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Estate Planning Can Prevent Exploitation

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According to experts, despite increased phishing emails and robocalls, it is far more common for financial exploitation to be committed by people who know the victim, such as relatives, caregivers, neighbors, or ‘friends.’

Putting an Estate Plan in Place can help prevent exploitation for those with faltering capacity.

Financial exploitation is far more common than most people think, especially among the elderly. There are several types of individuals more at risk for exploitation, according to a recent article from mondaq titled “How An Estate Plan Can Protect Against Financial Exploitation.” These include someone with cognitive impairment, in poor physical health, who is isolated, or has a learning disability.

For people in the twilight of capacity, having a trusted person (we want at least two successors also) is already selected and empowered as a hedge against abuse.

Exploiters share common characteristics as well. They are often people with mental health illnesses, substance abusers, or those who are financially dependent on the person they are exploiting.

There are warning signs of financial abuse, including:

  • Changes in patterns of spending, transfers, or withdrawals from accounts
  • Isolation from friends and family
  • Unexplainable financial activity
  • An inability to pay routine bills and expenses
  • Sudden changes to estate planning documents, beneficiary designations, or the addition of joint owners to accounts or property titles

One way to avoid financial exploitation is with an estate plan prepared in advance with an eye to protection. Several planning tools can aid in preventing exploitation. First, a durable financial power of attorney can empower a list of persons to step in to help when your ability to manage is diminished. This can be supplemented with a funded revocable trust, providing more robust protection from exploitation. A revocable trust-based plan includes safeguards like co-trustees and can require an independent party, called a Trust Protector, to consent to any trustee change or expense.

A support system is also important to protect someone should they be targeted for fraud or abuse. Estate planning attorneys collaborate with financial advisors, CPAs, and other professionals to create a plan to avoid or end elder abuse. Other steps to be taken include:

  • Consolidating accounts with a trusted financial advisor so all assets are easily observed
  • Have a family member or trusted person receive copies of account statements
  • Consider a credit freeze to avoid any possibility of being coerced into opening new credit card accounts or taking out loans.
  • Establishing a budget and sharing information with advisors and a trusted person, so any spending anomalies are easily flagged.

Elder financial abuse is an all-too-common occurrence, but taking proactive steps to safeguard the vulnerable family member is a good strategy to deter or thwart anyone intent on taking advantage of a loved one.

Reference: mondaq (Sep. 23, 2022) “How An Estate Plan Can Protect Against Financial Exploitation.”