More than a third of the U.S. population is now in the over-50 set. As the seniority trend continues, expect the rate of financial exploitation to rise accordingly. Be aware. Keep tabs on what elders need to look out for. Here, we review the kinds of financial manipulation happening on a large scale today.
Low Offers From Opportunistic Home Buyers
It can happen to anyone. The longer you’ve owned a home, the more likely it is to happen to you. As you read this, sneaky home purchasers are scouring the public property records for homes with low assessed values. They’re looking for homes likely to be owned by older people.
Next come the mailings and calls, containing urgent offers. Are you ready to sell for this big chunk of money? Some offers come with all the paperwork, and instructions on where to sign.
Swindlers even knock on doors, or seek out their marks in churches. These manipulators are betting that at least some of their targets will sign the agreement to sell—without checking their homes’ current values. By the time a hoodwinked homeowner understands what happened, the deed, so to speak, is done.
Pressure From Inside the Circle
Ultimately, age makes us all vulnerable. So, we hear about family members pressing older relatives to transfer the titles to their homes. Or maybe the pressure comes from a gardener who helped an elder after a fall. Maybe it’s a financial advisor the elder has known for decades. Trusted relatives, friends, and healthcare providers are all in positions of influence—for better or for worse. Indeed, nine out of ten exploiters of an elder’s assets are relatives, trustees, or financial advisers.
Undue influence occurs when a person in a position of trust overrides the vulnerable person’s best interests. It is “often linked to impaired cognitive capacity,” the American Bar Association tells us. Yet the influenced person may have sufficient legal capacity to make a binding agreement.
It’s often hard to tell when influence crosses that line to undue. To make matters murkier, undue influence typically happens behind closed doors.
Sometimes the older person gives away decision-making authority to the wrong person, through a legal vehicle known as power of attorney.
When the Power of Attorney Backfires
Often accompanying a will, a power of attorney (POA) names a relative, friend, or adviser as an agent. If a person (called the principal) loses the capacity to make binding agreements, the power of attorney is vital. That said, choosing an agent can backfire on the best of us.
Where allowed by law, some powers of attorney are drafted so someone else monitors the use of the power. Some states use their laws to limit potential POA abuse. In New York, for example, both the principal and agent must sign the POA. If the agent is expected to sell real estate or make large annual gifts to anyone, specific permission must be signed in front of two witnesses. Many states allow for performance reviews, or financial accountings handled by third-party accountants.
What if an exploited elder has already passed away before the trouble was caught? Check state law. California probate laws, for example, treat a beneficiary who exploited the deceased person as having predeceased the elder. The cheater may not continue acting as an agent, or collect anything from the estate.
Definitions: Powers of Attorney
General powers of attorney give an agent wide authority to handle the principal’s transactions, small or large. Actions can include taking items from a safe, agreeing to a home sale, obtaining personal data, and applying for loans or insurance.
Limited (“special”) powers of attorney authorize a particular transaction. For example, it can be difficult to buy a home from a remote location, as the notary will need to adhere to two sets of laws. But because having an agent handle a large purchase involves risk, an absent buyer is well advised to hire an attorney in the town where the home is, to oversee the transaction. Lenders require specific language (such as minimum sale price) when a power of attorney authorizes a home purchase.
A durable power of attorney continues in effect if the principal becomes incapacitated. A non-durable power of attorney does not. Typically, a nondurable power of attorney is used for a specific transaction—for example, in the principal’s absence.
The springing power of attorney, where allowed by law, takes effect when the principal is deemed incapacitated. This allows another person to sell the home when its owner no longer can.
POA Pitfalls to Anticipate
Watch for the following situations:
- A document drafted out of state might not be valid where the property is, because state laws require different language in documents. Moreover, the title insurer may balk at a transaction under a power of attorney,
- A springing POA in a home sale will prompt the title examiner to ask for detailed medical evidence of the owner’s incapacity.
- The POA is attached to a recorded deed, demonstrating proper conveyance. That said, when an adult child transfers title to the parent’s home as a gift, be sure the POA expressly allows gifts of real estate, so that the deed is valid.
Safety Mechanisms
Be safe. A power of attorney to sell a home is potent; it overrides contrary statements in the homeowner’s will. Clear, unambiguous direction to the agent is essential.
Some states allow joint agents in the interest of checks and balances. Yet many people avert conflicts by appointing neutral parties, such as attorneys, to supervise POAs. The POA can set an expiry date, requiring the principal to review and reformulate the arrangement as necessary. And a principal of sound mind may always revoke the POA. For a home sale, the principal should send the agent a revocation notice.
Know that an agent with power of attorney has fiduciary duties, including loyalty and care. So, agents may not sell homes to themselves for unfairly low prices. If they do, another interested party may petition for a court review, and possibly hold the agent liable. A self-dealing agent can be removed, or even face criminal charges for fraud, forgery, or theft. Lawmakers are cracking down on the financial manipulation of elders. Today, if a trusted person takes just $950 in value from an elder, the taker is subject to a federal provision for felony fiduciary abuse.
What To Do If You Have Been Targeted
If you think you might be, or might have been, manipulated:
- Take notes and keep records.
- Avoid signing documents before having them reviewed by your real estate, financial, or legal expert.
- Report deed fraud promptly to the police and your county district attorney’s office. Notify the county register of deeds, and obtain a certified copy of the fraudulent papers for a real estate lawyer’s review. A quiet title action can be useful in addressing deed fraud.
Generally, to prevent title problems, resolve to keep up with your affairs. Schedule regular checks on your property at the county register of deeds’ website. Look for unexpected deeds, liens, loans, or court filings. Does your county offer residents a free notification service? Sign up now, and get prompt notice of anything recorded on your property.