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Rule designed to stop elder financial abuse

Elderly Americans lose up to $30 billion each year because of financial abuse, according to an estimate. Some of this misappropriation includes presumably trusted family members and others who misused their legal authority. Properly-drafted guardianships should prevent this misconduct, but these relationships may be exploited.

On February 5, a new rule takes effect that requires certain brokers subject to the rules to ask that their customers provide the name of a trusted contact like a friend or family member when a new account is opened. The broker could contact that person if there is reason to believe that the client is a victim of financial exploitation. The rule was issued by Finra, the self-regulatory agency with oversight of brokers.

Brokers can make this request with existing clients when the firm routinely asks for updated information. Clients, however, do not have to provide any contact after the request is made.

Under these rules, brokers may place a hold on account withdrawals if there is a reason to believe there is exploitation. Initial holds last 15 business days but can be extended for another 10 business days. Evidence of possible exploitation includes situations where a client is suddenly withdrawing large sums of money or is has a cognitive impairment.

Thirteen states have enacted versions of the Finra rule and it is anticipated that more states will adopt these rules in 2018.

Congress is also considering a bipartisan bill, the Senior Safe Act, which would allow employees of banks, insurers and other financial institutions to report suspicions about elder financial abuse without being held liable for revealing private information.

Families should take other steps to prevent exploitation and assure that they can safeguard finances. Children or other relatives should know if bills are being paid or there is contact with strangers or new friends who may be taking advantage of the person.

They should assure that there are vital legal documents intact. These include a will, a healthcare proxy and a release form for HIPAA. Also, a durable power of attorney allows trusted family members to manage finances and pay bills when there is an incapacity due to disability or mental impairment.

An attorney can help protect finances and assure that a trusted agent can perform other daily needs. They can help prevent this exploitation, help create effective guardianships and draft other legally-valid documents that meet these needs.

Source: Consumer Reports, "New ways to prevent elder financial abuse," By Penelope Wang, Feb. 2, 2018

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