It is a sad fact that a combination of age, disability, cognitive impairment or poor mental health can make the elderly an easy target for financial abuse.
There are many examples of financial abuse, such as taking money or property, forging an elderly person's signature or promises being made in exchange for money and that promise being unfulfilled.
The potential perpetrators of financial abuse include family members, carers or potentially anyone in a position of trust and responsibility.
As trusted advisors, we need to be aware of this risk when helping elderly clients with the management of their affairs or estate planning.
In this article we look at how potential financial abuse of the elderly may be prevented in what is becoming a growing problem nationwide, and highlight some practical pointers.
Lasting powers of attorney
If your client has capacity, they should be encouraged to make a Lasting Power of Attorney ("LPA") for financial decisions. Here, your client's choice of attorney(s) is key, and it is always advisable for you to see your client on their own to ensure that there is no external influence being exerted over your client, and that the client's wishes or concerns about their choice of attorney(s) can be independently assessed.
Often more than one attorney may be appointed to act, and again, the ability of these two (or more) individuals to work harmoniously is key. Difficulties may arise if one attorney disagrees with the decision of another. The risks, and consequences, of this should be highlighted with your client when choosing suitable attorneys. If, for example, an attorney believes their co-attorney is acting outside of their powers or not in the best interests of the donor, they could initially raise their concerns with the other attorney. However, if that does not resolve the situation, the attorney may need to raise their concerns with the Office of the Public Guardian. Clearly, we would not want to find an elderly, or vulnerable, client potentially caught in the crossfire between the attorneys managing their finances.
It is also important that attorneys understand their duties under an LPA and the scope of their powers, so that they do not inadvertently commit financial abuse. For example, a common misconception is that attorneys have power to make substantial gifts or to undertake tax planning on behalf the donor, neither of which is the case.
Appointment of a deputy
However, if a client has already lost capacity and they are unable to make an LPA, the only option to protect their finances is to apply for a deputy to be appointed. This is a procedure whereby the Court of Protection appoints an individual to look after a vulnerable person's affairs on their behalf. The final decision of who to appoint as deputy rests with the Court of Protection.
The process provides an element of protection for the incapacitated individual, as the applicant must state who they intend to serve (or put on notice of) the application as a respondent –a person that the applicant reasonably believes has an interest in the application. The respondent's views as to the suitability or otherwise of the proposed deputy may be put to the Court of Protection as part of the application.
Again, the deputy must act according to the terms of the Order appointing them and, therefore, it is essential that they understand the extent of and limits on their powers.
Confidentiality considerations
If you suspect that financial abuse may be taking place, there are various courses of action available. However, depending on the facts, remember that your client's affairs are confidential and think carefully before raising your concerns with third parties.
And a final word of caution - as a trusted adviser, you may often have dealings with the family as a whole. Discussions with well-meaning family members or attorneys can lead to a blurring of lines as to who is your client. Be mindful of this from the outset and set sensible boundaries with the family, including clear explanations of the need for such boundaries.
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