Forensic Geriatric Finances

Today’s post revisits the subject of caring for the financial independence of your loved ones. There’s nothing here about military retirement, but I’m very glad that our aggressive savings and low-cost lifestyle have enabled us to retire from military service without a bridge career. As all too many of us Baby Boomers are finding out, eldercare can be its own full-time job.

It’s been 16 months since my Dad has moved into his care facility. His Alzheimer’s symptoms reached mid-stage and he could no longer live independently. My brother (the guardian) and I (conservator) have spent most of that time pursuing guardian & conservator appointments, shutting down Dad’s apartment, figuring out his finances, and getting caught up on old business. (See the other links at the bottom of this post.) In the middle of that we shifted our focus to dealing with multiple myeloma and chemotherapy. It looks like things are finally settling down. Dad’s happy, the oncologist is in “wait and see” mode, and I have Dad’s finances almost where they should be.

So last month I started going through a three-foot stack of his files. 16 months ago (while Dad was in the hospital) I’d given his file drawers (a ten-foot stack) a quick once-over and pulled out the most important ones. I threw out about five feet of 20th-century stock analysis and spreadsheets. I boxed up the rest of the files for “later”, and now I’m going through them page by page. Luckily half of the box turned out to be all of Dad’s tax returns dating back to 1953– including supporting documentation. Most of those folders hadn’t been touched in decades.

These “less important” history files turned out to be more important than I thought. They had fascinating names like “Old Medicare receipts”, but they also had mis-filed papers. It never occurred to me that my father would make mistakes with his incredibly neat filing system.

Dad’s an electrical engineer, and he handled Alzheimer’s for nearly three years of independence with rigorous calendars & checklists. Even though these days he wakes up disoriented every morning, his wall calendar catches his eye and he reads his note to himself about where he is and what’s happening that day. It’s sort of a short-term memory re-boot… every morning. So I thought he’d been filing his papers in the right places, but that must have stopped soon after the Alzheimer’s got started. I guess that’s another one of my conservator’s blind spots.

One of the papers is a note on an osteopath’s stationery dated June 2009. Dad was probably referred by his primary doctor during his treatment for high blood pressure. The osteopath’s note covered all sorts of dementia causes and advised various things to do (or avoid). The doctor said that dementia is particularly difficult to diagnose in high-functioning people (that’s my Dad), and the doc wanted to do followup tests. Dad made his own notes on the osteopath’s diagnosis, and then added a memo to make another appointment in September 2009. But it was filed in the wrong folder, and I bet Dad either forgot about it or decided that he was tired of being a “lab rat”. We know that a couple of months later Dad wrote us letters that he could no longer use his computer, and that news started our countdown timer on his independent living. If he’d filed the osteopath’s note in the right place then he might have started treatment with Aricept or Namenda. But he didn’t. We never knew about it.

Another mis-filed form in the Medicare folder is a blood test from April 2010. The lab noted that his white & red blood cell counts were low along with his platelets. The memo asked Dad to come in for more tests, but there’s no evidence that he ever did. I don’t know whether this test was showing signs of multiple myeloma way back in early 2010, over a year before Dad was diagnosed with it. But the tests might have reflected lab errors or malnutrition instead of myeloma. I forwarded the lab results to his oncologist.

Most disturbing of all was a mis-filed form from his Medicare supplemental insurance company… for life insurance.

Dad’s Medicare supplemental insurance (“Medigap”) policy comes from a branch of Bankers Life and Casualty in his old town. Dad’s “Old Medicare receipts” folder had a bunch of letters from various agents over the years, introducing themselves or turning Dad’s Medigap business over to a new agent. Then in March 2010, an agent sent Dad a “Life Insurance Buyer’s Guide” pamphlet with an application. I can’t tell whether Dad started the conversation or whether the agent contacted him first, but somebody (other than Dad) actually filled out his application for a $92K life insurance policy.

The application’s not accurate or complete, but it named us sons as beneficiaries. It was signed by Dad and witnessed by two agents. It has a policy number and it’s listed as “Single premium whole life insurance”. The application summary printout said it cost $67,636.94 to obtain $92,380 of coverage.

You might say that I became a bit agitated. By March 2010 Dad was showing clear signs of Alzheimer’s as witnessed by two doctors (and us two sons). However, even a year later he was still carrying on social conversations with lawyers who thought he was competent, and he actually passed two mini-mental state exams with flying colors. So I could believe that his social skills made him seem competent… especially to an insurance agent seeking a big commission.

But $67K?!? That’s not a premium, that’s fraud. I searched all over Dad’s records for large withdrawals or mutual fund sales to pay that fee, and I couldn’t find a thing.

So I wrote to the insurance agent, included my conservator’s appointment letter, and asked for more information about the policy.

The original agent was no longer at that branch, but a different agent wrote back with new one-page computer summary. It turns out that the premium was actually $6763.69. (So for a while I had no idea where the “$67,636.94” came from.) The coverage was still the same. The policy was paid up with that single premium, so I only learned about it by finding the application in his medical file. I never would have received any other bills or correspondence from Bankers Life.

It’s hard to prove that anybody took advantage of Dad. If anyone is getting ripped off, it’s the insurance company. Dad could’ve bluffed his way through the whole application, especially if they filled it out for him. Even if the insurance agents were taking advantage of Dad for a commission, I think it’d be impossible to make a legal case out of it. The last thing I’d want to do is hire another lawyer, and even if Dad did get cajoled into spending over $6700 then eventually his estate is going to collect $92K.

However, I still couldn’t find any record of that $6763.69 payment. My remaining worry was that the money to pay the premium might have come from a bank or a brokerage account that I hadn’t found yet. Or even worse, what if it came from a safe deposit box? Dad’s financial files had looked pretty accurate until I started going through them one page at a time. What if he’d started opening new accounts, forgotten about them, and mis-filed the paperwork– or never filed it at all?!?

So I shared my concerns with the agent and asked whether they had any record of how Dad had paid for the policy. The mystery payment cleared up pretty quickly once the mail got back to Hawaii: the new life insurance policy was bought from a 1035 exchange of old whole-life policies.

Over four decades ago, Dad purchased four separate whole-life policies on my brother and me. (The first I learned about this was in March 2011 when Dad was in the hospital. I found the policies in his “In case of death” files.) I don’t know much about life insurance– I’ve only ever had military term life insurance and I don’t carry any today. The 1960s company was “State Mutual Life Assurance”, which eventually morphed into “First Allmerica Financial”.

However, we know how that whole life insurance turned out. From Dad’s files, in the late 1970s the dividends began to fall short of the premiums and Dad let the difference accrue as loans against the cash value. In the ’80s the tax laws changed (the interest on the loans was no longer tax-deductible) so Dad paid in more money to keep the policies current. He had four thick files of correspondence with SMA/Allmerica asking every year for more money to pay the premiums, Dad grudgingly paying the extra, and both sides bickering over the cash value. It takes a lot to get my Dad upset, but judging from his letters this company succeeded more than once.

Over the years the four policies grew to a total cash value of about $65K and an insured value of just over $98K. By 2010 (when he did the 1035 exchange) I’d already achieved financial independence. My brother is close too, so I’m not sure how Dad felt about keeping these policies going. My opinion is that neither of us sons needed Dad’s life insurance, but Dad didn’t talk about it with us.

We still don’t know who started the conversation in 2010, and that insurance agent has moved on so we may never know. However, interest rates were still dropping and the old policies may have needed more paid-in premiums, so I bet Dad was pretty happy to do a 1035. The application listed their cash value at $67,636.94 (I recognized that number!), and the agent recorded a one-time premium of $6763.69. Their “net surrender value” was a little over $62K and the insured value is now $92K. Those numbers don’t make much math sense, but that’s what’s on the one-page database printout summary.

I don’t know why Dad kept the old policies in force for so long, but I’m sure some of his motive was “sunk costs“. By 2010, as his Alzheimer’s symptoms took hold, I can understand how he’d think a 1035 would solve all his problems. He probably felt that he didn’t need the cash, because by this point he wasn’t even spending his pension. Maybe he wanted my brother and me to have enough money to take care of death expenses. I wish he’d talked about it.

I mailed a query letter to First Allmerica, and they confirmed the 1035 exchange.

Dad’s old tax returns are also a valuable resource for hunting missing assets. I looked through 10 years of 1099s and confirmed that he’d only had one other checking account at another bank. He mentioned in an old letter that he’d closed it in early 2004, so I’m feeling pretty confident that we’ve found all his assets… and this time I really mean it.

His 2010 tax return also included four 1099-Rs from First Allmerica for the 1035 event. None of that was considered taxable.

All this from a sheet of paper in the wrong folder.  At least we had a starting point.

I learned that insurance companies are required to turn over inactive policies to the state in which they were purchased. The National Association of Unclaimed Property Administrators runs a database that links to the state’s websites. I’ve gone through this search several times, along with the Treasury Hunt website for government bonds. We haven’t found anything yet.

The account search paid another unexpected dividend. It’s been 16 months since Dad used either of his credit cards, and both have expired. I have the new cards and I have not activated them, but the accounts are still active. I’ve never needed to do anything with them, so I’ve never looked at them before. When I went through their online account histories looking for a $6763.69 premium charge, I realized that one of the accounts is a Chase “rewards” card with 17,000+ points on it. I clicked on the “Redeem rewards” link and I was able to claim a $150 cash rebate plus a $10 gift certificate.

Another asset-management tip that needs to be added to the conservator’s manual. Somebody should write a book…


Related articles:
Book report: “The 36-Hour Day”
Geriatric financial lessons learned
Geriatric financial management update
Geriatric financial management
More on caring for an elder’s finances
Financial lessons learned from caring for an elderly parent


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About Doug Nordman

Author of "The Military Guide to Financial Independence and Retirement" and co-author of "Raising Your Money-Savvy Family For Next Generation Financial Independence."
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2 Responses to Forensic Geriatric Finances

  1. Janette says:

    YOU should. We have had to weed through so many things to straighten out my mother’s life. My dad left her with plenty of money—but she had NO idea. AGGGG!

    • Doug Nordman says:

      I write the posts a couple weeks ahead of time, and after I drafted this one I started talking about it with my family. I’m working on an outline.

      I’d love to include the stories & advice of other families who’ve had to deal with this situation. Please let me hear what you wish you’d known before, and what you wish your parents had done before it was too late!

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