Michael Ford (post until Oct. 31/19)
Estates & Wills & Trusts

Prevent elder abuse by using safeguards

By Mary Wahbi

Financial abuse is the most common form of elder adult abuse. It often involves theft or misuse of money or property like household goods, clothes or jewelry and can also include fraud, scams and withholding of funds from the older adult.

Often, the abuser is an attorney acting improperly under a Power of Attorney for Property or a joint account/asset holder acting improperly. Unfortunately, the abuser is most often a child of the older adult.

According to The Ontario Network for the Prevention of Elder Abuse (quoting Lachs and Pillemer, The Lancet; October 2004; Volume 364; pp 1192-1263) the rate of occurrence is between 2 per cent and 10 per cent and those who assist abused older adults believe the rate is closer to 10 per cent.

An abuse scenario like this typically plays itself out in the following manner: Older adult parent needs assistance in managing their finances, either because it is too physically or mentally taxing, and involves their child in their financial arrangements. This can be by way of adding their child as a joint bank account holder at the bank, by transferring assets into the child’s name (investment accounts perhaps), or by signing and delivering to the child a Power of Attorney for Property which is immediately effective.When the child has access and control over the financial assets, the child treats them as their own and starts to either “borrow” from the funds or out-and-out uses the funds for their own purposes, now having full legal authority as far as third parties are concerned. Often, the older adult is isolated and totally dependent on the child so does not complain.

The most important way to ensure that a child does not commit financial abuse of their older parent is to do everything possible to prevent the older parent from becoming vulnerable and solely dependent on the child for financial help and physical/emotional support. The more the older parent is vulnerable and isolated, the more likely they will be taken advantage of.

Some of the non-legal proactive steps that can be taken to prevent a child from committing financial elder abuse is first and foremost, to ensure that either the parent retains control of their own finances or, if that is not feasible, that there is some method of oversight over what the child is doing. It is trite to say that the older adult has to be completely satisfied that the child can be trusted and will respect their wishes since that is usually assumed. However, some practical ideas are the following:

-Since it is usually the isolated older adult that is more vulnerable to abuse, it is important to ensure that the older adult does not become isolated and solely dependent on the child; the older adult should stay active, see other friends and family, visit neighbours, join a seniors' reading, travel, book or exercise club and keep involved with other people

-The older adult should attend educational seminars/sessions offered in their community regarding their rights, safety, and legal issues affecting them

-The older adult should have all cheques payable to them (CPP, OAS, interest cheques, RRIF cheques) automatically deposited into their bank account

-The older adult should have all bills payable by them automatically paid out of their bank account

Some of the legal steps that can be taken to guard against a child committing financial elder abuse include:

-Getting independent legal advice from a lawyer who will act only for the adult and not the child and who is well versed in estate planning and older adult issues before transferring any assets either outright or jointly to the child and / or before preparing a Continuing Power of Attorney naming the child as attorney.

-A lawyer well versed in this area of law will advise the older adult of the pros and cons of asset transfer or joint ownership. This will include advising that there is no need to transfer assets to the child or to hold them jointly with a child and the same can be accomplished either by putting in place a Power of Attorney or considering other vehicles such as an Alter Ego Trust or in the case of a transfer of a home, transferring it subject to a life interest in favour of the older adult. If the older adult still insists on the joint ownership, at least the lawyer can obtain information as to the asset balances and prepare a Declaration of Trust for the child to sign so there is a clear record of what the starting values are of the assets and that the child is not being gifted these assets but holds them in trust. The notion that transferring assets into the joint names of the older adult and the child will save on estate administration tax is not correct (see Pecore v. Pecorewhich held that there is a presumption of resulting trust when there is a transfer from a parent to an adult child) and the savings of course are far outweighed by the risk of financial abuse. A Declaration of Trust will be evidence of the fact that these assets belong to the older adult and are held jointly only for ease of administration and will be ammunition if there is litigation concerning the matter either in the older adult’s lifetime to retrieve the assets from the child or after the older adult’s death among the beneficiaries.

-A lawyer well versed in this area of law will advise the older adult of the appropriate considerations before the older adult signs a Power of Attorney for Property in favour of the child. Considerations of when the Power of Attorney is to be triggered and who ought to be named as the attorney under the document will be canvassed.

Some of the safeguards to put into place include:

-Having more than one child involved as the attorney so that no one child can act without accounting to the other
-Naming a third-party trusted friend as co-attorney jointly with the child
-Naming a third-party professional such as an accountant, lawyer or trust company as co-attorney with the child
-Ensuring that there is an objective mechanism that must be triggered before the Power of Attorney can be used such as assessment by a geriatric professional of loss of capacity to manage finances
-Specifying in the document itself certain wishes to ensure that the older adult’s wishes are clear on expenditures to be made on their behalf (so that the child doesn’t withhold funds from the older adult caring more about their inheritance than about the older adult’s care). For example, the following are sample phrases I include in my form of Power of Attorney:

“In managing my estate and applying it for my maintenance, advancement in life and general personal benefit, I direct my attorney to expend such amounts as may be reasonably necessary so that I may live in my own home for as long as possible, with such nursing or other assistance as I may require, rather than being moved into an institution.

“I direct my attorneys to expend such amounts as are reasonable to ensure that during my lifetime I am provided for in the same manner as I provided for myself when I was capable concerning my standard of living (i.e. hygiene, shelter, clothing, food, etc.).

“I hereby direct my attorney to cooperate with my attorneys for personal care and to pay or reimburse my attorney for personal care for all expenses incurred by them. Furthermore to the extent that is reasonable, they shall ensure that funds from my estate are made available to finance personal care decisions made by my attorneys for personal care. I have instructed my attorneys for personal care to keep me living safely and comfortably in my own home for as long as possible and as long as doing so does not create an undue burden for my family and friends. I hereby direct my attorneys to act consistently with the decision of my attorneys for personal care, and in particular to use my property to keep me safe and comfortable in my own home, even if doing so exhausts my property during my lifetime or renders meaningless the value of my estate.”

Another safeguard is a further step our firm takes when preparing Powers of Attorney. We include in the document itself a note to the attorney that they have legal duties and responsibilities and suggest that they seek legal advice in using the document. We also provide the older adult with an information sheet to be delivered to the proposed attorney setting out their duties and obligations.

While there is really no perfect safeguard against abuse of vulnerable older adults, with a combination of the foregoing the incidents of financial abuse may be lessened. An older adult should balance trusting their child with the safeguards outlined above.

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