The aging process affects all of us differently. After working for decades toward the goal of a comfortable retirement, retirees hope that their physical and mental condition permits them to enjoy the activities that many of us postpone until our post-retirement years. This is the time when our quality of life and strength of our financial statement should be at their peak. However, it is also the time when the aging process begins to erode our abilities to manage our finances.
Consider the following example: Mom and Dad have been married for over 40 years. Mom has an unexpected stroke and goes into a nursing home. Dad is very lonely, but has trouble driving and doesn’t get over to the home to visit very often. A neighbor that is several years younger takes an interest in providing care for Dad, including running him around on errands, and helping him with his banking and investing. A few weeks later, the neighbor’s name is on Dad’s accounts and investments, and Dad has helped the neighbor with some pressing and substantial financial problems. Dad will be lucky if his accounts and investments are not drained completely before the kids come back home for their annual visit.
The problems in the above example are much easier to prevent than to rectify. First, Dad’s mental and physical health likely will decline. The more time that passes, the more difficult it will become to determine whether Dad has capacity to transfer property to the neighbor, or if that truly was his intent. Second, as soon as the neighbor gets control over Dad’s property, you will be fighting an uphill battle to protect Dad’s property. The neighbor likely will hire an attorney, and they will pay the attorney’s fees out of funds that used to be Dad’s.
Below are some measures you can take to protect your aged loved ones from financial exploitation:
1 – Be involved in the lives, relationships and activities of your loved ones. In other words, be a “good kid”. If you are in regular contact, you will be in a better position to know when your aged loved ones need help managing their affairs, or if they become susceptible to exploitation or other influences. Just as you needed guidance and protection in your childhood and teenage years, your aged loved ones need your help now.
2 – Encourage your loved ones to consult an attorney with regard to their estate plan. Although you cannot compel your loved ones to visit an attorney, there are several compelling reasons for your aged loved ones to seek out professional legal advice. An attorney will be able to provide a fresh opinion as to your loved ones’ capacity to manage their own affairs, and to identify whether they are susceptible to exploitation. Further, an attorney will be able to guide them on issues that include: (1) minimizing estate taxes, income taxes and gift taxes; (2) proper titling of assets; (3) avoiding probate; (4) providing for long-term care needs; (5) properly capturing their wishes in writing; (6) protecting their property from creditors; and (7) determining whether to leave their property to beneficiaries either outright or in trust.
3 – Encourage your loved ones to use a revocable living trust to plan their estate. The benefits of a revocable living trust are a subject for a completely separate discussion. In the context of protection against financial abuse, a revocable trust makes it more difficult for the prospective abuser to make changes to account title and beneficiary designations. Further, a trust has a succession of trustees specified in the event of incapacity or death of your loved ones.
The measures listed above are not a fail-safe method to protect against financial exploitation of the elderly. Arizona law provides that certain persons who engage in financial abuse of the elderly may be subject to penalties that include: (1) criminal penalties for theft; (2) civil damages up to three times the amount appropriated; and (3) forfeiture of all benefits under the estate of the vulnerable adult (see A.R.S. 46-456). However, once the property is gone, the challenge to get it back often is too great. That is why planning and preparation are crucial to the protection of the elderly and their quality of life.