Age is no barrier to matters of the heart, and your older clients are as likely as anyone else to form romantic attachments. Canadians over the age of 50 are markedly different from previous generations of older people. The affluent among them are much more likely to be women, and they are more adventurous than their mothers were in pursuing new partners both on internet dating sites and offline.
But there is a financial complexity to grey romance that is not usually present in younger relationships, and it poses a challenge for those giving older clients financial advice. Christine Van Cauwenberghe, director of tax and estate planning at Investors Group in Winnipeg, notes that most seniors bring some, if not significant, financial assets to the relationship, as well as family commitments. “Later in life, people tend to have more assets, and sometimes considerable assets,” she said. “They have homes, cottages, businesses, investments and they may have received inheritances. And they should be concerned about protecting them if the relationship ends and upon their deaths.”
You will want to be alert to any signs that you client has a new love interest. Maybe it’s new clothes, a new hairdo or a new sparkle in the eyes. “It’s a fair question to ask—especially of single or widowed clients you may only see once a year or so—whether they have entered a new relationship since you last met,” Van Cauwenberghe said.
New love will not necessarily lead to marriage. Many of your older clients have already been there and done that, and are opting for common-law relationships. But Van Cauwenberghe stressed that both parties should get independent financial advice before marriage or co-habitating, and the couple should draw up a marriage contract or a co-habitation agreement that specifies each party’s rights and obligations during the marriage or relationship. It can include full written disclosure of each partner’s assets, liabilities and income, and it can spell out the consequences upon separation or divorce, such as ownership or division of property, and support of a dependent spouse.
“Many will say, ‘I didn’t have a prenuptial agreement when I married in my 20s, so why should I have one now?’ ” she said. “The answer is that you have more assets to protect now.”
In most jurisdictions, partners get credit for the assets they brought into the relationship. “But a family home is shareable in Saskatchewan, Ontario and Newfoundland no matter when it was acquired,” she said. “And in Nova Scotia all assets are shareable no matter when they were acquired.”
Many later-life marriages and common-law relationships result in blended families. “The partners need to think carefully about how they will protect the interests of their children,” Van Cauwenberghe said. “Many don’t consider that the new spouse may outlive them, and in the absence of a will, the assets that may have been intended for the client’s children may go to the new spouse. As a financial planner, make sure that clients’ beneficiary designations are consistent with their intentions, and make sure that clients with children from a previous relationship consult a lawyer who specializes in estate planning.”
The lawyer may suggest a testamentary trust that will ensure a surviving spouse will be provided for and that some assets will go to the children. The home, for example, can be left to the spouse in a trust; he or she will have a home for the rest of his or her life, and the house will go to the children upon the surviving spouse’s death.
Later-life relationships can also bring dependent relatives into the mix. Ask your client if he or she has considered what would happen if the new partner’s adult kids and grandchildren joined them in the event that the kids lost their jobs or were disabled. What would the financial impact of this be? And what kind of strain would it put on your client’s relationship? And there could also be a new set of elderly parents to consider. What would the new couple do if the elderly relative could no longer live alone? Does the new partner have enough money to take care of this situation or would your client be expected to pick up the bills?
Entering a relationship at mid-life or older also means that serious illness is more likely to befall one of the partners in the near future. “Your client needs to think about planning for this with disability and critical illness insurance, and long-term-care insurance—and as early as possible to ensure that he and his partner still qualify for it and that it hasn’t become prohibitively expensive,” Van Cauwenberghe said. “And appropriate power-of-attorney designations should be in place to ensure there is someone around to look after things.”
Couples with established homes may enter common-law relationships gradually, she noted, “so there may be a grey line about when they started living together. Under the federal Income Tax Act, common-law couples are those who have co-habited for at least 12 months, and they need to file income tax returns as such. There are common-law partners who file as single individuals in order to qualify for additional social assistance benefits—and some then try to apply for survivor benefits after their partner’s death.”
It is important to file income tax returns truthfully, she said, because the penalties can be onerous for those who are found out. “And there are a number of tax benefits that common-law couples can avail themselves of, such as the ability to split pension income and to roll over assets to the surviving partner on a tax-deferred basis after death.”
Some new partners may prove to be controlling individuals, and this may affect your relationship with your client. A new love may want to join his partner when she meets with you, and will then question how you manage her account. He may demand other changes such as being made the beneficiary of her RRSPs.
“Ask your client if she has thought through that decision,” said Det. Sgt. Kenneth Molloy, supervisor of the Winnipeg Police Service’s Commercial Crime Unit. “If the new man in her life is there in your office, ask him to step out for a few minutes so you can have a private conversation with your client.”
But it may not do any good, he added, if that person is emotionally manipulating your client.
Loneliness and isolation can make people vulnerable to predators, noted Krista James, national director of the Canadian Centre for Elder Law in Vancouver. Clients who have retired from their jobs, are widowed, divorced or single, and live far from family members may be especially susceptible to what police call sweetheart scamsters.
When he was interviewed for this article, Det. Sgt. Molloy said his unit had opened three sweetheart fraud files in the past three weeks. “One victim took out a $30,000 loan because the new love interest was having financial problems,” he said. “Lonely people may fail to recognize that these individuals have ulterior motives.”
Many sweetheart scamsters use online dating sites, he said, but some meet their victims in person. “We had a case in which a care worker went into the home of an elderly person on a regular basis. A friendship developed, and the family noticed that personal property, including a diamond ring, was missing.”
James noted four red flags that could alert financial advisors that a client is the victim of sweetheart fraud:
Four red flags
Secrecy. Sweetheart fraudsters, like other con artists, like to operate in secrecy, and ask their victims to keep the relationship a secret.
Isolation. Fraudsters will try to isolate their victims, and discourage them from maintaining contact with family and support networks. They don’t want their target to receive feedback that may thwart their plans.
Time pressure. Fraudsters will pressure their victims into doing something quickly—perhaps jumping into a hasty marriage or rushing into an investment “opportunity.”
Requests for money. “If you see a change in your clients’ spending patterns and more requests for cash, often in escalating amounts, they may be victims of fraud,” James said.
“It comes down to knowing your clients,” Det. Sgt. Molloy added. “If a client suddenly wants to change the beneficiaries of a will, particularly to people outside the family, advisors should ask questions.”
But there is only so much advisors can do if they suspect a client’s new sweetheart has less-than-honourable intentions. “There are limits to sharing a client’s information,” James said. “Advisors can’t go to a client’s children with this information unless the client has been declared mentally incompetent and the child holds power of attorney, or they have a letter of authorization from the client.”
Van Cauwenberghe suggested addressing the situation in a non-confrontational manner that won’t upset the client. “The con artist is probably telling the client not to say anything,” she said.
“Address the quality-of-life issues, especially if you see signs of stress,” James added. “The relationship may be causing the client stress and worry, and point this out to the client. Suggest calling the police together if you think the client is being financially and emotionally, and maybe even physically, abused. Make the client part of the solution.”
Advisors who believe action needs to be taken to protect the client should contact head office and ask for advice on what to do, Van Cauwenberghe said.
“And paper your file,” she added. “Document each time you spoke to Mrs. X and what you said to her.”
And show respect for your clients’ decision-making autonomy, James said. “At 25, a person is allowed to gamble away all his money, so at 80 he has the right to spend it on a younger woman.”
She suggests the following strategies advisors can take to protect clients against fraudsters of all kinds:
Note changes in clients’ spending patterns, and in their physical appearances and mental outlooks.
Encourage them to develop street smarts, such as keeping important information in a safe place, shredding credit-card statements and ensuring that their mail cannot be tampered with.
Encourage greater financial literacy.
Find ways for clients to access information and local support. Advisors can compile a list of resource agencies in their area.
But keep in mind that there is only so much that you can do, Det. Sgt. Molloy added. “You should do your best to help your clients. But you can’t stop people from making stupid mistakes.”