Skip to main content
It's not always easy to see the financial abuse of an elder as it's happening, but education and putting plans in place early on are the best ways to prevent it. Here's how you can spot it as well as ways to help avoid it.

This article originally appeared on RBC Wealth Management.

Elder abuse consists of more than just fraud targeting unsuspecting seniors. Leanne Kaufman, president and CEO of Royal Trust, defines financial elder abuse as a case of family members, caregivers or friends taking advantage of an elderly person’s finances. “It could be a family member, a service provider that the older adult has entrusted, or it could be a neighbour or a friend,” says Kaufman.

Financial abuse can take many forms, from the seemingly innocent, like a child charging their groceries to their parent’s credit card, to the more deliberate, such as a new partner trying to get included in a Will. Often elderly people don’t realize they’re being taken advantage of until it’s too late. “It may not start with some big request,” notes Krueger.

The challenge with elder abuse–and a reason why abuse experienced by older adults often goes hidden or undetected–is that it’s often difficult to ascertain, says Kaufman. “It’s an increasingly grey area,” she says. “When is it assisting with estate planning, and when is it stealing?”

Spot the red flags: new “friends” or changes in spending patterns

It’s not always easy to see the financial abuse of an elder as it’s happening. More often, cases are discovered after large portions of one’s savings have gone missing. But there are warning signs that loved ones should watch for, says Kaufman. One big red flag is the new “friend.”

Suddenly, a new friend, companion or romantic interest appears on the scene, then begins accompanying the senior to meetings with lawyers and financial advisors. Kaufman recommends that family members and loved ones determine who that person is and question why he or she should be involved. Also, be aware of any unusual purchasing habits, such as seniors suddenly shopping online when it’s never been their habit. In such cases, it’s possible that someone else, a child or the new “friend,” is shopping with that senior’s credit card, warns Kaufman.

Social isolation is another red flag. If the senior is spending less time with their family or established social networks and too much time with one person, it could be cause for concern. Krueger recommends that the elderly person in question stay involved in their community and maintain their social circle. Loved ones should be on the lookout for any sudden changes in social networks and patterns of behaviour.

Protect your loved one by establishing financial Power of Attorney

The best way to prevent elder abuse is to put plans in place early on. Begin by appointing the proper financial Power of Attorney, or POA, which is distinct from a health-related POA. By default, many people appoint the senior’s child as Power of Attorney, says Kaufman. But in many cases, she cautions, one’s offspring may not be ideally positioned to oversee the parent’s finances.

What if the child must decide between expensive around-the-clock home care and a less expensive retirement home? Can a child objectively make the best choice when one option may very well cut into their inheritance? And if the child is not adept at managing their own finances — should they be in charge of their parent’s finances?

It’s not easy to think critically about family members. Still, it’s important that the senior fully understand their relationship with the individual who has Power of Attorney and that person’s relationship with others. Krueger has seen many cases of children disagreeing as to what is in the parent’s best interests. Sometimes, families end up making mistakes simply because siblings live elsewhere and they’re not physically present.

“You need to be realistic about your family situation,” cautions Kaufman. This means striving to be objective when making decisions affecting multiple parties and extended families. That’s where having a trusted wealth management professional can help bring some clarity and independence to make the best decision for the senior.

Krueger recommends three criteria for choosing a private person to act under a financial Power of Attorney: The attorney should be trustworthy, live in the same geographic area, and, most of all, have the senior’s best interests at heart.

Krueger believes the best way to mitigate family issues or tensions is to appoint an attorney who can oversee spending, asset allocation, distributions to family members and more. “The attorney is not influenced by people’s opinions and is held to a very high standard,” says Kaufman.

Kaufman also recommends that seniors offer guidance to their Power of Attorney on how they would like to see their money spent. For instance, if the grandparent wants to pay for a grandchild’s education, they should articulate this specifically and have it documented. An advisor can help seniors articulate their preferences through a wealth management plan.

Educate yourself and your loved ones about all the options

Last but not least, education is key. Those who are either approaching retirement or living in retirement must understand their financial goals, their sources of income, how to manage their current finances, and what to be aware of when it comes to potential financial abuse

You can better protect yourself and your loved ones by being vigilant and well-informed — recognizing that it’s not uncommon for something — or someone — to go awry. It’s difficult to believe that someone they love and trust would be capable of taking advantage of an elder’s finances, but it does happen. Having a clear understanding of your finances and communicating your wishes to your financial advisor are some first steps to take to manage your estate as you age.