Prevention of financial abuse of people living with dementia

The World Report on Violence and Health (2002) defines elder abuse as :

“a single or repeated act, or lack of appropriate action, occurring within any relationship where there is an expectation of trust which causes harm or distress to the older person”

Elder abuse can take many forms including physical psychological emotional sexual and financial abuse. It can also be the result of intentional or unintentional neglect.

World Health Organisation defines financial abuse as “the illegal or improper exploitation or use of funds or resources of the older person.

The purpose of this paper is to outline some recommendations as to how the laws in NSW could be modified to provide better protection for an older person who is the subject of financial abuse. This abuse is often perpetrated by someone they know, either family or friends, who may have been appointed their enduring power of attorney.

Power of Attorney

An enduring power of attorney appoints a person to manage the older person’s legal affairs on their behalf and continues to have operation when they no longer have capacity. An Enduring power of Attorney gives the attorney authority to manage legal and financial affairs including buying and selling real estate, shares and other assets, operating bank accounts and spending money on the older persons behalf. The attorney has the same powers as the older person to deal with the person’s financial affairs and has a legal obligation to act in their best interests.

An enduring power of attorney can be specified to commence when a person lacks capacity to manage their financial affairs as determine by a general practitioner in consultation with a geriatrician.

When an attorney acts outside the scope of the power and the older person lacks capacity, this is theft by the attorney against the older person. An attorney cannot give gifts to themselves or third parties or gain a benefit to themselves, where the older person lacks capacity, unless the gift or benefit is authorised in the power of attorney document.

Recommendations to Regulate Operation of Enduring Power of Attorney

  • A register for enduring powers of attorney be implemented at the Guardianship Division of the NSW Civil and Administrative Tribunal. In this way solicitors can conduct searches determine who the attorney is for the older person with capacity issues in order to make enquiries about management of their affairs. If the attorney is not fulfilling their responsibilities applications can be lodged for a review of these documents by persons concerned for the welfare of the principal, quickly.
  • If abuse has occurred by the attorney under an Enduring Power of Attorney and they have failed to act in the best interest of the older person or outside the scope of the power of attorney, there may be a criminal offence and certainly grounds for civil action. It is suggested that it would assist police if the Power of Attorney Act 2013 set out a list of criminal offences where an attorney breaches their obligations.

 Potential Offences:

  • Protecting interests of principal and keeping funds separate;
  • Not giving gifts to third parties or the attorney unless expressly authorised
  • Keeping any property received on behalf of the donor in safe- keeping
  • Keeping an adequate account of dealing with principals assets
  • Avoiding abusing his position by obtaining a profit or causing a conflict between the principal’s interests and the attorney’s interests.
    • Dedicated Police positions should be created for vulnerable and elderly people with specialist training on prosecuting attorneys who misuse the authority who have experience in dealing with the elderly and challenges of dealing with an older persons with varying levels of capacity. Evidence may be able to be gathered on basis of written records (bank statements) in some cases rather than a statement from the older person.
    • Attorneys should be educated on their roles as attorney and the circumstances that will constitute a conflict of interest and therefore a breach of their fiduciary obligations. If the attorney or a third party is to obtain a benefit from the principal’s funds then this must be expressly authorised in the document otherwise the attorney is in breach of their fiduciary obligations to the principal. Some potential conflicts that lead to financial exploitation are:
  • Attorney spouse selling joint owned property to place principal in aged care and purchase home in own name with main amount of proceeds.
  • Attorney carer remaining in home rent free whilst principal placed in aged care.
  • Attorney accepting contribution of principal to extensions in home and then placing principal in aged care.
  • Attorney taking out reverse mortgage on principal’s home to pay self for caring services provided to principal in the home.
  • Attorney cannot gain these benefits from role as attorney unless expressly authorised.

It is suggested that if the attorney’s signature was also required to be witnessed by a solicitor upon acceptance of the appointment this would give a solicitor an opportunity to explain conflicts to the attorney prior to their acceptance of the appointment.

TARS was a member of the advisory group for an Alzheimer’s Australia NSW research project on preventing financial abuse of people with dementia. The findings and recommendations from this research project will be published in Alzheimers Australia NSW discussion paper to be launched on June 18 at NSW Parliament House.

Written by:

The aged rights service logoMelissa Chaperlin, Solicitor

The Aged-care Rights Service

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