How Do I Protect My Generous, Impaired Grandparent?


Picture this: your beloved grandfather hands out cash gifts to his three grandchildren every year on their birthdays. Each grandchild receives $100 every year like clockwork. Then, one year, your grandfather gives your cousin $1,000. The next month, he again gives your cousin $1,000 and so on, until your cousin has received $1,000 each month for a year.

You ask your grandfather about these transfers and he tells you that your cousin needs this money for college and that he intends to give your cousin $1,000 per month for the next three years. In fact, your cousin graduated college five years ago and debt-free (suspend your disbelief, this is a hypothetical). You suspect that your cousin is taking advantage of your grandfather. What are your options to protect your grandfather?

Protecting a loved one from financial ruin is a delicate balance. On one hand, you do not want to tell someone how to spend their own money. On the other hand, if that person is impaired, their decisions might cause irreparable harm to their future. This risk of harm is especially concerning for an elderly person with limited means or a fixed income and high healthcare needs.

I’m sharing five ways you can protect your family member from financial ruin, in order from least court-involved to most court-involved. It is important to remember, however, that the second and third options I list require a person to have sufficient mental capacity. You can learn more about standards for capacity in this post from my colleague Russell.

1. Creative Solutions

The first, and sneakiest, option is for you to accept the gifts your grandfather gives you and establish a bank account into which you deposit the gifts. Then, you can find a way to return the money—with interest—later. If other family members are in on the plan, you can even find a way to recoup much of the money your grandfather is giving away.

The major drawback of this option is if your grandfather is giving large gifts to people or institutions outside of the family. The other snag might be returning the money without your grandfather noticing but returning the money may be easier with an electronic transfer than with, say, a check that requires a signature.

Regardless, this option might require more time and attention than you have the energy for and might not work well in practice (try talking your sibling into handing over money to you sometime, I know it never works for me).

2. A Trust

Your grandfather can create a trust, or someone can create one on his behalf, into which he will place his money. Trust distributions can be set up to occur on a fixed schedule for your grandfather’s health and welfare, or in some cases to bypass your grandfather altogether. For example, a trust can directly pay rent, utilities, or a mortgage on his behalf.

Suppose you set up a third party as the neutral trustee with your grandfather as the beneficiary. In that case, your grandfather can continue to live as he wishes, albeit with some reduced authority over his own money.

The biggest benefit of this option is that there is no need for court involvement whatsoever. The biggest con—in addition to the capacity issue—is that this option requires your grandfather to voluntarily put his assets out of his direct control.

3. Power of Attorney

Your grandfather can execute a power of attorney. This document establishes an attorney in fact who is authorized to act for your grandfather, the principal, in specific financial transactions or in an unlimited capacity. The biggest pro to this option is that the attorney in fact has no authority other than what the principal grants to them, so their powers can be as broad or limited as the principal chooses. In addition, such a power does not need to be permanent. It can expire when the principal becomes incapacitated or be durable and remain effective during periods of incapacity.

As my colleague Noelle has written, the possibilities for a power of attorney instrument are virtually endless.

4. Conservatorship

You can file a petition to appoint a conservator for your grandfather. In Massachusetts, conservatorships are generally as limited as possible “to encourage the development of maximum self-reliance and independence of a protected person and make protective orders only to the extent necessitated by the protected person’s limitations and other conditions warranting the procedure.” G. L. c. 190B, § 5-407 (a).

Otherwise, the conservator will have authority over your grandfather’s spending in all areas designated by the court. One drawback to a conservatorship is that the protected person might resent losing control over their own finances. Seen another way, the broad powers of a conservator might be the only way to prevent your grandfather from spending down all of his assets.

5. Health Care Proxy and Guardianship

Another important consideration is whether your elderly grandfather requires additional healthcare, particularly if you suspect that his condition is treatable. Think about it this way; instead of assuming he has irreversible dementia, wouldn’t you rather find out that he has an easily treatable condition that mimics dementia?

If your grandfather is amenable, encourage him to see his doctor for an evaluation of his capacity. If your grandfather is resistant, find out if he has executed a healthcare proxy and invoke that proxy. If neither is an option, consider filing for guardianship. A guardianship, like a conservatorship, will typically be limited or temporary at first and may become unlimited or permanent as needed. Such a guardianship may be difficult for your grandfather to accept, but it may be the only way to ensure his continued health and wellbeing.

Final considerations

In conclusion, if you encounter this scenario, there are two important considerations before deciding to act. First, is your grandfather open to having a conversation about his finances? If he is, consider proposing a discussion with a financial planner. A financial planner can help your grandfather understand his needs and the consequences of continuing to give money away. In addition, meeting with a financial planner can involve your grandfather continuing to make the donations he wants to make and using his money in the way he wants to, but with more of an eye towards his own needs.

You might also consider raising the fact that your cousin has graduated college and note that this does not have to be a serious conversation but can start lighthearted. For example, “I can’t believe that all of my cousins are out of college already!” If there is a way to craft a collaborative solution, you can accomplish your goal of protecting your grandfather without unnecessary family strife.

If your grandfather is not open to this conversation or is incapable of having it, do other family members agree with you? The more consensus you can create within your family, the less risk that something like this will cause irreparable harm to your family bonds.

Second, what are your motivations? It is one thing to act if your primary motivation is your grandfather’s well-being. It is another thing entirely if your actions are motivated primarily by a concern that your cousin is getting more money than you.

If one of your family members is impaired, you are likely to face many difficult decisions and emotional moments. I sincerely hope that this post provides some useful advice for ensuring that your family survives and thrives regardless of each family member’s mental capacity.

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