A MULTI-BILLION DOLLAR PROBLEM: FINANCIAL EXPLOITATION OF THE ELDERLY
Recent stories in the media have been rife with high profile examples of financial exploitation of the elderly. Elder financial abuse is estimated to be anywhere from a $2.9 billion to a $36.48 billion problem annually. Even more troubling, the persons preying on the elderly are often trusted advisors, friends, and family. Michigan law provides some corrective measures to address the financial exploitation of the elderly, but as with one’s health, preventative measures are far more effective.
In situations where the exploitation is already suspected to have occurred, there are a number of different avenues of redress. First and foremost, Michigan law makes certain forms of financial exploitation of the elderly a crime, punishable with both fines and imprisonment. See MCL 750.174a. The validity of financial transactions can also be challenged in court under a number of different theories, including breach of fiduciary duty, undue influence, fraud, conversion, breach of contract, and others. Timely litigation may allow the effects of the financial exploitation to be ameliorated. This firm’s elder law attorneys have utilized litigation to invalidate a real estate transaction between a mother and one of her daughters, who unfortunately attempted to transfer certain real estate from her elderly mother without consideration.
Litigation is remedial or corrective, but does nothing to prevent the exploitation from occurring in the first instance. Moreover, while potentially effective, litigation is both expensive and time consuming to the point where the ultimate remedy secured is of little value to the elderly individual. Unlike litigation, actions taken prior to the exploitation have the benefit of acting as preventative, stopping exploitation before it happens. Some types of preventative actions that should be considered include:
1. Conservatorship. Under MCL 700.5401(3)(a), the jurisdiction of the probate court can be invoked when an individual, including an elderly individual, is no longer able to manage his or her financial affairs. Once an individual is subject to a conservatorship, the individual will no longer be able to enter into contracts and other financial arrangements absent the consent of the conservator.
2. Caregiver Agreements. Even if the potential caregiver is a loved one or close friend, elderly individuals and those family members of elderly individuals would be well-served to enter into formal agreements concerning the care to be rendered. Careful screening of potential caregivers is further advisable and can be used in conjunction with a written agreement. Clear expectations, along with prohibitions on certain actions can help prevent exploitation.
3. Estate Planning. Careful estate planning can also help stop financial exploitation of the elderly before it happens. For example, creation of a trust and retitling certain assets in the trust can prevent the direct exploitation of the elderly, by forcing the potential scammer to deal with the validly appointed trustee. For larger estates, further protections can be built into the trust document itself, including the appointment of a so-called “trust protector,” endowing such person with the power to direct certain actions in relation to the trust. A durable power of attorney can also be utilized to permit another individual to have authority to manage assets and make other decisions, particularly in the event of disability. Having a durable power attorney in place can prevent a potential predator from directly preying on your elderly loved one.
4. Communication. Perhaps the best defense against the exploitation of the elderly is active and open lines of communication. The more time spent with a loved one, the more you will be informed about his or her mental capacity and general disposition.
The financial exploitation of the elderly is a continuing and growing problem. Contact the talented elder law attorneys at Kreis Enderle to take advantage of some of the best practices identified above.