THE HIDDEN COSTS OF ELDER FINANCIAL ABUSE

Report
THE HIDDEN
COSTS OF
ELDER
FINANCIAL
ABUSE
Colorado Coalition for ELDER
RIGHTS & ABUSE PREVENTION
Catherine Anne Seal, JD,
LL.M. CELA
Kirtland & Seal, LLC
What is Elder Financial Abuse
(EFA)
A
situation in which a person, including
but not limited to, one who has care and
custody of or who stands in a position of
trust, of an elder adult, takes, secretes, or
appropriates their money or property, to
any wrongful use, or with an intent to
defraud
EFA
 The
illegal or improper use of an elder
adult’s financial resources
Signs and Symptoms
 Unexplained
disappearance of money or
valuables
 Senior has an adult dependent child
 Senior is dependent upon abuser for care
 Senior has made transfers of money or
property
 Senior has made excessive payments for
care or services
Signs & Symptoms continued






Senior does not know how much income they
receive
Senior’s bank accounts are depleted
Sudden appearance of previously uninvolved
relatives or friends
Change in payee, agent or in a will or trust
Change in title to property and/or vehicles
Change in bank or stockbroker
Signs & Symptoms cont’d
 Change
in banking habits, such as use of
ATM’s or debit card for the first time
 Sudden increase in cash withdrawals
 Changes in credit card use
 Change in account beneficiaries
 Caregiver is overly frugal
 Unexplained cash flow
 Unusual household composition
Signs & Symptoms cont’d
 Chronic
failure to pay bills
 Senior is kept isolated
 Signatures on checks do not match
senior’s signature
 Senior complains that he or she does not
know what happened to their money
 Bank statements no longer come to the
house
Signs & Symptoms cont’d
 Senior
reports signing documents and
doesn’t know what was signed
 Change
in lawyers, physicians,
accountants
Prevalence
 From



2011 study by Metlife
Annual financial loss by victims of EFA is
estimated to be at least $ 2.9 billion
Women are nearly twice as likely to be
victims of EFA than men
Most victims are between the ages of 80
and 89, live alone and require some level of
help with either health care or home
maintenance
Prevalence
 Nearly
60% of perpetrators are male, and
most male perpetrators are between
ages of 30 and 59
 Most
female perpetrators are between
the ages of 30 and 49
Methods
 Crimes
of opportunity – perpetrator
realizes senor is vulnerable and exploits
the vulnerability to gain control of money
or property
Methods
 Crimes
of desperation – prevalent theory
in the Great Recession, that dependent
adult children are exploiting their parents
or grandparents because they have no
other resources
Methods
 Crimes
of Predation – a perpetrator
targets a vulnerable senior

Sweetheart scam

New best friend

Advisor scam
Undue Influence
 Perplexing
situations in which EFA occurs
in instances in which the senior does not
lack capacity
 Should
 But
have the right to make gifts
what if the “gift” causes financial
hardship for the senior?
Undue Influence (UI)
 Definition
– the substitution of one
person’s will for the true desires of another
 Can
include persistent unrelenting
pressure, threats, flattery, trickery and
deception
4 elements to UI
 The
victim must be susceptive due to
dependency or because of a
psychological, mental or physical
disability
 There
must be an opportunity, usually
shown by establishing the existence of a
confidential relationship
4 elements to UI
 There
must be evidence that the
influencer was inclined to exercise undue
influence over the victim
 There
must be evidence of an unnatural
or suspicious transaction
UI
 Undue
influence is a form of
psychological abuse
UI
 How
does UI occur?
 Isolation
of the victim, controlling
telephone calls, visits and mail
 Callers
and visitors are told that the victim
is asleep, busy or not feeling well enough
to talk or visit
UI
 The
perpetrator convinces the victim that
no one cares for the victim but the
perpetrator
A
common tactic is to tell the victim that
all other family/friends want to place the
victim in a nursing home and the
perpetrator is the only one who can
prevent this from happening
UI
 Making
the victim dependent upon the
perpetrator. This can include overmedicating the victim to affect their
mental status, confining the victim and
even providing insufficient nutrition to
physically weaken the victim
UI
 Threatening
the victim with harm, neglect
or abandonment if the victim does not
comply with the perpetrator’s wishes
UI
 Stockholm
bonding
 Strong
syndrome aka traumatic
emotional ties that develop
between two persons where one person
intermittently harasses, beats, threatens,
abuses or intimidates the other.
Traumatic Bonding
 1.
There must be an imbalance of power
with one party more in control
 2.
The abusive behavior is sporadic in
nature as characterized by intermittent
reinforcement, or alternating between
acts of kindness or affection and abusive
behaior
Traumatic Bonding
 3.
The victim engages in denial of the
abuse for emotional self-protection. In
extreme cases, this can include
disassociation. The victim feels powerless
to change and uses denial as a coping
strategy.
 4.
The victim masks that the abuse is
happening
Victims of UI
 Someone
with assets to exploit,
particularly someone with physical
dependency, cognitive impairment, or
suffering from depression or bereavement
or with a chemical dependence
Risk Factors of UI

Elderly, mentally ill or physically disabled, or
cognitively impaired

Living alone

Recently bereaved

Dependent for transportation

Few local family or friends

Isolated from community
Risk Factors for UI
 Naïve
 Little
and overly trusting of strangers
knowledge of finances
Who are the perpetrators

Family members, particularly dependent adult
children

Accountants, attorneys, trustees, guardians

Housekeepers, caregivers, nursing personnel,
physicians

Church members, clergy

Strangers
Signs – victim behaviors
 Victim
makes gift or loan to someone
 Victim
is never left alone with anyone
 Victim
is pressured to complete a
transaction without being given time to
consult an independent advisor
Signs – victim behavior
 Victim
appears coached when speaking
with banker, attorney, financial advisor
 Victim
appears sedated, intimidated or
controlled
Signs – perpetrator behavior

Perpetrator speaks for victim and does not
allow victim to speak

Perpetrator does not appear to have any
means of support other than victim’s
resources

Perpetrator has controlling and defensive
attitude when questioned about relationship
to victim
Signs – perpetrator behavior

Perpetrator denies access to victim by
formerly trusted persons, including family,
friends and advisors

Perpetrator moves into victim’s home and
promises to care for victim now in exchange
for property at death

Perpetrator convinces victim that no one else
can be trusted
Signs – perpetrator behavior
 Perpetrator
creates alliance with medical
professionals by insisting that only the
perpetrator can care for the victim
 Perpetrator
takes victim to new attorney
to make changes to estate planning
documents
Bennet Blum, M.D.
www.bennettblummd.com
 IDEAL
MODEL
 Isolation
 Dependency
 Emotional
manipulation and/or
exploitation of a weakness
 Acquiesence
 Loss
Hard to uncover
 Most
evidence not readily available
 Threats and intimidation do not usually
occur in the presence of witnesses
 The victim is often unwilling to admit that
his or her actions were not voluntary
 The victim often believes that the
perpetrator is the only one on whom they
can rely and will not make statements
against the pepetrator
How to intervene in cases of
EFA
 The
method of intervention depends
upon the intervener and the nature of the
abuse
Family intervention
 Family
intervention can be difficult.
 The senior may be estranged from the
family for reasons that have nothing to do
with abuse. Common scenarios are a
history of mental illness, alcoholism or
abuse with the senior or a deceased
spouse as the perpetrator
Family Intervention

The perpetrator may be intimidating family
members to keep them away, either through
threats of harm or by using their authority as
agent.

Perpetrators sometimes call the police to
claim that family members are harassing the
senior when the family tries to visit.

The senior may be telling family to stay away,
particularly in cases of undue influence
Family Intervention
 The
senior may be telling the family to stay
away, particularly in cases of undue
influence
Family Intervention

Family members may consult with an elder law
attorney

Family may call APS to make a welfare check on
the senior

Family may ask the agent to account for their
actions as agent under power of attorney or
trustee under a trust


Family may petition for appointment of a
conservator for the senior
Family Involvement
 Contact
law enforcement directly. While
a welfare check is a likely result, if law
enforcement is presented with a power of
attorney which appears on its face to be
properly executed, without more
information it may be difficult for law
enforcement to do more. The family may
have enough evidence for a police
investigation, such as evidence of
improper financial transactions
Family intervention
 Questionable
methods include securing a
new power of attorney and/or granny
snatching
Professional Intervention
 An
attorney with a long standing history
with a client may take an action, either
with or without the client’s assent
 Some of these interventions can actually
end up empowering a perpetrator
Other interventions
 Someone
in the senior’s life may notice a
red flag
 A home care agency, assisted living
facility or skilled nursing facility with an
outstanding balance for service may
contact APS with a concern about the
unpaid bill
Other Interventions
A
doctor’s office may notice that
appointments have been missed
 A bank employee may notice that the
individual is being accompanied to the
bank by an individual not seen with the
senior until recently. Other red flags for
banks are sudden use of ATM’s or request
for a debit card for the first time
Other Interventions
 Someone
in the home for some purpose
notes that something appears “off”
 Repair
person working on an appliance or
utility, paramedic or firefighter responding
to a call, or contractor or service provider
 Any
of these parties could generate a
report to APS
Other interventions
 Nosy
neighbors!
APS Intervention
 Advantage
of APS involvement is a review
by a skilled social worker
 If the facts warrant an intervention, APS
may refer the case to the county attorney
for appointment of a conservator
 If the facts appear to suggest that a crime
has been committed, APS may contact
law enforcement
APS involvement
 In
some counties, including El Paso
County, APS may refer the case to the
Public Administrator for review, which is
permitted under C.R.S. § 15-12-622
Public Administrator
 Some
evidence of financial exploitation is
obvious, such as a recorded deed
 Other
evidence of exploitation must be
recovered through research and
investigation
My investigation
 Review
real property records for property
currently owned
 Obtain an ownership and encumbrance
report on all real property owned
 Search grantor/grantee index of county
records for documents filed with senior’s
name (property transfers, powers of
attorney, mortgages)
My Investigation
 If
I have a known perpetrator, search
CoCourts.com under the name and
obtain basic information on criminal and
civil cases the person has been a party to.
$7.00
 Shows criminal record and outstanding
judgments
My investigation
 Search
the Accurint database for
information on motor vehicles recently
owned by the senior
 Review
past tax records for information on
past income generating assets
My investigation
 Gather
bank records for several years. If
records begin when senior was handling
their own finances, you can determine
financial habits before abuse began.
Bank records should include copies of
checks
 Google payees on checks if you cannot
determine purpose of the payment.
My investigation
 Obtain
past credit card statements
 Look
for payments through check,
electronic payment or credit card
 Some
items usually do not make sense for
a senior, particularly one homebound or
nearly homebound
Civil Remedies
 Someone
has to pay for civil prosecution.
Generally, there needs to be a
reasonable chance of recovery, i.e. the
ability to regain an asset or recover a
judgment
 An agent under power of attorney can
be required to account for their actions as
agent
Civil Remedies
 Appointment



of Conservator
Does not require finding of incapacity
Does require finding of inability to manage
money or property
A conservator has the authority to obtain
financial records necessary to pursue a
perpetrator
Civil Remedy
 Lis
pendens
Civil claims
 Breach
of fiduciary duty against agent,
guardian, personal representative,
conservator or trustee
 Plaintiff
alleges that fiduciary has failed to
act according to the standard of care
required by a fiduciary under applicable
law
Conversion
 Civil



theft
Plaintiff either owned the property or had
the right of possession at the time of
conversion
Defendant converted the property by a
wrongful act or disposition of the plaintiff’s
property rights; and
The plaintiff suffered damages
Recission of Contract
 The
senior may have entered into a
contract which is not in their best interests.
This can be a contract for sale of property
which the senior was induced to sign, or
for purchase of an annuity product or a
service which is not an appropriate
service for the senior
Recission of contract




Did the senior have capacity to contract?
Restatement 2nd of contracts
§12. Capacity to Contract
(1) No one can be bound by contract who
has not legal capacity to incur at least
voidable contractual duties. Capacity to
contract may be partial and its existence in
respect of a particular transaction may
depend upon the nature of the transaction or
upon other circumstances.
Recission of Contract
 2)
A natural person who manifests assent
to a transaction has full legal capacity to
incur contractual duties thereby unless he
is
 (a) under guardianship, or
 (b) an infant, or
 (c) mentally ill or defective, or
 (d) intoxicated.
Recission of Contract




§ 15 Mental Illness or Defect
(1) A person incurs only voidable contractual
duties by entering into a transaction if by
reason of mental illness or defect
(a) he is unable to understand in a
reasonable manner the nature and
consequences of the transaction, or
(b) he is unable to act in a reasonable
manner in relation to the transaction and the
other party has reason to know of his
condition
Capacity
 Capacity
can be a variable state for
seniors. Capacity can be influenced by
reactions to medication and by
environmental factors. Because all
persons are presumed to be of sound
mind unless adjudicated otherwise, the
plaintiff has the burden of proof regarding
lack of capacity.
Void vs. Voidable Contract

One remedy the plaintiff may seek is the
voiding of the contract. The majority rule
distinguishes between void and voidable
contracts. A contract entered into by a
person who was previously adjudicated as
incapacitated is void, while a contract
entered into by a person alleged to be
mentally ill or incompetent, but who was not
adjudicated as incapacitated prior to
execution of the disputed agreement is
voidable, rather than absolutely void.
Replevin

Replevin is an action for recovery of the
property, which can be brought against the
person holding the property and is usually
pled as an additional remedy in another
action. In many states, after posting bond, a
plaintiff can recover the property and
maintain possession until trial. The remedy
can be very useful in situations involving
valuable personal property and the author
has had experience with default by
defendants at trial on the merits, as a result of
filing such a pleading.
Fraud

In many cases, the questionable transaction
involves fraud. In cases involving fraud in the
inducement, the victim is told a lie or mistruth
in order to convince him or her to enter into
the contract. In cases of fraud in the
execution, the victim is led to believe that the
transaction is not what it is, i.e. the document
is not a deed and will not transfer his property
when the document is in fact a deed.
Duress
 Duress
is similar to fraud, but does not
involve a claim of deceit. In a duress
case, the plaintiff gave consent, but only
because a threat of harm if he or she did
not do so.
Undue Influence
 Undue
influence is a viable claim in
instances where, although the victim did
not act of his or her own free will, the
nature of the persuasion was not a threat.
Sometimes, the claim of undue influence
is pled as part of a fraud claim, but undue
influence is also pled as part of a
recession claim as well.
Undue Influence

§ 177 When Undue Influence Makes a Contract Voidable

(1) Undue influence is unfair persuasion of a party who is under the
domination of the person exercising the persuasion or who by virtue
of the relation between them is justified in assuming that the person
will not act in a manner inconsistent with his welfare.

(2) If a party's manifestation of assent is inducted by undue
influence by the other party, the contract is voidable by the victim.

(3) If a party's manifestation of assent is induced by one who is not
a party to the transaction, the contract is voidable by the victim
unless the other party to the transaction in good faith and without
reason to know of the undue influence either gives value or relies
materially on the transaction.
Undue Influence

Undue influence can be a factor in a situation where
the senior has deeded property to one of her
children, in a case where she has several children.
However, often the nature of the relationship
between the grantee and grantor is such situations
can make it very difficult to discern after the fact if
the transaction was or was not the product of undue
influence. If the child is the care-giver child, who is
providing many services to the parent, it may not be
unusual for the parent to provide more to that child
than to the rest of her children. Undue influence is a
frequent claim in a will contest, when an heir is
unhappy with a testamentary plan. However, undue
influence can be very difficult to prove.
Constructive Trust
A
constructive trust is a remedy pled in
equity, against an individual who by
actual or constructive fraud, or by duress,
or abuse of a confidential relations, or
some other unconscionable conduct, has
or holds title to property which he or she
should not have. The remedy is designed
to prevent unjust enrichment.
Civil Theft
 Some
state criminal theft statutes provide
for civil actions, often including recovery
of attorney's fees for cases involving the
criminal elements of theft.
Preparing the Civil Case
 In
some states, an action involving a
senior may receive expedited scheduling.
Plaintiffs may wish to avail themselves of
this, unless the particular case involves a
number of financial records for which
ample discovery time may be needed.
Counsel may wish to take depositions of
elderly clients and witnesses, in order to
preserve testimony in the event a key
witness is not available for trial.
Criminal Prosecution
 Criminal
codes in many jurisdictions have
criminal statutes that are age specific. It
may be that there is a specific charge for
theft against a person who is a disabled
adult or an adult over a certain age, or
that the age or disability of victim causes
the penalty for the theft to increase.
Criminal Prosecution

Criminal cases against abusers are less likely to
receive attention from law enforcement for many
reasons, including:.

A belief that financial crime is less devastating
than other types of crime

A belief that misappropriation by a family
member, particularly under power of attorney, is not
theft, but rather is a civil matter.

Victims may not be viable witnesses, making
cases harder to prove.
Criminal Prosecution

Many financial abuse and exploitation cases are
document intensive, requiring many hours of
investigation.

Few police officers and prosecutors have sufficient
training to understand all of the issues present in a
financial exploitation case (contract law, real
estate law, and mental
capacity)

Statutes of limitations are not always long enough
Effects of EFA
 Financial
Effect
Seniors are often at a stage in life
where their expenses are rising. They may
not be able to recover from significant
financial exploitation. If the assets cannot
be recovered, the loss of financial security
can be devastating.
Effects of EFA

A second problem which can arise is the
threat to Medicaid eligibility. If the senior
needs skilled care within five years, the
Medicaid lookback period can be a problem.
This is particularly likely in cases where the
perpetrator was an adult child of the senior,
or other family member and the senior does
not wish to cooperate with a criminal
complaint. The transaction(s) will then be
construed as a gift, which is a disqualifying
transfer.
Effects of EFA
 Psychological
effect
 Effects are similar to other crime victims. A
loss of trust in others is one of the most
common consequences. Victims may
become fearful. They may experience a
loss of confidence, particularly adults with
capacity who are the victims of undue
influence.
Effects of EFA
 Physical
effect
Common results are depression,
hopelessness, even suicide.
Prevention

By the Senior

Some of the tools used for prevention are the
same tools used by perpetrators, including the power
of attorney and the revocable trust. Both are useful
alternatives for management of property that can
be set in place by the senior in the event assistance is
needed in the future. The keys for effective use are:

Appropriate choice of agent or successor
trustee

Prevention

By the Senior

Standards for the agent or trustee, particularly
with respect to gifting of the principal's assets

Requiring regular accountings from the agent
or trustee and designating someone
trustworthy to review them on behalf of the
principal
Prevention
 Daily
money management programs can
provide seniors with supervision of routine
financial matters, including bill paying,
checking account management,
budgeting, and verifying bills for payment
(including medical bills). Fees for daily
money managers can range from
between $25 per hour to $100. The
Association of Daily Money Managers can
provide details and referrals.
Prevention
A
senior can appoint a representative
payee to receive his or her Social Security
income if they need help in managing the
funds. The Social Security Administration
will appoint a payee upon receipt of an
affidavit from a physician.
Prevention

The Social Security regulations provide a priority list for appointment as payee:
(1) A legal guardian, spouse (or other relative) who has custody of the
beneficiary or who demonstrates strong concern for the personal welfare of
the beneficiary;

(2) A friend who has custody of the beneficiary or demonstrates strong
concern for the personal welfare of the beneficiary;

(3) A public or nonprofit agency or institution having custody of the
beneficiary;

(4) A private institution operated for profit and licensed under State law,
which has custody of the beneficiary; and

(5) Persons other than above who are qualified to carry out the responsibilities
of a payee and who are able and willing to serve as a payee for a
beneficiary; e.g., members of community groups or organizations who
volunteer to serve as payee for a beneficiary.

Prevention







Despite the priority list, the Social Security Administration will deviate
from those criteria, as they also consider the following:
(a) The relationship of the person to the beneficiary;
(b) The amount of interest that the person shows in the beneficiary;
(c) Any legal authority the person, agency, organization or
institution has to act on behalf of the beneficiary;
(d) Whether the potential payee has custody of the beneficiary;
and
(e) Whether the potential payee is in a position to know of and look
after the needs of the beneficiary.
The payee must use the funds only for the beneficiary and
only for food, shelter, clothing, medical care and personal items.
Prevention
 Attorneys
drafting powers of attorney and
revocable living trusts bear significant
responsibility in counseling the client
concerning the serious question of who
they appoint as agent or trustee. Too
often, attorneys give little emphasis to the
importance of this question.
Prevention


By the Courts
In guardianship and conservatorship,
fiduciaries should be required to bond. For higher
asset cases, the majority of assets can be held in
restricted accounts, which require court orders for
withdrawal, with a certain number of months of
operating expenses held in accounts under bond.
The combination can keep bonding costs down,
while protecting assets. Orders for guardians and
conservators should contain restrictions on sale
and/or encumbrance of real property and courts
should require recording of letters with restrictions
noted in the real property records.
Prevention


By Third Parties
Mandatory reporting of elder abuse,
physical and financial, is the law in 46 states and
the District of Columbia, but not in Colorado. In
states with mandatory reporting, mandatory
reporters are usually immune from liability for
reporting suspected abuse. Reporting generally
triggers a mandatory investigation by a state
agency. Mandated reporters are generally
doctors, nurses, psychologists and social workers.
In some states, including California, financial
institutions are among the mandated reporters.
Prevention

Employees of financial institutions are often
among the first individuals to notice suspicious
activity. Mandatory reporting statutes and training
of bank employees can vent further exploitation of
an individual after the matter comes to the
attention of bank employees. Under Colorado
law, an individual over age sixty may request that
their bank provide them with an informed consent
form waiving confidentiality to allow the bank to
make the individual's banking records available to
the county department of human services for the
purpose of investigating a potential or known case
of financial exploitation.
Prevention



BY STATE LEGISLATURES
Some of the examples of financial abuse and
exploitation discussed are gifts and loans to
professionals who provide services to the senior. If
professional organizations are unable to police
their membership to prevent exploitation, state
legislatures should enact legislation revoking
professional licenses and criminalizing this
conduct.
State legislatures should also be prepared to
provide adequate funding to adult protective
service departments, to allow proper training and
timely investigation
In Conclusion



CONCLUSION
EFA has some common themes:
Isolated seniors make better targets, particularly
seniors who have been recently widowed

Sometimes the exploitation is not discovered
until the money is gone

Even when confronted with a promissory note,
an exploiter may deny that the debt exists or will
claim it was paid or forgiven
In conclusion
 The
preventative measures listed above
will not prevent all cases of financial
exploitation. However, some of them can
reduce the vulnerability of a senior.
In Conclusion
There is a misconception that the only individual
harmed is the senior, but that is false. In many
instances, when the senior lacks sufficient funds to
pay for their care needs, he or she ends up living in a
skilled nursing facility with Medicaid assistance.
When the perpetrator is not pursued because a
local prosecutor does not believe that they can
prevail in a criminal action and there are not
sufficient resources to pursue a civil case, the
perpetrator is able to benefit from their actions and
the cost is shifted to the state. The lesson the
perpetrator learns is to exploit the elderly because it
is profitable and there are no repercussions.

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