Mary, a retired professional woman who had never married, first came to see me in 1992, when she was 70. She had invested in three blue chip companies in the 1950’s and was savvy enough to hold onto those stocks through the years. As a result, her three investments had grown to a value of $1,000,000 by the time she became my client.
Mary, however, had a hunch that having her entire investment nest egg tied up in three stocks wasn’t prudent. That’s why she engaged my services. We worked together to slowly liquidate her concentrated holdings, diversifying the proceeds into various asset classes. We set her spending at 4% of her portfolio, an amount intended to keep the portfolio growing to at least equal the inflation rate. This strategy worked well. Mary’s nest egg not only provided an ample income, but grew to over $2,500,000.
Over the years, we created an estate plan to benefit several charities. With her financial needs taken care of and her legacy in place, Mary still had one serious concern. She was uneasy about who would make financial decisions for her if she were unable to. Mary had no children, siblings, nieces or nephews; she had few close friends.
She had appointed a friend as her trustee in the event she became incapacitated. Several years later her trustee died. She asked me to be her executor/successor trustee, and also her durable and health power of attorney. This meant I would make all her financial and health decisions if she became physically or mentally incapacitated. I had always refused such requests from clients. Mary, however, had no one else. After conferring with my compliance attorney, I agreed to act as her power of attorney and to serve with her attorney as a co-executor/successor trustee.
A couple of years ago, I helped Mary move into an assisted living center. I became increasingly concerned about her, noticing she was becoming somewhat forgetful and confused.
At our quarterly review meeting a few months ago, Mary initially seemed somewhat confused. I was able to reassure her about the stability of her finances, and she seemed clearer by the time we finished. Three weeks later, I received a handwritten letter from her: “You have my finances in a mess. I can’t get to my money. You are fired.”
To say I was stunned would be an understatement. Still, ethically I was required to comply by moving her holdings to another broker.
Several conversations over the next few weeks confirmed to me that Mary was suffering from periodic memory loss and delusion. This gave me a lot of concern, since in her mental state she could be taken advantage of easily. Yet, because she had fired me and removed me as her power of attorney, I was powerless to step in and protect her from herself.
Mary and I had never considered the need to protect her from a gradual physical and mental deterioration. Had she been disabled by a sudden accident or a stroke, I could have stepped in. Yet, because her decision to fire me was made at a time when she was arguably still competent, my hands were tied. It was sad to watch Mary destroy, in a matter of days, the safety net she and I worked so carefully to construct over 15 years.
I wish I could end this column with some answers as to how you can protect yourself from slowly becoming delusional and destroying your carefully laid financial plans. Unfortunately, this is one area where I don’t have answers. Perhaps someday, I will.