Personal Finance

My 69 year old sister has a net worth of $10M and dementia. Her bank took advantage of her and tied up 90% of her money. What can I do?

John Seetoo

Published: January 2, 2025 3:11 pm

24/7 Wall Street Key Points

• Banks can be predatory, so it is important to comparison shop before signing commitments involving large sums of money. 
• Even financially experienced and savvy individuals can benefit from an objective, third party professional opinion on a strategy, so going with a bank’s suggestion on a product without review is unnecessarily risky.
• People who may assume trustee or caretaker status over a relative’s estate and financial assets often may not know the entire story and can mistakenly believe their relative is a malfeasance victim of a large financial entity, when missing answers to other questions may reasonably fill in the blanks.
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My Cousin Vinny (1992) is a comedy starring Joe Pesci as Vincent Gambini, a newly licensed lawyer from Brooklyn who has to go to Alabama to defend his cousin and friend in a robbery trial. There is circumstantial evidence that needs to be debunked if Vincent is to win the case, his first ever trial. Much of the humor comes from the fish-out-of-water Brooklyn wiseguy in a genteel Southern town. Marisa Tomei won a Best Supporting Actress Oscar for her role as Vinny’s fiancee, Mona Lisa Vito. The movie has often been cited by lawyers as one of the closer to real-life depictions of jurisprudence and evidentiary analysis. 

Many financial situations also can contain what appears to be strong circumstantial evidence of institutional malfeasance. While the vast majority are civil disputes, some can enter the criminal arena. However, much of that circumstantial evidence can often be explained, and oftentimes the mistaken assumptions are due to incomplete information, a lack of knowledge on the part of the accuser, and a lack of research into the actual documents of the matter. The problems are compounded when the accuser is a newly arrived third party to the scenario. 

A Case for Vincent Gambini?

A Reddit poster sought financial advice on a scenario that struck a number of respondents as being more demanding of legal, rather than financial advice. His 69-year California-based older sister has developed dementia, and has a projected life expectancy of 3-5 years. The brother has become the trustee over her finances, and he is troubled over the annuities his sister contracted with her bank. He believes she is a victim of the bank’s predatory practices on seniors and was soliciting amelioration advice. The information he discloses includes:

• The sister’s net worth is $10 million: home equity of $2-3 million, $5 million in stock from the sale of her company, which becomes liquid in 2 years, and the annuity, which is worth $2 million.
• The sister’s monthly expenses for home health care, mortgage, et al. are $50,000 per month.
• Her mortgage of $1.1 million has a 2.75% interest rate, costing $10,000 per month.
• The sister is still employed, despite her dementia, and earns $600,000 annually.
• The annuities are $1.2 million at 5.15% and $800,000 at 3.0%. The funds are locked up unless she pays the surrender charge penalty. The distributions are scheduled to start in 3-5 years.
• The sister insisted on buying more expensive deferred annuities with guaranteed principal protection. She apparently contracted the annuities prior to her diagnosis.
• The poster claims that his sister only has access to 2% (i.e., $20,000) of her money.
• The poster claims that the bank, which also underwrote the mortgage loan, is intimately familiar with her finances, as she conducts all of her financial business with them. He suspects that the bank took advantage of her and recommended lucrative fee generating annuities that favored the bank’s sales reps over his sister’s best interests. 

The Rashomon Effect Of Different Perspectives On The Same Event

The poster has considered filing a complaint with the CA attorney general’s office. However, like the classic Akira Kurosawa film, Rashomon (1950), the same event can be viewed as drastically different from varying perspectives. 

The majority of respondents advised getting a lawyer. Some thought of getting a California politician involved to publicize the case to highlight elder abuse issues. One reply came from an attorney, who advised checking on the contract dates for applicable back provisions under California statutes as “free look” provisions vary from state to state and might provide a legal escape clause. 

Quite a few questioned the validity of the $50,000 monthly expenses, which seems unusually high, and some mused whether or not the brother himself was acting with ulterior motives. 

However, most of the respondents who are familiar with annuities thought that the bank acted in accordance with the sister’s wishes and held no liability.  The terms are standard for deferred annuities, given that her projected retirement would be at age 73. Surprisingly, there was a dearth of practical solution responses. One would think these proposals might be worth a look:

• Contact the bank about closing out the annuity and taking the surrender charge so that the sister has immediate access to the $2 million (minus fees, which can run up to 7%, on average, apart from income taxes). As the sister’s estate would have access to the $5 million from the business sale in 2 years, that would sufficiently cover her financially until her passing.
• In order to make the bank amenable to cooperation, request that the bank’s wealth management department handle the funds with an eye towards continuing growth to replace withdrawal amounts on a best efforts basis.

This article was written solely from an informational basis. If more comprehensive advice is sought, a financial professional should be consulted.