Recognizing and Preventing Financial Elderly Abuse

Kay Dee Cole

October 3, 2016

The American Bar Association reports that one in 10 Americans over the age of 60 will experience some form of elder abuse. And according to the National Center on Elder Abuse (NCEA) only one in 45 cases is actually reported!

Most people can’t imagine that physical, emotional or financial abuse would ever occur in their family, but it can happen. The best way to ensure that your loved ones are free from abuse by family members or caregivers is to recognize the warning signs, communicate, and have a plan in place to reduce risk.

What is Elder Abuse?

Elder abuse is defined as an intentional act, or failure to act, by a caregiver and/or a trusted person that creates risk or harm to an older adult – usually adults over 60.

Bruises, weight loss, sleep issues, confusion – often dismissed as common during ‘the aging process‘ – should not be taken lightly. Financial elderly abuse is increasingly common and can be catastrophic if not detected and stopped. Unexplained checks to strangers and questionable charities or increased stress about finances, when there shouldn’t be any, should raise red flags.

Question You Should Ask if You Suspect Elder Abuse

Who manages your loved one’s money on a day-to-day basis? How are your loved one’s bills paid? These are just a few of the important questions to consider. Finding out the answers to the following questions provides a great jumping off point for next steps.

  • Has your loved one run out of money at the end of the month or have they been worrying about any recent financial decisions?
  • Does anyone else have access to their accounts or assets, or to sensitive documents and passwords, or asked for access to these assets and documents?
  • Is someone else named as an authorized person on their bank or investment accounts?
  • Has anyone recently asked them for a loan?
  • Has anyone asked them to change their will?
  • Has your loved one given power of attorney for their financial affairs or health care decisions?

If you cannot answer these questions, you may wish to have a discussion about putting a system of checks and balances into place to minimize the possibility of financial fraud – and keep talking. This important conversation should be ongoing and will become easier over time once the foundation has been laid.

7 Tips for Preventing Financial Elder Abuse

Here are some more tips that will help prevent financial elder abuse that are easy to implement:

1. Become familiar with your loved one’s financial information and current estate plan documents and know where they are kept.

2. Review the financial information and estate planning documents at least annually. Wishes may change and confirming that those wishes are noted in the proper documents will provide comfort that those wishes will be honored.

3. Get to know you loved one’s ‘team’. Establishing relationships with your loved one’s attorney, tax adviser, financial adviser and medical caregivers before they are needed can make the process smoother and less stressful when they do become necessary.

4. Provide respite for caregivers, especially if they are family members.

Related: How to Avoid Burnout When Caring for Aging Parents

5. Stop by unexpectedly if your loved one is frequently alone with a caregiver. Check to see if anything is missing, like valuables or checks. Make sure the physical space is clean. If your loved one is nervous or uncomfortable, or whispers so as not to have the caregiver overhear…there may be an issue.

6. Gently educate your loved one about current solicitation scams. This information is available from the Oregon Department of Justice.  Subscribe to their Scam Alert Network so that you can share the latest scams targeting the elderly.

7. Communicate, communicate, communicate.

What To Do If You Suspect Abuse

If you suspect that your loved one has been subject to abuse that is not life threatening, contact your state’s Adult Protective Services. You do not have to prove abuse is occurring – agency professionals are responsible for investigating your concerns.

And if you think your loved one may have been a victim of fraud or other abuse, don’t be squeamish about asking them what has or is transpiring. If they are in immediate danger, call the police or 911 as soon as possible.

Fight Against Financial Elder Abuse with Clarity

As financial advisors, it’s our duty to ensure clients of all ages are aware of the dangers of financial elder abuse. Click here to schedule a consultation with Clarity Wealth today.

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Just Found Out You’re the Beneficiary of a Trust? Here Are 14 Questions & Answers You Need to Know

Just Found Out You’re the Beneficiary of a Trust? Here Are 14 Questions & Answers You Need to Know

If you have been named as a beneficiary of a trust, you probably have many questions about what comes next. Trusts can take many forms and may be governed by unique provisions established by the creator of the trust or “grantor.” As a trust beneficiary, you have certain rights. But to ensure that your financial and other interests are fully protected, you need some basic information about different trust structures and their management.

Trust Basics

At their most basic, trusts can be grouped into two broad categories – living trusts and testamentary trusts. A living trust is created by an individual during his or her lifetime. The grantor transfers property to a trust that is managed for the trust beneficiaries by a trustee. The grantor may act as trustee, or he or she may appoint another family member or family advisor, such as an attorney or accountant to be the trustee. A testamentary trust is established by will upon the death of the person whose assets it represents. Testamentary trusts can be used for many purposes; chief among them to provide for current and future beneficiaries.

In either case, it is the trustee who is charged with administering the trust in strict accordance with its terms. If this so-called fiduciary duty of the trustee is breached in some way, beneficiaries have the right to protect their interests by taking legal action against the trustee.

Role of the Trustee

Following is a brief overview of the trustee’s role and responsibilities.

• Asset collection and protection – Two of the trustee’s key responsibilities are collecting assets earmarked for the trust and ensuring the protection of those assets. For instance, if real estate is included as a trust asset, the trustee is responsible for the maintenance and upkeep of the property and maintaining appropriate insurance on the property. In the case of financial assets, such as cash or securities, the trustee must maintain one or more separate accounts on behalf of trust beneficiaries.

• Investment oversight – The trustee ensures there is a plan in place to address the needs and interests of current and future beneficiaries. Typically, trust investments are expected to generate income for beneficiaries while also retaining and reinvesting principal. In some cases, the trustee may have the authority to make distributions of principal to beneficiaries.

• Taxes – The trustee reports all income generated by trust assets and pays tax on any undistributed income as well as capital gains realized by the trust. In addition, the trustee informs beneficiaries of the amounts that they must report on their personal income tax returns as a result of trust distributions.

• Recordkeeping – The trustee is responsible for documenting every transaction that takes place in the trust accounts. Prior to final settlement, the trustee must demonstrate to the beneficiaries that all assets and income have been properly administered and distributed.

Beneficiary Right to Action

In addition to regular accounting of trust assets, beneficiaries have a right to request a special accounting from the trustee if there is reason to suspect a problem with the trustee’s performance of his or her fiduciary role. If it is found that the trustee is in violation of his or her responsibilities or fails to provide proper documentation of trust activity, then the beneficiary has the right to take legal action, including removing the trustee and requesting a replacement. Such action is normally handled by filing a petition with the local probate court.

Revocable vs. Irrevocable Trusts

Living trusts may be revocable or irrevocable. As its name implies, property held in a revocable trust may be “revoked” at any time; the terms of the trust may be changed and assets returned to the grantor. He or she can establish detailed instructions as to the handling of trust assets during his or her life and ensure continuity of management upon incapacity or death. Revocable trusts need not be filed in probate court after death, thus maintaining family privacy. However, the grantor will be subject to income and estate tax as if the property were owned outright.

In contrast, assets placed in an irrevocable trust are permanently removed from the grantor’s estate, and any income and/or capital gains taxes owed on assets in the trust are paid by the trust. Upon the grantor’s death, the assets in the trust are not considered part of his or her estate and are therefore not subject to estate taxes.

Irrevocable Trusts Offer Lifetime Giving to Beneficiaries

While requiring some loss of grantor control, a properly drafted irrevocable living trust allows individuals of substantial wealth to begin transferring assets to beneficiaries during their lifetime without incurring gift or estate tax. (Please note that a three-year survival period may be required in certan situations).

For example, the normal annual limit on tax-free gifts is $14,000 per beneficiary in 2015, an amount that may be indexed for inflation in future years. Under some circumstances, a taxpayer may include amounts above that in his or her unified estate and gift tax exclusion amount ($5.43 milliion in 2015 for an individual, twice that for a married couple, and subject to indexing for inflation in subsequent years). In addition, upon the grantor’s death, appreciation on the remaining trust assets is not subject to estate tax (assuming any three-year survival requirements are met).

Being named as a beneficiary of a trust is indeed a welcome event, but not without its complications and, if handled improperly, unfortunate consequences. For help understanding your rights and protecting your inheritance, it may be wise to engage the services of an experienced trust attorney.

Financial Planning Association
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