Jul 25, 2022 • Catherine Hodder, Esq.; FINDLAW/BLOGS/LAW AND DAILY LIFE
Protect Your Parent from Elder Financial Abuse with A Power of Attorney
Even the smartest person can be taken in by a scam. And unfortunately, many con artists prey on elderly persons to steal their money and personal information. One in 10 people aged 60 or older has been the victim of elder abuse, which includes financial abuse and identity theft.
Before his death in 2018, Marvel comic co-creator Stan Lee was the victim of alleged financial abuse. Police charged Lee’s manager with fraud, forgery, and false imprisonment of his client. There are also allegations that the manager mismanaged over $5 million of Lee’s money and moved Lee out of his home and hired security guards to keep his family away.
If a celebrity can be taken in with all of their money and visibility, how can you protect your aging parents from falling victim to financial exploitation?
How Can I Protect My Parents from Elder Financial Abuse?
First, understand how scammers target seniors and educate your parents about them. Elder financial abuse takes many forms, such as:
- Fraud/forgery: People writing checks or using their credit or debit cards for personal gain
- Identity theft: People using their information to open credit cards or take out loans
- Embezzlement/breach of fiduciary duty: A person trusted with money uses it for themselves
Most elder fraud is committed by caregivers and family members in a position of trust or financial advisors or accountants who help with financial decision-making. Essentially, someone who has access to financial accounts or who has undue influence over your parents could be suspect.
Second, offer to help them monitor their bank accounts or emails for suspicious activity or withdrawals. An excellent way to do this is to look at their bank or credit card statements for any errors. You may be able to set up notifications from your bank for low balances or large withdrawals. Also, checking their mail and email will alert you to any red flags or shady dealings.
Third, ask them if they have a power of attorney for their finances and who their agent is. Older adults may have cognitive impairments or physical disabilities; they need to rely on loved ones to help them. A power of attorney allows adult children to monitor their finances and prevent elder financial exploitation.
What Is a Financial Power of Attorney?
A financial power of attorney allows you (the “principal”) to name someone you trust (the “agent” or “attorney in fact”) to handle your financial transactions. The agent has a fiduciary duty to act in your best interests, or they will face criminal charges or lawsuits. This is a separate document from a health care power of attorney.
There are typically three types of financial power of attorney:
- Limited/specific: This type of power of attorney grants only one authority or gives powers for a limited time or scope. Examples of a limited power of attorney are handling a real estate transaction for a principal or managing the principal’s finances when the principal is out of town or indisposed (i.e., a hospital stay).
- Durable: This power of attorney remains effective during the principal’s incapacity.
- Springing/contingent: This power of attorney becomes effective upon a date or event such as incapacity. Typically, if a power of attorney is contingent on incapacity, two physicians must certify in writing that the principal is incapacitated and cannot manage their affairs.
What Can I Do With a Power of Attorney?
A power of attorney is a simple, straightforward document with significant implications. As an agent, you step into the shoes of the principal. So you can borrow money on their behalf, commit them to loans, or sell their property.
There are certain general powers that your parents could grant you to manage their financial resources, such as:
- Buying or selling real estate
- Managing stocks, bonds, securities, financial investments, retirement benefits, pensions, and annuities
- Handling all banking activities, including accessing a safe deposit box or taking out a loan
- Managing a business entity or buying or selling a business
- Buying or selling insurance policies (Note: They can’t change the beneficiary of an insurance policy)
- Making changes to an estate plan or trust
- Filing lawsuits or defending a lawsuit
- Supporting the family’s standard of living by paying bills, tuition, etc.
- Handling government benefits such as Medicare, Medicaid, Social Security, and military benefits
- Preparing, filing, and paying taxes
There are certain powers that your parent may or may not want to grant. Those powers allow an agent to reduce the size of the principal’s estate. This should only happen for estate tax planning purposes or for your parent to qualify for benefits like Medicaid.
How to Make a Power of Attorney
You can help your parent prepare a power of attorney with online forms or contact an elder law or estate planning attorney to prepare one for you. The information you will need for a power of attorney is:
- Your parent’s name and address
- The chosen agent’s name and address
- The name and address of any backup or successor agents, if the first choice is unavailable
- The powers or authority to grant
- The time to start or end the power of attorney
Once the document is ready, your parent will sign the power of attorney before a notary.
How Do I Report Elder Financial Abuse?
Suppose you suspect your parents have been scammed. In that case, you can report elder financial abuse to the federal government’s Consumer Financial Protection Bureau or the Adult Protective Service agency in your state. Also, contact their banks, credit card companies, and financial institutions to put a fraud alert on the accounts.
An elder law or estate planning attorney can help you navigate issues caused by financial elder abuse.
Be the Guardian of Your Parent’s Financial Galaxy
Talk to your elderly parents about who has access to their financial information. If they allow it, volunteer to be their power of attorney if they cannot manage their financial life independently or need help with bill paying or financial decisions. It is a valuable tool to protect against elder financial abuse.