Dear Mr. Premack: My mother has been ill with dementia for quite some time. Her stated instructions in her Will have always been that when she dies, her accounts should be divided equally among her three children. Last week, we found out that her largest account has been changed to pay on death status with instructions that the money pass to a lady who has been helping care for her. Is this legal? Is there any way to get this changed? If she were to die, do we have any way to get that account for her children instead of her caretaker? – EC
Perhaps the most important task here is to define what is meant by “ill with dementia”. It could mean being completely disconnected from reality or it could mean she has some trouble remembering details but is otherwise functional.
If your mother dies while this pay on death contract still exists, the Executor named in her Will can file suit against the caretaker to recover the funds. To succeed, the Executor will need to prove that, on the day she signed the pay on death contract, your mother lacked legal capacity. If the contract is void, the funds would be returned to her estate and be distributed under the terms of her Will.
In the case “Estate of Minton” recently decided by the Court of Appeals (13th District), the court examined similar circumstances. Mr. Minton had been suffering from dementia yet changed several accounts to be paid upon his death to a retired police officer he had known for three years. The key question was whether Minton had legal capacity on the day he signed the contract. The court decided a jury could hear testimony about Minton’s mental condition on earlier dates if that evidence indicated a lack of capacity, the evidence implied that his condition was ongoing, and the evidence was relevant to his mental state on the date he signed the contract. The jury decided that Minton lacked capacity and required the funds to be returned.
Of course, your mother is still alive. Investigation and correction is still possible. From a business perspective, her paid caretaker should not be condoning, not be encouraging and not be accepting this pay on death arrangement. If the caretaker is employed by a senior care company, you should contact her supervisor or the company owner. It is likely that being named as a beneficiary for one of her patients violates company policy and/or her employment agreement.
From a legal perspective, there is always the suspicion that an inheritance for a paid caretaker is illegal exploitation by the caretaker. Under Texas law, exploitation is the improper use the resources of an elderly (or disabled) person for benefit, profit, or gain of a caretaker, associate or family member without informed consent from the elder. Report the situation to Adult Protective Services (call 800-252-5400 or go online to http://www.TXabusehotline.org to make a confidential report). They will investigate promptly and determine what legal actions can be taken to help resolve the situation.
If your mother is in fact highly functional and has legal capacity, you should request a meeting between her and her lawyer (the one who helped write her Will). The lawyer can explain the effect of this new pay on death arrangement and can assess whether she is sincere in her desire to change her instructions or if she is being exploited.
Paul Premack is a Certified Elder Law Attorney and a Five Star Wealth Manager (Texas Monthly Magazine 2009-2013) practicing estate planning and probate law in San Antonio.
Original Publication: San Antonio Express News, March 3, 2014