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Bar News - October 6, 2006

Elder Law Preventing and Remedying Financial Exploitation of the Elderly


 David P. Eby
David P. Eby

        As the Baby Boom Generation enters its “golden years,” incidents of elder financial exploitation are on the rise, both in New Hampshire and across the nation. Although law enforcement is available as a recourse after elder abuse has been detected and reported, other mechanisms—some involving court involvement and some not—are available to protect elderly clients and to prevent and remedy financial abuse. This article briefly explores some of these mechanisms and how they can be implemented effectively.


Financial Exploitation

        First, it is helpful to define what exactly is meant by elder financial exploitation. The National Center on Elder Abuse defines it simply as: “the illegal or improper use of an elder’s funds, property or assets.” Financial exploitation is far more common than physical or emotional abuse, and the perpetrator is often a family member or another person who has developed a close personal relationship with the elder, such as a caregiver. It is the individual who has gained the trust of the elder, in a fiduciary relationship—with easy access to check books, credit cards and bank accounts—who is the most likely to exploit that relationship. This trusting relationship makes the exploitation, or theft, easy. Funds are often taken in small increments, making detection difficult. Some signs of financial exploitation include sudden changes in banking practices, changing of estate planning documents, changes in personality or appearance, and isolation or withdrawal from family members.


Power of Attorney

        Several mechanisms may be used to protect the elderly from financial exploitation. The most well-known of these is the durable power of attorney, which grants authority to another to manage and oversee the elderly individual’s finances. It essentially will allow the agent to do all the acts the principal could do, and may enumerate specific powers such as the power to open bank accounts, sign checks, invest in securities, and the like. It may even specifically authorize the agent to make gifts, including gifts to the agent. It is “durable” in that the power of attorney continues to be effective after the principal becomes incompetent.

        Given the broad powers an agent may have under a power of attorney, it is easy to see how it is ripe for abuse. There are few built-in safeguards. There is no automatic court or government agency supervision and the agent has no duty to provide an accounting to the elderly individual unless specifically requested (which usually is not done until it is too late).

        There is also no easy way to notify banks or other institutions when the power has been revoked. For these reasons, the power of attorney can just as easily be used as a vehicle to perpetrate financial exploitation as it can to prevent abuse. However, the New Hampshire Power of Attorney statute (RSA 506:7) at least provides some leverage to remedy financial exploitation by an agent. The statute allows a range of “interested parties,” including a spouse or child of the principal, beneficiaries of the principal’s will, health care providers and the Department of Justice, to bring a petition in Superior or Probate Court against the agent. The court may limit or terminate the agent’s authority and may compel the agent to submit an accounting of the principal’s assets. Attorney’s fees are also available under the statute.

        In my practice, I often see family members abusing the powers granted under the power of attorney and, too often, I see the elder’s assets dissipated as a result. I counsel my institutional clients to always request a copy of the power of attorney form to make certain the purported “agent” indeed has the authority to act on behalf of the principal. It is amazing to me how many banking and other institutions do not make such requests. It is not too uncommon for an individual to represent that he or she has the power of attorney, when in fact the principal never signed the power of attorney form, or the form is otherwise somehow deficient.



        An alternative approach to safeguard against financial exploitation of the elderly is a guardianship. Guardians are appointed by a court and charged with taking control of the physical and financial care of the “ward.” The guardian’s powers are extensive and include the right to custody of the ward and/or the right to establish the ward’s place of abode. Guardians can also be charged with providing for a ward’s care and comfort, protecting his or her civil rights and, where permitted by the court, authorizing medical care. With respect to a ward’s financial estate, guardians are duty-bound to oversee and protect the ward’s real and personal property and to manage the ward’s financial matters, including testamentary planning. Guardians are required to file annual accountings and inventories with the court, which, unlike the power of attorney, provides a much greater degree of oversight of the guardians’ activities.

        Guardianships are involuntary proceedings and reserved for those cases where the elderly individual is incompetent and unable to care for his or her own well-being and affairs (RSA 464-A).

        The procedure for establishing a guardianship is somewhat involved, as it requires demonstrating to the court the elderly individual’s incompetence and the need for guardianship. The individual appointed as the guardian will also be required to post a bond, which can be used to satisfy judgment for any wrongdoing by the guardian. Should the guardian take advantage of his/her position, it is this bond that may be the only “asset” available to collect on any eventual judgment. RSA 464-A:39 provides that anyone “interested in the ward’s welfare” has standing to bring a petition to terminate the guardianship and to seek an order for further accounting of assets.



        A conservatorship is another available mechanism (RSA 464-A:13-16). Though not often-used, it may serve to protect elderly individuals from financial abuse. Distinct from the guardianship, a conservatorship is a purely voluntary relationship entered into between a ward and the conservator, whereby an individual deems himself/herself unfit to manage his/her own financial affairs. A conservatorship is limited to financial management. The duties of the conservator over the ward’s estate are otherwise the same as that of a guardian, i.e., to manage and protect the ward’s financial affairs and, if ordered by the court, to provide an accounting. The conservatorship will end either by order of the court or upon the death of the ward and appointment of an estate executor.

        As with a guardian, the court appointed conservator shall post a bond with the probate court. In a case of abuse by the conservator, the bond should satisfy, at least in part, any judgment against that individual. The importance of the bond cannot be overstated. In most cases I have been involved with, once a fiduciary takes the money, it is gone, and collecting any judgment is difficult. The bond provides a needed recourse for collection.



        Often used as a method of probate avoidance, a trust is another mechanism that may also safeguard the assets of the elderly. This mechanism, which does not require involvement of the court to establish, allows an elderly individual to appoint an individual or financial institution to serve as trustee and to manage the elderly individual’s assets. The trustee’s powers are outlined in the document creating the trust. Trustee powers are also granted by statute and, unless limited by the trust document, empower the trustee to collect trust property, continue the business of the trust, maintain real estate, enter leases, insure property, and pay taxes on behalf of the trust beneficiary, among other powers.

        As with the power of attorney, I often see trustees who take advantage of their powers. RSA 564-B:10-1001 (the Uniform Trust Code) [see also RSA 564:9] allows a beneficiary or co-trustee to bring an action against the trustee to compel the payment of funds, to provide an accounting or to prevent the trustee from removing or selling property. The Uniform Trust Code provides for the recovery of funds improperly taken or needed to restore the trust, or the amount the trustee may have profited from a breach of duty—whichever amount is greater (RSA 564-B:10-1002). The statute also provides for an award of attorneys’ fees at the court’s discretion (RSA 564-B:10-1004).

        Unfortunately, financial exploitation of the elderly is a growing problem and the civil cases stemming from this abuse are increasing. Given the growing number of elderly in our state, and the wealth of the Baby Boom Generation, I see the problem worsening before getting better. Despite this grim projection, proper use of the above mechanisms to protect and prevent financial exploitation and the remedial measures available under statutes governing powers of attorney, guardianships, conservatorships and trustees, gives practitioners some tools to help fix the problem.


David P. Eby is an officer at Devine Millimet & Branch, P.A. in Manchester, where he serves as chair of the firm’s Probate Litigation Group and handles probate and commercial litigation matters. He can be reached at or 603-695-8518.





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