Protecting clients from financial abuse

Financial abuse has been around for decades. It used to consist of exploiting parents’ and grandparents’ language barriers, taking them to the bank when they couldn’t speak English and making them sign documents. Now children are playing on their parents’ emotions, says Anna Hacker, EQT estate planning senior manager.

There are many ways that children are financially abusing their parents. They could include:

• Controlling where someone might live, to leave more money in the estate
• Pressuring them to act as guarantor for a loan, or to take out a loan
• People authorised to manage their money not acting in their best interest, or using their money for themselves

Hacker says sons are also more likely to be appointed as financial attorneys, while daughters are more likely to be appointed as medical attorneys.

“They might run into strife in their own life…sometimes the parents don’t know that the child is taking advantage of them and using their money.”

“There is a risk by putting all that power into one person’s hands. I would usually recommend appointing more than one…with SMSFs there’s a huge amount of power there for an attorney to come in and take over. It’s not just little bits of money, it can be everything, it can be a person’s whole wealth.”

Age discrimination commissioner Hon Susan Ryan, says a new guide, Your Rights at Retirement, will be helpful for concerned brokers to refer clients to.

Share these tips with your clients, or download the full guide to rights at retirement, here.

1. Get independent legal advice. Clients should never sign any legal documents under pressure without getting advice about the consequences of signing. Make sure they are not relying on family or friends to explain them, and the lawyer they see is independent, and can be spoken to in private.
2. Know what is at stake. Clients need to be aware that it they use their home as security for a loan, they risk losing it and potentially being made bankrupt. They can still be evicted even if they transferred their home to someone else on the condition that they would still have a right to live in it. Find out how their Age Pension will be affected before they agree to anything such as giving away money or selling property.
3. Consider all your options. Before giving others access to their money, they should decide what kind of help they need. This will prevent giving away too much control over their affairs.
4. Get it in writing. If they give money to a friend or family member make it clear in writing whether it’s intended as a gift or whether the money is to be repaid. If there is nothing in writing it will be difficult to show that money was given as a loan and not intended to be a gift.
5. Don’t be afraid to say no. They have the right to protect your own financial security by saying no. 
6. Be vigilant. If others are authorised others to access their finances or they made a loan that they expect to be repaid, ensure they keep a close eye on what is happening. Check bank account statements regularly.