What should a trust officer do when the settlor who is also the named discretionary beneficiary called to request for an ad- hoc lump sum distribution of $25,000 in addition to the monthly allowance he receives? The settlor claimed that he wanted to use the money for a Fixed Deposit placement with a bank, and he has promised the Relationship Manager to make the placement.
In normal circumstances, a trustee will accept the instruction in the above request, especially if the settlor has reserved some powers (such as revocation) under the trust. However, in this case, the settlor is in his late seventies, and the Trust officer who knows the settlor well, could sense that he was in a distressed state during their telephone conversation. In addition, the trust officer was certain that the settlor was unlikely to have the need to request for such a distribution in view of his financial situation.
The trust officer decided to further investigate the matter and called the settlor’s contact persons under the Trust. The matter turned out to be more complicated than imagined and the trust officer contacted the protector and the family members for discussion.
The protector, who played a crucial role in setting up the Trust for the settlor, re-emphasized that the Trust was set up to finance the settlor’s retirement needs and the Trust fund should only be used for that purpose. However, the protector agreed to review the monthly allowance to identify any gaps.
The Trust Officer
The trust officer did her due diligence to alert the protector and the close family members on the situation while waiting for a decision to be made. In the meantime, the settlor persistently contacted the trust officer requesting for distributions of different amounts, citing different reasons each time. Suspecting the settlor may be subjected to financial abuse from specified persons, the trust officer skilfully turned down each request while maintaining a close communication with the settlor through telephone calls, emails and home visits to offer support. “I know that he is under tremendous amount of stress. I care about his emotional well-being”, said the trust officer.
During one of the home visits, the trust officer reviewed the settlor’s monthly expenses and determined that the monthly allowance distribution from the Trust was more than sufficient to meet his needs. From the interview with his family members, they shared that the settlor has showed signs of gradual cognitive decline and poor appetite. They observed that he was uncooperative, easily agitated, unable to recall accurate details of recent conversations and display social avoidance.
Further to that, the trust officer also reached out to a lawyer experienced in mental capacity matters for further advice. According to the lawyer, because of his deteriorating mental capacity, the settlor may be in the situation where he does not know how to draw boundaries as part of aging and deteriorating mental capacity. As a result, the settlor does not know how to say “No” to people whom he knows. The family can submit a case to the court to prohibit “specified people” to be in touch with the settlor, if required.
The Family Members
The family members were asked:
1. to identify and gather evidence of “specified persons” who may be taking advantage of the settlor, and
2. to obtain medical assessment on the settlor’s mental incapacity regarding his financial decision-making ability and his mental and emotional well-being.
Upon investigations, they confirmed that the settlor had made multiple transactions to transfer his money to a few specified persons. They had clearly taken advantage of his vulnerability over a long period of time before he had to turn to the Trustee to request for additional funds.
According to the clinical Neuropsychologist, the settlor reflected significant memory impairment, inflexibility in mental processing and reduced thinking agility. The clinical and cognitive evidence suggests that the settlor lacks decision- making capacity in managing complex financial transactions and may be vulnerable to financial abuse or cognitive errors of judgement and reasoning of complex financial transactions. The clinical Neuropsychologist further concluded that the client would benefit from supported financial decision-making by his appointed donees.
Having assessed the situations, the Trustee had to decline further distribution to the settlor but continued to work closely with the settlor, the protector and the family members to ensure the well-being of the settlor.
It is true that one cannot go back and change the beginning, but one can start where he is and change the ending. Currently, the settlor is living with a close family member and is shielded from unwanted interactions with people who may be taking further advantage of him.
The Trustee team is very proud of the trust officer who has managed to work closely with protector and the family members to protect the settlor, not just financially, but mentally and emotionally. A huge kudos to our trust officer for her professionalism and the great work done!