Protecting your clients from financial abuse

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Retirees need to be better prepared when it comes to protecting their wealth – especially from family members, says Anna Hacker, EQT estate planning senior manager.

There are many ways that parents and grandparents are being financially abused by younger members of their family including:

  • 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 the main issue is with Power of Attorneys, and this is where advisers can make a big difference with their clients.

“Unfortunately statistics do show that sons are more likely to be appointed as financial attorney and daughters as the medical,” says Hacker. “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.”

She says that advisers are in a good position to warn clients of the risks, particularly when they have more than one child.

“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 commissions Hon Susan Ryan, says a new guide, Your Rights at Retirement, will be helpful for advisers to refer clients to.

“We would hope the adviser is quite knowledgeable about Centrelink entitlements, concessions, the importance of legal advice, Power of Attorney. There are a lot of separate issues and I think if the adviser read it, it would trigger their thinking about what their client needs to know.”

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.