Unfortunately, elder financial abuse is a serious problem in the United States. According to The True Link Report on Elder Finance Abuse 2015, more than $36 billion is stolen each year from elders.
Research shows that seniors from all walks of life are susceptible to financial manipulation, regardless of education or financial experience. Indeed, the True Link study showed that a significant number of victims were younger seniors who were college-educated and not living in isolation. Moreover, they lost more to abuse than those who were older, isolated and less educated.
Who are the abusers? Unfortunately, the facts show that family members are the most frequent abusers of seniors. In my family, a relative lost thousands as a result of financial abuse by a family member. The older person might not be as astute as he or she once was and might not see what is happening. It could be a widow or widower who has assets, and a relative asks for a "loan" to tide them over or to make a "surefire" investment or to start a new business. Frequently the loan is never repaid, the business fails or the investment is a scam. The elder often has no recourse.
In some states, the misuse of a position of trust with an older person that harms the elderly financially is known as "undue influence" and is prohibited by law. However, it is rare that an elderly person in these circumstances wants to take any legal action against a relative. The emotional results can be devastating. Relationships are destroyed, and depression or even suicide can result.
However, there are safeguards.
Estate plans can protect elders. It is important that every elderly person with assets designate, as part of their estate plan, a trusted individual as durable power of attorney for finances. The durable power of attorney should be accountable to others, such as the estate planner, financial adviser, insurance representative and other family members, on a regular basis to ensure that transparency is maintained regarding the spending of assets. Long-range planning should include a backup plan for the successor of the power of attorney, when necessary. The use of an experienced estate-planning attorney is important to establish this hierarchy. It may be necessary to use corporate trustees if there are family conflicts.
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Statistics show that 1 in 3 people 85 or older have Alzheimer's. Currently, there is no cure. Unfortunately, many people who develop Alzheimer's do not realize they are slipping at the onset of the disease process. Many are in denial, fearing that if they give up control over their money, it will cause them to be put into a nursing home. There is no way to predict the way we will age, so it is necessary to take action to protect yourself (and your elder relatives) in the event of incapacity for financial matters. Accordingly, it is essential that you have designated power of attorney to a trusted individual (or corporate entity) for finances to prevent any financial abuse.
Here is a partial checklist of recommendations from Larry Swedroe and Kevin Grogan in their comprehensive book "Your Complete Guide to a Successful & Secure Retirement" (Harriman House) to avoid potential financial abuse.
- Have a signed, notarized durable power of attorney for finances.
- Have a signed advance health care directive.
- Make a list of all bank accounts, passwords, investment records, financial records and contacts. Provide written permission to your loved ones to talk to your lawyer, accountant and financial planner.
- Make a list of all insurance policies.
- Make a copy of your mortgage statement and any other loans, financial statements and bank accounts.
- List your physicians, care providers and medications. Give written permission for your loved ones to speak with your doctors.
- Put in writing your wishes for burial or disposition of your remains.
- Have a family meeting, provide these items to your loved ones, and explain them.
Elliot Raphaelson welcomes your questions and comments at email@example.com.