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We increasingly encounter situations where a vulnerable person may have been financially abused by a third party. A recent study by STEP found that financial abuse is increasing and it is most prevalent where there is uncertainty about whether a person lacks capacity or their decision-making ability is in decline.
Individuals who have a reduced cognitive function are more at risk of being victims of financial abuse and the risk factors associated with abuse increases with age and isolation. A global review by the World Health Organisation has estimated that one in 15 adults aged over 60 experience financial abuse annually. A report undertaken by Hourglass/YouGov in November 2024 revealed that 25% of respondents in England and Wales did not consider that using a Power of Attorney for personal financial gain is ‘abuse’. Sometimes vulnerable individuals are unable to recognise when they are being abused in such a way.
The STEP survey (“Spot the Signs”) carried out in 2023 also indicated that wealth managers and financial advisers are in a position such that they may be able to identify and prevent financial abuse due to the close relationships with their clients and their knowledge of the individual’s usual financial activity.
The Care Act 2014 defines financial abuse and includes in that definition theft, fraud, coercion in relation to an adult’s financial affairs or arrangements and having money or other property misused.
The Care Act Guidance provides examples of financial abuse including in connection with wills, property, inheritance or financial transactions and the misuse or misappropriation of property, possessions or benefits.
In practice, signs of financial abuse may be difficult to spot and may only come to light after someone has passed away. Abusers are likely to want to take steps to conceal their actions however, some indications of financial abuse may include:
- Unexplained and unusual gifts, either due to the size of the gift or the person to whom the gift is made. This can also include transferring property to one individual without any obvious reason, or gifting large sums of money without explanation.
- An individual increasingly making financial decisions apparently by themselves in circumstances where they have previously relied on a professional advisor.
- Making sudden or abrupt changes to an earlier will which may be at odds with previous wishes or disinheriting someone who benefited under a prior will, particularly if the ‘new beneficiary’ has recently become more involved in a testator’s life.
- Someone moving into a person’s home and living rent-free or a third party generally becoming integrally involved in the person’s life quickly and without reason. This is particularly concerning if that leads to isolation from friends and family. The explanation is generally that someone is providing care to the person, although friends and family may be concerned about the level of care being given.
- Large cash withdrawals to pay for outgoings, particularly in circumstances where the person does not have significant outgoings or previously paid for things by direct debit (rather than ‘cash in hand’).
Understandably, it can sometimes be difficult to approach the subject of financial abuse with an individual but it is important to recognise ‘red flags’ and be aware of the safeguarding steps which can be taken if you consider that there is a risk of financial abuse. This could include raising the concerns with the person, recording the concerns contemporaneously so there is a record, or discussing with them the option of an independent person advising them on any significant financial decisions, such as an accountant or wealth manager. If the person the concerns relate to is an attorney or deputy, a report can be made to the Office of the Public Guardian. Consideration can also be given to making a report to the adult safeguarding team at the local authority if the person being financially abused lacks capacity.
FURTHER INFORMATION
If you have any questions regarding this blog, please contact Laura Phillips in our Dispute Resolution team.
About the author
Laura Phillips TEP, is a Legal Director in the Dispute Resolution team. Laura has particular expertise in Contentious Trust and Estate and Court of Protection Disputes.
We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.
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