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The Senior Safe Act, which was passed by Congress and signed by President Trump last year, allows advisors to hold transactions when you suspect financial abuse of a client. The Act is designed, at least in theory, to allow time for the trusted contacts you have on file to take appropriate action. Many of those victimized by predators or manipulated by unscrupulous family have dementia and have lost their judgment about what makes sense financially. The Act ensures that you are not breaking privacy rules by alerting trusted contacts in the reasonable belief that your client is being financially abused.
You can hold a requested transaction as long as a month. This is where the Senior Safe Act has missed the mark.
Let’s look at the reality of impaired elders who are in charge of their wealth through the family trust. The trust is in order, and if the elder recognizes that he or she is experiencing decline in mental ability, that trustee may choose to resign. Simple. But that happens in too few cases. Many elders who have cognitive decline and dementia do not recognize that they are impaired. “I feel fine!” he tells his worried family. When asked to resign as trustee, having total control over (theoretically) millions of dollars in a trust, the elder flatly and stubbornly refuses. Meanwhile, financial abuse can continue unabated.
Cognitive decline typically has a very slow onset. Short-term memory loss does not raise enough red flags for those closest to the elder to take any action. “She’s just getting old,” they say dismissively. But memory loss is often the first and earliest warning sign of Alzheimer’s disease, the most common form of dementia. The odds of having Alzheimer’s disease by age 85 are greater than one in three.
Think about your own older clients. Some live well beyond age 85. The risk of dementia rises with age. Short-term memory loss interfering with daily life is not a normal part of aging. Financial abuse and cognitive impairment go together.
When financial abuse reaches a visible level, the advisor may do what the law allows and call the trusted contact, usually an adult child. The advisor hopes that the call will trigger something and the abuse will be stopped. But here is a reality check: The family can’t accomplish anything in two weeks or even a month, after which transactions by the elder can no longer be held.
Here is an example of just such a situation, showing how long it took.
My partner (and husband), Dr. Mikol Davis, at AgingParents.com and I worked with a family. We saw rampant financial abuse of an elder by a family member. The elder had dementia but had not been formally diagnosed by his doctor. Over 70% of his income was going to the predator. He was asked to resign as trustee by his two adult children, who were reasonably worried that he was going to give away all his cash and further encumber his home. The dad, whom I’ll call Gene, had been developing dementia for at least two years. He felt obligated to the predator and was totally powerless in resisting her demands for money. He just kept writing checks, draining his own resources. It was clearly a case of financial manipulation.
We helped persuade Gene to allow what his family trust provided: to have his daughter, Jennie, become the successor trustee. He agreed, then reneged. He accepted the logic and then refused to accept it. The kids had no choice but to use the law to take over control. Their father was too stubborn to resign as trustee when asked, even with the entire family presenting a united front, asking and respectfully begging.
The trust, like many such documents provided that Gene could be removed as trustee by his appointed successor, his daughter, after two physicians had declared him to be incapacitated for handling his own finances. A court decision was not required. However, getting him to two doctors willing to assess him and put their observations in writing was a challenge that took months to accomplish. The total time spent getting the change of trustees accomplished according to the terms of Gene’s trust was eight months.
His children were the trusted contacts in the advisor’s file. They knew about the abuse and were in agreement with the advisor that Gene had to stop being the trustee. The adult children had to hire us as consultants (AgingParents.com), have meetings, hire an attorney, and try various methods to get the job done. Their time, energy and thousands of dollars were expended to prevent an even worse outcome – being left to support their aging father if he were to totally deplete his own funds.
The takeaways
- Though well intended, the Senior Safe Act will not do much to stop financial abuse because of the short time allowed for a financial professional to hold transactions. In Gene’s case, the predator would have been happy to wait a mere two weeks or a month before resuming the financial manipulation of Gene.
- An older client may not understand that he or she is cognitively impaired and will ignore pleas to resign as trustee with total control over any family trust.
- If you see that an older client is showing signs of cognitive decline, do not wait until it gets worse. Reach out at the time of your first suspicions of trouble. The family or other trusted persons may well have a better opportunity to persuade an elder to transfer power over finances to the appointed successor before complete loss of capacity. Expect this to take time.
In the case described above, as a result of ongoing financial abuse, nearly all of Gene’s cash was depleted during the eight months it took for his adult children to have him removed. The advisor did the right thing but it did not stop the loss. Reporting of the loss to authorities would do no good while Gene was considered competent. It took months to determine that he was not.
If you are seeing financial abuse and feel lost about how to stop it, contact us at AgingInvestor.com for a confidential consultation with our nurse-lawyer, geriatric psychologist team so that you can do everything possible to protect your vulnerable client.
Carolyn Rosenblatt, RN, is an elder law attorney. More information about her and her services can be found at AgingInvestor.com.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.