How Seniors Can Avoid Elder Financial Abuse

Elder financial abuse is anything done to a senior in a relationship of trust that causes them financial harm. Unfortunately, it’s more prevalent in Canada than you might think, and it plays out in many heartbreaking ways, says Jan Goddard, the founding partner of Goddard Gamage LLP, a law firm in Toronto that specializes in elder law and estate administration. 

Theft from a bank account by using someone’s bank card, forging cheques, getting someone to sign cheques that they don’t want to sign, and misuse of a joint bank account are all examples of financial abuse, Goddard says. It could also mean moving into someone’s house without their permission and living there without paying any expenses like rent.

Often, abusers are close family members of the victim, like a child, sibling, niece, or nephew. Financial and emotional abuse are considered the most prevalent forms of elder abuse in Canada, and they often go hand-in-hand.

About 10% of seniors in Canada report themselves as abuse victims each year. And statistics indicate that 4.5% of Canadians will also declare themselves victims of abuse at some point in their lives after turning 65. 

This means that elder abuse is a very relevant issue in Canada. Someone you know will likely have been abused financially sometime in their late adult life. Goddard says that these statistics are just the tip of the iceberg: most elder abuse cases are never reported.

If you or someone you know is a victim of abuse, do not hesitate to report it to law enforcement or call 911 if you are in danger. You can also call the Seniors Safety Line at 1-866-299-1011 for free, confidential support for seniors experiencing abuse.

What are the implications of a joint bank account?

A regular bank account only has one owner. In contrast, a joint account has more than one owner. Most commonly, there are two owners, but it is possible to have multiple. 

These accounts are often set up when someone wants assistance with their finances from a family member or they are opened by a family member who believes they should assist a person with handling their money matters.

It is crucial to fully understand the implications and consequences of this type of account. Joint bank accounts do not just give another individual access to your finances. Every person whose name is on the account owns all of the money and has the same rights to that money. 

“It’s a very serious arrangement to enter into,” Goddard says. “The only names that should be on an asset are the names of the people who you actually intend to own the asset. If your intention isn’t to give that asset to somebody today and make it theirs, don’t put their name on it.”

The risks of opening a joint bank account

Opening a joint account can expose you to many risks, including financial abuse. The most obvious risk of opening a joint bank account is theft. Because anyone whose name is on a joint bank account is legally an owner of the money in that account, another owner can withdraw your money at any time.

Claims from creditors can also be an issue. 

If another owner of your account owes money, a creditor can be paid that money from your account to settle the debt. Suppose another owner of your account goes through a divorce. In that case, your account could also be counted on the division of property between them and their spouse.

These are not just hypothetical cases where things go wrong for the senior whose money is in a joint account. Goddard says she has come across disagreements like these over what it meant for an asset to be put under more than one name. Even if you win a case like this, it can have serious consequences. These issues may take years to be resolved in court, may cost hundreds of thousands of dollars in legal fees, and will almost certainly take an emotional toll on those involved.

“Often, there is some misunderstanding about what the implications are because there’s more to it than just dealing with this bank account,” she says. “There are vulnerabilities and risks that you create for yourself when you’ve set the account up.”

What are some alternatives to forming a joint bank account with a family member?

The most common reason seniors form joint accounts with family members is to get help in managing expenses like bills. A good alternative in this situation is to get a power of attorney.

Powers of attorney are legal documents that give another person the legal authority to make financial or legal decisions for you. In this case, it could give someone else the ability to pay your bills from your account. 

This is a better option than forming a joint bank account because it is clear what the other person’s responsibilities are, and you are still the sole owner of all the money in your account. This reduces the risk of financial abuse.

Another situation where you might want to form a joint bank account with a family member is so money will be readily available for funeral expenses after your death. An alternative to this is prepaying for these types of costs. This way, you can spend exactly how much you want on your funeral arrangements, your family will not have to undergo additional stress, and your bank account will still be secure.

Finally, you may want to avoid the estate administration tax. This is a tax paid on the assets of an estate so that the executor can get what they need to show that they have the authority to deal with the estate. Ontario has the highest tax in the country at 1.5% of the value of the assets in your estate.

To avoid this tax, you may want to make a joint account and trust that the other account owner will distribute the money to your specifications after your death. However, this also makes your assets vulnerable while you are alive.

Goddard says this risk just isn’t worth it.

“Say you have an estate of $500, 000, and that tax is going to be $4,500. You can’t even buy a good used car for $4,500. So you’ve traded your financial security for a bad used car.”

If you’ve already formed a joint account, is there anything you can do to avoid financial risks?

It is possible to enter into a written agreement after a joint account has been formed that confirms who is the beneficial owner of the assets in the account. Usually, you are both the legal and beneficial owner of your assets: your name is on the title, and you also own the benefit of that asset.

Suppose you want to enter an agreement like this with other account owners. In that case, you can make yourself the beneficial owner and clarify that any other owner is only a legal owner for administrative purposes.

Goddard says that although it is possible to make an agreement like this for an existing account, entering this agreement is ideal before the account has been created. These agreements can prevent personal conflict or even potential legal fights. 

“Documenting your intentions is helpful, regardless of what those intentions are,” she says.

If you no longer want to have your money in a joint account, Goddard’s advice is to move your money from a joint account into a new one where you are the sole owner. 

“In most cases, you should be able to close that account as an owner of the account, transfer the money elsewhere, and do that before someone else does,” she says.

If you encounter issues doing this, it is essential to at least stop the flow of funds into the account. Then, redirect the flow of funds into a new account where you are the sole owner.

BIO

Jan Goddard is the founding partner of Goddard Gamage LLP, a law firm in Toronto that specializes in elder law and estate administration. She entered law wanting to help seniors, but when she graduated from law school over 30 years ago, elder law was not even a recognized field. Goddard made her way up the ranks and started her own firm in her desired area of law in 1999. She has consistently been recognized as one of the best lawyers in Canada since 2009 by Best Lawyers and was chosen as Toronto's Lawyer of the Year in Trust and Estates in 2020.

For more information go to: Goddard Gamage LLP