How Can Seniors Avoid Scams and Financial Predators?

 In Durable Powers of Attorney, Revocable Trusts
Protection from elder financial abuse

Photo by Philippe Leone on Unsplash

Question:

My wife and I currently run a wellness center and the bulk of our clients are 55+ years in age. We are concerned that the rise in fraud and scams targeting elders will only skyrocket further. A recent case sent us both over the edge when a caregiver exerted undue influence over an elderly person via a romance scam and had an unscrupulous notary present to get the victim to sign over his estate. This has caused us to want to learn more about what should be done to increase safety for seniors while still protecting privacy rights. What do you recommend?

Response:

This is a very difficult issue given both the law’s emphasis on personal autonomy and the fact that seniors are so often the targets of scams because of both the increasing likelihood that they may suffer from cognitive decline and the fact that they have savings accumulated over a lifetime. There are estate planning steps people can take in advance to protect their savings in the event of cognitive decline, but a lot depends on having someone to trust to step in when and if necessary.

These steps include the following:

  • Naming a trusted relative or attorney as agent under a durable power of attorney. Then they can step in and take over your finances when and if necessary. Be aware that some financial institutions have their own power of attorney forms, so it’s good to inquire and complete their documents as well as a general durable power of attorney.
  • Adding a trusted relative or friend to your bank or other accounts. This will give them immediate access to your accounts. This can work better than a durable power of attorney because they don’t need to establish their credentials with the bank or financial before intervening. Also, this gives them access to the account to see if there are any unusual withdrawals. Often, people only add joint account holders to their checking accounts because of these potential downsides:
    • Lack of privacy. The joint account holder can see what you’re doing.
    • Lack of protection. If the joint account holder runs into financial trouble, a creditor might seek access to your account.
    • Refusal to share. Upon your death, the account passes automatically to the joint account holder. This may be what you want, but if not you must clarify that they are on the account “for convenience only” and that you expect them to share the balance with your other heirs.
  • Creating a revocable trust. A revocable trust with a co-trustee has all the advantages of a joint account without many of the risks. Your assets in the revocable trust will not be at risk if the co-trustee runs into financial difficulties. They will not pass to the co-trustee upon your death. And if you don’t have someone in your life to designate as your agent under your durable power of attorney, a bank, trust company or attorney could act as co-trustee. There is some cost to this, but it’s worth the protection provided.
  • Implement a “Ulysses” clause. I was introduced to this concept by my friend and colleague, Michael Gilfix. As you may recall, when Ulysses was returning home from the Trojan Wars, his boat passed the island of the Sirens who would lure sailors to their ruin by their beguiling voices. Ulysses had his men tie him to the mast and told them: “If I beseech you and command to set me free, you must increase my bonds and chain even tighter.” Unfortunately, seniors who are often unaware when they are experiencing cognitive decline and often insist that scams are real. A Ulysses clause would designate an individual you trust to implement a durable power of attorney or a trust. For instance, you may create and fund a revocable trust, but not appoint a co-trustee right away. Instead, you would appoint a successor trustee to step in when the holder of the Ulysses power deems it necessary.

None of these steps is foolproof, but they can all go some way to providing protection against scams and simple financial disorganization. Often the best protection is avoiding isolation. If someone is helping a senior with their finances or visiting with them often, it’s much less likely for them to fall the victim of predators and much more likely that someone will intervene before any scam gets too far.

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