she made this life-or-death decision. Did Amy even discuss it with their mother?

Please read You’re in a Coma: What are the Financial Consequences? Don’t wait until it’s too late to let people know what you’d want if there comes a time when you can’t tell them.

Stealing from your parents

Dad died a few years ago, and Daniel believes Amy helped herself to whatever funds were left in the joint checking account. Their mother’s Social Security benefits are electronically deposited like clockwork on the 2nd of each month into their mother’s account. Amy writes checks payable to herself and forges Mom’s signature. Daniel said he knows his happens because his mother is clearly incapable of filling out and signing checks.

It’s correct that if you have power of attorney to handle someone’s personal affairs, “you’re not supposed to give yourself a salary – you’re supposed to do it out of the goodness of your heart,” he told me.

Neglecting the elderly

In addition to stealing money, Amy neglects to take basic care of their mother’s house.

If Amy needs light bulbs, she removes them from her mother’s home. It makes no sense. Amy isn’t struggling financially. She inherited $250,000 when her husband died. She cleaned out their dead father’s accounts. Amy receives Social Security disability benefits and freely spends her mother’s limited funds.

Yet she’s so stingy she won’t buy light bulbs for herself or her mother.

Daniel has limited income, but he’s the one who buys batteries for his mother’s smoke detectors.

He’s disgusted with his sister and described her as “a sponge who’s cheap and would rather fill up her daughter’s gas tank before taking care of the needs of her own mother.”

Mom is supposed to take medication to control her high blood pressure. Daniel checks the bottle of pills when he visits but it never looks like the quantity changed. Amy says she has a new prescription; the medication is inexpensive, but he thinks she doesn’t want to spend the money to fill it.

Daniel calmly told me his family stories but it was clear that he was deeply concerned and frustrated.

Power of attorney as a license to steal

I asked if he had confronted his sister. He hasn’t because he’s worried that Amy may retaliate by interfering with his ability to land a new job. He can’t afford to stay unemployed, but at the same time Daniel can’t bear how Amy mistreats their mother and uses her alleged power of attorney “as a license to steal.”

Daniel told me that worried about his mother’s welfare. He wants “to put everything the way it should be … you’re supposed to make sure all their needs are met and not put them at risk.”

He doesn’t want her house to get any darker.

Do you know any seniors who are vulnerable? How can you protect them?

EDITED: As one commenter below points out, if you suspect someone is the victim of elder financial (or physical) abuse, contact Adult Protective Services in your state.

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Related posts:

You’re in a Coma: What are the Financial Consequences?

Wife Insurance

 

 

Image © iStock.com/Kali Nine LLC

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Once a Deadbeat, Always?

Here’s another deadbeat dad story — but with an unusual twist.

(Yes, I know plenty of deadbeat mothers exist. Here’s a tragic example. But “Gold Diggers and Deadbeat Non-Custodial Parents” isn’t catchy.)

If you read my book Gold Diggers and Deadbeat Dads: True Stories of Friends, Family, and Financial Ruin, you might remember Diana’s story, “Where Did All the Child Support Money Go?”

Diana’s troubles began when she married her high school sweetheart Bart, who turned out to be anything but sweet, she told me.

Instead, he was a raging alcoholic who slept around their small town in a Minneapolis suburb.

After eight years and three kids, Diana moved to Pittsburg to live with her sister. While it was extremely painful to leave her children behind, Diana knew they needed a place to live, she explained.

Even if it meant staying with their father, who gambled away his paychecks and shacked up with a constant succession of girlfriends.

Bart garnished Diana’s wages to make sure she paid child support, but friends reported that her kids were neglected.

After Diana established herself in her new home, the kids were overjoyed to join her in Pittsburg.

Typical deadbeat dad

Bart quickly became the quintessential deadbeat dad, shirking his economic obligations. He played the classic game by working under the table to reduce the amount he had to pay.

It wasn’t long before Bart was $20,000 behind on his court-ordered payments.

Child support authorities were powerless

The kids told Diana where their father lived and she reported it to the Minnesota child support authorities. But it didn’t matter; the government never managed to catch up with slippery Bart.

Unfortunately, in many cases the non-custodial parent gets away with not paying.

And that’s where Diana’s story ended when we first met.

Update

I contacted Diana a few years later, after Gold Diggers and Deadbeat Dads was published. She was pleased to read her story and even showed it to her kids. It was “pretty darn accurate,” she told me.

I told her that I’m writing a sequel that includes updates on some of the original stories. I was sure that Bart never paid up, yet somehow she survived. I knew that she held down a good job and was in a stable relationship.

Diana had a most unexpected update for me.

Debt paid in full

She had received the full amount of the child support money. All $20,000.

Bart paid his debt?

Of course not.

Who did?

Bart stopped the carousal of women moving in and out of his house and he married Melissa. They had a daughter, but Bart hadn’t changed his ways; he drank all day and avoided anything that resembled regular employment.

One of Diana’s daughters called Melissa, who worked as a dental assistant, and asked her for help.

What? Why would Melissa want to help out her husband’s ex-wife with her problems?

It was quite simple, really.

Deadbeats go to jail

Diana explained: “Melissa paid Bart’s overdue child support to keep Bart out of jail.”

Melissa worked hard and forked over the entire $20,000 over 5 years because she didn’t want their own kid to grow up with an incarcerated father.

This woman paid the child support for another mother’s kids. Who had the same biological father as hers.

Was she a fool? Or strategic?

What do you think?

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Related posts:

Don’t Be a Deadbeat Mom

I’ll Bet You Don’t Know What a Deadbeat Is

The World’s Most Callous Deadbeat Dad

How to Beat a Deadbeat

Dirty Clothes and Money: What’s the Connection?

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My Dad Borrowed $50,000 and Paid Me Back. Why Was It a Complete Disaster?

Here’s an unusual story: A woman lends a family member a boatload of money. He pays her back in full. With interest.

End of story, right?

Wrong. Read further.

Chelsea, a freelance photographer in her late 30s, reached out to me on Facebook. All I had to do was mention “family” and “loans” and she raised a virtual hand. “Let me tell you about my dad,” she wrote me.

We spoke at length and she shared her story.

Her father was larger than life and financially successful by all external appearances, Chelsea told me. He retired early after being the CEO of a Fortune 500 company. He and his second wife, Lola (Chelsea’s stepmother) lived in ritzy West Palm Beach, had a condo in Denver, and travelled often. They lived the great life.

And why not? Her dad worked hard during his long career, and not just running The Big Famous Company; he also owned businesses in various industries. “Making money was never an issue for him,” she explained to me.

How it began.

At the time, Chelsea was 28, newly married to Carl, and they had just bought a house (at the height of the real estate boom).

Dad wanted to borrow $50,000 from Chelsea to buy several frozen yoghurt franchises. It was a short-term loan; he assured her he needed the money for only thirty days to cover a cash flow crunch.

Chelsea didn’t hesitate. “I didn’t even think about it. Never occurred to me that it might be a problem.”

She agreed to loan her dad the money, without discussing it first with Carl. Contrary to what you might expect, her decision was never an issue in their marriage. Carl “wasn’t super excited” but he didn’t protest.

They took a home equity loan and gave the cash to Chelsea’s dad, without a written agreement.

Thirty days go by. Dad sends her the monthly interest payment on her loan, but says he needs another thirty days to pay the $50,000 principal.

She agreed, but he kept procrastinating. In her father’s mind, it should be no concern for Chelsea. “What’s your problem? It’s not costing you anything, I’m paying the interest,” he brushed her off.

A year later.

The frozen yoghurt shops failed, and her father sued his partner. He lost the lawsuit, plus all the money he sunk into that venture.

Dad’s wife Lola knew nothing about her husband’s finances. She was clueless about his daughter’s loan or his long string of unsuccessful businesses. Meanwhile, they enjoyed extended vacations at posh resorts in Bermuda and Paris. Lola always had the latest Prada outfits and whatever cars she wanted. A sleek yacht was docked at their mansion.

In contrast, Chelsea and Carl lived relatively frugally. She didn’t care how her dad spent his own money.

Until now.

How could he afford his lavish lifestyle but couldn’t — or wouldn’t — pay her back? She was annoyed, but didn’t say anything directly to her father. She sort of hinted around about the loan.

For the first time, Chelsea saw the cracks in her father’s facade. He wasn’t an upstanding man who kept his word. She lamented to me, “He was no longer my dad; he was just an ordinary person.”

Chelsea didn’t want to get stuck with the loan balance; what if something happened? Her concern was legitimate; by now they had a baby, she had to quit her job, and Carl worked overtime to cover their growing expenses. Their house plummeted in value.

Her dad agreed to pay back $20,000 of the original loan; less than half, but at least it was a good chunk of the debt.

Two years.

Fast forward. It’s now two years since Chelsea blindly handed over $50,000 to her dad. “One day, I just lost it, I was done,” she told me. “I called him in tears and told him, ‘I need you to pay it back. It’s costing me sleep and peace of mind. Carl and I argue frequently about it.'”

It was a lie.

She and Carl never discussed the outstanding loan. It wasn’t a cause of friction in their marriage.

Yet Chelsea knew how to hit her dad exactly where it counted.

Her trick worked. She could hear it in his voice. He faltered, “Carl wants me to pay it back?” He didn’t want his only son-in-law to think poorly of him. Maintaining the image of being a super-successful man was his paramount concern.

Chelsea and her dad got into a heated argument. He said, “You’re my only kid. You’ll get all my money when I die. Or else you can get the rest of this loan now and that’s all.” He slammed down the phone.

In shock, Chelsea realized that her dad never had any intention of paying her back. Or that if he did repay the debt, she’d be disinherited.

Three days later, Chelsea and her dad managed to have a calm conversation. He promised to send the $30,000 balance in a few weeks.

Surprise.

He did. Paid his debt to her in full. Including interest.

Chelsea assumed her dad took the money out of his 401(k). She knew that top executives received compensation packages that included healthy retirement benefits.

Unusual, isn’t it?

I’ve chronicled many instances of loans between family members and friends that went bad. The borrower welched. Relationships and finances were destroyed forever.

Not the end.

But that’s not the end of Chelsea’s story.

Not by a long shot.

Two years after paying her back, Chelsea’s dad passed away. She and her stepmother Lola were the sole beneficiaries of his trust.

Meaningless.

Horrified, they discovered that there were no assets. None.

On the contrary, a mountain of debt — of Everest proportions — loomed large. The West Palm Beach mansion was engulfed in a $1.5 million mortgage and home equity loan. Dad owned his mother’s house in Portland, but it was far underwater. He owed at least five years’ back federal and state income taxes. Payroll taxes for employees of his numerous businesses were unpaid. Lots of outstanding loans to vendors and lenders totaled over $3 million.

How had an accomplished, shrewd, businessman messed up so badly?

Chelsea shared her theory with me:

It’s like he had a gambling problem. He’d get a brilliant idea, borrow money from people, and start a business. When you have an existing company, people aren’t too interesting in investing. But if you have an exciting new concept for a product or service, people will jump at the chance to be a part of it. His downfall was that he never thought the whole idea through. He’d get impatient and wouldn’t give the business enough time and money to grow.

The more Chelsea dug as she tried to settle the estate, the more worms crawled out from under the financial rocks.

Remember when he paid her the final $30,000 out of his 401(k) account?

Wrong. He had sucked that account dry.

Chelsea discovered that her father borrowed $100,000 from his brother. She can’t be sure, but Chelsea thinks that’s where her repayment cash came from. And it was no surprise that her uncle was left high and dry on his loan.

Out of the wreckage.

Chelsea is resourceful. She rescued the frozen yoghurt business, sold it to the managers, and the owner-financed payments will support her dad’s widow Lola for several years. She wasn’t surprised she didn’t inherit a fortune, but Chelsea was annoyed that she spent a considerable amount of time straightening out the mess of her dad’s botched financial affairs.

I asked her what caused it all. She answered quickly, “Not being honest with his wife. A lot of his problems stemmed from covering up the money problems, spending money he didn’t have, trying to keep up appearances, and not being able to admit it wasn’t going so well.”

I asked her, “Would you do it again? Loan the money to your dad?”

“No way,” she said. “If a person can’t get money from a bank, then they don’t know what they’re doing.”

Fortunate for Chelsea, she didn’t lose any money, and her marriage was unaffected by the whole debacle.

However, she lost something much more significant: respect for her father.

Have you ever loaned or borrowed money from family? How did it change your relationship?

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Related Posts:

I Loaned and Lost $5,000. I’m Not Rich. Why Was it No Big Deal?

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Your Rich Aunt Dies and Leaves You a Fortune – Now What?

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Image © iStock.com/Kiyyah

The post My Dad Borrowed $50,000 and Paid Me Back. Why Was It a Complete Disaster? appeared first on Gold Diggers & Deadbeat Dads.

Would You Lie to Help Your Family Avoid Financial Ruin?

Here’s a recent email I received from Linda in St. Louis (not her real name or homeland, of course):

I bought your book last month and have given it to a friend, who will share it with her sister. My best friend could have used it ten years ago. Amazing how many stories there are.

She shared her own tale and later we spoke at length about how her close family relationships were destroyed by money.

Linda and her husband Lyle lived frugally yet were generous when extended family hit them up for financial assistance. A few years ago, they helped out Lyle’s step-brother Dan and his wife Debbie when they needed a $6,000 loan. The two couples were close friends, not just family members by default, she told me.

Dan and Debbie lived life to the max. That is, credit card max and mortgage max. They used their home equity line of credit to buy a condo in Florida where they planned to retire. However, retirement kept eluding them because they were mired in debt. Linda and Lyle knew their siblings-in-law were livin’ large, but didn’t know the extent of their financial problems.

Bad became worse. Dan lost his job and at age 62, he was considered unemployable in his profession. By then, their home that carried $420,000 in debt was worth only about $275,000. The next step was inevitable: Foreclosure.

Dan and Debbie thought they had one last card up their sleeves. The Florida condo was owned by Debbie’s family trust. They hoped the bank wouldn’t uncover this asset and force them to sell it to cover the debt on their home.

Few options remained.

Linda and Lyle didn’t find out the complete backstory until they were invited to dinner “to discuss something important.” They both had the same initial reaction; their family had financial troubles and needed help. Again. Most of the previous $6,000 loan was still outstanding.

Dan fixed drinks for everyone and laughed nervously, “Relax, we aren’t asking you for money.”

OK, then what? An organ transplant?

“We thought you might want to buy our house in a short sale for about $250,000 and rent it back to us for two years until we move to Florida. It’s a good deal for all of us. You’ll get our house as an investment at a good price by paying less than the outstanding debt. We’ll have a place to live until we get back on our feet.”

Lyle was savvy enough to know instantly that this scheme would be illegal. He explained that a short sale must be an “arms-length” transaction — not between relatives — or else it might be fraudulent.

Dan cavalierly said, “So, lie about it.”

He and Lyle were step-brothers with different last names. Easy. The bank might never know, right? It’s possible Dan and Debbie wouldn’t get a better offer on the open real estate market. Was it fraud if no one was hurt?

Lyle questioned Dan and Debbie about their personal finances, which clearly annoyed them. And he gently tried to dole out some practical advice, which really pissed them off.

Linda and her husband carefully considered the deal for a week.

Helping out close family members would save them from financial collapse. However, they thought Dan and Debbie were so mired in the immediate crisis that they weren’t looking at the bigger, uglier picture. They might incur tax liabilities on the forgiven mortgage debt. Perhaps bankruptcy. The couple also probably never stopped to consider the myriad ways this arrangement might affect their social relationships.

And there were practical considerations. Linda and Lyle were renovating their own house and didn’t have that kind of cash on hand. They weren’t the types to rush into an investment, no matter how good it looked.

Ultimately, Linda and her husband couldn’t get past that part of the scheme that implicated all of them in an illegal transaction.

No.

Dan and Debbie became furious and said they didn’t want to have anything more to do with Linda and Lyle. Abruptly they cut off all contact.

Linda and I spoke just a few weeks after the blow up. She was still in shock and said it felt like a divorce. Linda thought she and her husband made the right decision, she told me. But she was devastated by the loss of the relationships. “And I’m sure, even if we had caved, they would have stopped talking to us later.”

I’ll check in with Linda later to find out if it was truly the end of the road for the two couples, and how Dan and Debbie dealt with their predicament.

Would you lie if a close relative or friend begged you to help them out of a desperate situation?

Related reading:

I Lied About Money and Got Away With It

6 Money Lies That Can Destroy Your Relationship

Would You Loan Your Family Money, Even if You Knew They Lied?

How to Loan Money to a Friend

Image © iStock.com/mandygodbehear

 

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Would You Loan Your Family Money, Even If You Knew They Lied?

 

I met William when he was doing plumbing repairs at my home. I’ve got an old house, so plumbing issues crop up periodically. We started talking and he told me about his dysfunctional childhood.

(It always amazes me when people tell me such intimate details about their lives, and not just about money.)

William had a complicated family tree with a slew of siblings, half siblings, and stepparents, he told me.

His biological parents physically abused him until his grandmother stepped up to raise him.

And everyone was out to get money from him.

If Momma ain’t happy

Including his own mother. It wasn’t enough that she beat him when he was a kid. First she asked to borrow $1,000. At the time, he didn’t have it. Her response? “I will piss on your grave.”

Wow.

I couldn’t believe he told me this so casually. As if everyone’s mother behaved so atrociously.

A few months later, William’s sister Mandy called and said their mother was in jail and desperately needed bail money. William was suspicions, so he called the jail to check out her story.

Mama wasn’t locked up.

He was devastated that his family lied to him.

“Why didn’t they just say they needed cash? If I had the money, I would have given it to them. Instead, Mandy made up some flimsy sob story. I don’t know what she wanted it for. Perhaps drugs.”

Lying runs in the family

The other sisters were fabricators also. Susan told him she needed $200 to get a restraining order against a violent, alcoholic ex-boyfriend. William doubted this story, especially when Susan couldn’t answer basic questions about her “situation.”

While he checked out my leaky faucet, I asked William why his family needed to make up these outrageous stories.

His mother and the girls thought he had money because he held a steady job and owned a car.

He thought for a minute and then added, “They told these stories to make me feel bad if I didn’t help them. They played on my kind heart, my sensitivity.”

Is William soured on his family (including some distant nephews who routinely ask to “borrow” cash)?

No. Instead, he feels badly.

“I wish I had more to help them. I hold no resentment. I wish we were closer.”

Would you loan or give money to family members, even if you knew they were lying to your face?

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Related posts:

I Lied About Money and Got Away With It

I Handed All My Money to the Handyman

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Image © iStock.com/Samo Trebizan

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Your Long-Lost Rich Aunt Dies. You Inherit a Fortune. Now What?

 

Have you ever dreamed that a wealthy relative died and left you a fortune? Nice fantasy, right?

It happened to David, an accountant who lives in Dayton, Ohio. He got a call from a lawyer in Cleveland. It seems that David’s late mother had a half sister named Lucy. David knew Lucy only vaguely; no one ever told him the family backstory, but bad blood flowed between Aunt Lucy and David’s mother.

Lucy had one son (David’s cousin) who dutifully set up a trust for the benefit of his mother. Unfortunately, David never got around to changing the beneficiary in case he died before his mother.

Which he did.

Who gets the money?

When Lucy died, she had no other children, grandchildren, or siblings, so next in line to inherit were David and his younger brother. They were stunned to find out they were entitled to a windfall of “a considerable amount of money,” the lawyer said.

Six figures. Hundreds of thousands of dollars.

Aunt Lucy must be rolling in her grave.

What to do with all that money?

I asked David what he planned to do with the money. New house? Car? Trip around the world?

No, David’s an accountant, and fortunately he’s too practical for blowing his fortune. When he gets the money in a few months (assuming there’s no challenge by an even more distant relative), he plans to stash it away and wait a year to figure it out rather than blowing it all on luxuries. He’ll probably put it towards college costs for his young kids. Quite practical.

Lesson

Think of a relative who’s not exactly your favorite person. Now, imagine you worked hard and did quite well financially during your lifetime. You die and that person gets all your money and possessions. Can you see the look of glee on their face? They’re not going to turn it down, even if you disliked each other, right?

Lesson? Keep your will, trust, and other estate documents up to date. Name a contingent beneficiary for your life insurance policy and IRA and 401(k) accounts. Play out all the scenarios of what will happen if people don’t die in the “logical” order of oldest first.

Don’t inadvertently give yourself a reason to pirouette in your mausoleum.

What would you do if you inherited a fortune?

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Image © iStock.com/Franck-Boston

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When You Die, You’re No Longer a Person

This post has little to do with financial issues, but I felt compelled to write it.

A dear friend was admitted to the ICU at a local hospital after an arduous battle with cancer. Her family lives on the West Coast and called to tell me that the doctors didn’t think she would make it. I rushed over to the hospital and sat with her for a few hours as she drifted in and out of consciousness. I’d like to think she knew I was there.

Early the next morning, I called the hospital to find out her condition. “We don’t have a patient by that name, ” they told me

“Of course you do. I was at her bedside a few hours ago,” I said, a bit annoyed about the bureaucratic inefficiencies.

My call was transferred to the medical unit where they told me she had been discharged. “Of course she wasn’t.” Now I was really annoyed. “She didn’t just walk out of there,” I snapped.

I tried, but I couldn’t deny the awful truth. My friend had passed away. I was the last person to see her alive, other than the medical staff. Now there was no record of her being a patient in the hospital.

When you die, you’re no longer a person.

PS: I did write on this blog and in Gold Diggers and Deadbeat Dads about “Serena.” She wanted me to be co-executor with her cousin of her estate. I told her I refused. I’d gladly serve as her sole executor or contingent executor. But there were too many potential problems that could arise by carrying out this critical task with a stranger. I was relieved that she named another friend as co-executor.

Image © iStock.com/peebert

Related posts:

Why I Refuse to be Co-executor of Your Will

You’re in a Coma: What are the Financial Consequences?

Did You Give Too Much Power in your Power of Attorney?

Update – Powerful Power of Attorney

Dying Words

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