Summary: Elder financial abuse is widespread and is probably getting worse as a result of the recession. Don't assume it doesn't apply to your parent or grandparent because of the level of their wealth or their perceived social status. Yes Virginia, it even happens in your circles, and even in nice neighborhoods. 50% of the people over 85 have cognitive impairment. So the number of elderly at risk is substantial. But more than the elderly are affected. Anyone with a cognitive or other disability that infringes on their ability to protect themselves is at risk. 90 million Americans have chronic health issues, and so many of them face the same risks and need the same protections. So while most call it "elder abuse" it is really "Financial Abuse of the Infirm." Just no one in the media seems to write about it!How do you prevent financial abuse of the infirm?
√ Acknowledge the risk and that it may affect you or a loved one. Even if your kids (niece, cousin, neighbor….) is too good to do that, temptation especially if compounded by dire financial circumstances can push even "good" people to do bad stuff. Do you really know that your home health aide is more concerned about your financial well being than that of his or her family back home (wherever that might be)? Your wealth relative to that of a home health aide or distant relative or even neighbor, may be perceived as being so great that their helping themselves or their loved ones who are in greater need may not be viewed as infringing on your financial security.
√ One of the most significant steps is to encourage the person at risk to establish a funded revocable living trust with an institutional co-trustee. With a bank or trust company as co-trustees along with the individual involved, they will remain in control as long as feasible, and financially safe from abuse. Fund the trust. The more assets (other than IRAs, a professional practice, or certain other assets) for which they transfer ownership into the trust the more secure they will be since the institutional co-trustee can help keep tabs on them. The person at risk requires contractual competency to establish and fund a trust. This is a greater level of competency than required to execute a will. Additional protection can be obtained for the at-risk person by their naming a succession of individual trustees to protect their interests. Also, someone should have the right to replace the bank/trust company. The at-risk person can hold this if they are capable, but a better approach might be to provide this power to an independent trust protector who cannot also serve as trustee.
√ A durable power of attorney is an essential step to protect the at risk person. But it is not enough to sign a standard form without carefully evaluating its provisions. If the at-risk person really does not have a taxable estate, or any persons he or she is responsible to support financially, the power might expressly state that the agent has no authority to make gifts. Gift language of various sorts is routinely included in many standard powers (even costly lawyer prepared documents) when in fact the temptation for the agent is not worth the possibility of the agent abusing the gift power. Consider appointing co-agents and an independent "monitor" charged with providing some degree of oversight of agent actions. These checks and balances are an important step to making a power of attorney protective rather than a tool for abuse of an infirm grantor.
√ Yep it sounds simple and costs nothing but consolidating assets into one institution (or as few as feasible in light of reasonable concerns about financial institution viability and insurance limits) is one of the most powerful steps to avoid financial abuse. A secure public institution with adequate insurance is ideal. For those CD lovers pick an institution that participates in the Certificate of Deposit Account Registry Service ("CDARS"), program. It allows investors to keep up to $50 million invested in CDs managed through one bank with full FDIC insurance, and under one agreement. We're not advocating CDs as an investment choice, but we are advocating consolidation and organization to protect the at-risk person.
√ Have a duplicate copy of the at-risk persons monthly statements sent to a trusted person. A long time independent CPA is a great choice. If a cost effective arrangement can be made for the CPA to balance all the monthly statements and send out a periodic report, even better. This assures that at least a bookkeeper at the CPAs office is reviewing everything. The at-risk person might also name an adult child who is not their agent under their power of attorney (nor the current co-trustee under a revocable trust) to receive monthly statements. The consolidation, simplification and independent review can minimize the temptation that agents and others in confidential and private relationships with the at-risk person might feel. That creates real checks and balances.
√ Set up accounts for automatic bill payment, payment to credit cards, payment plans with utilities and others that equalize payments every month, etc. Anything that can simplify and create regularity can make aberrations due to theft, fraud or other abuse more obvious to spot.√ Include in powers, revocable trusts and other documents a periodic mandatory inspection, interview or meeting by a social worker or similar independent organization with the person at risk, and a requirement that they report in writing to at least two fiduciaries. This can create another important check on personal as well as financial security.
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