2 ways to protect your elderly loved ones’ financial interests
Watching parents mentally decline can be heartbreaking. A power of attorney or guardianship may protect them from being financially exploited.
It can be difficult for New York residents to watch their parents age. Their parents raised them with compassion and wisdom, but all too often, senior citizens’ cognitive abilities decline and they become vulnerable to abuse and exploitation. Fortunately, there are estate planning options to protect senior citizens from losing their assets to scammers and others who prey on the elderly and vulnerable.
Unfortunately, elder financial exploitation is not uncommon. The National Adult Protective Services Association warns that one out of every 20 senior citizens across the United States may be the victims of financial abuse, and these numbers are likely to be underreported. Additionally, most elders are taken advantage of by someone they knew and trusted. Adult children or grandchildren who are worried about an elderly loved one with failing cognitive abilities being financially abused might consider a power of attorney or guardianship to protect their relative.
Power of attorney
A power of attorney is granted by someone before his or her cognitive abilities decline. It permits an agent to make financial decisions for the senior. For example, someone in the early stages of dementia or Alzheimer’s disease might sign over power of attorney to his eldest child, thus giving the child permission to make financial decisions on his behalf when he is no longer able to do it himself. It is important that a “durable” power of attorney be used so that any subsequent disability will not affect the validity of the powers granted.
In NY, the Power of Attorney form has been codified in statute and consists of a main portion of the form and a Statutory Gift Rider (SGR). It is imperative that this Statutory Gift Rider be reviewed prior to execution of any Power of Attorney as it expands drastically on many of the powers to be granted. One such power is gift giving/transfers which are limited to $500.00 without the execution of the SGR.
Without a POA in place, an individual is relegated to having a Guardianship in order to have their financial decisions made for them.
The court can grant legal guardianship over an incapacitated adult to make financial and everyday decisions for that person. This is often done when the incapacitation was unexpected or after someone becomes aware that his or her loved one is no longer able to make informed decisions and does not have a power of attorney in place. For example, a stroke may leave an elderly parent with limited cognitive faculties. Or, a parent with early onset dementia may have been tricked into paying hundreds of dollars to a sweepstakes scammer, which was the first sign anyone in the family knew her mental acuity was declining. By this point, the elders may be unwilling or unable to sign an informed power of attorney, making it necessary for their loved ones to petition the court for guardianship. A Guardianship is a time consuming, expensive and intrusive proceeding involving often many thousands of dollars to set up and maintain and constant Court oversight – all of which could be avoided with advance planning.
Helping elderly loved ones prepare for the final stages of their lives is an uncomfortable, but necessary, part of life. It may take a weight off everyone’s shoulders to consider powers of attorney and other estate planning options that prevent senior citizens from being financially abused. Since estate planning can be complicated, New York residents may want to seek the advice of an experienced estate planning attorney.