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How to Protect Seniors from Financial Exploitation

How to Protect Seniors from Financial Exploitation

October 29, 2024

By Johnson/Turner Legal

How to Protect Seniors from Financial Exploitation

October 29, 2024

By Johnson/Turner Legal

How to Protect Seniors from Financial Exploitation 

As people age, they may become more vulnerable to financial exploitation, a growing form of elder abuse that targets seniors for their assets. Scammers, and sometimes even trusted individuals, may take advantage of seniors’ cognitive decline, isolation, or lack of financial literacy. While Elder Law provides legal remedies for addressing financial exploitation after it occurs, Estate Planning offers proactive protections to help safeguard your loved ones and prevent exploitation before it begins. 

In this blog, we’ll explore: 

  • Common forms of financial exploitation 
  • Legal remedies under Elder Law 

 

Common Forms of Financial Exploitation 

Financial exploitation can take many forms, and seniors are often targeted because they may be more trusting or have accumulated substantial assets over their lifetime. Some of the most common forms of financial exploitation include: 

1. Unauthorized Access to Bank Accounts or Credit Cards

In many cases, family members, caregivers, or fraudsters gain access to a senior’s bank accounts or credit cards without permission. This can lead to the misappropriation of funds for personal use, leaving the senior with little or no control over their financial resources. Exploitation can also happen through identity theft, where someone uses a senior’s personal information to access their accounts or open new lines of credit. 

2. Fraudulent Claims or Pressure to Change Wills and Trusts

Seniors may also be pressured into making changes to their wills or trusts to benefit a manipulative individual, often at the expense of their true heirs. This can happen through coercion, undue influence, or even fraud, where seniors are deceived into signing documents they don’t fully understand. Fraudsters may claim to be acting in the senior’s best interest, when in reality, they are manipulating legal documents to gain control of the senior’s assets. 

3. Misuse of Power of Attorney

Another common form of financial exploitation is the misuse of Power of Attorney (POA). While POA is meant to help seniors manage their affairs when they are no longer capable, it can be abused when the appointed agent acts in their own interest rather than the principal’s. This may involve mismanaging funds, making unauthorized withdrawals, or selling assets without consent. 

Understanding these common forms of financial exploitation is the first step toward safeguarding your loved ones. The next step is knowing how Estate Planning tools can offer protection. 

 

Estate Planning as a Safeguard Against Financial Exploitation 

Estate Planning is one of the most effective ways to proactively prevent financial exploitation. Through careful planning, seniors can maintain control over their assets while putting protections in place to ensure that their wishes are carried out even if they become incapacitated. Below are some of the key Estate Planning tools that can help protect seniors from exploitation. 

1. Establishing a Trust

A trust is one of the most powerful tools in Estate Planning, offering strict oversight of how a senior’s assets are managed. By placing assets in a revocable or irrevocable trust, seniors can appoint a trustee to manage their financial resources according to the specific terms set out in the trust document. A trustee has a fiduciary duty to act in the best interest of the senior, which provides an extra layer of protection against financial abuse. 

    • Revocable Trust: Seniors can change or revoke this trust during their lifetime, maintaining flexibility over their assets. 
    • Irrevocable Trust: This trust cannot be changed once established, but it offers significant protection from creditors, lawsuits, and even Medicaid spend-down rules, which makes it harder for outsiders to access the senior’s assets. 

2. Using a Durable Power of Attorney (POA)

A Durable Power of Attorney allows seniors to name someone they trust to handle their financial affairs if they become incapacitated. However, to reduce the risk of misuse, seniors should choose their agent wisely. It is often helpful to: 

    • Appoint a trusted family member or professional to act as POA. 
    • Clearly define the agent’s powers and limit the scope of their authority to specific tasks. 
    • Set up dual agents, requiring two people to agree on financial decisions, which adds another layer of oversight. 

Regularly reviewing and updating the POA document helps ensure that it reflects the senior’s current wishes and that the appointed agent remains someone trustworthy. 

3. Regularly Updating Wills and Financial Plans

One of the most important steps seniors can take to prevent financial exploitation is to regularly update their wills, trusts, and financial plans. This ensures that the documents reflect current relationships and financial situations, reducing the chance that an outdated document could be used to exploit the senior. 

Additionally, regular updates make it harder for someone to claim that they were acting under an older, outdated version of the will or trust, which may no longer align with the senior’s wishes. Estate Planning attorneys recommend reviewing these documents every few years or after significant life events. 

4. Setting Up a Financial Monitor

Seniors can appoint a third-party financial monitor, such as a financial advisor or accountant, to oversee the management of their assets. This person’s job is to regularly review financial transactions and ensure that the agent or trustee is acting within their authority. By adding this additional layer of accountability, families can more easily identify signs of financial exploitation before it causes significant harm. 

 

Taking Action: How to Protect Your Loved Ones 

While Elder Law offers legal remedies after financial exploitation occurs, Estate Planning provides a proactive approach to preventing it in the first place. Here are some steps families can take to protect their loved ones from financial abuse: 

  1. Start Planning Early: The earlier you begin the Estate Planning process, the more control your loved one will have over their finances and the harder it will be for others to take advantage. 
  1. Consult an Estate Planning Attorney: Work with a qualified attorney to ensure all legal documents are properly drafted and reflect the senior’s wishes. An attorney can also help structure trusts and POAs to provide maximum protection. 
  1. Encourage Open Communication: Discuss financial matters openly with your loved ones. Family members should stay informed about the senior’s financial arrangements, which helps spot potential exploitation. 
  1. Monitor Financial Activity: Set up a system where a trusted family member or financial advisor can regularly review the senior’s bank accounts, credit cards, and other financial transactions for any signs of abuse. 

 

Conclusion: Safeguard Seniors with a Comprehensive Estate Plan 

Financial exploitation is a real and growing threat to seniors, but with the right Estate Planning tools, families can put measures in place to protect their loved ones’ assets and dignity. From establishing trusts and Durable Powers of Attorney to regularly updating financial documents, a comprehensive Estate Plan offers the best defense against financial abuse. 

If you’re concerned about protecting your loved ones from financial exploitation, consult an Estate Planning attorney today to create a tailored plan that ensures their future is secure. 

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