As Canada’s population ages, the risk of financial abuse against seniors is on the rise. According to the Canadian Anti-Fraud Centre’s 2022 annual report, Canadian seniors (those older than 60) made 17,000 fraud reports to the tune of $137.8 million in 2022.
“The reality is that we’re going to be dealing with the effects of the mass population hitting cognitive decline due to aging like we never have before,” says Jason Pereira, senior partner and financial planner at Woodgate Financial in Toronto. “Any Western nation with a baby-boom population that has longevity is going to have that problem.”
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According to the federal government, financial abuse is the “illegal or unauthorized use of someone else’s money or property,” and includes “pressuring someone for money or property.”
While the types of fraud cited by this group encompass everything from romance fraud and theft of personal information to prize and merchandise fraud, one of the most common yet least discussed types is familial elder financial abuse; when family members or caregivers take advantage of a senior’s finances for their own personal gain.
Some signs that the seniors in your life may be under financial pressure from family members include lending or giving away their money, possessions or property, making or changing wills or powers of attorney, and signing legal and financial documents that they don’t understand.
Pereira recalls a case with a senior who had one branch in the family pressuring her for money with hard-luck stories. “‘If we don’t get this, we’re going to get kicked out.’ At the end of the day, they were causing this woman a lot of mental distress, and they were potentially endangering her retirement. That is something that happens quite frequently.”
How can you protect your loved ones and yourself from being taken advantage of financially as you get older?
Come to terms with aging
“One of the things that seniors have to come to terms with is aging,” says Pereira. In practice this looks like ensuring your paperwork is in order so your family, lawyer and advisers know your wishes and can run interference against financial abuse. Having these documents in order allows you to be the decision-maker for yourself when you’re able to rather than having decisions forced on you due to physical or mental decline.
Get a power of attorney
A power of attorney is a legal document that you sign that gives someone the authority to manage your money and property on your behalf if you’re unable to manage them yourself due to illness or cognitive decline.
Elke Rubach, president of Rubach Wealth: Holistic Family Advisors, says that a power of attorney isn’t bulletproof, as the person holding the power of attorney can still take advantage, say through forging a senior’s signature. However, it can definitely act as an added layer of protection in preventing a senior from being taken advantage of or from spending all their money recklessly. The key is to choose wisely.
Lay out your plans with your family (and your adviser)
Rubach says getting the family together and talking about money is critical to ensuring your elderly loved ones are protected. “Because if dad dies and mom gets all the money, there could be a son taking advantage (of their relationship).” By having open conversations, everyone knows what you want done with your money and property so any suspicious behaviour among family members can be identified quickly.
Rubach adds that it’s important to be transparent with your adviser about your plans for your finances while you’re still of sound mind, as they will notice changes in spending habits.
Your trusted contact person
If you work with or are considering working with an adviser, you may have been asked about a trusted contact person. If your adviser suspects that you’re vulnerable due to cognitive issues or illness, they can reach out to the trusted contact person to confirm or deny their impression.
The trusted contact person can’t access your accounts or make any decisions about your investments, but if they confirm any changes, your power of attorney may go into effect.
“The addition of the trusted contact was a fantastic step forward in consumer protection, because before that we were in a tough position where, technically, we would have to violate privacy in order to alert people as to what was going on,” says Pereira. He says having permission to speak to someone you’ve authorized can make all the difference when it comes to things being caught and prevented versus people being drained of their investments.
Family or professionals?
When it comes to choosing people to act as your power of attorney or trusted contact person, both Rubach and Pereira say not to pick someone who has financial issues and may have a vested interest in getting money from you.
“I think the best first stop normally is spouse, children or parents,” she says. “But you also have kids they cannot trust to give all the information. I have a case of a client where the kids are an absolute catastrophe when it comes to finances because they don’t understand the value of money.”
In a situation like that, Rubach says there are professional organizations that will manage your finances and estate for a fee of between two to five per cent of the portfolio.
Both experts say that while there are some guardrails in place to prevent financial abuse of the elderly, there is room for improvement.
“I think that financial institutions really need to think through how they can create a system where individuals are supported by their support system to prevent abuse,” Pereira says.
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