Let's Work Together to Stop the Horrors of Financial Abuse of the Elderly

One of the most satisfying (yet disturbing) parts of my elder law practice involves helping clients and their families who have been victimized by financial abuse. Financial abuse occurs when a person takes advantage of another person for financial gain. When the victim is a member of the senior population, it is a form of a larger group of offenses committed against the elderly that is known and referred to as “Elder Abuse.” It is estimated that more than one-third of our elderly population has been victimized by financial abuse amounting to losses in excess of $36 billion. Further, experts anticipate that such abuse will only increase as the Baby Boomers continue to age.  

The consequences of financial abuse can be very serious and far-reaching.  When an abuser strikes, hard-earned savings, carefully cultivated investments, and precious family heirlooms can be lost forever.  Further, since most elders are retired, the assets cannot be re-earned - often leaving the victim without adequate funds to provide for their care and/or to pass on to loved ones. Financial losses aside, perhaps the greatest harm perpetrated against the victims of financial abuse is the damage inflicted to the victim’s dignity, self-worth and sense of security. Victims of financial abuse report having feelings of shame and depression. Further, there are studies showing that elders who experience abuse, even moderate in severity, have a 300% percent higher risk of death when compared to those who have not been abused. When loved ones discover financial abuse subsequent to the death of the victim, those left behind are often left to unravel serious financial issues created by the abuser. 

Perpetrators are often charismatic and present themselves as wanting to help the victim. In some instances, the abuser has known the victim for a long time (such as the relative or a close friend-of-a-friend). In other instances, the abuser comes into the victim’s life “out of nowhere” and works quickly to become the victim’s new best friend and protector. Underneath the friendly fa?ade, financial abusers are master manipulators who typically work to earn the trust of the victim for their own gain. Once the victim’s guard is down and the abuser has manipulated the victim into believing that she is deeply loved and appreciated by the abuser, the exploitation of the victim begins. Yet, in other instances, the abuser just demands money on pain of physical violence upon the victim, or purposeful neglect of the victim (e.g., refusing to bathe or feed the victim). Regardless of the manner in which the abuse is inflicted, the spoils to the abuser are identical: the assets of the victim. 

Sadly, many abusers go unpunished. In some instances, the victims have grown dependent on the abuser for assistance, advice and social interaction; or, sometimes the victim is riddled with shame and refuses to report the abuse. In other instances, the victim loses mental capacity and fails to recognize or remember the abuse.  When the abuse is discovered after the death of the victim, bringing the abuser to justice requires the victim’s family to meet a high level of proof (which may not be available) and typically involves complex and extensive litigation.     

While no one should be assumed guilty of perpetrating abuse without a fair trial, certain “red flags” warrant exploration of whether a person is being or has been victimized by financial abuse, including:

• unexplained bank withdrawals or cashed checks
• new credit cards and credit lines
• requests to make historically uncharacteristic changes to beneficiary designations, such as adding a new “friend” as a beneficiary of a Last Will and Testament, on bank accounts, life insurance, annuities and retirement plans
• undocumented personal loans to the abuser
• additions of a new “friend” as a joint owner of a bank account
• directives to make a new “friend” an agent under a Durable Power of Attorney
• the disappearance of items, such as family jewelry, silver or money
• isolation of the elderly person from loved ones-especially if the elderly person used to be very close to them
• unprecedented “bad mouthing” of family members in comparing them to the new friend or caretaker
• lack of access to information about financial assets
• sudden interest in inappropriate investments or investments that that would normally exceed the elderly person’s risk taking tolerance
• termination of a long-standing relationship with a service provider in favor of someone associated with a new “friend”
• gifts of valuable assets, including jewelry, art and machinery

    Of course, the best defense in a good offense. Here are my top tips protect yourself and your loved ones from a financial abuser: 

1.   Make (and Continuously Update) Your Estate Plan. A “good” estate plan includes designating someone else to make decisions for you (usually known as your “agent”) if you are unable (or do not care to) make decisions on your own behalf. With respect to legal and financial decisions, a person can designate an agent(s) under a Durable Power of Attorney. (Note: this can also be accomplished with a trust, but I leave that discussion to another article.) Having a plan and the legal documents to support that plan prior to the time you need them better ensures that the agent that you designate will be more inclined to follow your directives. Further, it provides you with an opportunity to share your goals. You want the agent to be fully prepared to act (and educated) when the time comes that you need them.

When one creates a Durable Power of Attorney, careful consideration must be given as to when the agent comes into her power. That is, the Power of Attorney can be effective immediately (someone can go to the bank and withdraw your account three seconds after you create the document); or, the Power of Attorney can be effective only when a specific event or events occur, (such as, you lose the capacity to make decisions for yourself). Care must be taken to evaluate who is the best alternate or backup agent who will act in the event that your first choice predeceases you or is otherwise not available to act as your agent.

A Power of Attorney that provides your agent with unlimited power over your assets can easily be abused.  But, there are means of adding protections, including adding another agent or designating a monitor to ensure that the agent is managing your assets in your best interests. 

Even with these safeguards, your estate plan should be regularly reviewed and updated. An estate plan is not something that should be governed by the familiar motto “fix it and forget it.” (This is not a rotisserie chicken we are talking about here.) Indeed, preparing a well-thought out estate plan and regularly reviewing these documents with your attorney and the decision–making agents that you designate is one of the best ways to thwart potential abuse. 

    2.   Stay Connected to your Loved Ones. Unfortunately, many predators who perpetrate financial abuse look for lonely, socially isolated victims.  Work to maintain long-time friendships and family connections and socialize with them as much as possible-even if it’s just on social media. Stay connected to the world and with the people you love. It will be harder for an abuser to take advantage of you if your loved ones are involved in your life. 

3.   Be Wary of Strangers.  Be wary of people who "come on too strong." Who makes a new best friend the course of just a few days? Common scams start with an email from people who contact victims (out-of-the-blue) on social media claiming to be a distant relative or a friend-of-a-friend. Other scams include contact the victim and claiming to be a relative who is in desperate need of money (because they were just mugged or their time blew out, for example). New York State provides a list of common scams being perpetrated at: https://www.dos.ny.gov/consumerprotection/scams/older_adults.html .

4.   Refrain from Oversharing. If you have not designated a person as an agent with authority to make financial decisions on your behalf, there are few reason to share your financial information with that person. It is none of their business. If they ask about your finances and you are not retaining them to provide services on your behalf (think lawyer or financial planning), change the subject.  If they persist, consider finding a new person with whom to socialize. 

5.   Scrutinize and Memorialize all Loans. Think long and hard before making personal loans to other people. If the requesting borrower is able to secure a loan from another source, you would be wise to encourage them to do so. Nonetheless, should you decide to go ahead and make the loan, have an attorney draft a simple contract that memorializes the loan, including the payment terms and an appropriate interest rate. Failing to properly structure and memorialize the writing can negatively impact the lender’s eligibility for certain governmental assistance programs for long term care (Medicaid). Further, loans that are properly memorialized in a signed document are more likely to be enforceable later on should the borrower fail to pay you back or should you pass away with monies still being owed to you. Further, special provisions can be added to your estate planning documents that would name a beneficiary to receive payments after your death, forgive the loan after your death and/or require the borrower to treat the forgiven loan as an advanced payment on the borrower’s share of your estate (the last two are typically used when a child or a grandchild is the borrower and loan is legitimate). 

6.   Tell Someone. If you suspect that you (or someone your love) have been targeted by someone who has or who is looking to exploit you, tell someone that you trust. In many instances, it may be a good idea to seek the advice of legal counsel. They can help you file reports and, as necessary, obtain a restraining order, and even assist you with bringing a legal action. There are state and local hotlines that are there to help as well. Do not hesitate to call the New York State Protective Services for Adults Hotline at 1-800-342-3009. You can also call 9-1-1 if you or someone you know is in immediate danger or risk of harm, or you can call 3-1-1 to report good faith suspicion of abuse to the appropriate authorities. 

Information is power. The more you understand about financial abuse, the better armed you are to protect yourself and those you love from being taken advantage of by a financial abuser.  I would like to believe that there are still good people in the world. Indeed, I meet good people every day. However, over the course of the past few years, my representation of financial abuse victims and their families has become a regular part of my legal practice. Let’s work together to reverse this frightening trend. Please share this Article with your friends and loved ones.  It we can each prevent just one more instance of abuse, it is well worth it.