Recent headlines surrounding the ordeal of 104-year-old socialite Brooke Astor chronicled a lawsuit filed by her grandson that accused his father of mismanaging his grandmother's financial affairs.For once, maybe the rich aren't so different: Experts predict that, for millions of Americans, the problems associated with relatives acting as trustees, guardians or conservators will only grow as the population ages. Policymakers are focusing on solutions that may well affect the way CPAs serve clients in the coming years.
On a national level, separate bills in both the House and Senate seek to address the burgeoning problem. Both are titled the "2006 Elder Justice Act," and each piece of legislation aims to increase the detection, prevention and prosecution of elder abuse.
Some state legislators have begun addressing the issue as well. For example, a recent bill introduced in California would require the state's 500 professional conservators to get licensed and be subject to frequent audits and investigations.
"I find it really interesting that all of a sudden people are starting to realize that financial elder abuse is a significant issue," said Mitchell Freedman, CPA/PFS, of Mitchell Freedman Accountancy Corp. of Sherman Oaks, Calif.
However, the California legislation is not likely to pass, as Gov. Arnold Schwarzenegger's office indicated that should the bill hit his desk, the governor won't sign it.
Some view the California proposal as overkill. While professional trustees currently must register with the state, the proposed legislation stiffens the requirements.
Freedman, who is a frequent speaker about elder financial abuse, wrote a letter expressing his opposition to the bill as written. "Part of this bill requires trustees to take exams and many other things that CPAs already do, like being fingerprinted, continuing education and ethics rules," said Freedman. "Whatever good intentions the legislation might have, it casts such a wide net, and in its current form would create still another unnecessary bureaucracy."
The states of the elderly
While the national legislation could affect all CPAs, few are hearing of activity within their home legislatures.
Like California, most states have some provisions in place to deal with elder financial abuse. The National Center on Elder Abuse, online at www.elderabusecenter.org, lists and analyzes laws state by state.
"In New York, we just get named the trustee in the document," explained Michael David Schulman, CPA/PFS, of Central Valley, N.Y. "And any problems with the actions of a trustee can be dealt with through the courts or a number of legal means."
The changing laws will directly impact CPAs who are professional trustees or conservators. However, CPAs can also be affected by the elder financial abuse by others. Since CPA advisors perform a number of functions such as tax and estate planning and investment management on behalf of trusts, the CPA often is the first to recognize possible mismanagement.
"Most of what I've seen so far could be called good-faith mistakes, like cutting distributions at improper times or selling real estate without considering the tax consequences," said Schulman. "But this might change as the number of professional trustees grows, along with the number of elderly people living more and more distant from possible trustees who might have a personal connection with them."
The role of trustee, guardian or conservator is big business in Florida.
Since many people retire there but leave families up north, handling the affairs of the elderly falls to professionals. For the Miami-based firm of Morrison Brown Argiz & Farra LLP, that translates into offering related client services under the auspices of its ElderCare Services Unit.
"Sometimes we become trustee, but more often we assist in paying bills, make sure the pension checks are coming as promised, or ensure that a stockbroker is not mismanaging the investments," said MBA&F's Phillip S. Sroka.
Sroka served on the Florida Institute of CPAs' Committee on Elder Care, and suggested that the industry find another name for the practice area. "Clients don't want to be called 'elderly,'" he said. "They want to have their affairs handled to be able to retain their independence, but don't see themselves as being old."
Several not-for-profit organizations are stepping in to solve problems on behalf of the elderly. Fiduciary Abuse Specialist Teams, units dedicated to getting restitution for the abused elderly from those who committed the abuse, are springing up in many regions, based on early success in Southern California.
The National Committee for the Prevention of Elder Abuse lists guidelines for starting a FAST group on their Web site at www.preventelderabuse.org/communities/tech.html.
"Governments might think about funding and strengthening these groups as a positive step toward solving the problem," said Freedman.
However, more stringent regulations could shift how professionals choose to serve this client niche. "If I'd have to go through a complicated registration process to act as trustee, I'd opt out," says Schulman. "The client's child would be trustee and I'd act as financial advisor to the trust."
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