Protecting the financially vulnerable

Financial abuse can take many forms and affects a broad range of vulnerable people – it’s an issue that Channel Islands practitioners must remain acutely aware of

When actor Mickey Rooney died in 2014 at the age of 93, he left behind a celebrated movie career stretching back to the 1930s. Yet he apparently had only $18,000 in the bank. The reason? From 1998, he’d allowed his stepson, Chris Aber, to manage his financial affairs. 

Rooney alleged that Aber stole $400,000 from him, kept him in the dark about his own finances, forced him out on the road to earn more money, used abusive language and refused him basic necessities such as food and medicine. The star won out in the end – with a $2.8 million judgment against Aber in October 2013. For Aber, the matter would drag on long after Rooney’s death, in the form of a feud with his younger brother, Mark. 

For Rooney it was a tragic ordeal, of course, but the damage cut deeper than the lining of his pockets. He described feeling “trapped, scared, used and frustrated but, above all, helpless” because of it. 

He’s not alone – people are wealthier and live far longer these days, so financial abuse is a growing problem, and not just for Hollywood celebs. Thanks to the scale of its wealth management industry, practitioners in the Channel Islands need to be alert to unscrupulous and manipulative chancers looking to wrangle their way into vulnerable people’s affairs.

Exploiting the elderly

When we talk of the vulnerable, the spectrum is broad and includes people with addiction problems, such as alcoholism, those suffering mental illness and severe depression, as well as those with physical conditions such as brain tumours. But the most commonly vulnerable group when it comes to wealth is, unsurprisingly, the elderly. And the abuse they suffer can be quite insidious and easily overlooked.

“When an elderly person becomes unwell, the relative looking after them may start to isolate them, taking control of their mobile, monitoring chats and calls, and making them feel they can’t do without their help,” explains Alison Ozanne, Partner at Walkers Guernsey. “All of this may well poison the mind of a vulnerable person against the rest of the family.”

There are other ways in which such people could be taken advantage of – they might be frogmarched to the lawyer to rewrite a will, influenced to change the beneficiaries of a trust, or forced to hand over lump sums of cash. It could be carers emptying people’s purses or, more subtly, family members emptying a bank account slowly over time.

Ozanne cites a case involving a stepmother to four adult siblings, whose father had passed away. Ozanne’s team challenged the wills, saying the woman was using undue influence to get new wills written. They brought in Professor Robin Jacoby, one of the UK’s most highly regarded experts in legal issues of mental capacity, to assess the testator’s cognitive powers when he executed the wills. 

“He’d read them out in front of jurats, so they argued it was legitimate,” says Ozanne. “But the part of the brain that deals with reading is very different to that which deals with cognitive understanding – you can read it beautifully without understanding what you’re saying. Professor Jacoby found the deceased lacked capacity when he executed those wills.”

Grey areas

This case illustrates the difficulties when it comes to issues around mental capacity and undue influence. There are lots of grey areas. Losing mental capacity can, for example, be a gradual process, and while the family may be uncomfortable with the affairs they see unfolding, the person may not have yet reached the point where anything can be done about it legally.

And that’s not just a worry for the families and beneficiaries. The wealthy themselves have much to fear here too. Jersey, for instance, currently lacks a law through which someone can set out what they want to happen to their affairs if they lose capacity, in a legally binding way. 

New legislation, slated for introduction in 2018, will allow people to do just that. “We’re getting more and more enquiries about this,” explains Julie Melia, Head of Probate and Estates practice at Ogier. “People have seen situations where others have lost capacity and issues have arisen as a result. The new law should make a lot of difference, allowing people to plan ahead for their physical care and wellbeing as well as their assets.”

Family dynamics

While the issue of mental capacity is at least provable by medical records, undue influence is a more difficult territory for practitioners, not least because it throws them into the centre of those impossibly charged family dynamics. 

“I had one client who became increasingly difficult to deal with, because his wife was only interested in his money,” says Mark Biddlecombe, Client Services Director at Nerine Group of Fiduciaries. “As trustees, we had to preserve what was left, in a trust set up as a lifeboat by the man’s father, who’d feared such a thing would happen. 

“It was a very difficult situation for us, making sure he had the care he needed while trying to keep wife number two at arms’ length. When he died, the first call I had was from her, saying ‘Now he’s passed on, what are you going to do for me?’. That trust now serves the needs of his children.”

Indeed, a huge part of the problem is that such struggles may only surface after the key player has passed away. Lawyers are left forensically recreating evidence for the court to decide whether that influence was undue. So where does that leave the family or beneficiaries who have concerns over the influences being exerted on a wealthy relative? 

Court is an option, but it invites expense and stress, and success is far from a given. “Undue influence is very difficult to prove in law,” says Professor Jacoby, who as well as being Professor Emeritus of Old Age Psychiatry at Oxford University, spends most of his time compiling legal reports for solicitors in cases where wills have been challenged, usually by family members who feel cheated out of their inheritance. 

“For undue influence, you must establish coercion, which is very, very difficult,” he says. “And if the person challenging the will can show there’s a case of suspicion, the burden falls on the other side to prove otherwise. Most wills are challenged on the grounds of lack of capacity.”

Dealing with vulnerability

Practitioners such as trustees and lawyers need to be aware of how to deal with vulnerable clients to avoid becoming embroiled in expensive, lengthy disputes later – quarrels that can destroy the client relationship and damage their business.

“It’s not easy,” says Biddlecombe. “You have to know the client, the family and the people around them, as well as understanding the client’s needs and what kind of request they’re going to make. See them on a regular basis, in an environment where you know you’re speaking to them and it’s their own mind you’re accessing, not an influence being practised by others. People who take advantage of the vulnerable tend to be very cunning about it. Trustees will have to deal with that.”

Lawyers may also find themselves entering that cauldron of family turmoil to prevent clients from over-reacting and chasing a lost cause through the courts. “We’re only humble lawyers,” says Melia. “We can warn people about the scale of the challenge and the potential cost, but there’s only so much we can do.” 

• Professor Robin Jacoby will be speaking at BL’s Guernsey Trust Conference on 16 November in St Peter Port on the subject of ‘Fraud and financial abuse of the vulnerable’. For more information, visit www.blglobal.co.uk/events.