What You Can Learn From This Beauty Queen’s Scandal

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Planning for financial dependence isn't fun, but it can help you avoid family squabbles and even "scandals."

Planning for financial dependence isn't fun, but it can help you avoid family squabbles and even "scandals."

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  • Image from FoolEditorial Flickr portfolio
  • Personal worth from Forbes: http://www.forbes.com/profile/liliane-bettencourt/
  • 1 billion in Euros – dollar figure is based on current exchange rate.
    http://www.theguardian.com/world/2010/jul/09/liliane-bettencourt-profile
    http://www.forbes.com/profile/liliane-bettencourt/
  • http://www.aarp.org/money/investing/info-03-2012/financial-burden-alzheimers-prime-time-radio.html
  • http://www.aarp.org/health/conditions-treatments/info-03-2012/alzheimers-generation-video-inside-estreet.html
  • http://www.aarp.org/money/investing/info-03-2012/financial-burden-alzheimers-prime-time-radio.html

Transcript

  • 1. What You Can Learn From This Beauty Queen’s Scandal
  • 2. Planning for Financial Dependence One of the hardest facts of growing older is that a day will likely come when you are no longer able to manage your own wealth. After years of saving and investing, the money you’ve amassed will be handed over for others to manage. But if you’re aware of this fact, a little planning can make a world of difference once it’s necessary that you make the transition to financial dependence.
  • 3. The Beauty Queen’s Cautionary Tale Planning for a financial transition affects people of all wealth levels. In the not-too-distant past, one of the world’s richest women experienced a “scandal” surrounding the management of her vast estate: Liliane Bettencourt Personal worth: $38.6 billion Age: 91 Majority stakeholder (31%) and heir to The L’Oreal Group -- the world’s largest cosmetics company
  • 4. Family owned and operated In 2011, Bettencourt’s then-estranged daughter, Françoise Bettencourt Meyers, filed a suit claiming that her mother’s mental state had deteriorated to the point that she was no longer capable of managing her own affairs. The fight stemmed from Bettencourt’s long-standing friendship with famous photographer François-Marie Banier. During their relationship, Bettencourt had given Banier gifts totaling almost $1.36 billion.Together with other gifts to Banier’s partner, Bettencourt’s generosity to the pair totaled nearly 10% of her total worth. Because Bettencourt was diagnosed with dementia, her daughter contended that the heiress was manipulated by Banier to give those gifts. The courts agreed, placing Bettencourt’s affairs under Meyers’ control.
  • 5. What Bettencourt failed to do Throughout the court battle, Ms. Bettencourt argued that she was capable of managing her own financial affairs. What she failed to do was support her claims through a personal system of checks and balances. While it’s true that a person should be able to do what they wish with their money, including people you trust in your decision making can be a helpful tactic as you age. Ultimately, you will still hold the final say, but using others as a sounding board helps you by A) giving you second opinions on your plans and B) documenting your intentions and wishes.
  • 6. What she could have done One of the best options for those wishing to include a trusted friend or family member in their personal finances is to grant them power of attorney, which allows the named person to act as an extension of the grantor. Though Bettencourt felt that she was able to manage her finances, granting her lawyer or a family member POA would have given her an alternative to acting independently, which ultimately led to the family struggle. Legally, a POA is charged with acting in the interest of the grantor, with a loyalty to their wishes. If Bettencourt did not feel that any of her family members could handle her finances with her best interests in mind, she could have paid a third party to act as her POA.
  • 7. Timeliness is everything One of the limiting conditions of a power of attorney is that it must be granted while the principle (Bettencourt in this example) still has the mental capacity to give authorization. Since Bettencourt was diagnosed with a moderate form of dementia, the court was ultimately required to name those parties that would act in her stead as a result of the lawsuit. The lesson is to act early, before any complications from medical conditions can prevent your planning from being successful.And dementia may prove to be a tricky problem for the aging population.
  • 8. Dementia is a silent stalker With diagnoses of dementia, and Alzheimer’s disease in particular, expected to double within the next 30 years, those preparing for their financial future should include plans for handing over the management of their finances. Early signs of dementia include memory loss and other cognitive difficulties, which will naturally include difficulty managing money. While there’s no consistent timeline for when cognitive difficulties begin, a person diagnosed with Alzheimer’s disease or another form of dementia can live anywhere from 5 to 10 years with declining brain function.
  • 9. Planning for the worst With the prevalence of dementia on the rise, it’s important for anyone managing an investment portfolio to prepare for the worst-case scenario: having to hand over control of your finances to a trusted family member, friend, or professional. Source: Flickr; kev_shine
  • 10. Keys to a successful transition Here are some tips to help you if and when the time comes that you need help in the future: • Maintain orderly files:Once a year, go through your documents and purge purge any old info that’s out of date or belongs to an old account. • Make your wishes known: Communicate with your family and friends (or a a professional) to make sure they’re up to date on what you want for your money. • Write it down: Document your wishes in an easy-to-find place. • Make it legal: Designate a trusted person with power of attorney, talk to a a lawyer about your estate planning, and keep copies of any fully executed legal documents you complete.
  • 11. Planning for your family’s financial success includes more than preparing for medical expenses down the road. We’ve found a simple way to make sure that you and you family get the most benefits from the IRS and Social Security…