10 Ways the Elderly Can Avoid Financial Abuse
Increased dependency due to illness, disability or cognitive impairments can make seniors susceptible to financial abuse. Nest eggs accumulated over decades also often make seniors attractive targets for predators, whether the predator is an offshore bogus sweepstakes or a care provider who sees an opportunity to be paid more than an hourly wage.
Just as sunlight makes the best disinfectant, transparency provides the strongest abuse protection. If others are aware of the senior's finances, either possible predators will see that no opportunity exists to take advantage of the senior or the family members or professionals can step in to keep any fraud from going too far. Here are some steps seniors or their loved ones can take to prevent financial abuse.
1. Arrange for account oversight
Make sure that someone close to the senior has access to her accounts to be able to see if anything unusual is going on, for instance large checks being made out or larger-than-usual cash withdrawals from ATMs. The oversight can be through copies of monthly statements or online access to accounts.
2. Create joint accounts
A joint account with someone gives them oversight as well as the ability to write checks, make investment decisions and take steps if necessary to protect the funds in the account. It also avoids probate, making the transition somewhat easier at the owner's death. But make sure you only add the name of someone you really trust to the account because it can also be an avenue for financial abuse if the joint owner becomes the perpetrator.
3. Use a revocable trust
Revocable trusts can be useful for a number of reaons. They include all of the benefits of joint accounts, with few of the drawbacks. Your revocable trust gives someone you trust access to your accounts in trust and the ability to step in seamlessly if you become disabled. Unlike a joint account, it does not give the trustee any ownership interest in the account. If, for instance, you had four children but named one as a co-owner of your joint accounts, at your death she would have the legal right to keep the funds rather than share them with her siblings. That would not be the case with a revocable trust.
4. Visit often
Nothing prevents financial abuse or stops it in its tracks better than frequent visits by loved ones. Either the potential perpetrator will see that he can't isolate the senior and take advantage of him or family members or friends will notice the abuse before it goes too far.
5. Get help paying bills
If someone helps you pay your bills, they will help you make sure that you're not letting anything slip through cracks or paying something that you shouldn't. They will be able to help you sort through your mail and determine what is important and what is not.
6. Use a limited credit card
Credit cards are now available that allow another person to monitor the activity of the cardholder and to limit both the amount he spends and where he can spend it. One of these is the True Link card.
7. Sign up for do not call registry
It is quite easy to register your telephone number with the Federal Trade Commission's Do Not Call Registry either online at www.donotcall.gov or by calling 888.382.1222. While this may not stop someone intent on defrauding a senior, it should help reduce calls from salespeople.
8. Sign up for Nomorobo
You can sign up for Nomorobo to block robo calls. Unfortunately, it does not work with all telephone providers, including Verizon.
9. Consult with an elder law attorney
An elder law attorney can help set up a revocable trust and durable power of attorney to assist with financial management, advise on the best protective steps to take in each situation and provide additional oversight to discourage financial abuse.
10. Opt out of mail solicitations
At www.dmachoice.org the Direct Marketing Association permits you to limit the amount of catalogs, credit card offers and other direct mail pieces you or a loved one receives. You may well ask why the Direct Marketing Association does this. The answer is that they don't want to waste their print and mail costs sending to consumers who have no interest in the product being marketed.
While there's no foolproof measure you can take that will both prevent financial fraud and leave you or your loved one with at least some independence and control over his or her finances, the steps described above can make the world a safer financial place. Just remember what was said at the beginning: isolation is a breeding ground for financial abuse (as well as depression and other ills). Social involvement is the best protection.
Protection in Estate Planning
You're beginning to accumulate substantial wealth, but you worry about protecting it from future potential creditors. Whether your concern is for your personal assets or your business, various tools exist to keep your property safe from tax collectors, accident victims, health-care providers, credit card issuers, business creditors, and creditors of others.
To insulate your property from such claims, you'll have to evaluate each tool in terms of your own situation. You may decide that insurance and a Declaration of Homestead may be sufficient protection for your home because your exposure to a claim is low. For high exposure, you may want to create a business entity or an offshore trust to shield your assets. Remember, no asset protection tool is guaranteed to work, and you may have to adjust your asset protection strategies as your situation or the laws change.
Liability insurance is your first and best line of defense
Liability insurance is at the top of any plan for asset protection. You should consider purchasing or increasing umbrella coverage on your homeowners policy. For business-related liability, purchase or increase your liability coverage under your business insurance policy. Generally, the cost of the premiums for this type of coverage is minimal compared to what you might be required to pay under a court judgment should you ever be sued.
A Declaration of Homestead protects the family residence
Your primary residence may be your most significant asset. State law determines the creditor and judgment protection afforded a residence by way of a Declaration of Homestead, which varies greatly from state to state. For example, a state may provide a complete exemption for a residence (i.e., its entire value), a limited exemption (e.g., up to $100,000), or an exemption under certain circumstances (e.g., a judgment for medical bills). A Declaration of Homestead is easy to file. You pay a small fee, fill out a simple form, and file it at the registry where your deed is recorded.
Dividing assets between spouses can limit exposure to potential liability
Perhaps you work in an occupation or business that exposes you to greater potential liability than your spouse's job does. If so, it may be a good idea to divide assets between you so that you keep only the income and assets from your job, while your spouse takes sole ownership of your investments and other valuable assets. Generally, your creditors can reach only those assets that are in your name.
Business entities can provide two types of protection--shielding your personal assets from your business creditors and shielding business assets from your personal creditors
Consider using a corporation, limited partnership, or limited liability company (LLC) to operate the business. Such business entities shield the personal assets of the shareholders, limited partners, or LLC members from liabilities that arise from the business. The liability of these owners will be limited to the assets of the business.
Conversely, corporations, limited partnerships, and LLCs provide some protection from the personal creditors of a shareholder, limited partner, or member. In a corporation, a creditor of an individual owner is able to place a lien on, and eventually acquire, the shares of the debtor/shareholder, but would not have any rights greater than the rights conferred by the shares. In limited partnerships or LLCs, under most state laws, a creditor of a partner or member is entitled to obtain only a charging order with respect to the partner or member's interest. The charging order gives the creditor the right to receive any distributions with respect to the interest. In all respects, the creditor is treated as a mere assignee and is not entitled to exercise any voting rights or other rights that the partner or member possessed.
Certain trusts can preserve trust assets from claims
People have used trusts to protect their assets for generations. The key to using a trust as an asset protection tool is that the trust must be irrevocable and become the owner of your property. Once given away, these assets are no longer yours and are not available to satisfy claims against you. To properly establish an asset protection trust, you must not keep any interest in the trust assets or control over the trust.
Trusts can also protect trust assets from potential creditors of the beneficiaries of the trust. The extent to which a beneficiary's creditors can reach trust property depends on how much access the beneficiary has to the trust property. The more access the beneficiary has to the trust property, the more access the beneficiary's creditors will have. Thus, the terms of the trust are critical.
There are many types of asset protection trusts, each having its own benefits and drawbacks. These trusts include:
Since certain claims can pierce domestic protective trusts (e.g., claims by a spouse or child for support and state or federal claims), you can bolster your protection by placing the trust in a foreign jurisdiction. Offshore or foreign trusts are established under, or made subject to, the laws of another country (e.g., theBahamas, the Cayman Islands,Bermuda,Belize,Jersey,Liechtenstein, and the Cook Islands) that does not generally honor judgments made in the United States.
A word about fraudulent transfers
The court will ignore transfers to an asset protection trust if:
A creditor's claim arose before you made the transfer
You made the transfer with the intent to defraud a creditor
You incurred debts without a reasonable expectation of paying them