Stop Elder Abuse Guide

Stop Elder Financial Abuse With NY Guardianships

1. WHAT IS ELDER FINANCIAL ABUSE?

Financial exploitation is one form of elder abuse. Federal and state laws use a wide variety of definitions and categories for it. Financial exploitation is defined in the U.S. Older Americans Act as: “The fraudulent or otherwise illegal, unauthorized, or improper act or process of an individual, including a caregiver or fiduciary, that uses the resources of an older individual for monetary or personal benefit, profit, or gain, or that results in depriving an older individual of rightful access to, or use of, benefits, resources, belongings, or assets.” Similarly, the National Research Council and the Government Accountability Office define it as “unjust, improper, and/or illegal use of another’s resources, property, and/or assets.”

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Financial exploitation is defined in New York Social Services Law as the improper use of an adult’s funds, property, or resources by another individual.  This includes:

  • Coercion – using force or intimidation to compel someone to engage in or refrain from certain conduct.
  • Coerced Property Transfers (Extortion) – compelling a person by intimidation or force to turn over his/her property.
  • Conspiracy – the intent to commit a crime and an agreement with another person to perform that crime.
  • Denial of Access to Assets – the improper withholding of access to an adult’s funds, property or resources by another individual.
  • Embezzlement – to fraudulently appropriate money or property entrusted to one’s care.
  • Falsifying Records – creating records with false or incorrect entries.
  • False Pretenses – knowingly making false representations of fact, with the intent that another person will rely on those false representations.
  • Forgery – falsely making or altering a writing by which the legal rights or obligations of another person are apparently affected.
  • Fraud – obtaining money or property under false pretenses.
  • Identity Fraud – fraud that involves stealing money or getting other benefits by pretending to be someone else.
  • Larceny – wrongfully depriving someone of their property by keeping it yourself, withholding it from its owner or giving it to someone else. Obtaining money or property by embezzlement, extortion, and false pretenses are all crimes of larceny.
  • Misappropriation of Funds – the use of funds or property for unauthorized purposes.
  • Power of Attorney Abuse- abuse by agent or purported agent under a document wherein a person (the principal) gives legal authority to act on his/her behalf to another person (the agent) in certain specified matters.
  • Scam – a mechanism used to trick someone into turning over money or property.

The typical victim of elder financial abuse is between the ages of 70 and 89, white, female, frail and cognitively impaired. She is trusting of others and may be lonely or isolated; although reports show that there is a very diverse population of victims.

 How Prevalent is Elder Financial Abuse?

 A 2011 Federal Trade Commission survey of the prevalence of scams and fraud in the U.S. found that 7.3% of adults 65-74 and 6.5% of adults 75 and older were victims. Another factor making good data hard to obtain is the underreporting of elder abuse of all forms; only 1 in 23 cases is reported.

Elder financial exploitation costs the elderly more than $2.6 billion a year and is most often perpetrated by family members and caregivers, according to the MetLife Mature Market Institute.  Up to one million older Americans may be targeted annually.

Who are the Perpetrators of Elder Financial Abuse?

Family members and caregivers are the exploiters in 55 percent of cases, although financial losses are higher with investment fraud scams. The elderly may also be victimized by care providers or other trusted fiduciaries, such as attorneys or stockbrokers. Scams are perpetrated by persons who are initially strangers, but who may try to establish an ongoing relationship with vulnerable elderly or impaired adults in order to exploit them further.

There are these two types of perpetrators of financial exploitation:

  • Fraud, misrepresentation, or scams by a stranger or “new friend” who deceives the vulnerable person by con games, such as bogus lotteries, sweetheart swindles, grandparent scams, fake charities, home repair     fraud, IRS back taxes schemes and identity theft. These are generally      all criminal forms of abuse.
  • Financial abuse/exploitation by a known person (a family member, close friend, caregiver, or person/organization in a position of trust) who breaches the trust of a vulnerable person and misuses the        individual’s funds to serve his/her own needs at the elder’s expense.    Remedies for these kinds of abuse are generally civil and possibly

Because family members have a unique relationship with elders and can often access their financial information, family members commit a large portion of financial abuse, especially with the use of powers of attorney (see “Powers of Attorney” on pages 20-23 and “Powers of Attorney Revoked” on pages 26-27).  The following are common tactics employed by family members and other trusted persons:

  • A trusted person may threaten to put the elder in a nursing home if he/she does do not comply with the abuser’s wishes.
  • Trusted persons often isolate elders from other friends and family, make important decisions for them and try to leave them out of conversations.
  • A friend, family member or caregiver may forge the elder’s signature on financial documents to transfer ownership of real estate or other valuable assets.
  • Trusted persons can also exploit elders by convincing them to change their wills, trusts, and to sign over their homes and other assets. They claim they have the elders’ best interests in mind and will protect them, when in reality they are stealing their assets.
  • Trusted persons may have access to elders’ bank accounts in order to pay their bills, but they may spend the money on themselves.

According to the National Adult Protective Services Association, perpetrators of financial exploitation often include:

  • Adult children and other family members
  • Caretakers
  • Neighbors
  • Friends
  • Attorneys
  • Bank employees
  • Pastors
  • Health care providers.

What are the Signs of Financial Exploitation?

Elderly or impaired adults may be at risk for financial exploitation if they are:

  • Neglected or receiving insufficient care, given their needs or financial status.
  • Isolated from other family members.
  • Accompanied by a family member or other person who appears to coerce them into make banking transactions.
  • Not allowed to speak for themselves or make decisions.
  • With an acquaintance who appears overly interested in their financial status.
  • Nervous or afraid of the person accompanying them.
  • Giving questionable explanations about what they are doing with their money.
  • Concerned or confused about “missing funds” in their accounts.
  • Unable to remember financial transactions or signing paperwork.
  • Fearful that they will be evicted or institutionalized if money is not given to a caregiver.

CHECKLIST

2. Guardianships FOR INCAPACITATED Persons

New York Mental Hygiene Law Article 81 Guardianship (“MHL 81”) proceedings are initiated  when an interested or concerned party believes that a person, because of his/her mental health and/or physical and functional limitations, is unable to manage independently, and as a result, may be at risk of harm. Supreme and County Courts have jurisdiction over the person and property of a mentally incapacitated adult.

A guardianship may be needed to provide for personal (health/medical) and financial decisions of an incapacitated person who is unable to make those decisions and has not executed a power of attorney, health care proxy, or living will. Often guardianships are necessary when one family member is concerned about possible fraud, financial abuse, and manipulations by another family member.

Checklist of Initial Considerations

 These twelve questions should be seriously and thoroughly considered before filing a guardianship petition:

(1)     Are there are any alternatives to guardianship available (see Chapter IV)?

(2)     Is the guardianship necessary in order to apply for Medicaid and emergency Medicaid planning (See Chapter III)?

(3)     Are the proposed transfers of the Alleged Incapacitated Person’s (“AIP”) assets sought in the guardianship petition consistent with the AIP’s wishes as expressed in his/her will or living trust? Any beneficiaries under an existing will or trust who will be affected by the proposed transfer are entitled to notice of the proceedings.

(4)     Will the guardian’s powers be of an “unlimited” or a “definite” duration?  A critical factor as to the duration of the   guardianship will be whether there is likelihood that the AIP will be able to handle his/her financial affairs at a later date.

(5)     Does the guardian need any specific or special powers over the AIP’s person or property, such as power to relocate the AIP to another state or to make gifts or transfers of the AIP’s property?

(6)     Is the guardianship only needed for a “special”, “limited”, or “single” transaction? For example, if the AIP has executed a Health Care Proxy, but not a power of attorney (POA), the guardianship could be                       limited to a guardianship of the property only.  Additionally, if the plan is to transfer all of the AIP’s assets to his/her spouse or children for Medicaid eligibility purposes, limiting the guardianship to a term that will end once all of the assets are transferred should be considered (see Chapter III).

(7)     Is there a possibility that the guardianship will be contested? If the AIP or a family member contests the guardianship, the legal costs could be extraordinary and the appointment of the guardian could be delayed for months.  Furthermore, there may be bad feelings on the part of the AIP resulting in the AIP executing a new will excluding the petitioner as a beneficiary.  A finding of incapacity and the appointment of a guardian does not necessarily mean that the AIP does not have the capacity to execute a new will.

(8)     Is there is an urgent need for someone to handle the AIP’s personal and/or financial affairs? If so, a temporary guardian may be required in order to immediately marshal the AIP’s assets to prevent waste, dissipation, or fraud.

(9)     Is the AIP a victim of elder abuse, fraud, or manipulation?  Such a situation may necessitate a temporary restraining order preventing a third party from having contact with the AIP and restraining access to the AIP’s bank accounts and assets.

(10)   Are there standby guardians available in the event the guardian is later unable to perform his/her duties?

(11)   Is there sufficient evidence that the AIP is incapacitated and needs a guardian (see pages 12-14)?

(12)   Do you have the names and addresses of all parties that must be served with the order to show cause and petition (see page 11)?

Who is the Guardian?

 A MHL 81 Guardian is a person appointed by the court to assist an incapacitated person with personal needs and/or property management. The court may appoint a guardian for any incapacitated adult, including persons who are mentally retarded and developmentally disabled. The decision to appoint a guardian is based on a careful review of the person’s mental capacity and life circumstances.

 Who is the Petitioner?

 The petitioner is the individual who brings the guardianship proceeding with the belief that the AIP cannot take care of his/her own personal needs, e.g. healthcare, or cannot manage his/her property, e.g. pay bills.  Because of this inability, the petitioner advocates that the court should appoint someone with the power to make decisions regarding personal needs and/or financial management on behalf of the AIP.

The petitioner can be any of the following:

  • The AIP.
  • Persons entitled to share in the estate of the AIP.
  • An executor or administrator of an estate of which the AIP is, or may be, a beneficiary.
  • A trustee of a trust of which the AIP is the grantor or a beneficiary.
  • A person with whom the AIP lives.
  • A person concerned with the welfare of the AIP, including a public agency, such as the Department of Social Services in the county where the AIP lives.
  • The CEO of a facility in which the AIP is a patient or resident.

Who Must be Notified?

 An order to show cause why a guardian should not be appointed must be served on the following persons and entities:

  •  The AIP’s spouse, parents, adult children and adult siblings.
  •  The persons with whom the AIP resides.
  • If no person listed above is given notice, then notice shall be given to at least one, and not more than three, of the AIP’s living relatives in the nearest degree of kinship who are known to the petitioner, or whose existence and address can be ascertained by the petitioner with reasonably diligent efforts.
  • The AIP’s health care proxy and POA, if known to the petitioner.
  • If known to the petitioner, any person or organization with a personal relationship with the AIP demonstrating a genuine interest in promoting his/her best interests through regular visits and communication.
  • The county Department of Social Services if the AIP receives public assistance or adult protective services.
  • If the AIP resides in a facility, the chief executive officer in charge of that facility.
  • If the AIP resides in a mental hygiene facility, the Mental Hygiene Legal Service of the judicial department in which the facility is located.
  • Joint account owners (See page 20).
  • Such other persons as the court may direct based on the recommendation of the court evaluator.

Who is the Court Evaluator?

When an order to show cause and petition for guardianship is filed, a court evaluator will be appointed. The evaluator acts as an independent investigator who assists the court in its determination of the AIP’s capacity and needs. The court evaluator has the authority to retain an independent medical expert to assess the AIP and to apply to the court for permission to inspect the AIP’s medical records.  The court evaluator may also conduct any other necessary investigations and make recommendations for additional measures that the court deems appropriate to serve the interests of the AIP.

Pending the outcome of the guardianship hearing, the court evaluator can prevent the waste, misappropriation, or loss of the AIP’s property.  The court may also appoint a temporary guardian to serve this function.  This authority is crucial when the AIP is a victim of financial exploitation or at risk of such abuse. For example, if the AIP has large amounts of cash susceptible to theft or misappropriation, the court evaluator or temporary guardian has the authority to open a bank account and deposit the money.

What Evidence is Necessary to have a Guardian Appointed?

 If the AIP does not agree to the appointment of a guardian, the petitioner must prove by clear and convincing evidence, using specific factual allegations, that the AIP is incapacitated. The petitioner has the burden to show that the AIP is likely to suffer harm because of an inability to provide for his/her own personal needs and/or property management.  The petitioner must also show that the AIP cannot adequately understand and appreciate the nature and consequences of such inability.

A finding of incapacity is a functional analysis.  The law requires the court to give primary consideration to the functional level and functional limitations of the AIP. This consideration includes an assessment of the AIP’s:

  • Management of the activities of daily living.
  • Understanding and appreciation of the nature and consequences of any inability to manage the activities of daily living.
  • Preferences, wishes, and values with regard to managing the activities of daily living.
  • The nature and extent of his/her property and financial affairs and ability to manage the resulting demands.

The court will also consider any physical illness, mental disability, alcoholism or substance dependence, the prognosis of such illness, disability or dependence, and the effect of any medications with which the AIP is being treated.

A court may appoint a guardian if it determines that a guardian is necessary to provide for the AIP’s personal needs, such as food, clothing, shelter, health care, or safety.  A court may also appoint a guardian to manage the AIP’s property and financial affairs. The guardianship must be the least restrictive form of intervention meeting the AIP’s personal and property management needs while simultaneously ensuring the greatest degree of independence and self-determination.

The guardianship must be managed in accordance with the AIP’s wishes, preferences, and desires to the greatest extent safe and possible under the attendant circumstances. A guardian should be granted only the powers necessary to accomplish what is necessary. A guardianship can also be created for a limited duration of time and for a specific purpose.

A guardianship is appropriate for personal needs in order to protect a person who is no longer able to care for his/her own well-being. Such inabilities may stem from severe loss of cognitive abilities caused by dementia, Alzheimer’s or Huntington’s disease.   Other physical and mental restraints may also prevent an individual from attending to his/her own personal needs. This may be indicted by an inability to self-administer medications, difficulty to ambulating, eating spoiled or uncooked food, and carelessness resulting in dangerous situations, such as kitchen fires.

Guardianship may be appropriate for financial management where an AIP makes irrational expenditures or is unable to pay his/her bills, resulting in mounting debt. Often, unchecked financial abuse, in the form of people stealing or commingling the AIP’s funds, can itself be a sign that a guardianship is necessary.

A guardianship may also be necessary where the AIP is unable to maintain a livable home, especially when such circumstances may result in homelessness.

What are the Guardian’s Powers?

 The powers of a guardian are separated into property management and personal needs. A guardian’s powers might be limited to just one of these categories, but often a guardian’s powers include both.

Property management powers may include, but are not limited to, the power to pay bills, sell real estate, authorize the release of confidential records, make gifts, enter into contracts, marshal assets, create trusts, and pay for funeral expenses.

Personal needs powers may include, but are not limited to, the power to manage medical treatment, determine living accommodations, make decisions about social activities, and assess whether travel is appropriate.

The guardian’s ability to apply for government and private benefits on behalf of the AIP falls under both the property management and personal needs powers (See Chapter III).

What are the Guardian’s Responsibilities?

 The guardian must always make decisions with the incapacitated person’s best interests in mind.  The guardian must also personally visit the incapacitated person at least four times a year and send reports to the court. These reports must describe how the person is doing. The first report is due 90 days after the guardian officially qualifies. The next reports are due once every year in the month of May.

 3. THE USE OF GUARDIANSHIPS IN MEDICAID PLANNING

 According to the Department of Health, 90% of New York State nursing home residents depend on public benefits to finance their long-term care needs.  Most commonly they use Medicaid.

The Medicaid application process is very comprehensive. A nursing home resident with senile dementia and no support network in the community may find it impossible to document his/her eligibility for Medicaid.  The application requires a five-year history of all bank records and financial statements, including explanations and documentation of deposits and withdrawals from all accounts; proof of income, citizenship, and residency; an accounting for all transfers from or between accounts; copies of all checks over $1,000; proof of Social Security and pension income; and production of personal documents, such as original birth certificates, marriage, and spouses’ death certificates. A patient with no family or POA cannot possibly complete a Medicaid application.  Most nursing home residents need 24/7 care and

have no way of traveling

Even though most nursing homes have a Medicaid department, only the resident or the resident’s legal representative can access the private records that must be submitted to the Department of Social Services in support of a Medicaid application.

For nursing home residents who lack the capacity to sign a release of information or to appoint an authorized Medicaid representative, guardianship may be the only method available to document eligibility for Medicaid.    New York judges take the following approaches to the problem of nursing home residents who have few assets and lack the capacity to complete Medicaid applications:

  • Pressuring the Department of Social Services guardianship program to accept the guardianship appointment.
  • Appointing the nursing home administrator as property management guardian.
  • Authorizing the court evaluator to compile the AIP’s Medicaid documentation.
  • Adjourning the MHL 81 hearing to enable the petitioner’s attorney to find the AIP’s recalcitrant power of attorney.
  • Appointment of a non-profit guardianship program.

Usually, a nursing home resident with no family or POA has neither a payment source nor the ability to apply for Medicaid benefits.  In such a situation, the resident is subject discharge from the facility for non-payment or a collection lawsuit for the balance due.

In an informal opinion, the New York State Attorney General recognized that it is necessary for nursing homes to address the financial needs of incapacitated residents and specifically pointed to MHL 81 as a means by which to address such residents’ financial needs, including remitting income to the nursing home.

Healthcare facilities have successfully used guardianship proceedings to obtain medical insurance and government benefits, such as Medicaid, on behalf of patient in the following cases:

  • A hospital commenced a guardianship proceeding to obtain Medicaid benefits for an AIP who had accrued a large balance. The court appointed a guardian and revoked the AIP’s POA because the agent refused to cooperate in applying for Medicaid benefits.
  • The court appointed a guardian to sell an AIP’s co-op apartment so that the AIP could become eligible for institutional Medicaid benefits. In appointing the guardian, the court recognized the necessity of doing so since without Medicaid, the AIP would otherwise be unable to continue residing in the nursing home.
  • An AIP could not complete his Medicaid application unassisted, jeopardizing his ability to pay for the nursing home care he needed. The court found that such a situation required the appointment of a guardian.

In many cases a valid POA has been executed, but it is not sufficiently broad enough to address the AIP’s financial needs. There may be an immediate need for broad gifting powers for emergency Medicaid or estate planning purposes, but the POA limits gifting to the personal federal gift tax exclusion of $15,000 per person, per year.

If the POA does not specifically permit broader gifting powers with a Statutory Gifts Rider, a guardianship proceeding may be necessary. This commonly occurs when, in order to become Medicaid eligible, it is necessary for a nursing home patient to transfer all assets to children or a spouse.   The spouse can then execute a spousal refusal for Medicaid eligibility purposes.

MHL 81 authorizes a guardian to make gifts and transfer a part of the incapacitated person’s assets to or for the benefit of another person on the ground that the incapacitated person would have made the transfer if he/she had the capacity to act.  New York courts have consistently permitted the guardian to plan for Medicaid on behalf of the incapacitated person, holding that to deny a guardian such authority would be to deny an incapacitated person the opportunity which is available to all competent persons.

The eight requirements to permit the transfers of property for emergency Medicaid planning are:

(1)     The individual lacks sufficient capacity to make the proposed disposition.

(2)     The disability is not likely to be of such short duration that the individual could personally make the disposition upon recovery.

(3)     The needs of the incapacitated person and/or any of his/her dependents can be met from the assets remaining after the transfer.  The guardian will be directed to calculate the amount that could be transferred while leaving sufficient assets to pay the incapacitated person’s nursing home bills during the penalty period. The guardian must detail the Medicaid planning formula in the court order.

(4)     The proposed donees of the transfer are the natural objects of the bounty of the incapacitated person.

(5)     The proposed plan is consistent with known, previously made testamentary plans or pattern of gifts.

(6)     The proposed transfer will produce estate, gift, income or other tax savings   which will benefit the incapacitated person or his/her dependents.

(7)     There is clear and convincing evidence that a competent reasonable individual in the position of the incapacitated person would be likely to perform similar acts under the circumstances.

(8)     The proposed plan is not inconsistent with any earlier acts of the incapacitated person.

In Erie County and Genesee County Supreme Courts, Friedman & Ranzenhofer, P.C. has been successful in obtaining court orders requiring that the proposed guardian transfer part of the AIP’s assets nunc pro tunc to or for the benefit of his children to implement Medicaid planning utilizing gifts and actuarially sound promissory notes on the ground that he would have made the transfers if he had the capacity to act. The proposed plans were not inconsistent with the earlier acts of the AIP.

4. ALTERNATIVES TO GUARDIANSHIPS

 Guardianship should be pursued as a last resort when there are no available resources or adequate alternatives available to protect the AIP.   Guardianship may be an unnecessary and excessive intrusion upon the individual’s liberty interests if his/her personal and property management needs are adequately addressed by the following resources:

  • Powers of Attorney (“POA”) (see pages 20-23).
  • Living trusts (see pages 23-24).
  • Health care proxies and living wills (see pages 24).
  • Medical Orders for Life Sustaining Treatment (MOLST) or Physician’s Orders for Life Sustaining Treatment (POLST).
  • HIPAA authorizations.
  • Joint ownership (see page 20).
  • Assisted Outpatient Treatment: A close family member or institution can petition a court for Assisted Outpatient Treatment services for someone who has a mental disorder and cannot otherwise live in the community without being a danger to himself/herself or others.
  • Representative payee for Social Security benefits: Social Security permits a family member, friend, or qualified individual to receive benefits on behalf of an individual that cannot manage their benefits themselves.

A durable POA, healthcare proxy, living will and HIPAA authorization are only valid if the person had capacity when these documents were signed.

 Joint Assets

If the AIP has assets in joint title with others, it is important to determine whether the other title holders are able to access the accounts in the event that the AIP is unable to make financial decisions.  Although a husband and wife may have joint title to an investment account, both account holders’ signatures may be required for transactions, and the financial institution may not permit an account transfer from one spouse to the other without a POA permitting such a transfer. This problem does not generally occur with joint bank accounts, since the funds can be accessed upon the signature of either title holder.

If the petitioner seeks  guardianship of the assets held jointly by the AIP with a third party, or in trust for a third party who is not his/her spouse, the petitioner should ascertain whether the joint account is a true joint account, entitled to the presumptions of joint ownership and survivorship rights pursuant to NY Banking Law § 675,  or a “for convenience only” account wherein the joint title holder has no ownership interest or survivorship rights per NY Banking Law § 678.  If the petitioner is requesting guardianship control over true joint accounts or “in trust for” accounts, notice of the guardianship proceedings must be served on the joint account holder with a specific request that these accounts be retitled in a manner allowing the account to retain its joint or “in trust for” status.

Powers of Attorney

Everyone needs a properly prepared New York statutory POA. It will save you and your family thousands of dollars and expedite the handling of your financial affairs in the event of mental or physical disability.  By signing a POA, you as the “principal” can authorize another person or persons known as the “agent” or “attorney-in-fact” to perform any number of specified acts on your behalf.

POAs are useful to manage your affairs if you subsequently become incapacitated, thus avoiding the need for a more complex and costly guardianship. A POA is not a substitute for a will because it automatically terminates upon your death. The following are twelve important facts about POAs.

(1)     POAs can be either immediate or springing.  A springing POA does not take effect until a certain event, such as a physician signing a certification that the principal is incapacitated.

(2)     If you designate more than one agent, they must act together unless you initial a statement authorizing them to act separately.

(3)     The POA does not revoke any POAs previously executed unless you state so under the “Modifications” section.

(4)     You may grant authority to your agent with respect to the following subjects:

  • Real estate transactions.
  • Chattel and goods transactions
  • Bond, share and commodity transactions
  • Banking transactions.
  • Business operating transactions
  • Insurance transactions.
  • Estate transactions.
  • Claims and ligation.
  • Personal and family maintenance.
  • Benefits from governmental programs or civil or military service.
  • Health care billing and payment maters.
  • Records, reports and statements.
  • Retirement benefit transactions.
  • Tax matters.

          Furthermore, you may grant and full and unqualified authority to your agents to delegate any or all of the above powers to any person or persons whom they select.

(5)     To authorize your agent to make gifts in excess of $500 annually, you must initial the gift statement and execute a Statutory Major Gifts Rider (“SMGR”) witnessed by two people simultaneously with the signing of the          POA. Specific provisions in the SMGR grant the agent authority to create, revoke, modify and fund living trusts; designate insurance beneficiaries; create joint accounts; and change beneficiaries on retirement benefit plans.

(6)     If you appoint a monitor, your agents, if requested to do so, must provide him/her with a copy of the POA and a record of all transactions made on your behalf.  Third parties holding records of such transactions must also provide the records to the monitors upon request.

(7)     Your agents are entitled to reimbursement from your assets for reasonable    expenses incurred on your behalf.  You may also wish to compensate your agents from your assets for services rendered on your behalf. If you wish to define “reasonable compensation,” you may do so under the “Modifications” section.

(8)     Agents have specific fiduciary responsibilities, including the “prudent person standard of care.”  This includes record keeping with receipts and requires that records be made available within 15 days of a written request by a monitor, co-agent, certain governmental entities, court evaluator, guardian, or a representative of the estate. An agent may be liable for conduct or omissions which violate the fiduciary duty. A special proceeding can be instituted for various purposes, including to compel an agent to produce a record of receipts and disbursements.

(9)     The POA form is “durable,” meaning not affected by subsequent incapacity, unless the form specifically provides that it is terminated by the incapacity of  the principal.

(10)   If a guardian is later appointed, the agents must account to the guardian, rather than to the principal.

(11)   Provisions regarding health care billing and payment allow agents access to HIPPA-protected medical records.

(12)   Acceptance of the POA form by a third party, such as a bank, is required.  A third party cannot refuse to honor the SMGR, or any POA form properly executed, without reasonable cause. It is unreasonable for a third party to require its own form or to object because of the lapse of time since execution of the POA.

It is important that the POA is prepared by an attorney.  Entrusting a professional with this document ensures the following:

  • It is properly signed, initialed, dated, witnessed and notarized. The form must be signed, dated and notarized, not only by the principal, but also by the agents. It takes effect when the principal and all agents have signed before a notary, unless it is a springing POA, which takes effect upon a future occurrence, such as the signing of a written statement by a physician or licensed psychologist/psychiatrist certifying that the principal is suffering from diminished capacity.
  • You receive the correct advice on how to best utilize the POA in conjunction with any living trust, health care proxy, or living will.
  • You appoint the correct agents who will not abuse their authority and powers
  • It is properly prepared so as to not to risk invalidation. A slight inaccuracy in the document or in the execution of the document may result in third parties, such as banks, not accepting the POA.
  • Modifications can be made enabling agents to handle Medicaid and estate planning.
  • It is properly stored or recorded, if necessary, with the County Clerk.

Living Trusts

A living trust, also referred to as an inter vivos trust, is created to hold ownership of your assets for the benefit of named beneficiaries during your lifetime and distributing those assets after your death.  Living trusts may be revocable or irrevocable. Irrevocable trusts are necessary for Medicaid nursing home asset preservation.

The individual who creates the trust (the grantor or creator) names a trustee and successor trustee who will follow the trust’s terms after the grantor dies.  Except for irrevocable Medicaid trusts, the grantor, while alive, usually may serve as a trustee and control the assets even though they belong to the trust.

Creation of a living trust does not automatically fund the living trust.  For a living trust to go into effect, title to the grantor’s assets must be transferred into the trust.  This includes title to bank accounts, stock certificates, and real estate owned by the grantor. Assets avoid probate only if they have actually been transferred into the living trust. A deed is necessary to transfer real estate into a trust. It is insufficient to merely recite in the trust agreement that assets are assigned to, or are held by, the trust.

To distribute any property that is not transferred into the trust, a “pour-over will” is required.  A will becomes a matter of public record during the probate process. A living trust, on the other hand, is a private document that is not subject to public scrutiny. However, a “pour-over will” becomes a matter of public record when it is submitted for probate and the “pour-over” portion incorporates the living trust by reference.

 Health Care Proxies and Living Wills

 Your spouse or other relatives are not legally authorized to make medical decisions on your behalf unless that authority is delegated to them by a living will and health care proxy. Health care proxies recognize your right to appoint a health care agent that you trust to decide about medical treatment in the event that you become unable to decide personally.

Unless specified otherwise, the agent will have the same authority that you would have in deciding about treatment. The authority encompasses the right to forego treatment or to consent for needed treatment. The agent’s authority begins only when a physician determines that you have lost the capacity to decide about treatment. Living wills are written declarations instructing your family and doctor about life-prolonging medical procedures when your condition is terminal and there is no chance of medical recovery.

Under constitutional and common law, patients have the right to refuse medical treatment. A living will gives you the opportunity to express your wishes in advance, since you may not be able to make them known when it becomes necessary to do so. Life-prolonging procedures include using machines to facilitate breathing, performing operations or prescribing antibiotics that cannot realistically increase the chances of recovery, starting your heart mechanically, or feeding by tube. You can specify that the only treatment rendered be for the relief of pain.

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5. HOW IS GUARDIANSHIP USED IN RESPONSE TO FINANCIAL ABUSE?

 Where there are signs of financial abuse, guardianship provides both immediate and long-term solutions:

  • The court may appoint a temporary guardian at any time prior to the appointment of a guardian if there is evidence that an AIP is presently in danger or will be in the reasonably foreseeable future.
  • Prior to appointing a guardian, the court may issue an injunction to stop someone from transferring or disposing of the AIP’s property, or acting in any other manner that threatens to endanger the AIP. If abuse is suspected, the court may freeze bank accounts and suspend POAs.
  • The court evaluator can take steps to preserve the AIP’s assets and property (see page 12).
  • If an agent acting under a POA has allegedly engaged in financial abuse, the court has the authority to demand an accounting covering the entire period of agency and to vacate the POA upon determination that the agent violated his/her fiduciary duties.
  • A guardian can commence a Summary Discovery Turnover Proceeding in which the guardian is authorized to compel testimony from any individual whom the guardian believes is holding assets belonging to the incapacitated person. The guardian can also subpoena records to find evidence of financial exploitation. If such exploitation is discovered, the guardian can obtain a court order compelling the abuser to relinquish the property to the guardian.

Powers of Attorney Revoked

 POAs confer broad powers with no supervision and thus are especially susceptible to abuse.  Abuse can occur as early as the creation of the POA when the principal is incapacitated.  Potential agents may forge principals’ signatures, misrepresent their intentions, or exert undue influence over principals. Even when voluntarily and competently executed, abuse can occur at a later time where the agent exceeds his/her authority, engages in self-dealing, or conducts transactions that contravene the principal’s expectations.

 Elderly persons, who are hospitalized or otherwise away from home and unable to pay bills, may sign a POA authorizing a relative or friend to take care of their finances, risking that the agent may seize property, close bank accounts and steal money.  Because they were granted POA, an abuser will often justify making major changes to the principal’s financial affairs by arguing that the principal trusted him/her to do so.

Attorneys Robert Friedman and Michael Ranzenhofer have had success in revoking POAs held by abusive agents.  In one such case, their client’s mother, while competent, had designated her adult daughter to serve as her POA and health care proxy. The daughter used her mother’s credit cards, bank accounts, and automobile for her own personal use. Her son filed a MHL 81 petition to have a guardian appointed and to revoke the POA and health care proxy held by his sister.  The Erie County Supreme Court revoked the POA due to the daughter’s self-dealing and breach of her fiduciary duty. However, the court did not revoke the health care proxy because it was not proven that the daughter was unavailable or unwilling to act, or that her actions or inactions rose to the level of incompetence or bad faith. However, due to the fighting among the children, the court appointed an independent third-party to serve as full guardian of the mother’s property and limited guardian of her person.

 The Kings County Supreme Court vacated a POA and health care proxy both of which had long been held by the one of the AIP’s daughters.  In its decision, the court cited breach of fiduciary duty due to the daughter’s failure to keep accurate records of her expenditures on behalf of her mother and also co-mingling her own funds with those of her mother.  This failure to properly account was of concern to some of her other siblings who were accusing her of theft of their mother’s resources.  Nonetheless, evidence showed that this daughter was paying for her mother’s medical bills out of her own pocket to ensure that her mother, now suffering late stage dementia, received proper care.  Meanwhile her brothers were living in the mother’s home rent-free. This daughter was also best equipped, through her own professional experience as a nurse and manager of a visiting nurse service, to understand and provide for her mother’s needs. The Court revoked the POA and Health Care Proxy for breach of fiduciary duty and appointed the same daughter as guardian, thereby obligating her to report to the court. Matter of Cox, 15 N.Y.S.3d 711 (Sup. Ct., Kings Cty. 2015)

A Bronx County nursing home initiated an MHL 81 proceeding for a 94-year-old resident. During a bedside hearing at the nursing home, evidence showed that the AIP had made a questionable payment of $50,000 to the nursing home after she had been found to lack capacity to do so by the nursing home’s own psychiatrist. It was also discovered that the nursing home, fully aware of this lack of capacity, had commenced a lawsuit seeking further payment from the AIP.  Furthermore, the AIP’s health care agent/POA was her former attorney with whom she had not had contact in over two years and whose assistance the AIP had previously refused.  The court, noting its outrage at the actions of parties “who have all unabashedly demonstrated . . . that they are only interested in getting paid,” invalidated the health care proxies and POA, and appointed an independent guardian.  The court empowered the guardian to defend the AIP’s interest in the civil action brought by the nursing home; to investigate whether she had been the victim of financial exploitation; and, with prior court approval, to refer the matter to the Offices of the District Attorney and/or Attorney General. Matter of Carl Willner (F.G.), 5 N.Y.S.3d 331 (Sup. Ct., Bronx Cty. 2014)

The Second Department Court of Appeals vacated a will and POA where the AIP executed these documents in favor of home health aides upon whom she was completely dependent. The court found that both the will and POA were executed as a result of the aides’ undue influence on the AIP. In re Ruby S., 759 N.Y.S.2d 885 (2nd Dept. 2004).

6. THE ROLE OF FINANCIAL INSTITUTIONS

Bank Employees Help Prevent Elder Financial Exploitation

 Bank employees are in a unique position to have early knowledge when elderly or impaired adults are being abused.  Since they have frequent contact with the public, bank employees often notice when situations develop that could put a vulnerable customer at risk of financial abuse.  Bank employees, as well as financial advisors, should take these basic measures to prevent the financial abuse of their elderly customers:

  • Noticing changes in investment style, attitude, or caregiver involvement.
  • Asking frequent questions of and paying close attention to older customers.
  • Getting to know older customers’ family members and caregivers.

Banks can further protect their customers by establishing a protocol for employees to identify and report suspicious behaviors to a designated bank manager. The manager can then decide if there is sufficient reason to make a referral to New York Adult Protective Services (“APS”) or, in emergency situations, to the police.

APS will conduct an assessment and, if necessary, access the victim’s bank records.  If unable to obtain a release form from the customer, APS will request the bank records under New York Social Services Law § 44-a. which requires banking/financial institutions to provide certain information to social services officials. APS will use back records and information gathered from interviews to determine whether exploitation has occurred.  Once that determination is made, APS will develop a plan to resolve the identified problems.

Suspicious Banking Activity

 One warning sign that a customer is being financially exploited is an unusual amount of activity on the account.  Increased activity may take the form of:

  • Frequent account changes from one branch to another.
  • Frequent account changes from one bank to another.
  • Unusually large withdrawals.
  • Large withdrawals or transfers from recently opened joint accounts.

Banking activity that is inconsistent with the customer’s usual habits also are indicative of financial exploitation.  Bank employees should be on the alert for:

  • Withdrawals from previously inactive accounts.
  • Large withdrawals from savings accounts.
  • Frequent ATM withdrawals, especially if the customer has rarely used ATMs due to frailty or lack of mobility.
  • Payments by check for rent or utilities cease abruptly.
  • Revocation of single beneficiary trusts.
  • Alteration of distribution procedures requiring payments to third parties.
  • Bank statements and cancelled checks are no longer sent to the customer’s home address.

In some situations, the customer may suddenly experience increases in incurred debt from being unaware of the following types of transactions:

  • Bank loans.
  • Second mortgages.
  • Large credit or reserve credit debts.

There are a number of other tactics employed by those who would take advantage of vulnerable customers.   Additional scenarios signaling suspicious activity include, but are not limited to:

  • Signatures on checks or other documents, such as credit card applications, that appear forged; or when the signature appears correct, but dollar amounts are in different handwriting.
  • When a POA or another individual withdraws funds that do not seem to benefit the customer.
  • The customer or person accompanying him/her gives implausible reasons for why suspicious banking activity has occurred.

 Regulatory Broker Reforms

 On February 5, 2018, two Financial Industry Regulatory Authority (“FINRA”) rules took effect, allowing brokerage firms to respond quickly to protect customers from suspected elder financial exploitation. One of the rules allows broker-dealers to place a temporary hold on disbursements from a client’s account when exploitation is suspected. The other rule addresses possible financial exploitation by facilitating communication between brokerage firms and trusted contacts of customers.

FINRA Rule 2165, “Financial Exploitation of Specified Adults”, permits broker-dealers to place a temporary hold on disbursements of funds or securities from certain customer accounts upon reasonable suspicion that financial exploitation of the customer has occurred, is occurring, has been attempted, or will be attempted. The rule covers customers who are age 65 and older as well as those who are 18 or older and who, the broker-dealer reasonably believes, have a mental or physical impairment preventing them from protecting their own interests.

If a brokerage firm places a hold based on reasonable suspicion, Rule 2165 provides the firm with a safe harbor from other FINRA rules. For example, the broker-dealer will not be held liable if compliance with this rule conflicts with the FINRA requirement to follow a customer’s instructions. The hold can remain in effect for up to 15 business days, and the brokerage firm can extend the expiration date for an additional 10 business days following an internal review. State agencies, such as Adult Protective Services or a state securities regulator, also can extend the hold.

FINRA’s Amendment to Rule 4512, “Customer Account Information”, requires brokerage firms to make reasonable efforts to obtain the contact information of an individual whom the customer trusts when a retail account is opened and also whenever the account information is updated. Brokerage firms are required to ask for the information, but customers are not required to provide it. If the customer declines to do so, the firm can still open the account.

If a brokerage firm places a hold on a customer’s account, the trusted contact must be notified unless there is a reasonable belief that the trusted contact is the one responsible for the financial exploitation. The trusted contact is intended to be a resource for broker-dealers. For example, the Amendment to Rule 4512 also allows, but does not require, the brokerage firm to communicate with the trusted contact before deciding to place a temporary hold on a particular disbursement when there is a concern that the customer is being financially exploited.

A brokerage firm may communicate with the trusted contact to inquire about the customer’s health upon suspicion that the customer may be suffering from Alzheimer’s disease, dementia or other forms of diminished capacity. The brokerage firm could also reach out to the trusted contact to confirm the identity of a customer’s legal guardian, executor, trustee, or POA.  In addition, the brokerage firm can disclose the customer’s account information to the trusted contact.

The FINRA rules forbid such communications with anyone who is not listed as a trusted contact, even if the person is a close relative of the customer. Brokers may only communicate with persons whom the customer already has designated as trusted contacts.  Being designated a trusted contact does not in itself confer authority to transact business on an account.  The Amendment to Rule 4512 allows persons already authorized to transact business on an account—such as joint account holders, trustees, or holders of POA— to be designated as trusted contacts.

Even before the Amendment to Rule 4512 took effect, some firms asked customers for the names of trusted contacts. This had been considered an industry best practice, but it was not universally followed. Now that it is mandatory, this best practice will become standard practice for all brokerage firms.

The FINRA rules permit account holds only in cases of suspected financial exploitation, not in instances of suspected diminished cognitive capacity unaccompanied by financial exploitation. If customers make bad financial decisions solely as a result of Alzheimer’s disease or other cognitive impairment, the brokerage firm is not authorized to place a hold on disbursements from the account. However, the brokerage firm is permitted to call the customer’s trusted contact to discuss concerns that the customer may be suffering from diminished capacity.  Once alerted to that concern, the trusted contact might follow-up directly to assist the customer in addressing the health issues. This might occur when the trusted contact is a son or daughter living in another state who is unaware of the suspected cognitive decline. Other types of financial institutions, such as banks, are not covered by these rules.

Senior Safe Act

Federal Public Law No: 115-174, the Senior Safe Act (“S$A”), defines exploitation as the “fraudulent or otherwise illegal, unauthorized, or improper act or process of an individual, including a caregiver or a fiduciary that uses the resources of a senior citizen for monetary or personal benefit, profit, or gain; or results in depriving a senior citizen of rightful access to or use of benefits, resources, belongings, or assets.”

S$A provides immunity both for those who report exploitation and for covered financial institutions, including credit union depository institutions, investment

7. HOW TO PREVENT ELDER FINANCIAL ABUSE

 To prevent elder financial abuse, you should always plan ahead to protect your assets and to ensure that your wishes are followed.  People who talk about their finances with trusted third-party resources feel better equipped to prevent elder financial abuse than those who keep to themselves.  With this in mind, consider taking the following steps in developing a network of trusted friends, family members, and financial professionals who can effectively shield you from potential exploitation:

  • Have an objective third-party review all financial statements.
  • Consult with an attorney or financial advisor to discuss your best options before signing any document that you do not understand.
  • Get to know your banker and build a relationship with the people who handle your finances so that they can be alerted for any suspicious activity related to your accounts.
  • Carefully choose a trustworthy person to act as your power of attorney or agent for estate planning matters.

On the other hand, it is critical to exercise extreme caution when dealing with unknown persons.  Never give your personal information, including Social Security Number, account numbers, or other financial data to anyone over the phone or internet unless you initiated the communication and the other party is trusted.  In general.  Resist pressure to give someone financial information or access to your financial accounts. Trust your instincts. Exploiters often are very skilled. They can be charming and forceful in their effort to convince you to give up control of your finances.  If a deal sounds too good to be true, it probably is.  Other important precautions when dealing with unknown persons include:

  • Ask for details in writing and get a second opinion before rushing into any financial decision, especially if it involves changing your power of attorney, will, trusts, or any personal financial information.
  • If you feel pressured to give up information or sign documents, talk to a friend or family member with whom you feel comfortable, or contact a financial advisor.
  • Check references and credentials before hiring contractors and do not give them to access to your financial information.
  • Never pay a fee or taxes to collect sweepstakes or lottery “winnings.”
  • Be suspicious of anyone who has gained recent an interest in your life and/or finances.

You have the right not to be threatened or intimidated. If you think that someone close to you is trying to take control of your finances, call your local Adult Protective Services, notify your bank, and take these additional steps to financial abuse:

  • Shred receipts, bank statements and unused credit card offers.
  • Lock up your checkbook, account statements, and other sensitive financial information.
  • Keep a paper trail by paying with credit cards and checks rather than cash.
  • Order copies of your free credit report annually to ensure accuracy.

Your friends and family members can also take in active role in protecting you from financial exploitation by properly vetting your potential caregivers.   When selecting an individual who will be put in such a position of trust, it essential that whoever hires the caregiver to take the following steps:

  • Use a certified agency.
  • Check references.
  • Do not pay the caregiver in cash.
  • Be on alert for suspicious behavior.
  • Be prepared to fire the caregiver upon any indication of a questionable relationship with the elder.

8. HOW TO REPORT ELDER FINANCIAL ABUSE

New York Adult Protective Services (“APS”) is part of the New York State Office of Children and Family Services.  Their services are available to adults 18 and older. APS investigates adults’ needs, evaluates risks of harm, counsels victimized adults and their families, and provides case and financial management services.

  • To find your local county Department of Social Services Adult Protective Services search here: http://ocfs.ny.gov/main/localdss.asp.
  • To find specific telephone numbers for your local APS unit, call 1-800-342-3009 (press 6), available 24 hours.
  • In New York City, contact the Human Resources Administration (HRA), Central Intake Referral at 212-630-1853

New York Social Services Law 473-b provides immunity from civil liability to any person who, in good faith, refers an adult whom they believe may need protective services.  APS will commence an investigation as soon as possible, and will visit the referred adult within three working days. An assessment will be conducted concerning the adult’s impairments, risk of abuse, willingness to accept help, and the ability of others to assist in protecting the individual. If a crime is suspected, a referral will be made to the police. If a referral is received for an adult who is not impaired, APS will link him or her to appropriate community services, or another agency such as the New York Office for the Aging.

  • To report abusive financial products or services targeting the elderly call Department of Financial Services at 1-800-342-3736
  • You can also file a complaint on the Department of Financial Services website: http://www.dfs.ny.gov/consumer/fileacomplaint.htm
  • For questions related to investments, FINRA has a toll-free FINRA Securities Helpline for Seniors, offering assistance from FINRA staff. The Helpline number is 844-57-HELPS or 844-574-3577. FINRA staff is available to answer questions from 9am – 5pm ET, Monday through Friday.
  • To report potential criminal conduct, call your county district attorney or the Attorney General’s Office at 1-800-771-7755.

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