MSTR Cat

Trust Law/Level IV · Trusts that care/4.2 Old age and long-term care/Lesson 6

Elder financial abuse and the trustee’s shield

Common forms of elder financial abuse, how trust arrangements can add oversight, and where to report concerns in the United States.

Education, not legal advice. Trust law changes from country to country and state to state, and the right structure depends on your situation. Anything you sign should be drafted or reviewed by a qualified lawyer where you live.

The lean path

The cheapest, lowest-tax, simplest and most private route the law allows, best first. Each step names the rule it rests on and the condition that keeps it lawful.

  1. Free first step: freeze the older person’s credit at Equifax, Experian and TransUnion; the FTC says freezing and lifting cost nothing and do not affect the score, though each bureau must be contacted separately.
  2. At brokerages, FINRA Rule 4512 has firms ask for a trusted contact person, and Rule 2165 lets them hold disbursements from accounts of people 65 or older for up to 15 business days, extendable; naming a contact is optional and free.
  3. While a living trust is revocable, UTC §603 sends the trustee’s duties only to the settlor, so a clause giving a named relative copies of statements, or naming co-trustees, adds oversight; state versions differ.
  4. Reporting costs nothing: Adult Protective Services takes reports, the Eldercare Locator (1-800-677-1116) finds local services, and 911 handles immediate danger. Some professionals have mandatory reporting duties under state law.
  5. A professional trustee is cheaper overall only for larger estates, distant families or conflict; fees reduce care money. A trustee suspected of misconduct can be removed by a court on a beneficiary’s petition.

MaterialsA copy of any existing trust or power of attorney documentsContact details for your local Adult Protective Services office, which the Eldercare Locator (1-800-677-1116, eldercare.acl.gov) can help you findRecent bank or account statements, if the person is comfortable sharing them

Wonder

  1. What specific signs indicate that an elderly relative is being financially exploited?
  2. How does a professional trustee differ from a family member as a safeguard?
  3. Where can I report suspected elder financial abuse if I am not the legal guardian?

Explore

  1. Elder financial abuse means taking or misusing an older person’s money or property. Common forms include exploitation by family members, caregivers or others in a position of trust; undue influence, where someone pressures or isolates a person to change a will, trust or account; and scams by strangers, such as fake prizes, romance scams or people pretending to be government officials. It can be hard to spot because it often comes from someone the person knows. Respect matters too: an older person may make choices others disagree with, and that alone is not abuse.
  2. A trust can add structure. When assets are held by a trustee, the trustee must follow the trust terms and owes fiduciary duties of loyalty and prudence (lesson 2.3.6). With a revocable living trust, the settlor is often the first trustee, and a successor trustee takes over on incapacity (lesson 3.1.4). Some families name co-trustees so that two people see the accounts, or a professional trustee, such as a bank trust department or a professional fiduciary. No structure prevents all abuse; a dishonest trustee is itself one of the risks.
  3. Reporting duties help, within limits. Under Uniform Trust Code §813, which many states have adopted with changes, a trustee must keep qualified beneficiaries reasonably informed and send current beneficiaries a report at least annually. But under UTC §603, while a trust is revocable the trustee’s duties are owed to the settlor, so family members generally do not receive these reports during that time. Some settlors therefore provide in the trust that a named person, such as an adult child or adviser, receives copies of statements. State versions differ.
  4. Common red flags include sudden changes to a will, trust, power of attorney or account beneficiaries; a new friend or caregiver who limits contact with family; unexplained withdrawals, transfers or unpaid bills; missing belongings; and an older person who seems fearful or cannot explain their own finances. The Consumer Financial Protection Bureau (CFPB) publishes free ‘Managing Someone Else’s Money’ guides for agents under a power of attorney, court-appointed guardians, trustees of revocable living trusts and government fiduciaries, explaining their duties and how to watch for exploitation and scams.
  5. In the United States, Adult Protective Services (APS), run by state and local governments, responds to reports of abuse, neglect and financial exploitation of older adults and adults with disabilities. The Eldercare Locator, a public service of the federal Administration for Community Living (1-800-677-1116, eldercare.acl.gov), can help find local services, including APS. If someone is in immediate danger, call 911. Anyone can usually make a report to APS; some professionals are required to report under state law, and those rules vary by state.
  6. Professional oversight costs money: trustee fees vary by state, provider and the size of the trust (lesson 2.2.3), and they reduce what is left for the person’s care. Families weigh this against their own circumstances, such as distance, family conflict or the size of the estate. Where a trustee is suspected of misconduct, beneficiaries can ask a court for remedies, including removal (lesson 2.3.7). An elder-law attorney is typically involved when documents are changed or a court is needed. This lesson describes options; it does not suggest which suits your family.

Key facts

  • Common forms of elder financial abuse include exploitation by people the older person trusts, undue influence and scams by strangers.
  • Under UTC §813, a trustee must keep qualified beneficiaries reasonably informed and report to current beneficiaries at least annually; states vary.
  • Under UTC §603, while a trust is revocable the trustee’s duties are owed to the settlor, so family members generally do not receive §813 reports then.
  • Adult Protective Services, run by state and local governments, responds to reports of financial exploitation of older adults and adults with disabilities.
  • The Eldercare Locator (1-800-677-1116, eldercare.acl.gov), a service of the Administration for Community Living, helps people find local services, including APS.
  • The CFPB’s free ‘Managing Someone Else’s Money’ guides cover agents under a power of attorney, guardians, trustees and government fiduciaries.

Exercise nine, six, three, one

9CollectList up to 9 people or organizations involved in an older relative’s finances (some families have fewer), such as family members, caregivers, banks, advisers, agents under a power of attorney or trustees.
6ClusterSort them into 6 categories: family, paid caregivers, financial institutions, professional advisers, people holding legal authority (agent, trustee or guardian), and others.
3DistillReduce the 6 categories to 3 groups: people who can see the accounts, people who can move money, and people who currently check on either.
1CrystallizeWrite 1 sentence naming one gap in oversight you noticed and where you could find information about it, such as a CFPB guide or the Eldercare Locator.

Fact check

Dates, figures and claims checked against the published sources listed below.

Open in the interactive academy →

PT ES ZH JA KO RU DE FR MS