In the Jan 24, 2019 article “Scamming Grandma: Financial Abuse of Seniors Hits Record,” the Wall Street Journal states that U.S. banks reported a record 24,454 suspected cases of elder financial abuse to the Treasury Department last year, more than double the amount five years earlier. Although it is hard to obtain an exact figure because so much elder financial abuse goes unreported, the AARP frames elder financial abuse as a $40 billion to $50 billion problem within the U.S. Trusts can help.
The United States reports higher rates of elder financial abuse than other industrialized nations. In Europe, seniors’ retirement funds are mostly doled out to them gradually, in monthly payments from government or other pension funds, where they are used to pay monthly expenses. In the United States, because of insufficient monthly Social Security and pension payments, workers are encouraged to save a great deal of their retirement funds themselves, held in potentially large IRAs or other accounts which they control. In fact, according to the Wall Street Journal article and the American Bankers Association, people over 50 represent only one third of the population, but account for 61% of bank accounts, and 70% of bank deposits.
In the U.S., these large pots of money in the hands of seniors (who also exhibit higher rates of illness and cognitive decline) are irresistible to thieves–who can be local door to door scammers, local or long distance romance scam artists, household workers or care providers, nefarious family members, or international financial scam and con artists who reach seniors through telephones, computers, and cell phones. Recent scientific studies reported by the National Institutes of Health tell us that as brains age, they undergo physiological changes that diminish older people’s ability to identify threats and assess the trustworthiness of potential predators. Thieves, of course, discovered these weaknesses long ago.
An elder law or estate planning attorney can create a trust for a senior who is still competent, which figuratively creates a “vault” holding the seniors’ assets, and gives the vault key to a responsible family member or institution. Only this “trustee” can make financial transactions on the senior’s behalf. When predators, such as telephone scam artists, figure out that the senior does not have the key to the vault holding his or her assets, they often quickly lose interest in continuing the scam.
Trusts may also be set up much earlier in life, so that as long as the owner of the assets is mentally competent and not susceptible to predators, the asset owner can act as his or her own trustee and account manager. As the asset owner ages, a co-trustee may be added to help watch the accounts and help the account owner when needed. If the asset owner later becomes susceptible to financial abusers or is no longer mentally competent to manage assets, another responsible family member or an institutional corporate trustee may become sole trustee and manager of the senior’s accounts.
Because trusts may contain detailed, legally enforceable instructions for how a senior’s money is to be used, but financial or durable power of attorney documents typically do not, a trust may be a safer vehicle for managing a senior’s money than a power of attorney. In addition, trusts are more complex, and frequently put together in a lawyer’s office where the trustee can potentially be screened by the drafting attorney. A power of attorney document is often easily downloaded from the Internet, and used by a thief or dishonest family member very quickly, without an attorney’s involvement, to scam a senior.
As banks and financial institutions see higher rates of fraud with powers of attorney, and because trusts are often associated with more affluent clientele, a trustee managing a senior’s assets may be treated with more deference by financial institutions, and experience fewer hassles, than an agent on a power of attorney document.
An elder law or estate planning attorney can help a family determine if a trust is right for their needs.