Real Life Example:

In a real-life scenario, a grandson, the successor trustee of a family trust, requested a loan using his grandmother’s trust property.  This raised suspicions of financial elder abuse, as the grandson intended to use the loan for personal gain rather than for the benefit of his grandmother.

Article:

The Loan Request:

My client is a 94-year-old lady in a retirement home. Her husband has passed away.  The property title is held in a family trust with multiple beneficiaries, and the grandsons serve as the successor trustee.  The estate will be settled upon Grandma’s death, and the proceeds will be distributed to the numerous family beneficiaries.

The successor trustee, the grandson, wants to borrow money, using the free and clear single-family asset held in the family trust, as collateral to purchase a franchise business he intends to operate.

Borrower background:

The trust document authorizes the successor trustee (the grandson) to convey title in a sale or borrow against the property as the sole signatory.

The property is valued at $800,000, free and clear. The grandson desired to sell the property with the option to purchase it back within 24 months for maximum cash-out, to acquire a franchise business as a 100% owner.  His chosen method to obtain capital for his business franchise purchase was to quickly sell the property at a steep discount to get his greedy hands on the proceeds.

The “greedy’ grandson planned to borrow quick money and use the property as collateral while waiting for a sale and closing.  He was referred to a hard money lender, a private lender that typically provides short-term loans secured by real estate, for a short-term bridge loan.  A hard money lender typically provides loans with higher interest rates and shorter terms, often used for real estate investments or in situations where traditional financing is unavailable.

The remaining family beneficiaries were unaware that their future inheritance financial benefits would be misappropriated and permanently lost by one greedy relative.  Like millions of others, the sociopathic grandson dwells in a self-absorbed dreamland of entitlement. I have met a few of these terrible people.

The competent lender responds.

The lender representing the ultimate debtor asked the procuring Borrower's loan broker if the elder had legal counsel to represent her interests.  Would the Borrower's counsel provide a letter stating that the Borrower understood the material facts and ramifications of this transaction?   Do you happen to know if the transaction is a financially sound decision?

When asked if the elderly grandmother had legal counsel to represent her interests, the loan broker representing the grandson responded, Yes, a lawyer involved only represents the grandson.  This response raised a major red flag, as it indicated potential collusion. The lawyer, who represented only the grandson, may have been willing to participate in defrauding the grandmother in the scheme to misappropriate unearned benefits from the estate.

Any equity or proceeds from the sale of the property, or loan proceeds, should be reserved to pay for Grandma’s housing and ongoing care.

Any prudent and knowledgeable real estate or mortgage broker representing private money trust deed investors will decline this loan request. The procuring Borrower, a broker representing the greedy grandson, will likely continue dialing for dollars to find another sucker lender dumb enough to arrange this transaction.

A procuring loan broker involved in this transaction is a bona fide scoundrel, a term used to describe a person who is genuinely and notoriously dishonest or dishonorable.  The property equity has gone, the grandson takes money for personal use, other beneficiaries get screwed, and there is no money to care for grandma’s medical and living expenses.  The parasitic scoundrel was waiting for Grandma to die to cover up this fraud.  I call this effort ‘Felony Stupid.’

Yes, fraud, elder abuse, and negligent misrepresentation may surface when beneficiaries left out of their rightful inheritance file a lawsuit against the grandson, mortgage brokers, the Borrower's lawyer, and the investor(s) who purchased the trust deeds.

Any reasonable loan broker will run for the hills or hop on a bus, Gus, and drop off the Key Lee to avoid this transaction.

Comments:

Financial elder abuse relates to the misappropriation of financial resources or assets.  An abuser will take, misallocate, misappropriate, secretly obtain, or retain the real or personal property of an elderly or dependent adult for wrongful use, intending to defraud. This is a prevalent issue that requires immediate attention and action.

Third-party support staff members have daily contact and access to older adults, working to instill confidence and trust.  Trusted individuals, like family members, paid caregivers, and nursing home staff members, commit most elder abuse cases. We read about these incidents daily. Misappropriating an older adult’s financial interests, engaging in personal abuse, or committing intentional negligence constitutes fraud.  Known incidents should result in the prosecution of the perpetrator.  Unfortunately, too many get away with the abuse because incidents go unreported.

As a real estate professional, your vigilance and awareness can significantly reduce the risk of financial elder abuse.  Watch for signs of potential financial misappropriation or misrepresentations by any parties. Your feelings and intuition serve as a guide to rightness or wrongness.  Avoid any transactions that do not pass the conscience test. By being vigilant, you can play a crucial role in preventing such abuse and protecting vulnerable individuals.

The problem is that some people who are described as sociopaths or antisocial personality disorder are said to lack remorse or filter decisions through a conscience.  They generally have no bad feelings about their actions that harm others. In the U.S., between 6.25 and 17.7 percent of adults are considered sociopaths, with an average of about 12%.  12% of approximately 260 million adults equals 31 million.  The walk among us; ponder that!

All involved parties should be self-aware and vigilant at the first sign that a person cannot care for or make decisions for themselves.  The self-aware person is the one who notices, through personal interaction, that something is not right, will notify the relevant parties, and take the necessary action to remedy the situation, whether temporary or permanent.  This person is a hero and a star.  Millions of people are these heroes, yet they often receive no credit for their efforts.

Statistics suggest that only 1 in 44 financial abuse cases are reported, according to the National Adult Protective Services Association (NAPSA).  Reporting is not only critical but it’s crucial.  NAPSA also notes that elderly victims of financial abuse are three times more likely to die and four times more likely to enter a nursing home without sufficient funds to care for themselves. By reporting, you can help prevent these dire consequences. Your actions can make a significant difference in the lives of vulnerable individuals.

Elders will be victims of financial crimes perpetrated against them, resulting in approximately 20% of $73 trillion, or $14,600,000,000,000 (trillion with a capital T and 12 zeros) in assets that should otherwise go to future beneficiaries being misappropriated or stolen. This staggering figure underscores the prevalence and urgency of the issue.

An estimate of the average wealth of a baby boomer family might be $2,000,000.  The calculation means that there would be an estimated 20% of the wealth (14,600,000,000,000/2,000,000=7,300,000) separate incidents of elder financial abuse.  For this estimate, let’s assume this is over ten years +/—730,000 separate elder abuse incidents per year, or 2,000 new ones every day.   His awareness should prompt us to be more cautious and vigilant.

We have degraded our society to encourage entitlements and pursue unearned benefits and parasitic behavior, where criminal-based exploitation has little or no consequences.  Any act of eroding a person’s lifetime earnings and financial stability is an unheard-of, terrible act.  Any involvement by a fiduciary is a fraud.