A Family Affair: Five Ways To Foil Family Financial Abuse

I know family members are responsible for elder financial abuse because I’ve seen it happen. It occurs more often than you think.

The scenario goes like this: A sibling “takes over the management” of Mom or Dad’s finance. They obtain power of attorney and start fleecing their own parents. I wish I could say this is a rare scenario, but it isn’t.

In one piece that I wrote, I came across a son who had robbed his 103-year-old mother. She had to go to court to stop the exploitation.

According to the SIFMA Senior Investor Protection Resource Center, of the $3 billion in elder financial fraud, more than half of the crimes are committed by family members or caregivers.

“In cases where such exploitation is discovered, it is often only after large, questionable requests or aggressive power of attorney tactics,” the SIFMA Center notes.

“On top of this, senior investors are also heavily targeted by fraudsters who often utilize common schemes such as the Jamaican Lottery Scam, Nigerian Letter Fraud, Sweetheart Scams, Granny Scams, Contest Scams, and the Sale of Non-Existent Investment Products.

Moreover, it is estimated that only 1 in 44 instances of senior financial exploitation is ever reported.”

How can you protect your family members from fraud? Here are what financial watchdogs recommend:

– Have a responsible family member monitor and pay bills. More than two family members should be involved. That way you can spot any large charges, withdrawals or changes in account ownership.

– Financial (durable) power of attorney should be granted to the most responsible, financially savvy siblings. That way, in the event of cognitive decline, a family trustee can take over. Siblings who’ve had financial setbacks or suddenly move in with Mom or Dad should be monitored closely.

– Keep in touch with all financial professionals in your parents’ lives. You should have access to their lawyer, accountant, financial planner and broker. Are they making any major moves such as cashing out accounts or buying new investments? Talk to them every week.

-- Know your recourse. If there’s fraud involved, you can always involve your state attorney general’s office. You can also file for arbitration against brokers.

– Communicate with your elders. Have they met a “new friend” who just happens to be selling insurance, brokerage products or real estate? Are they going to “free” lunches sponsored by brokers?

There are lots of scams out there. You can’t be on top of every one, but you can certainly be vigilant with your relatives.

For more on how to prevent financial abuse, click here.

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A Family Affair: Five Ways To Foil Family Financial Abuse

Colliton: Tips to avoid Power of Attorney financial abuse

Janet M. Colliton

One of the most common reasons seniors likely hesitate to sign a Power of Attorney appointing another person to act on their behalf is fear of loss of control and exploitation. In this respect, as an elder law attorney, I admit some conflict.

On the one hand I have seen instances where an individual becomes disabled without having signed a Power of Attorney, something that can be acquired at reasonable cost and with minimal aggravation, and there the only alternative is for an interested party to file for guardianship. Guardianship is time consuming, expensive even when not contested, can limit the individual’s freedom, and may result in appointing someone the person would not want. Guardianship can, however, be the right answer in the right case.

On the other hand those seniors who believe that Powers of Attorney are powerful documents and require thought are right.

Here is how to keep you, the senior, in the “driver’s seat” when designating an Agent under Power of Attorney.

Choose your Agent well. >> The number 1 way to prevent financial exploitation by an agent under Power of Attorney is to choose your agent well. In our office we use the “checkbook across the table” rule. This means you would feel confident taking your checkbook and handing it across the table to the person you are appointing and he or she would act responsibly, act in your best interest, follow through in paying bills appropriately, consult with experts where expert advice is needed, keep a record of transactions, and be scrupulously honest when it comes to handling your funds and your assets.

You should not choose your Agent based only on whether that person is your oldest child or whether there would be hurt feelings. If your agent is experiencing money problems herself or himself this might not be the time to appoint since the stress could be too great.

Have backups. >> There should almost always be at least one backup agent under Power of Attorney appointed. If your primary agent becomes disabled or unavailable, someone needs to step up and act.
Ask questions to tailor the document to your specifications. >> Every Power of Attorney is not the same. You could give unlimited power, limited power, or no power to gift and you should know why in each case. You could give control over handling of your business or corporation, or not. Gifting could be allowed so long as your needs have been satisfied and without dissipation of your estate.

Limited gifting means $14,000 per person per year. That might be too much or not enough. You could give power to cash in insurance policies for your needs without allowing the agent to change beneficiaries.

You could have more than one agent and then specify whether they need to act together or each might act separately. There are pluses and minuses to each. Consider reasonably whether your Agents could work together. If you do not know answers, you can ask the attorney. This is why she or he is there in the first place.

Financial Power of Attorney and Health Care Power of Attorney can be separated. >> One child might be great for health care and another a whiz on figures. The documents can be separated or the same person could act as both but under separate documents.  (Continue Reading)

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Colliton: Tips to avoid Power of Attorney financial abuse