How an Estate Plan Can Protect Against Financial Exploitation

Although we may think of phishing emails, robocalls, or other types of scams when we think about financial exploitation, it is far more common for this type of exploitation to be done by relatives, caregivers, neighbors, or friends someone believed they could trust. Financial exploitation is more common than most people realize, but understanding financial abuse and strategies can help people avoid being exploited.

Several studies have shown that individuals who have a cognitive impairment, are in poor physical health, are isolated, or have a learning disability may be more at risk for financial abuse.

Studies have also revealed common characteristics of individuals who financially exploit others, including those who have substance abuse issues, mental illness, or who are financially dependent on the person they are exploiting.

The AARP has published the following warning signs that someone may be the subject of financial exploitation:

·        changes in patterns of spending, transfers, or withdrawals from accounts;

·        isolation from family and friends;

·        financial activity that cannot be explained;

·        inability to pay for routine bills and expenses;

·        sudden changes to estate planning documents, beneficiary designations, or adding joint owners to an account.

One way to help avoid financial abuse is to develop a plan to prevent it, including preparing documents in advance that can be implemented should a person become vulnerable to exploitation. A funded revocable trust may provide better protection than a durable power of attorney for individuals who are vulnerable.  A revocable trust-based plan can include safeguards such as co-trustees as well as the requirement of an independent party’s consent to any trustee change or amendment.

The professionals, financial advisors, and accountants who work with the same individual can also build a support system to help protect them and develop and implement a plan to avoid or end financial abuse. In addition to estate planning documents, here are other steps to consider in this process:

·        Consolidate accounts with a trusted financial advisor. It can be much harder to spot financial abuse when accounts are scattered among different banks.

·        Have copies of account statements sent to a family member or trusted person to monitor these accounts remotely. A CPA can also be hired to assist with this.

·        Consider a credit freeze to prevent new credit cards from being opened or new debt being taken on if it’s something the individual may be talked into. A credit check can also be considered to see what obligations and accounts there are.

·        Establish and share a budget with advisors and a trusted person so that unusual spending can be flagged more easily.

Financial exploitation and abuse are serious risks and are, unfortunately more common than you may think.  It’s best to take steps to put protections in place ahead of time and prevent financial abuse from happening.

For help with your estate plan, contact us at Wilson and Wilson Estate Planning and Elder Law, LLC at 708 482 7090 for our main office in LaGrange, Illinois or at 847 656 8958 for our Northbrook, Illinois office.