Protect Aging Clients Against Undue Influence

Financial elder abuse is unfortunately far too prevalent in our society.

The Centers for Disease Control and Prevention defines such abuse as the "illegal, unauthorized, or improper use of an elder's money, benefits, belongings, property, or assets for the benefit of someone other than the older adult," and estimates that more than 500,000 older Americans are victims every year.

This abuse also includes undue influence, with those responsible ranging from the victim's own children to a neighbor or acquaintance who see an opportunity to exploit.

As a life insurance professional, I've had older clients make policy changes regarding who is listed as the recipient of a death benefit — and depending on how those changes are made, it can raise red flags.

Perhaps three children had previously been designated as beneficiaries and an adjustment is made so that one becomes the sole beneficiary.

Did this child convince the parent that they should receive the entire death benefit for one reason or another?

Even more concerning, did the child take advantage of the parent not being of sound mind and influence them to sign documents they didn't understand?

Increasing influence

For financial advisors, it's important to be aware if someone is increasingly influential in the life of your client as they get older, whether or not that person is a family member.

If you're deeply concerned about a situation, I recommend letting others at your firm know about it, from managers to compliance to the legal department.

Depending on the circumstances, there might even be cause to contact local authorities.

If there's a beneficiary change in an estate plan removing a family member, or if a plan previously treated all the children equally but now favors one child, it should at least pique your curiosity and lead you to ask clarifying questions or for a direct explanation.

Similarly, if you see large withdrawals from a client account, asking the client where that money is going could provide you with helpful insight.

Other important steps for advisors to take with older clients include extensive documentation of any meetings, and asking if the client would feel comfortable with family members or friends attending meetings in order to witness what was discussed and verify that the client is of sound mind.

You can also ask if there's anyone else you should be communicating with, such as trustees, and request permission to send communications to them.

Challenging concepts

One of the challenges with financial abuse and undue influence is that they can be difficult to detect and even tougher to prove in court.

If an estate plan has been changed from treating multiple children equally to favoring one child, maybe the client had a good reason for doing so.

Perhaps the other siblings are doing better financially and don't need the money as much, or the parent gets more help from the child who they're now favoring.

It doesn't necessarily mean that financial abuse or undue influence is taking place, but asking targeted questions like, "Why are you choosing to make this change?" can help you find out.

Additionally, I recommend encouraging clients to tell their children about their decisions.

If unequal treatment in an estate plan is discussed ahead of time, the impacted children still might not like what has been decided, but it could prevent them from accusing a sibling of undue influence after the parent passes away.

It's also important to remember that some level of influence wouldn't automatically be considered undue or improper.

If a child simply makes a convincing case to their parent that they deserve to be better taken care of in an estate plan, and the parent agrees, that's probably not undue influence.

At the end of the day, there can be many shades of gray in cases where financial elder abuse or undue influence are suspected.

But by being diligent, attentive to detail, and inquisitive, financial advisors can help prevent their clients from being victimized or at least take appropriate steps to address the situation.

Howard Sharfman is senior managing director and NFP Insurance Solutions. David Handler, a partner in the Trusts and Estates Practice Group at Kirkland & Ellis also contributed to this article.