Elderly need to be saved from joint accounts

Elderly people who are physically frail or feel threatened by the onset of dementia will understandably want to delegate management of their financial affairs to another person.

This can go as far as appointing a person with an enduring power of attorney, who will have full control over their finances and personal care once they become too incapacitated to make decisions.

But it can mean just a simple and informal arrangement whereby a healthier, and often younger, person can access money on their behalf through a joint bank account.

People might not think twice about trusting close friends or members of their family with their savings. However, anecdotal evidence suggests that joint accounts set up for the convenience of an elderly person are in fact being used to rip them off.

Financial institutions should change the way they set up joint accounts in order to give elderly people better protection from unscrupulous confidantes, according to the Law Reform Commission.

Joint bank accounts opened and funded by an elderly, often physically infirm, donor but with a relative, friend or carer also named on the account, have long been a source of financial abuse, says Ms Patricia Rickard-Clarke, law reform commissioner.

"If you go into a financial institution to set up a joint bank account, not many will ask you what the purpose of this account is," says Ms Rickard-Clarke, the main author of a new consultation paper by the commission on law and the elderly.

"There's no flexibility with financial institutions in how to assist the elderly," she says. Depersonalisation of financial services - the closure of local post offices and bank branches and the promotion of automated and internet banking - leaves vulnerable older people who need assistance with little protection, the paper says.

Joint accounts set up for the sake of convenience are "a legal minefield" and something banks often aren't very helpful about, agrees Mr John Costello, author of Law and Finance in Retirement.

However, the Law Reform Commission has called on the new Irish Financial Services Regulatory Authority (IFSRA) to encourage financial institutions to bring out a new type of joint account called a "protected account".

These would be scrutinised more heavily than ordinary accounts, with checks on large withdrawals. Any unusual transactions would be reported to the proposed Office of the Public Guardian, which will monitor those who handle the finances of incapacitated older people.

"It would protect against situations where the other person withdraws large sums of money over a period of days or months," says Ms Rickard-Clarke. "That's financial abuse of the elderly."

Setting up a standing order might seem like a good way for an elderly person to avoid someone having full access to their savings. For example, a set amount of money could be transferred every week to a carer's account in order to pay for groceries.

But while standing orders might work in some situations, they can also be quite cumbersome, according to Ms Rickard-Clarke.

Circumstances can change: a frail person who receives a certain amount of home help every week may suddenly need to pay for full day care or, in a minority of cases, residence in a nursery home.

They would then need to reinstruct the bank in order to increase the standing order - something they may at that stage be too ill to do.

Protected accounts could do more than just prevent financial abuse, they could also save on confusion by specifying what would happen to the money in the account if the elderly person became mentally incapacitated, unable to give instructions.

Then there is the question of what would happen if the elderly person died: it might not necessarily be the intention of the elderly donor that the funds be ultimately for the benefit of the other person after his or her death.

At present, the purpose of joint accounts is often "fudged", leading to arguments between the next of kin and the second named person on the account, says Ms Rickard-Clarke.

Banks also need to formalise their dealings with people nominated as enduring power of attorney, she adds.

Protected accounts for elderly customers are available in other jurisdictions, such as the state of New York. So what's to stop financial institutions providing such a service here?

Ms Mary O'Dea, consumer director of IFSRA, says the financial services regulator supports the ideas contained in the Law Reform Commission's consultation paper, but it is yet to look at the mechanics of how to introduce codes of conduct or encourage the provision of protected accounts.

IFSRA is considering making a submission to the commission for its final paper, she confirms.

Meanwhile, the Irish Bankers' Federation (IBF) says it is happy to examine the proposals set out by the Law Reform Commission and would be prepared to engage in consultation with IFSRA.

Both solicitors and concerned groups agree: at the moment, it is all too easy for a vulnerable elderly person's trust to be violated.