Avoiding Financial Abuse
Unfortunately financial abuse of older people isn’t an uncommon event.
We’ve all heard horror stories of parents or grandparents who have lost their home because they used it to guarantee a loan for a son or daughter or borrowed against it to loan a family member some money, which was then lost.
While this is a painful experience for the younger family member, it’s an absolute disaster for the older parents who have just lost their home and have no chance of owning another.
The only reason that the family home was used as security was that the people wanting the money were either family members or close friends and the parents felt pressured to assist them. Financial abuse is not limited to this example. Here are some of the more common forms.
- Pressure to act as a guarantor for a loan.
- Pressure to transfer ownership or sell the family home.
- Pressure to take out a loan in the parents name for someone else to use and repay.
- Pressure to give away money as 'gifts'.
- Money parents have loaned not being repaid.
- Persons authorised to manage their parent’s money using it for themselves.
Some good advice on how to respond to various forms of financial pressure was recently provided by the Age Discrimination Commissioner in a book titled Your Rights at Retirement. She suggested the following safeguards if you are ever approached to provide funds to a family member or friend.
Get independent legal advice. Never sign a legal document under pressure and always ensure you understand what you are signing.
Know what the dangers are. If you use your home as security for a loan, you risk losing it. There may also be issues which could affect your pension.
Can friends or family members repay the loan? If they can’t, your house can be at risk. Are they asking you for a loan because the bank has said 'no'? If the bank doubts their ability to repay the loan, you should too.
Get it in writing. Make sure all arrangements are clearly documented before any money changes hands. Your solicitor should view this written arrangement before you sign it.
Don’t be afraid to say 'no'. It’s your future security that’s on the line. You may be unpopular for not providing the money, but that’s better than losing your home or most of your savings.
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