Dec 8th, 2012 | By | Category: Senior Finances

Diminished Capacity vs Financial Abuse

A recent AARP quiz about financial abuse of elders caught our attention.  With the rise in family caregiving over the past decade, the risk of financial abuse of seniors has also increased.  Estimates suggest 55% of elder financial abuse in the United States is committed by family members. But when does care for elderly loved ones who are unable to manage their own finances morph into elder financial abuse?  Are the lines easy to draw, or are they not?

Elder financial abuse is clear: someone (usually a family member or close friend) takes financial advantage of the elder, taking the senior’s money against her/his will and/or without their knowledge, in a manner that causes harm or distress to the elder. (Wikipedia)  The senior’s money is taken and used against her/his will.  But what about the situation in which family members take responsibility for their elderly loved one’s finances–because of diminished capacity on the part of the elder–against their will, and the result is a very distressed senior?  A very distressed, cognitively impaired senior?

Guidelines for Family Intervention

We think some guidelines might be helpful to distinguish between elder financial abuse and helpful financial assistance for seniors with diminished capacity:

  1. Before the issue of cognitive impairment ever arises in your elderly loved one, have a conversation about what he/she want to have happen should diminished intellectual/cognitive capacity occur.  This conversation should take place with at least two people in addition to the senior; plans for what the senior wants should be written, and copies given to each person who might have responsibility for following the elder’s wishes.
  2. Once the conversation(s) have taken place, a Power of Attorney should be executed, with the understanding that it is only to be used in the event of the elder’s cognitive and/or physical incapacity.  A valid POA makes the conditions very clear.
  3. Other family members who may be legitimately concerned about the senior, but who are not involved in legal documents, should be made aware that the legalities have been taken care of, and who the family members are that have been asked to take legal responsibility should that need occur.  If these steps are taken before the need for action ever arises, a lot of potential heartache can be avoided.
  4. If the above three steps have not taken place, and an elderly loved one is in obvious need of help with financial management, concerned family members should consult with each other, and possibly an outside adviser, about reasonable courses of action.  The obvious issue clearly on the table should be how to assist the senior with financial management that does not create harm or distress for him/her, and frankly, that does not take advantage of him/her. Family members should realize distress may be unavoidable, particularly if the elder is already cognitively impaired.  Cognitively impaired seniors sometimes get distressed when loved ones attempt to help them with financial management.  The distress comes from brain dysfunction and may be unavoidable.

A senior’s reality is whatever he or she perceives.  That is the beginning point for planning any course of action in a family’s attempt to be helpful managing financial resources for an elderly loved one.  Elder financial abuse is unconscionable.  Helping elderly loved ones with management of their financial resources, without expecting or accepting compensation, is the best course of action–even when the elder’s mental condition interferes with reality.

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