Posted on Mar 31, 2016 by Jeffrey L. Payne
It’s a fact of life: as we get older, our powers of discernment diminish and our judgment of others – particularly their trustworthiness – often makes us vulnerable. Sadly, there’s a legal component to outliving our good judgment.
Elder financial abuse takes many forms, and the common denominator is theft. Sometimes a family member is involved. Sometimes it may be a caregiver who is a constant companion or someone met at church who seemingly just wants to help an older person manage his or her affairs. Families may seek legal help in regaining control over a loved one’s personal affairs or recovering squandered funds. Banks and others caught in the middle may seek legal help when they are unsure if granting a request for a joint account or other shared authority over finances is in the best interests of an older person. Lawyers called in on these types of cases often find that it is difficult to recover misappropriated assets, so if you suspect something is awry in an elderly person’s life you should seek legal counsel as soon as possible.
Most elder financial abuse schemes begin with the senior giving someone a power of attorney over their affairs. From there, they can pretty much do whatever they want – sell stocks, make joint investments, move money into new accounts, sell property and make dubious purchases.
One tactic we often see is establishing a joint checking account in the name of the senior and the person handling their affairs. Bills and living expenses are paid from this account, and money is transferred into it periodically from long-term savings or investments.
Many people use this arrangement responsibly, but it also is an easy way to steal. Usually, there is little or no oversight on the checks written, even checks for cash. The abuser can easily disguise expenses or justify them, and they are hard to challenge months or years later.
Joint accounts are sometimes called a poor man’s will, and that’s because any money in such an account becomes the property of the survivor when the other account holder dies, thus avoiding probate for those funds. While that may work well in family situations where a parent wants to leave money to a child without using a will, those who prey on the elderly know that they can load these accounts with excess funds and “inherit” it.
South Carolina provides an alternative to joint accounts
The South Carolina Legislature recognized this problem several years ago and passed a law that allows those who need joint accounts to set up “agent” accounts. An agent can write checks on an account but does not own the remaining funds in the account when the account holder dies. It’s not a cure-all for abusing check-writing privileges, but it does prevent someone from moving thousands of dollars into an account with the intent to keep it when the senior dies.
Beware these warning signs
If you have an elderly family member, be alert for signs of financial abuse. If a caregiver always has a reason you can’t see the person in their charge, if financial statements never seem to be available or you are told it’s none of your business – that's a strong indicator that something is being hidden.
Another warning sign is when bills go unpaid or the caregiver is stingy with expenses. This often happens when the caregiver wants to preserve the money in a joint account for themselves. Checks written for cash are another red flag.
Recovering money is difficult
The law does provide remedies, but they are not easy. Even if the misappropriated money can be found, it’s difficult to recover. The power of attorney status implies a fiduciary duty, and that’s one basis for a court challenge. Anything that benefits someone with power of attorney, such as a gift or loan, could be deemed a conflict of interest.
The mental capacity of a senior can be challenged in probate proceedings, and that often ends up being a contest between competing medical experts. While advanced dementia is easy to recognize, many older people have intervals characterized by lucidity and confusion. They may exercise clear judgment one day and be addled the next. Determining capacity and whether a senior had clear intent is a tricky business.
These cases are expensive to litigate and difficult to win. Many times, families give the abuser a settlement rather than pursue lengthy litigation. If you suspect financial abuse, unraveling it is not an easy process, and you should consult an attorney to assess your options.
Transparency is the antidote
The antidote for financial abuse is transparency. People who have taken on the admirable responsibility of helping a senior handle financial affairs should not mind sharing everything they do with family members. We recommend that family members receive copies of monthly bank statements and canceled checks, and perhaps a quarterly statement of expenses.
Another unfortunate fact of life is that siblings and other relatives may have legitimate – or even selfish – disagreements on how momma’s money should be spent, but transparency will at least ensure that those discussions will be held in the open.
Jeffrey L. Payne is a shareholder in Turner Padget’s Florence, S.C., office. He focuses his practice on commercial litigation, with an emphasis on business torts, construction, commercial collection, eminent domain, foreclosures, banking, and probate disputes. He may be reached at (843) 656-4432 or by email at email@example.com.