Distinguishing Asset Preservation Planning from Elder Financial Abuse

By: Carolyn L Kenton and Amy E Dougherty, Bluegrass Elderlaw, PLLC

We, as elder law attorneys, are often asked to explain the differences between a legitimate asset preservation plan and elder financial abuse. The key factors to look for are the intent of the elder adult and the intent of the recipient, usually an adult child or children, who are involved in transfer of assets.

Intent by legal definition means the exercise of intelligent will, the mind being fully aware of the nature of the consequences of the act which is about to be done.

So we ask, is the elder transferor fully aware of the intended results of the gift? Did the elder participate fully and consciously in the plan for the transfer? Was the transfer permitted under a power of attorney document which authorizes gifts? Was the recipient of the gift a trusted and responsible adult whose stated intention is to use the gift for the benefit of the elder adult, should that become necessary? Is the gift retained in a segregated account to be available for return to the elder adult if the need arises? Is the gift part of an overall plan to protect the elder’s accumulated resources for her family’s future or to place the assets in a protected environment for future supplementation of the elder’s life style? Was the gift part of the family’s decision to protect assets of a mentally disabled person or elder with dementia or their spouse? If these questions are answered in the affirmative, then we are talking about asset preservation.

On the other hand, have funds been converted from the elder’s ownership for nefarious reasons?  Financial abuse is the theft or embezzlement of money or any other property from an elder.  Has the wealth been taken from the elder adult by intimidation or through persistent solicitations on the phone or in the mail? Does the recipient of the funds only visit the elder when she is in need of “just a little loan” from Mom? Is the person receiving the funds a new friend or a caregiver? Does the elder appear to be confused or directed in her responses, especially when attempting to manage her banking? Has the money been transferred with no protection of a segregated account and no intention to retain it, in case the elder were to need it? Have the funds been spent on or for the benefit of the recipient of the funds? Has the elder been brought to the attorney’s office for a power of attorney “over” her? Does this would­­-be power of attorney replace a long-standing agent established in another power of attorney document? Is the gift of assets out of sync with the elder’s previous estate plan? Does the elder understand that beneficiary or payable upon death designations on bank or investment accounts circumvent the provisions of her will? If these questions are answered in the affirmative, then it is likely that financial abuse may have occurred.

Most elders still have decisional capacity and the free will to gift assets unequally among their intended beneficiaries and heirs.  Just because an individual family member receives a larger gift than another does not necessarily mean that elder abuse has occurred.  Each situation must be viewed as unique and the facts of the case examined to determine the intent of the gift.

Families who may want to engage in asset preservation planning would be well advised to seek competent legal advice, preferably from an elder law attorney knowledgeable in federal Medicaid rules and the use of such planning tools.