Family feud

Kiplinger's Personal Finance Magazine, Sept, 1998 by Stephanie Gallagher

Ricky Falk's daughter was supposed to be looking out for her mother's interests. A court ruled she was looking out for herself instead.

Marice "Ricky" Falk began asking about the money right after her husband, Louis, died in 1993. Several years before, the Falks' assets--worth approximately $1.6 million--had been split in half for estate-planning purposes. Each half was supposed to have been put into a trust for the other's benefit (and vice versa) until the second spouse died. Then it would be split 50-50 between Ricky and Lou's two children. But when Lou died, Ricky could not figure out where his money was. "I kept asking my daughter and my accountant about his estate, and their answer was always the same: `Everything goes to you,'" Ricky says. But no one ever showed her the money.

A year and a half later, she found out why. Her daughter and son-in-law, Linda and Terry Dellerson, were about to leave town on a skiing trip. They took Falk to lunch and brought her back to her Century Village apartment, in Pembroke Pines, Fla. Then Linda handed her mother a two-page letter. In it, Linda disclosed that she had been named the outright beneficiary of 75% of her father's trust; her brother, Steven, who is mentally ill, had been named a 25% beneficiary, with Linda serving as his trustee. The change in beneficiaries had been made while Lou was living in a nursing home and Linda had his power of attorney, and while Linda was also guardian of Ricky's property. Ricky had never been consulted.

"From this point forward, I will continue to handle your affairs as if they were my own," Linda wrote in her letter. "But the phone calls [from you] about your assets will stop. The calls to my accountant will also stop because they're bothering him, too .... I know it's hard for you to do, but you're going to have to direct your energies to shopping, your health, your apartment, entertainment, shows and your friends instead of your investments."

Ricky was furious. She took steps to end her daughter's guardianship, and filed suit to recover money she believed was rightfully hers. Falk's attorneys contended that Dellerson had devised a systematic plan to gain control of her parents' assets before they died and bilk her mother of Louis Falk's $800,000 estate. "There was a theme," says Richard Milstein, Falk's attorney. "It was called `Steps to an Early Inheritance.'"

The matter came to a head six months ago in Dade County, Fla., probate court. Judge Sidney Shapiro ruled in Falk's favor, issuing a $1.2-million judgment against Linda Dellerson and chiding her for "self-dealing that seriously violated her duties as her mother's guardian and trustee."

Dellerson filed an appeal and is seeking protection under Chapter 11 of the bankruptcy code. "I don't know how something like this could happen," says Linda, 44. "I've gone from having an inheritance to being put into the legal battle of my life."

The Falk Case is an extreme example of a form of domestic conflict that is apparently on the rise: adult children who financially exploit their elderly parents. Whether by gaining a parent's power of attorney, being named on a joint bank account, becoming the parent's guardian or simply writing checks for a parent with poor vision, children can gain control of their parents' assets, then siphon off money for themselves.

No studies in the U.S. have been published on the prevalence of this type of elder abuse, but law-enforcement agencies are devoting more attention and manpower to a situation that seems to be becoming more common. A growing number of states have recently passed laws that specifically make it a crime to financially exploit the elderly (the Los Angeles police department has a special unit that is devoted exclusively to investigating such crimes). In California, it is an automatic felony if someone in a caregiving capacity or position of trust steals more than $400 from an elderly person. Florida has a similar law on the books, and recently inaugurated the country's first Elder Court designed to deal with financial and other types of elder abuse.

Such cases generally follow a pattern. Take an elderly person, a longtime saver, with poor eyesight and maybe a touch of senility. Add a child or other relative, perhaps someone with a house he can't afford, a mountain of credit card debt--or a penchant for spending money. Combine them in a stressful caregiving situation and you've got the makings of a classic case of family financial exploitation.

Often a caregiver starts with the best of intentions. "They want to get involved in paying the bills and managing the assets," says Scott Solkoff of Deerfield Beach, Fla., a lawyer specializing in elder law. "But after that first step, it develops into, `What does Joe really need $900,000 for at this point in his life?'"

From there it's just a short leap to thinking "I deserve it" when the relative is the elder person's caregiver, or "She wants me to have it." The relative can arrange gifts of large sums of money to himself, using the rationale that he's helping the elderly person avoid estate taxes.