The Fine Line Between Help and Harm: Addressing Elder Financial Abuse

The challenge for lawyers is knowing when to step in and what steps to take, especially if there is a concern about the wellbeing of an elder person. A sudden change to a power of attorney or a big financial decision made out of the blue might be a warning sign – but what if it’s actually what the client wants? And when mental capacity comes into play, things can get even trickier. Lawyers have to protect older clients without undermining their independence, and that’s not always easy.

So how do you navigate these situations? What legal tools are available? And what’s the best approach to handling cases of suspected elder abuse?

• Gibbons and her sisters-in-law held land as joint tenants but the sisters later signed documents severing the joint tenancy despite questions about their mental capacity. The issue was whether the sisters had sufficient understanding of the nature and effect of the transaction, given that capacity varies with the complexity of the act in question. The High Court held that there is no fixed standard of mental capacity, only a relative test depending on the transaction.

Banks v Goodfellow (1870) LR 5 QB 549

• John Banks made a will in favour of his niece despite suffering from mental illness and his heir-at-law challenged it on the basis of lack of capacity. The issue was whether Banks had sufficient mental capacity to validly dispose of his property by will, a question that also informs the standard for entering into other instruments such as a power of attorney. The Court held that capacity requires understanding the nature and effect of the act, the extent of one’s property, and the claims of potential beneficiaries free from delusions affecting judgment, and since Banks satisfied this, the will was valid.

Louth v Diprose [1992] HCA 61

• Diprose, a solicitor with unimpaired legal and mental capacity, was infatuated with Louth, who manipulated his emotional dependence by fabricating an “atmosphere of crisis” to induce him to buy her a house in her name. The issue was whether a person with full intellectual capacity could nevertheless be under a “special disability” due to emotional dependence, such that the other party’s exploitation amounted to unconscionable conduct. The High Court held that Louth’s manipulation of Diprose’s vulnerability was unconscionable, confirming that even a person of sound mind can be unduly influenced where their emotional dependence places them at a special disadvantage.

Smith v Smith [2017] NSWSC 408

• Two sons challenged their step-mother’s misuse of their father’s funds under an enduring power of attorney while he had dementia, which had significantly reduced the estate left to them. The issue was whether the step-mother’s actions under the power of attorney, particularly spending on herself and her daughter, were valid and whether the delay in raising the claim after the father’s death barred recovery. The Court found the step-mother’s spending improper and ordered the funds (including property bought for her daughter) restored to the estate.

• Elder abuse is often undetected until after the victim has passed away. One sign of abuse is restricting access to the victim.
• Granny flat agreements, while not inherently elder abuse, can lead to financial exploitation, such as unexpected mortgages or inability to pay bills.
• The legal concepts of undue influence and unconscionable conduct are often used to address elder abuse.
• Capacity is a legal question, not medical, although medical evidence does play a part in assessing functioning.
• Any interested party, such as a hospital, aged care facility or service provider, can bring legal proceedings in relation to a vulnerable person. Other individuals, including adult children and spouses, can also take legal action as they have a vested interest in the person’s welfare.
• A power of attorney can be revoked and the court may appoint the NSW Trustee and Guardian to manage the estate.
• The Aged Care Act has undergone significant changes, including the introduction of a new concept of a “responsible person,” which raises concerns about its interaction with state-based power of attorneys. This potentially creates opportunities for abuse if an individual appoints themselves as a responsible person without holding power of attorney or enduring guardianship.

• Transactions should only proceed if the person involved has full capacity and is entering voluntarily with independent legal advice. If capacity is in question, it is advisable to seek approval from the appropriate legal body, such as NCAT, to ensure the transaction is valid and protects the vulnerable individual involved.
• Solicitors need to be careful in evaluating capacity as individuals may have varying levels of capacity for different decisions. It is recommended that solicitors ask open-ended questions to help in their assessment of capacity.
• Elderly people may be unduly influenced, with contributing factors including age, cultural differences and linguistic barriers. Solicitors should be vigilant for signs of potential abuse, such as elderly clients always being accompanied by someone else during legal transactions and any subtle cries for help. Remain alert and always probe further if you suspect something is not right.
• Open-ended questions, such as inquiring about who lives with or helps the individual with their banking, can help uncover potential signs of abuse without awkwardly confronting the individual.
• The Aging and Disability Commission can be contacted to investigate and address any concerns of abuse by conducting unannounced visits and taking necessary steps based on the findings.
• NCAT is well-known but many solicitors are not aware of the protective jurisdiction of the Supreme Court. The Supreme Court can order quick actions like injunctions to protect against financial elder abuse, which may be crucial in cases where suspected abuse is occurring.
• For proceedings with NCAT, it is often essential to provide medical information despite some doctors’ reluctance due to concerns about court involvement.
• It is crucial for solicitors to recognise the power and importance of instruments like a power of attorney and ensure proper care and thorough explanation to clients. Providing written advice and explanations can help mitigate misconceptions and educate about the role and implications of powers of attorney.

Supreme Court of NSW, SC GEN 23, Use of Generative Artificial Intelligence Practice Note

Elder financial abuse – it’s not always obvious, not always intentional even, but when it happens, the impact can be irreparable. As more families help their aging relatives with their finances, we’re seeing more and more cases where things don’t seem quite right – savings, disappearing, houses changing hands or wills being rewritten under questionable circumstances.

Now, the challenge for lawyers practicing in this area is knowing when to step in and how to do it the right way. A sudden change to a power of attorney or a big financial decision made out of the blue might be a warning sign but what if it’s actually what the client really wants? And when mental capacity comes into play, things can get. Even trickier lawyers have to protect older clients without undermining their independence and that’s not always easy.

So how do we navigate these tricky situations? What legal tools are available and what’s the best approach to handling cases of suspected elder abuse? What are the warning signs?

To break it all down. We are joined by Leah Sewell, barrister at Chalfont Chambers and a Trust and Estates practitioner with STEP. She’s also on the International Committee for STEP’s Mental Capacity Special Interest Group, so she’s deeply involved in this area.

Leah, thank you so much for joining me today on Hearsay.

TIP:  Elder abuse in Australia is an issue of increasing concern, particularly in the context of a rapidly aging population. The 2021 census recorded 4.34 million Australians aged 65 and older, representing 70% of the population – a figure projected to rise significantly by 2026. This demographic shift underscores the importance of understanding the prevalence and characteristics of elder abuse.

The National Elder Abuse Prevalence Study found that 14.8% of older Australians had experienced at least one form of abuse in the previous year. Psychological abuse is the most common at 11.7%, followed by neglect, then financial abuse, physical abuse and sexual abuse. Financial abuse, while less frequently reported, is particularly insidious, often involving exploitation by close family members, most commonly adult children.

Women reported elder abuse at a slightly higher rate than men. 15.9% of elderly women versus 13.6% of elderly men. Women were particularly more likely to experience psychological abuse and neglect. Reports of financial abuse were similar across genders, but there were notable differences in their perpetrators.

Financial abuse is often hidden, making it difficult to detect and address, despite financial abuse. Accounting for 2.1% of cases in the study, experts believe under-reporting may mean the true prevalence is even higher. Perhaps the most significant finding is that family members were the primary perpetrators of financial abuse.

Over 60% of reported cases involve relatives with adult children being the most common offenders. This abuse can take many forms, as Leah explained earlier, but can include misuse of power of attorney and pressure to provide financial support. Certain demographic and social factors significantly increase an older person’s risk of experiencing financial abuse.

For example, older people with stepchildren were at a higher risk of psychological and financial abuse. Divorced individuals who were twice as likely to experience elder abuse while widowed and never-married individuals were also at an elevated risk. Low income, older Australians and those renting or owning homes with debt reported higher rates of financial abuse.

And finally, those with limited social networks were more vulnerable. Financial abuse rarely exists in isolation. One in five older Australians who reported multiple types of elder abuse, experienced financial abuse alongside psychological abuse perpetrators often struggled with personal problems. Over 75% had financial difficulties, mental health issues, substance abuse problems or gambling addictions.

TIP:  So Leah and David just spoke about power of attorney. A power of attorney is a legal power that allows a person, the principal, to appoint someone, the attorney, to make financial and legal decisions on their behalf. In Australia, there are two main types of powers of attorney:

• A general power of attorney, which gives authority to an attorney to manage financial and legal matters, but only while the principal retains decision making capacity. It becomes invalid if the principal loses capacity or passes away; or 
• an enduring power of attorney, which continues to be effective, even if the principal loses decision making capacity due to illness, injury, or disability. However, it also becomes invalid upon the principal’s death. 

Power of attorney can be used for various financial purposes, including signing legal documents, operating bank accounts, paying bills, managing investments and buying or selling real estate. In New South Wales, if a power of attorney involves real estate transactions, it must be registered with NSW Land Registry Services. 

A power of attorney can be revoked or updated at any time provided the principal has decision making capacity if revoked. Relevant parties, including the attorney and financial institutions should be notified in writing and the original document should be destroyed.

A power of attorney does so much more than what a will does. A power of attorney allows someone to deal with your assets without your consent during your lifetime, even if those transactions were not ones that you would want to happen and that’s a fundamental misunderstanding of the power that you are giving someone away and it’s also where things go wrong because people get these powers of attorney and they do things that they shouldn’t perhaps be doing.

TIP:  So Leah just mentioned the STEP Global Congress. STEP, or the Society of Trust and Estate Practitioners, is a global professional body that focuses on helping families plan for the future with an emphasis on asset protection, succession planning and compliance. One of STEP’s key initiatives is the Spot the Signs campaign that Leah was involved in.

The Spot the Signs Campaign provides resources to identify and prevent elder abuse. Abuse can often be difficult to detect, so steps. AIM is to create awareness and encourage proactive measures in addressing elder abuse. The Spot the Signs campaign offers guidance on recognizing financial abuse.

Some warning signs include:

• unexplained withdrawals, transfers or changes in financial behaviour;
• missing valuables or sudden alterations to wills and legal documents;
• isolation of the individual from family or trusted advisors;
• pressure to sign financial agreements or make decisions against their best interests; and
• unpaid bills despite having sufficient resources.

STEP highlights the importance of planning ahead to reduce the risk of financial abuse.

TIP:  So Leah just spoke about experts presenting evidence regarding a person’s mental capacity in cases involving elder abuse and questions of mental capacity. Expert medical evidence is crucial in determining whether an individual had the capacity to make legal decisions at any given time. This evidence is often provided through retrospective expert opinion.

Particularly when the individual in question can no longer be assessed firsthand. Experts in these cases typically include neuropsychologists, neurologists, geriatricians and psychiatrists. Retrospective expert evidence is used when an expert has not personally observed the individual at the time a transaction took place.

Instead, the expert reviews contemporaneous documents such as medical records, legal documents, and witness statements, and applies their specialist knowledge to form an opinion on the person’s capacity. This is under section 79 of the Evidence Act 1995. 

Retrospective expert evidence requires court approval, however, this process can increase costs and delay proceedings. Courts have also expressed concerns about its reliability. In Starr v Miller [2021] NSWSC 426, Hallen J noted that evidence from treating practitioners is generally given more weight than retrospective evaluations. Hence, Leah mentioning that the judge might give expert evidence little weight, especially where other implied assumptions are relied on that may be based on external factors like personal bias.

So in terms of finding out whether they had capacity to enter into certain transactions. It is a finely balanced thing at times but the court will look at what type of transaction we are looking at. For example, someone might have the financial capability to go down to the supermarket and buy a loaf of bread and a litre of milk. They don’t have capacity to enter into a decision to sell their property and you can see intrinsically those transactions are very different. One is quite innocuous, part of everyday living and the other one is a transaction that some people may only engage in once or twice in their life.

TIP:  In November, 2024, the Australian Parliament passed the New Aged Care Act, and as Leah mentioned, that took effect from the 1st of July, 2025. It’s a major overhaul replacing three existing pieces of Commonwealth legislation, the first being the Aged Care Act 1997. Also, the Aged Care (Transitional Provisions) Act 1997 and the Aged Care Quality and Safety Commission Act 2018.

The goal is to create a more person centred system that puts older Australians, not providers, at the core of aged care. Dor lawyers working in this area of law, especially in cases where elder abuse intersects with questions of care, this new legislation may significantly affect how rights are identified and enforced.

One key shift is the introduction of a rights based framework, including a formal statement of rights for people accessing aged care. That includes rights to self-determination, culturally safe care and feeling respected and secure. This Act also introduces a clearer pathway for complaints and rights.

Aged care providers are required to have systems for managing complaints and issues can be escalated directly to the Aged Care Quality and Safety Commission. The Commission is gaining broader powers too, ranging from enhanced monitoring to issuing fines or civil penalties. 

For the first time, whistleblowers, including aged care workers and family members are explicitly protected. They can report breaches anonymously and their identities will be protected unless disclosure is necessary to prevent harm or comply with any legal obligations. Retrospective concerns like those often raised in elder abuse matters could intersect with these changes. 

The Act strengthens the expectation that providers document and demonstrate that their care aligns with the new rights based obligations, offering new avenues to challenge or scrutinise past care decisions.

It’s a significant legislative shift and it’s worth staying across how this may reshape the landscape of complaints, accountability and rights protection in aged care.

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