On Wednesday I presented a webinar for the Financial Planning Association’s July International & Cross-Border Planning Knowledge Circle. My webinar highlighted numerous US tax issues when safeguarding the finances of the elderly (or other vulnerable individuals), whether Stateside or overseas. You can listen to the entire webinar here.
The Case of the Wicked Stepdaughter
A recent district court case in Florida, DENNIS AND SUZANNE GOMAS v. UNITED STATES OF AMERICA, could not be more illustrative of the problems faced by older persons who get scammed. This is truly a horrible case and one can only hope that it is a rare occurrence that a family member can be so nefarious.
Here’s a summary of the case: Dennis and Suzanne Gomas are elderly individuals that worked their entire lives running a pet food business, in order to build sufficient savings to comfortably retire. They learned a horrible hard lesson, having over $1.2 million fraudulently taken from them by Suzanne’s own daughter, Anderson. Anderson had falsely claimed that certain former employees of the business were defrauding customers and that Dennis would be held liable and could soon be arrested. Anderson really ratcheted up the fear factor and said she had hired an attorney to prevent Dennis’ imminent arrest. Understandably the couple were very afraid and believed Anderson. In order to pay the purported attorney fees (Anderson had never hired an attorney and kept the funds), and to make matters infinitely worse, Dennis took the money from pension and IRA savings. He duly reported the amounts withdrawn as taxable income on the couple’s tax returns. A few years later when the couple learned their daughter had scammed them, they filed for refunds of the taxes paid (as well as interest and penalties).
The court determined that the Gomas’ were clearly the victims of a theft. Prior to certain tax law changes, it was permissible for taxpayers to take a theft deduction in the year a theft loss was discovered. Sadly, for the Gomas’ the theft was discovered in 2019, and Congress had eliminated the theft loss deduction for the tax years 2018 through 2025. As such, they could not use the theft loss deduction. The Gomas’ couple presented two other arguments to the court, both of which failed. Even though the court was clearly very sympathetic to the plight faced by this elderly couple, the law was simply not on their side and thus, the deduction was denied.
Prevention
The most potent weapon against financial fraud in the elderly community is to first consult with a professional. While what happened to the Gomas’ couple may possibly (and hopefully) be a rarity, the case highlights the need to work with a professional when it comes to matters of a legal or business nature. The professional will be detached and those with the requisite experience level will ask the right questions and dig deeply into the situation. If a scam is afoot, the professional should be able to more easily detect it. This is especially important when family members are involved and asking those difficult questions may be “skipped” since they are more awkward.
Planning with Joint Accounts, POAs and Trusts
Plans can be put in place to help the elderly with financial safety. It is important to learn about the options. Safeguarding finances of the elderly or mentally challenged person can be approached by different means, including the use of joint accounts, powers of attorney and trust structures. Each possibility comes with its own set of US tax issues when US persons are involved. Tax and legal issues are magnified and far more complex when families live in different countries, and hold multiple nationalities. For Americans overseas and multinational families, this dilemma takes on more significance—not just from the practical and logistical side of things, but also for the US tax aspects that can arise when an individual wants to assist another person whose financial assets may span the globe. My article here, originally published in Bloomberg, walks you through some safeguarding possibilities and explains the US tax pitfalls with each.
It’s a cold, cruel world – let’s make it safer for those who are most vulnerable.
Posted July 21, 2023
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