As a wills and estate lawyer in Toronto, Les Kotzer has heard it all — and it's not often pretty.
Take the story of an ailing, elderly woman who relied on a daughter's caregiving to avoid going to a nursing home. The child threatened to withhold care unless the mother's house was bequeathed to the daughter in a will. The daughter even drove her to a lawyer's office to have the document drawn up.
But the mother told Kotzer she got her revenge. When the daughter left for a vacation, the mother called the lawyer to the house to secretly execute a new will that disinherits the child.
"I was shocked [the mother] would have to go to this length," says Kotzer, co-author of "Where There's An Inheritance," which contains families' stories and advice on how to avoid estate fights. Less surprising, Kotzer says, is that the child was the bad apple.
"The financial abuser is often a family member," he says.
Financial exploitation of the elderly can take all forms, and firm figures aren't available. A 2009 MetLife study estimated that the number of victims nationwide could be as high as 1 million a year, with losses amounting to at least $2.6 billion annually. Victims tend to be women in their 70s and 80s who are trusting, cognitively impaired or isolated, the study found.
The problem is only expected to grow, given our aging population and the fact that older adults control the bulk of wealth in this country, making them a target.
Granted, plenty of families act in the best interest of their oldest members. Still, most financial exploitation is perpetrated by a relative, with an adult child being the culprit one-third of the time, according to the National Center on Elder Abuse.
"It's more common that we like to admit, mostly because it's hidden," says Michael W. Davis, an estate planning lawyer in Columbia. "Who is going to complain to whom? That becomes the problem."
Some children outright steal from parents. Others "borrow" money with the intention of repaying parents but never do. Or children feel entitled to funds they expect to inherit later. "Some just can't wait," Davis says.
New efforts are under way to combat financial abuse of the elderly.
The nonprofit Investor Protection Trust announced a campaign last month aimed at helping physicians identify financial fraud among older patients — particularly those with cognitive impairment — and then refer those cases to authorities.
A new Maryland law taking effect in October will strengthen protections for those creating powers of attorney, a document naming an agent to make financial and other decisions on your behalf. Starting in October, the document must be signed before two witnesses and notarized — a standard not required presently, says Richard Wright, an estate planning lawyer in Annapolis.
The new law will also allow heirs, government agencies and others with an interest in the elderly person's welfare to ask the court to require that the agent account for how he or she is handling affairs, Wright says.
Of course, much more needs to be done to safeguard seniors. And older adults should consider these steps to make themselves less vulnerable:
Choose a trustworthy agent: Never be pressured into giving power of attorney over your affairs to anyone. But if you do want this document, choose an agent with care.
Avoid anyone with debt troubles or addictions who might be tempted to pilfer your money to solve his or her problems. Parents usually choose a child but sometimes might be better off with another trusted relative or close friend, lawyers say.
Or consider naming more than one agent to act as a check-and-balance on each other, Kotzer suggests.
Maintain control of assets: Sometimes older adults land in trouble trying to avoid probate, the process where the title of a deceased's assets are transferred to beneficiaries. (Probate for most estates in Maryland is less onerous and expensive than in other states, lawyers note.)
As an example of how things can go wrong, Kotzer tells the story of a woman whose children persuaded her to turn ownership of her assets over to them to bypass probate. They promised to pay her an allowance. But it was so stingy that she barely had enough to live on, and her children berated her if she asked for more, he says.
Bank tellers often advise older customers to add a child as a joint owner of an account to avoid probate, but the consequences can be devastating, lawyers warn.
"Not only can the child take the money out of the account … but if the child has a judgment against them, that account can be used to satisfy the judgment," says Jeffrey Myers, an assistant attorney general and counsel to the Maryland Department of Aging.
Instead, open a "convenience account," suggests attorney Davis. This will allow a child to be able to write checks and pay bills for you, but the child won't own the account.
And you can still avoid probate by making the account "payable upon death," when all the money in it will go to one or more beneficiaries after you die, he says.
Similarly, don't put a child's name on the title of the house, Kotzer says. It's possible for the child's creditors to force the sale of the home, he says.
Report pressure: Let other children or relatives know if a caregiver or child is pushing you to change a will or make other financial moves you don't want, Kotzer says. They may be able to intervene or watch out for you.
Compensate agents: Often the work and stress of caring for an elderly parent falls upon one child, while other siblings go about their lives, Davis says. The caregiver, who also tends to be the agent in the power of attorney, isn't paid.
Davis says he has been recommending that parents revise their power of attorney to compensate their agent child. "It's just a matter of fairness," he says.
Plus, in certain cases, this compensation and recognition could reduce agents' frustration and the temptation to help themselves to a parent's money, he adds.
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