Recent data from the Office of the Public Guardian (OPG) has highlighted a surge in reports of financial abuse, especially in cases involving Lasting Powers of Attorney (LPA). With an ageing population and complex family dynamics, the likelihood of financial abuse appears to be increasing.
For example, a carer was recently found to be financially abusing her elderly client. The elderly woman, who had been living with a progressive neurological condition, had appointed the carer as her attorney under an LPA. Over time, the carer took advantage of the trust placed in her and began to withdraw money from the client’s account, transferring funds into her own name and using the client’s credit cards for personal expenses.
In another example, an elderly widow fell victim to financial abuse by her own son. The son had been granted an LPA over his mother’s finances. He took advantage of her cognitive decline, draining her bank accounts, making unauthorised withdrawals, and selling off her property without her consent. This went unnoticed for some time until a concerned relative of the woman raised alarms.
Key Findings from the OPG on Financial Abuse
The OPG has noted a sharp rise in the number of reported cases of financial abuse, particularly in relation to the misuse of LPAs. In fact, cases of financial abuse involving LPAs are some of the most frequent types of cases the OPG handles. Since 2018, they have reported a steady increase in the number of concerns raised about attorneys who are allegedly mismanaging finances, exploiting their position, or manipulating individuals to gain access to their financial assets.
In 2020 alone, over 10,000 cases of potential abuse were reported to the OPG, highlighting the magnitude of the issue. A significant proportion of these cases are reported to involve family members, friends of paid carers taking advantage of the vulnerable person’s trust and authority granted through an LPA.
It was found that elderly individuals or those with diminished mental capacity (such as those with dementia or cognitive decline) are particularly vulnerable to this type of abuse.
A common pattern involves an attorney coercing the vulnerable person into changing their estate plans, misusing the LPA for their own benefit, or taking control of the individual’s finances without their consent. Many cases have emerged where attorneys have:
- Withdrawn funds for personal use, not related to the welfare of the person they represent.
- Sold property or other assets without proper consent or due process.
- Altered Wills or legal documents to benefit themselves, sometimes by exerting undue influence or taking advantage of the person’s mental vulnerability.
The OPG has a rigorous process for investigating and addressing these cases, but the abuse is often not discovered until it is too late. This can leave the vulnerable person without access to their assets or result in financial losses that are difficult to recover.
Rising incidence of dementia and other cognitive disorders is contributing to an increasing number of financial abuse cases. As individuals lose cognitive abilities, they become more susceptible to manipulation and control by others. According to the OPG, individuals suffering from dementia are at heightened risk of financial exploitation, especially if they have not properly safeguarded their financial affairs or updated their estate plans.
Another significant finding was that many vulnerable individuals don’t have adequate independent oversight when they appoint someone to manage their financial affairs. In many cases, attorneys act without sufficient external checks, and this lack of accountability makes financial abuse easier to perpetrate. The OPG has stressed the importance of having regular reviews of LPAs and ensuring that attorneys have appropriate professional guidance to avoid conflicts of interest or the temptation to misuse their position.
What Are Some Red Flags to Look Out For?
Estate planning professionals and private client solicitors are often in a prime position to notice potential financial abuse. Here are some key red flags to be aware of:
- Sudden Changes in Financial Behavior or Documents: A sudden change in a client’s estate plan or financial behaviour can be a sign of undue influence. Watch for unexpected changes in Wills, LPAs, or financial transactions, especially if the client appears confused or reluctant to explain the changes.
- Unexplained or Large Withdrawals: If a client’s bank account shows sudden, large withdrawals or transfers without a clear explanation, this may indicate financial exploitation. Similarly, frequent transactions to a third party that aren’t part of the client’s usual routine should raise concerns.
- Isolation of the Client: If a family member or caregiver isolates the client from others, whether friends, family, or professionals, it can be a sign that they are trying to control the person’s decisions and access to advice.
- Resistance to Outside Help: A family member or caregiver might insist on handling all communications on behalf of the client and resist allowing others, like legal or financial advisors, to meet with the client alone. This can prevent the client from getting the help they need and may be a tactic to control them.
- Changes in Behaviour or Emotional State: If a previously confident or independent client becomes noticeably anxious, confused, or fearful around certain individuals, this can be a psychological red flag that something is wrong.
- Reluctance to Discuss Finances: If a client is suddenly unwilling to discuss financial matters with trusted advisors or seems uncomfortable when the topic is raised, it could suggest they are being pressured by someone to conceal or divert information.
For legal and financial professionals, staying alert to the signs of abuse and maintaining open, direct contact with clients is key. Regular reviews of LPAs, stronger safeguards, and increased awareness can help reduce the risk of exploitation.
Stay vigilant and protect your clients against financial abuse
If you are a legal, financial, or estate planning professional, it’s more important than ever to stay alert to the warning signs of financial abuse. Regularly review your clients’ arrangements, encourage safeguards, and act quickly if you suspect exploitation.
Need support in strengthening your processes around LPAs and estate planning? Our system can help you create stronger safeguards, conduct regular reviews, and ensure greater protection for your clients and their assets with ease. Find out more or book a demo.