Protecting Miss Daisy: Resisting Financial Exploitation of the Elderly

This is the 23rd in a series of brief articles that Moye White is sending to its clients and friends to provide practical insight about the opportunities and challenges presented by today's economy.

What is Exploitation of the Elderly?

Financial exploitation of the elderly can be defined as the illegal or improper use of an elderly person’s money or property for another person’s profit or advantage. In Colorado, law enforcement statistics show that approximately 2/3 of financial exploitation cases are perpetrated by someone the elderly person knows, often a relative, paid caregiver or “friend” who has recently come into the elder’s life. Financial exploitation is estimated to be the most underreported crime in the U.S. Many people do not view it as a crime at all. If you would like to protect yourself or someone you care about from devastating financial losses, consider the stories at the end of this article about what has happened to other people and the suggestions on how to protect against similar victimization.

Who is at Risk?

Why do people financially exploit the elderly? For the same reasons bank robbers rob banks— that is where the money is. In Colorado, the law defines “elderly” as persons over age 60. Many people over 60 are enjoying the rewards of a successful career, or receiving regular Social Security and private retirement income. They often own their homes free of debt. They are people who worked hard all of their lives, paid taxes, served their country, survived the Great Depression, and contributed to their communities and families. Many have carefully saved all of their lives to provide a dignified retirement for themselves.

Risk Factors for Exploitation

One or more of the following factors put elders at greater risk of exploitation:

1. Over age 60.
2. Lives alone and is socially isolated.
3. Lives with an unemployed relative.
4. Befriended late in life by a much younger person.
5. Caregiver not from a bonded, insured service.
6. Willing to sign documents he or she does not understand to avoid displeasing the person requesting the signature.
7. Cognitive impairment, subject to deception.
8. Physical, mental or emotional dysfunction (especially depression).
9. Recent death of spouse or divorce.
10. Estranged from children.
11. Middle to upper income.
12. Frailty.
13. Taking multiple medications.
14. Fear of change of living situation (fear of placement in institutional setting if elder does not comply with requests/demands of perpetrator).
15. Implied promise to care for the elder in exchange for transfer of money and property to perpetrator.

Steps to Protect Yourself and Others

There are various things people can do to protect themselves and family members from financial exploitation. As a first step, however, we must accept that any of us could become victims. Some of the methods to protect an elder involve doing things differently than have been done in the past, in other words, may require changes to the person’s manner of living in some respects. This can feel unwelcome and uncomfortable, but the quality of a person’s life can depend on self-protection.

It is impossible to draw an arbitrary line as to an age when people should institute the suggestions made in this article because people’s situations vary so greatly, but consider the following changes for anyone over 70:

1. Consider a move to an independent living center that has graduated levels of care (assisted living, nursing care) to avoid isolation and have appropriate care available if needed in the future without another move.
2. Establish a relationship with a CPA, a banker and an attorney and consult with them on any financial change or transaction. Get their opinions on any investment proposal before agreeing to anything. (There is no reason that a legitimate investment opportunity cannot wait for a day or two.) Keep in regular touch with them so they will know if something is amiss and can take prompt action to protect you.
3. Create a living trust to own real estate, investments, CDs, as many assets as possible. Appoint a corporate trustee to act with you as Co-Trustee so that a professionally trained second person takes a look at financial transactions and takes on the responsibility of preventing losses. The cost can be surprisingly reasonable and will be far less than the cost of being victimized.
4. Be very careful about signing powers of attorney. Consider naming two unrelated parties as co-agents on any power of attorney so no one person has the ability to unilaterally access and control your assets.
5. Do not add other persons to bank accounts or deeds to real estate for convenience or probate avoidance. Joint owners have legal rights to all of the money in a bank account and can mortgage real estate without your knowledge or deed it to third parties. A banker can assist you with creating a bill-paying system or you can hire a bookkeeping service through your CPA to help with this task. The cost of probate in Colorado is far less than the cost of dealing with some of the problems that can result from adding other people to the deeds to real estate.
6. If you are receiving in-home care, remove all financial records and documents from your home, including checkbooks and credit cards, place them with a reliable person, and have all financial statements mailed to that person.
7. Realize that people we love can have well-hidden drug, alcohol and gambling addictions or personal problems which make them financially desperate and willing to victimize anyone who is vulnerable.
8. Recognize that the safest people to take charge of your finances may be people who are not related to you, are professionally licensed, are audited and overseen by others, carry liability insurance and charge a fee for their services.

The Stories

The following accounts of exploitation are factual, except for the names of the victims. Note that only one of these cases was reported to law enforcement. In all of the situations, the perpetrator was a friend or family member of the elder.

Elizabeth’s Story

Elizabeth was a retired college professor in her late 70s, very intelligent and well-educated. She and her late husband never had children and none of their extended family lived in the area. A couple of years after her husband passed away, Elizabeth contacted the attorney who had prepared the estate plan for Elizabeth and her late husband some years ago. She told the attorney that she now had a young friend, “Richard,” who had become just like a son to her. She wanted to change her will to leave her entire estate to Richard. She also wanted to sign a durable general power of attorney making Richard her agent with power over her assets. Richard accompanied Elizabeth to the meeting, but the attorney insisted on meeting with Elizabeth alone. The attorney asked many questions of Elizabeth, but she insisted that she loved Richard and wanted the changes she had requested. The attorney reminded Elizabeth that her husband had created a trust during his lifetime and transferred their home and all of their investments into the trust. A bank was trustee and could only make distributions for Elizabeth’s benefit. Upon her death, any remaining funds would pass to her husband’s relatives. The attorney explained to Elizabeth that the only assets that would pass under her will were her home furnishings and jewelry. Elizabeth was very disappointed and the attorney did not hear from her again. A few years later, Richard was arrested for misusing a power of attorney signed by an elderly man suffering from cancer and for his murder. Richard had used the power of attorney to transfer the man’s house and all of his investments and cash to Richard. He had used a medical power of attorney to obtain permission to give the man morphine and administered a fatal overdose. Richard is serving a life sentence in the state penitentiary. The only reason the police ever knew of any of these events was that an out-of-state nephew became suspicious and investigated the circumstances of his uncle’s death and property matters.

Mary’s Story

Mary’s husband left her a carefully diversified investment account worth over $3 million at his death when Mary was 68. He had worked in an industry which did not provide a pension or retirement plan, so the account was her only nest egg for the rest of her life. Mary had never worked outside of the home and didn’t enjoy dealing with money. Mary’s son offered to help her with financial tasks. He was unsophisticated and had no experience or education about investing, but Mary wanted to trust him because he was her son and she loved him. One of the son’s friends told him that he could get a guaranteed 20% annual return for Mary on her money. The friend convinced Mary to give him the investment account to manage. Mary signed a stack of documents without reading them and without asking anyone else to read them. She did not ask for an explanation or second opinion and succumbed to pressure to sign on the spot. After a few months passed Mary asked when she would start getting her 20%. The friend gave her one excuse after another. After a few more months, Mary’s son told her that the “guaranteed” 20% would not be coming and that almost all of the money was gone, supposedly lost in investments that failed. Eventually, it was determined that the “friend” had simply spent or hidden all of her money and claimed it was impossible to return any of it. Mary did not press criminal charges against the friend because she was afraid that her son would be implicated. It is not clear whether or not the son took any of the money for himself. Mary was left with less than $50,000 to live on for the rest of her life.

Jack’s Story

Jack was 80 and divorced many years ago. He lived alone and had for a long time. His two children lived out of state and didn’t see him often. He lived in an apartment complex where he was befriended by a younger man who lived in the same building and visited him often. Jack had never been very good about keeping up friendships, did not belong to any social groups, clubs, organizations or a church. He had never developed hobbies or interests he shared with other people. The young friend was really the only social contact he had. The friend asked Jack if he could use Jack’s credit card to pay for an emergency expense. Jack let him use the card. Jack couldn’t recall whether or not the friend had paid him back for the amount he charged. When Jack was hospitalized after a fall, his daughter came to help and discovered that the friend was making daily charges to the credit card, had convinced Jack that he was “investing” the money he charged and that any day now, the “investments” would pay off. The daughter contacted the credit card company and told them what the friend had been doing. The credit card company stopped authorizing any further charges. The friend made desperate phone calls every day to Jack while he was in the hospital begging for money. Jack’s daughter pleaded with him to stop giving money to the friend, but Jack told her that he was capable of making his own decisions and choosing his own friends. Jack’s daughter was faced with the choice of allowing her father to be impoverished by giving away his money in daily increments or petitioning the court to appoint a conservator to take over her father’s assets based on his inability to understand the ramifications of giving away so much money.

Rhoda’s Story

Rhoda was a widow with three adult children. She had paid off the mortgage on her home in full. One day, her daughter asked her to go with her to a notary. The daughter told Rhoda that she needed her to sign some documents so the daughter “could get a loan.” Rhoda signed all of the documents without asking questions. A few months later she received the property tax bill showing that her home was now owned by Rhoda, her daughter and her daughter’s husband. Soon the lender foreclosed on Rhoda’s house for non-payment of a mortgage. The daughter then filed for divorce and the home had to be dealt with in the divorce case. Rhoda did not understand that the quitclaim deed she had signed transferred 2/3 of her home to her daughter and son-in-law. She believed that quitclaim deeds “don’t count.” She also did not realize that her daughter and son-in-law had mortgaged her home, taken all the money from the loan, spent it, and never made a single mortgage payment. Rhoda’s daughter had no money left to repay Rhoda. Rhoda did not want to notify law enforcement because she loved her daughter and did not want to get her in legal trouble.

Frank’s Story

Frank’s wife passed away when he was 86. She had always taken care of their home and planned their social life. They had one son who lived out of state. When the son visited, he noticed that his father’s clothes were dirty, the house was a mess and there was little food in the kitchen. He placed an ad in the newspaper to hire a woman to take care of his father, to shop, cook, take care of the house and take his father to appointments and activities. Neither Frank nor his son kept in touch by phone very often. On his next visit, a year later, the son discovered that his father had been writing very large checks to the caregiver. Frank deferred to the caregiver about every decision, however large or small. Frank told his son that he must be an imposter because he had no family and the caregiver was the only person he had in the world. He told his son how much he loved the caregiver. The caregiver had found and taken all of Frank’s financial records, including check books, and filled out checks and told Frank to sign them, which he did whenever she asked him to. The caregiver took Frank to an attorney and told the attorney that Frank wanted to change his will to leave everything to her. The attorney recognized that Frank was being exploited and petitioned the court to appoint a bank to take care of Frank’s finances. The caregiver disappeared.

For more information contact: Marilyn McWilliams, Chair, Trusts and Estates Group or Ted White, Chair, Transaction Section at (303) 292-2900.

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Moye White LLP has prepared this bulletin to provide general information; however this bulletin does not provide legal advice and does not create an attorney-client relationship between the reader and Moye White. No legal or business decision should be based solely on the content of this bulletin.