How Living Trusts Can Help Seniors

It’s an unfortunate fact that seniors can be prime targets for financial abuse and scams. Sadly, the elderly are often taken advantage of by strangers — and sometimes even their own family members. That’s why it’s important that planning is in place to help seniors protect themselves and their assets.

As we age, it can become increasingly difficult to manage our assets. Most of us will, at some point, need assistance with these details to help ensure that our financial and other assets aren’t depleted. If you or an aging loved one are looking for ways to safeguard assets, a Living Trust is often the best way to do so. Living Trusts allow seniors to rest assured that their finances and assets are managed by a trusted person.

What is a Living Trust?

Living Trusts help protect and manage the assets of those who cannot do so themselves due to age, illness, or disability. Many seniors assume that a will is the only protection they need. However, trusts are designed to safeguard the assets of the living, while wills only outline what happens to a person’s assets when the pass away. Furthermore, wills must go before a probate court and taxes must be paid on inheritances, while Living Trusts allow beneficiaries to avoid probate after their loved one’s passing.

To establish a Living Trust the owner, or grantor, places assets within the trust. The grantor then appoints a trustee to manage it and names beneficiaries to receive the assets of the trust when the time comes.

There are different types of Living Trusts. Let’s take a look at each and the ways these trusts can benefit seniors.

Testamentary Trust

A Testamentary Trust protects an elderly person’s assets when a spouse dies. Assets of the deceased are transferred into a trust — enabling the appointed trustee to make all financial decisions regarding those assets. This helps a surviving spouse by protecting him or her from fraud or mismanagement of assets. Trustees can help the surviving senior generate income from remaining assets via sales or investments and take advantage of tax benefits.

Revocable Living Trusts

A Revocable Living Trust safeguards seniors by making it more difficult for non-trustee family members to mismanage money or assets. The grantor (senior) can amend or revoke the trust at his or her own discretion without the consent of the beneficiary. This type of trust allows the grantor to stay in control of assets by either serving as a trustee or appointing one. In this case the grantor, serving as trustee and beneficiary of the trust, appoints a successor in the event he or she becomes incapacitated or dies. This appointed person is then responsible for disposal of the trust’s assets.

Irrevocable Living Trusts

An Irrevocable Living Trust is one that cannot be changed or revoked by the trustmaker. This means that the grantor/trustmaker gives up his or her rights to the assets once they are transferred. Seniors over 65 who are eligible for Medicaid often choose to transfer assets into an Irrevocable Living Trust to avoid having to dispose of assets in order to remain eligible for Medicaid coverage or long-term care benefits.  Once assets are in an irrevocable trust, they cannot be counted for Medicaid eligibility purposes, but there could be a penalty for transferring assets to an irrevocable trust.

An elder law attorney can assist in determining the best way to set up this type of trust and how to best transfer assets based on Medicaid stipulations. An Irrevocable Living Trust can provide income for seniors and their spouses. It also protects their property and other assets from being seized to pay for medical costs, without impacting Medicaid eligibility. This type of trust can also remain in place for a surviving spouse after the grantor’s death.

The sooner assets are placed in an Irrevocable Living Trust the better, as a penalty will be assessed by Medicaid during the first 5 years the trust is in existence (if Medicaid is required during that time).

Ultimately, Living Trusts give seniors more control over their assets than a will, allowing them to set parameters and stipulations and appoint a trusted advisor to help them make decisions. If you or your loved one would like more information about setting up a Living Trust, we can help. Contact our firm today to discuss how we can tailor a trust to your specific situation and needs.

Financial Elder Abuse: Awareness and Prevention

Elder financial abuse has been a growing problem of the past decade. The financial exploitation of older or vulnerable adults can take many different forms. This portion of the population can be exploited by strangers of professionals who deal with their assets, and even trusted family members and friends. It is a problem to which a solution has been difficult to find because many exploited people are ashamed that they were able to be taken advantage of and therein do not report the crimes. Unfortunately, this type of abuse not only affects the finances of the victim, but also their mental and physical well-being. Let’s take a look at the types of financial elder abuse and some measures that can be and are being taking to prevent this type of abuse.

Types of Financial Elder Abuse

The first type of financial elder abuse is committed by strangers. This often includes phone scams. The grandparent scam is one tactic strangers use for financial exploitation of seniors. In this scam, the senior is called and told his or her grandson is in jail and needs money immediately. Many seniors fall prey to this scam because they want to help their grandchild.

Charity scams are another common phone scam. The scammer calls and asks for money for what seems to be a very good cause in order to get money from the senior. Disasters are often used in this type of scam.

Home repair con artists are another way vulnerable adults succumb to financial abuse. They promise to provide a service and ask for payment up front. Then they never return to provide the service.

Financial elder abuse can also be committed by “professionals”. These predators often use lending schemes to pressure elders into taking inappropriate loans or reverse mortgages that do not benefit the senior. Email scams concerning false bank accounts are used to siphon money from vulnerable adults. Investment schemes are also used to manipulate seniors into believing they will get unrealistic returns on certain investments. Identity theft is another way that these so-called professionals take advantage of senior adults. They use the identity of the senior to fraudulently open credit card accounts. Medicare scams are some of the costliest scams by professionals.

Finally, financial elder abuse is commonly committed by family members and close friends. These scams can take many forms. Some care takers will begin small, keeping the change from running errands. Often the Power of Attorney will use the power given by the individual to control the finances as an opportunity to steal the elder’s money and use it for his or her own purposes. Family or close friends also commit financial elder abuse when they use ATM cards or steal checks to gain access to money from the vulnerable adult. There are many variations on these types of abuse.

Protecting Our Elders

One way to help stop financial elder abuse is to let our elderly loved ones know that there is no reason to be ashamed to report possible financial abuse. These thieves and scammers are smart and know how to play the game to take advantage of people. Another way is to stay on top of accounts and work with law enforcement and banking officials to keep track of accounts and to report anything that looks suspicious. It is important for family members and friends to have checks and balances when taking control of someone else’s money and assets. Have more than one person who looks at account information and possibly shares control. Recently the Senior Safe Act was signed into law. This is a step by the federal government to help protect elders from financial abuse. Under the Act, banks, credit unions, investment advisers, broker-dealers, insurance companies, and insurance agencies are protected from being sued for reporting suspected fraud, but their employees must be trained to understand the warning signs. It empowers financial service representatives to identify warning signs and help keep vulnerable adults from becoming victims of financial abuse. There is no easy answer, but it is hopeful that awareness will help financial elder abuse to decline.

If you have any questions about something you have read or would like additional information, please feel free to contact us.

New Law Encourages Reporting of Elder Financial Abuse

President Trump signed the Economic Growth, Regulatory Relief, and Consumer Protection Act into law on May 24, 2018. The Act contains a section that was once a stand-alone bill from Sen. Susan Collins (R-Maine) which is designed to encourage the reporting of elder (age 65 and older) financial abuse witnessed by financial institutions. The Act does not mandate that these institutions report financial abuse directed towards elders to avoid penalties, rather it gives them an incentive to do so. The Act provides immunity from any lawsuit alleging elder financial abuse if the financial institution reports it to state or federal law enforcement agents. To qualify for immunity, a financial institution has to create and administer a training program for employees to teach the employees how to spot elder financial abuse. This Act provides immunity to financial institutions because they are often the first to witness elderly clients making unusual transactions that may be linked to a scam.

 

The Act was inspired by the Senior$afe program in Maine. Senior$afe encourages state regulators, financial institutions, and legal organizations to work together on educating banking and credit union workers to spot and stop elder financial abuse. When elders have a trusted third party to talk to about their finances, they are less likely to fall victim to elder financial abuse, and this program has found success in reducing the amount of elders who fall victim to these scams.

 

However, this isn’t an entirely new idea. In 2016, the Consumer Financial Protection Bureau (CFPB) issued a report that found how reporting elder financial abuse has already become a respected norm in hundreds of counties around the country. The report found that these counties created voluntary community-based partnerships to prevent, detect, and respond to elder financial abuse situations. These partnerships often include entities such as financial institutions, adult protective services, and law enforcement. The CFPB found that these partnerships can be incredibly effective in protecting their elderly citizens. What’s more, in states without elder financial abuse protection laws, these community efforts have created a sense of responsibility within these counties to protect their most vulnerable from financial scams, without reward or threat of prosecution against financial institutions. Following this report, the CFPB released a resource guide and best practices to help and encourage other counties across the US to adopt their own protection partnerships. Among other recommendations, the CFPB encourages communities to directly include law enforcement and financial institutions in these partnerships. Financial institutions are often the first to spot these cases, and law enforcement has an obligation to investigate once a claim is made. Also, the CFPB recommends that partnerships which serve diverse areas engage with groups that are already entrenched in the community, such as service groups or faith-based organizations.

 

Protecting our most vulnerable is important to providing a safe and prosperous society for all citizens. These community-based partnerships and the Economic Growth, Regulatory Relief, and Consumer Protection Act are both steps in the right direction towards protecting those who aren’t able to protect themselves. If you have any questions about something you have read, please do not hesitate to contact our office.

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