Responding to Financial Exploitation
Financial abuse or exploitation of older adults has been called the crime of the 21st century. While the extent of the problem is not fully known, a recent survey commissioned by Vancity Credit Union entitled “The Invisible Crime” suggests almost half of seniors in Vancouver and Victoria have been a victim of financial abuse. While only 6.4% of respondents self-reported being victims of financial abuse, when presented with a list of scenarios, 41% of seniors in the Lower Mainland and Victoria regions have experienced at least one situation that can be classified as financial abuse.
The most common experiences of the survey respondents were:
- 18.7 % had someone borrow their money without their knowledge, or having someone refuse to pay back a loan
- 18.1% had someone pressure them to give that person money
- 12.1% had experiencing an unsolicited work scam where someone offers to perform work for a reasonable fee, then after starting the work insists on more than originally agreed before completing the work
- 10.1% had someone take a valuable possession from their home, either to keep it or to sell it
- 9.0 % had someone pressure them to buy that person something or to pay a bill for that person
- 7.9% had someone forge their signature
- 7.1 % had someone use their credit or debit card without their permission.
In all, 41 per cent of respondents indicated that they had experienced at least one of the abusive situations listed. Financial exploitation is the most common form of elder abuse we see in our work at BCCEAS. We want to share with you some of what we have learned about responding to this form of abuse. As has been noted by our colleague Graham Webb:
The availability of restitution as a civil remedy; the absence of a presumption of advancement; and the existence of the presumption of a resulting trust has greatly simplified civil recovery work in the field of the financial abuse of older adults.
From “Tackling the Financial Abuse of Older Adults” – Graham Webb, Advocacy Centre for the Elderly
Financial exploitation or financial elder abuse is the misuse, misappropriation, and/or exploitation of an older adult’s funds and assets without that person’s knowledge and/or full consent, or in the case of an older adult who is not mentally capable, not in that person’s best interests; or the misuse of an Enduring Power of Attorney.
Some indicators are:
- Standard of living not in keeping with income or assets;
- Theft of property;
- Unusual or inappropriate activity in bank accounts,
- forged signatures on cheques;
- Forcing a person to sign over property or execute a Will or EPOA; or,
- Overcharging for services or products, overdue bills.
Risk factors for financial abuse include transition points in an older person’s life, such as:
- widowhood for a woman with little or no experience with financial matters
- when an older person’s health is changing and he/she begins relying on new-found women or men friends
- when cognitive capacity is starting to decrease
- when a person becomes dependent on others to aid with banking or shopping
Typical Financial Exploitation Scenarios
Older adults with some money or a house will often be pressured by family members for:
- Emergency loans;
- Places to live when they are out of job;
- Help paying for higher education (university);
- Assisting with major purchases (e.g. – a car)
- Making down payments for a home
- Co-signing or serving as guarantor for loans
- Using house title as collateral
- Taking out a ‘reverse mortgage’ to provide funds
- Help avoiding bankruptcy (adult son/daughter) at the point of losing business, home
Adapted from: Charmaine Spencer, Diminishing Returns (1995)
Lack of Documentation
Many of these family loans are undocumented, and the borrower may later claim it was a ‘gift.’ However the law has a ‘legal presumption’ that these types of advancements from an older adult to an adult child are considered a loan rather than a gift [see Pecore v. Pecore,  1 SCR 795, 2007 SCC 17], unless the adult child can show proof otherwise (e.g. – money was in a birthday card). For advancements to a minor child (under 19 yrs.) the presumption is reversed, it is presumed to be a gift unless it can be shown to be a loan [e.g. – I.O.U, promissory note, loan document).
In the Limitation Act of BC, there are special ‘discovery’ rules about personal loans. The first step in determining the deadline to commence a claim relating to a loan is to determine whether the loan agreement has created a ‘demand obligation’ or a ‘contingency obligation.’
Examples of a contingency obligation include when the loan is due at a particular date in the future, or there is a set repayment schedule or when some other future event happens (e.g. – property is sold,, repaid on someone’s death etc.). For these ‘contingency obligations,’ one can argue the limitation period doesn’t run until the contingency occurs – e.g. person missed a repayment date, the property is sold, the person has died, etc. If and when the contingency happens, the lender is considered to have ‘discovered’ that is time for the loan to be paid back and it isn’t being paid back, and so the claim should be filed. The two year clock starts to run. If the loan had no fixed conditions or contingency, it is a ‘demand obligation.’ These are loans which are either:
(a) expressly payable on demand
(b) in which no time for payment has been expressed.
Many family loans are likely (b) – no mention is made about how or when they should be paid back. In the case of demand loans, ‘discovery’ is on the first day of default after a demand for repayment has been made and no payment is made. [section 14 of the Limitation Act]. Note that there are two parts to this ‘discovery’ – a demand is made, and the person who borrowed the money does not comply. From the date the payment was demanded and not paid, the clock starts to run for the two year limitation period. So this can be quite a while after the loan was made.
The law recognizes for a lot of people who aren’t used to lending and collecting on loans, a two year period from the date an undocumented loan was first made is too short a time to be fair.
Rogue Power of Attorney
Powers of attorney can be seen as part of the solution for an older adult who is unable to manage their funds, but they can also be part of the problem. The most common form of financial elder abuse is a ‘rogue’ power of attorney – POA’s have been called “a license to steal.” The attorney can literally bankrupt the older adult.
There are some obvious responses to financial abuse and the older adult is capable – for a rogue power of attorney, the power of attorney can be revoked (see Nidus material Procedures to Revoke (Cancel) an Enduring Power of Attorney which includes a form of a Notice of Revocation), and another attorney appointed in their place. The Public Guardian and Trustee can investigate allegations of financial abuse. Civil and criminal remedies are available. See generally the CLE-BC Practice Point paper Dealing With The Rogue Attorney by Kimberly-Anne Kuntz of Bull Housser & Tupper LLP, Vancouver, BC.
Adding onto Title of Property/Joint Bank Account
Joint Bank Accounts
An older adult may set up a joint bank account with a relative or friend to help with banking chores and paying bills. But this may create another “a license to steal” – each signer on the account is entitled to 100% of the money at any time. The Pecore case tells us again there is a legal presumption is that when an older adult puts an adult child on a joint bank account for convenience, there is a ‘resulting trust’ and the child is a ‘trustee’ for the older adult’s money and not entitled to it themselves. When the older adult dies, the money would be part of the estate, rather than automatically going to the adult child. This may be the case even if it is a joint account with ‘right of survivorship’ – it is not necessarily automatically the property of the surviving account holder. Prudent practice suggests if an older adult does intend to gift the joint account a ‘deed of gift‘ should be used. On the other hand, to make clear no gift of the account proceeds is intended, a bare trust document should be executed.
Joint Tenants of Property
Older adults will often put another on title of a car or real property such as their home. Often this is set out as a ‘joint tenancy’ however if the title document does not specify, the presumption in BC is that real property ownership is tenancy-in-common, while for personal property the presumption is as joint tenants.
There are numerous concerns with joint tenancy ownership. Judgments or the bankruptcy of the other owner are a concern. The other joint tenant can unilaterally sever the joint tenancy (a break in one of the four unities.) While there may be an apparent joint tenancy, has the beneficial ownership been given? Is the right of survivorship and independent property right, post Pecore?
Older adults will often put another on title when that person is expected to be their caregiver in exchange either for the right to live there, or to inherit the property when the older adult passes. We recommend a private care agreement in these circumstances.
Issues to Be Aware Of
Here at BCCEAS we are often contacted by one adult child of an older adult, concerned that a brother or sister is financially abusing their parent(s). On further investigation, and with confirmation that the older adult is capable, it often turns out that this ‘abuse’ has been a long standing form of financial assistance for a child who is unable to manage on their own due to some disability. We explain that the older adult is free to do with their money as they wish. It may be that the adult child calling is more concerned about the ‘best interest of their inheritance’ rather than the best interest of the parent(s). Or it may be a long standing resentment – a ‘mom always liked you best’ situation. Reports of financial abuse by a sibling need to be looked at carefully before rushing to judgment.
Lawyers may be familiar with the equitable concept of undue influence in the area of wills drafting. Undue influence can be used to set aside a transaction that cannot be said to be freely or sufficiently consented to.
Undue influence may be “actual,” or intentional, where one person intentionally manipulates or pressures another person for the purpose of obtaining that person’s agreement. Undue influence may also be exercised unintentionally, where influence arises by nature of the relationship itself. A relationship of dependence may develop between an older parent and adult child for example, in which the parent relies on the child for emotional support and practical assistance. In this context, the parent may agree to transactions because of a fear that doing otherwise might jeopardise this crucial relationship. The adult child may be completely blameless, with no intention of withdrawing support or otherwise punishing the parent who does not go along; the parent’s experience of influence, and not the intentions of the child, establish undue influence for the purposes of the doctrine.
From M. Hall, “Equity and the Older Adult: Undue Influence and Unconscionability”
In A. Soden, ed., Advising the Older Client
Underutilized Remedy – Restitution
Lawyers, especially older lawyers, may be less familiar with restitution as a civil remedy. The Supreme Court of Canada has recognized restitution as an independent source of civil obligation, resting on the principle of avoidance of unjust enrichment. It has been said to be the third main area of civil law, after contracts and torts, and to cover cases of unjust enrichment not adequately dealt with by these two mainstays of civil law.
The unique advantage of a claim for restitution is that it is usually not necessary to show a “meeting of minds” or even a “common intention” between the older-adult plaintiff and defendant recipient of money or property in respect of which recovery is sought. This body of law alleviates the need for much evidence concerning what were the precise terms that the parties intended…
Graham Webb, Advocacy Centre for the Elderly, Toronto
To succeed in a restitution claim, a plaintiff need only show
- that the defendant received an enrichment
- to the detriment of the plaintiff, and
- that there is no good reason in law (‘juridical reason’) for the defendant to retain that benefit.
McLaclan J (as she then was) in Peel (Regional Municipality) v. Canada
When these 3 elements are proved, the right to restitution arises from this “unjust enrichment.” The court may declare that money is owed from the defendant to the plaintiff, or the court may declare a constructive trust. The latter may be a more appropriate remedy if the defendant is at risk of bankruptcy, or the property in question has risen in value. (from Lionel Smith, Restitution (Legal) – Canadian Encyclopedia)
“Restitution is frequently the most easily litigated, accessible and valuable remedy to the financial abuse of older adults.”
Graham Webb, Advocacy Centre for the Elderly, Toronto
For further information see:
Graham Webb, Restitution for the Elderly Client
P. D. Maddaugh and J.D. McCamus, The Law of Restitution (Aurora, Ont.) Canada Law Book, looseleaf
See also the CLE BC publication Experience Hendrix, Please! Lesser Known Restitutionary Remedies Revisited.
Four Areas of Responses to Financial Exploitation
We have organized the responses to financial exploitation into four main areas:
- Informal responses – documents and banking arrangements
- Agency Responses – designated responders, PGT
- Civil Law Responses – litigation (restitution), Civil Resolution Tribunal,
- Criminal Law Responses – criminal charges, restitution orders, enhanced sentencing
If the financial abuse is ongoing or imminent, it may make sense to contact the police to intervene to prevent any theft or misappropriation of funds. One may face an obstacle when doing this – the police often suggest that this is a ‘civil matter’ or ‘family matter’ rather than a police matter. It is important to be adamant that this is a crime, that the police need to intervene to prevent a further crime from happening.
– set up direct deposit of all incoming pension + other $
– set up pre-authorized payment for regular bills
– consider prepaid cards with fixed limits for spending $
|– set up joint bank account – for monitoring or accessing $
– will this include ‘right of survivorship’ or just to help out?
– should review dangers of joint account
– could have two accounts – transfer just enough each month to joint account meet daily needs
– other $ in a separate savings account
Enduring Power of
|– appointing trusted person to manage finances + legal affairs
– attorney needs to be clear about roles & responsibilities – see Nidus info sheet & statutory provisions
– accounting to older adult + involve older adult in decisions
– consider adding a ‘monitor’ – 2nd person to receive accountings and keep an eye on things
|– s. 7 RA can include ‘routine financial management’ – basic finances- does not include credit cards, loans, mortgages
– see Regulation to RA Act for routine financial management from A-Z
– unless spouse or trust/authorized credit union (Vancity), monitor required (or 2 reps)
– much more limited capacity test – useful last minute advance planning tool when OA is slipping
Or S7 RA
|– OA can revoke EPOA or s7 RA if attorney or rep acting wrongly, but OA must be capable (different statutory tests for creating/revoking s7 & s9 RAs)
– can apply to court to have RA or POA revoked or terminated
– might obtain authority as Committee or Statutory Property Guardian (COI) (see elsewhere on chart)
Protective Trusts &
|– a ‘protective’ or ‘discretionary’ trust may be a last resort solution for an older adult who just can’t say no to others
– child or other relatives may be gambling or drug addict, or have overdeveloped sense of entitlement
– putting a home in a trust with a life interest or life estate to the older adult also a possibility
– health authorities are assigned legal responsibility for responding to reports of abuse, neglect and self-neglect of vulnerable adults – significant right of entry powers
– those who report are protected/duty to report offence/ may refer to PGT
– can result in support/assistance/restraining orders – see below
|– The Assessment and Investigation Services (“AIS”) division of the PG&T takes referrals and reviews allegations of financial abuse of vulnerable adults – AIS Referral Form
– Power to apply to court to ‘cancel’ a POA, freeze bank accounts, prevent property transfers during an investigation – authorized to collect personal information , demand accountings – can apply for Committee order
|– Agreement to Administer Benefits (CPP/OAS/GIS only) form (ISP3506OAS) and doctor’s ‘Certificate of Incapability OAS/CPP’ form (ISP3505OAS) – for person or agency (agency or institution form (ISP3507OAS) – – can be voluntary or involuntary
– agencies/institutions could include churches and seniors centres – main one in Vancouver is ‘The Bloom Group’ (formerly with St. James Anglican Church).
|– after a determination of financial incapacity (medical + functional assessment) a certificate of incapability (COI) is issued
– PGT then becomes statutory property guardian – full authority for legal and financial affairs
NOTE- other process is court application for private Committeeship – w/ 2 Dr’s affidavits.
|– Income Security Programs can investigate any misappropriation of pension funds
– little information is available on how these investigations are requested +/or conducted
– contact 1-800-277-9914 (for allegations of fraud, abuse misuse re. CPP or OAS)
Mental Health Committal
|– one certificate for admittance; two for committal to psych facility
– Director of facility makes treatment and placement decisions re psych diagnosis
– involuntary committal for psychiatric treatment – time limited
– sue for return of funds (up to $25,000)
– can include restitution order for unjust enrichment
– can include order for return of personal property
|– all of SCC remedies for over $25,000 – including restitution for unjust enrichment
– order for accounting by attorney, rescission of transactions by attorney/conversion of funds
– partition and sale of jointly held property – Partition Property Act
|– online mediation of disputes – – where mediation doesn’t work – can go to tribunal
– tribunal’s orders have same legal force and effect as a court order
– site includes legal information
Patient Property Act
– application for declaration older adult incapable + Committee appointed (also Committee of person)
– Committee then has full authority over legal and financial affairs – terminates any POA/RA unless court order otherwise
– a gift, conveyance or transfer to 3rd party is ‘voidable’
|– court can order anyone to release info to the PGT to aid in an investigation
– court can void a POA and all actions done under it- similar provisions in Representation Agreement Act for RAs
Support and Assistance Order
|– a DA can apply to court for a ‘support and assistance’ order based on a support and assistance plan
– court can make a support order under Part 7 of the Family Law Act
– order not contact or association with the adult or the adult’s financial affairs – Family Protection Orders under the Family Law Act also possible
– a support order might require PGT to provide services to ensure OA’s financial affairs are protected
– theft, conversion, embezzlement
– fraud, forgery, larceny
– criminal exploitation
|specific provisions in the Criminal Code of Canada regarding abuses by attorneys under a POA (also abuse by trustees under a trust agreement)
– asset freezes?
|– when police say this is a ‘civil matter’ or too little $ involved
– older adult or agent can ‘lay an information’ before a JP (s 504 + 507.1 of Criminal Code)
– will have to conduct own prosecution if summary
|– criminal court judge orders financial compensation to victim from convicted offender
– must be requested in Victim Impact Statement or in letter to Crown + copies of docs
– can be condition of probation , or stand-alone order enforceable in civil court
|– connect people to community, social, health, justice and government resources, including counselling resources.
– info on the justice system, relevant federal and provincial legislation and programs, resources as needed.
|– when determining sentence, one of the ‘aggravating circumstances’ a Judge can take into account is “evidence that the offence had a significant impact on the victim, considering their age and other personal circumstances, including their health and financial situation”
– while this was called the “elder abuse” amendment, there is no particular age specified
Resources – Financial Exploitation
- Power of Attorney Elder Abuse Awareness Project
- Background Paper – Financial Abuse of Seniors: An Overview of Key Legal Issues and Concepts – March 2013
- CCEL Report –Financial Arrangements Between Older Adults and Family Members
identifies some of the issues which can arise when an attorney misuses the authority granted by a power of attorney.
Government of Canada Resources:
Public Guardian and Trustee Resources:
- How You Can Help: Options for Helping Adults Who Cannot Manage Financial and Legal Matters on Their Own
A review of various options including informal options, personal planning documents (EPOA; RA7); other legal options (Pension Trustee, Committee of Estate); and, about responding to concerns about abuse, neglect or self-neglect (role of DAs, PGT).
- Options To Consider -When an Individual has Difficulties Managing Their Financial, Legal or Personal Affairs
A table setting out various options including informal options, personal planning documents (EPOA; RA7); DAs; TSDMs; other legal options (Pension Trustee, Committee of Estate + Person); statutory guardianship, and, mental health committal.
An info sheet for when an adult in residential care is no longer able to manage their affairs, or a substitute decision maker is abusing or mismanaging the adult’s finances.
besides a useful flowchart or ‘decision tree’ for making effective referral to adults who may be vulnerable and/or incapable and being abused, financially exploited, neglected or self-neglecting, this tool include a link to a video on the relevant law, and a chart with information about calling the police, designated agencies and the PGT.
The chart includes videos about the role of the police, DAs and PGT,
Canadian Bankers Association
- Do You Suspect Financial Abuse? information page
- Commitment on POAs and JDAs – the Canadian Bankers Association has made a ‘voluntary’ commitment to the Federal Government [before they were forced by regulation] to educate their staff and their customers on the uses and possible risks of powers of attorney and joint bank accounts.