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Financial Exploitation by Family Members When One is Under Guardianship

Senior Couple In Garden With Adult Children


A guardianship surety bond is a bond that provides protection for a ward in the event of any financial exploitation or mismanagement of their funds. This bond works by ensuring that the guardian follows the court-mandated guidelines and also provides financial protection to the ward. By having this bond in place, it helps to make sure that the ward’s interests are taken into consideration and that their finances are safeguarded. Below, we look at financial exploitation of those under guardianship in-depth and explore ways to prevent and address this issue when it occurs.

Financial exploitation of the elderly and other vulnerable individuals is a serious problem in society. Those who are under guardianship are especially vulnerable as they are often not in a position to make their own financial decisions. Unfortunately, family members can take advantage of this vulnerability, resulting in financial exploitation.

Definition of Financial Exploitation

Financial exploitation is defined by the National Adult Protective Services Association (NAPSA) as “the illegal or improper use of an elder’s funds, property, or assets”. It can include a range of activities such as stealing money or items from an elderly person, gaining access to accounts with false information and diverting benefits intended for the person under guardianship. Additionally, it can include activities such as pressuring an elderly person to make large payments on goods or services that are not necessary, making personal loans with high interest rates and taking advantage of an elderly individual’s limited capacity in order to gain access to financial accounts.

In many situations, elders are taken advantage of by their own family members who have been entrusted with their care.

Overview of Guardianship

Guardianship is a legal status that is sometimes necessary and provides an appointed person with the authority and responsibility to take care of someone who cannot do so themselves, or make decisions on their own. Examples of persons requiring guardians include children under the age of 18, individuals with disabilities or mental illness, or an elderly adult. The type of guardianship and scope of authority will depend on the specific needs and best interests of the individual in question.

When a person is put under legal guardianship, they may become vulnerable to financial exploitation by family members. Common red flags that suggest family financial exploitation may have occurred include:

  • Sudden changes in estate plans
  • Abrupt transfers of assets
  • Irrational donations to a particular family member
  • Large withdrawals from ATMs in strange locations at unusual times
  • Changes to joint bank accounts without notice
  • Unpaid bills while other funds are being spent irregularly

Types of Financial Exploitation

When a person is under guardianship, family members may take advantage of the situation and exploit them financially. This type of financial exploitation is unfortunately quite common, and it often involves taking advantage of the person’s guardianship status to gain access to their finances, or to make decisions about the ward’s financial situation that are not in their best interests.

Misuse of Power of Attorney

Having the power of attorney (POA) allows someone to make decisions for the person under guardianship. It is important that this role is taken seriously and POA’s act in the best interest of their loved one. There are potential risks when it comes to misusing this power and its’ importance should not be overlooked.

When a POA misuses their power, they may engage in activities such as embezzlement, investing against their ward’s wishes, making bad decisions that could interfere with the ward receiving necessary care, or simply denying their ward’s access to money falsely claiming they don’t have enough funds to cover medical bills or basic living supplies. In some cases, family members can use the POA to take money from the elder without permission, or even pressure an elder into selling a valuable asset at a discounted price.

It is important for families to be aware of these issues and ensure that financial exploitation does not occur. In order to guide an elderly or disabled family member through what can easily become a complex situation, families should consult a financial advisor or lawyer. They can help create safeguards and stringent rules regarding clear record keeping of all financial matters and explain all legal documents related to guardianship so that rightful ownership and control remain with the elder who is under protection.

Unauthorized Withdrawals

Unauthorized withdrawals, or misappropriation, is a form of financial exploitation that often occurs when a person or their estate is under guardianship. It is important to be aware of signs that point to unauthorized withdrawals and take the necessary steps to protect one’s assets.

Unauthorized withdrawals are typically classified as taking money without permission from bank accounts or safe deposit boxes belonging to someone else. It can also include using an ATM card without authorization, stealing funds or writing checks without permission. It is important to recognize signs of unauthorized withdrawals and take the necessary steps if they do occur.

Signs of Unauthorized Withdrawals:

  • Unexpected changes in bank balances
  • Confirmed thefts from any accounts
  • Missing possessions from safe deposit boxes
  • Suspicious requests for money made by the guardian
  • Unusual check writing activity on account statements
  • Significant amounts of cash missing from their accounts

If you suspect any type of financial exploitation has taken place, it is important to act quickly and take steps to protect the assets of one’s estate. The guardianship should have processes in place for proper oversight as well as reporting and prevention measures. If such processes are not in place, there may be legal ramifications for those allowing vulnerable adults with guardianship arrangements to become subject to fraudulent activities such as these unauthorized withdrawals.

Unauthorized Gifts

Unauthorized gifts are another form of financial exploitation in guardianship cases. These can occur when a family member influencing an elderly person who is under a guardian’s authority makes gifts of money, goods, or services to that person without the guardian’s knowledge. Gifts may be made with or without the individual’s consent, depending on the capacity of the elderly person to understand and make decisions. The gifts may be intended to benefit both the giver and receiver, but they present dilemmas for families and guardians managing a relationship with an elderly person who is under legal guardianship.

It is important for family members, guardians and other individuals responsible for caring for people who have diminished capacity to have systems in place that recognize and address potential uses of financial influence by others. In some cases, court orders can be obtained to stop certain types of activities such as making unauthorized gifts. When such activities occur, it is important to seek guidance from lawyers who specialize in this area of law to protect the best interests of individuals who need guardianship protection from unfair or exploitative practices.

Factors Contributing to Financial Exploitation

When a family member is put under guardianship, the potential for financial exploitation rises dramatically. It is important to note that while this is a serious issue, it is not solely attributable to the guardian who is assigned the responsibility of making financial decisions on behalf of the individual. Other factors that contribute to financial exploitation include lack of knowledge of the individual’s financial position, family dynamics, and lack of understanding of their rights and options.

Lack of Financial Literacy

Financial literacy encompasses knowledge and understanding of financial concepts, the ability to think critically about those concepts and the skills needed to use that knowledge. Lack of financial literacy can often be a major factor in leading to financial exploitation, especially when one is under guardianship.

When an individual does not understand basic financial principles, such as different types of investments or insurance policies, it makes them more susceptible to being taken advantage of financially since they do not understand how their money is being used or manipulated. This risk is exacerbated when it is a family member exploiting these weaknesses in the individual, as they are able to take advantage of their familial relationship and manipulate their trust in order to gain access to their finances.

Furthermore, weak financial literacy can also lead an individual to make bad decisions with the money that they do have; this allows perpetrators, like family members and guardians appointed by the court, to exploit them by convincing them that certain investments or actions with their money are in their best interests. The lack of understanding may then prevent victims from objecting as they are unable to see through the manipulations until after it has been too late.

Therefore, steps can be taken towards preventing instances of family-led exploitation by attempting to educate individuals on proper financial management practices; this should include how individuals should be able spot potential signs of exploitation from themselves and from others. It is important for those who are vulnerable within society – such as those under guardianship –to be educated on these matters so that they may more easily identify any potential warning signs before any damage has been done via exploitation.

Poor Understanding of Guardianship

One of the primary factors contributing to financial exploitation by family members when one is under guardianship is a poor understanding of the system. Guardians MUST act in the best interest of the ward. Guardians are in place to ensure the safety and proper management of an individual’s finances, but family members may not be aware of the responsibilities this role entails. Without an understanding of these regulations, individuals may not recognize instances when abuse or exploitation is taking place.

In addition, when guardians are appointed on behalf of an individual, they may lack knowledge of best practices with managing finances or have incomplete documentation or processes applicable to their role as guardian. This can further lead to vulnerable individuals being subject to inappropriate or illegal activities with regards to their finances such as theft and fraud.

Moreover, a lack of training for guardians as well as an absence of regular monitoring actions on behalf of external entities also increases chance for abuse susceptibility with regards to financial exploitation. For example, potentials for embezzlement or unauthorized spending swells if appropriate auditing operations are not provided by professionals authorized in areas such as estate management and fiduciary responsibility. When this lack of oversight exists it provides opportunity for those who might be inclined towards taking advantage over others to do so without fear for adverse consequences.

Mental Health Issues

Mental health issues may be a factor in financial exploitation. There are some cases in which vulnerable individuals with dementia, mental illness, or impaired capacity may be subject to opportunistic manipulation and abuse. This is true whether the perpetrator is related or not. Mental health issues can worsen existing caretaker conflicts and lead to increased risk of financial exploitation.

Other signs of mental health issues that might lead to financial exploitation include confusion or psychosis, experience difficulty focusing on complex tasks and proper decision-making, diminished cognitive functioning, anxiety or depression that similar widely in their severity, impaired ability to control impulses, distrust of professionals providing services, fear of change or fear from a lack of control over surrounding events in one’s own life.

Financial abuse is difficult to identify due to the secretive nature of perpetrators, who are typically family members or other close relatives relying on the vulnerable individual for support and assistance. As such, it can take prolonged periods before anyone recognizes what has happened as well as an understanding of the larger manipulation schemes being deployed by such abusers leading up to a financial exploitation incident.

Prevention Strategies

One of the most effective preventive measures is mandating a guardianship surety bond. A guardianship surety bond guarantees that if the guardian misuses funds or violates any terms of the guardianship they can be held accountable and pay compensation up to the amount of the bond’s penal sum (up to 1.5x the value of the personal assets).

A guardianship surety bond provides financial security in cases where a person may be taken advantage of financially by their appointed guardian or another family member. The principal (guardian) must have a surety company guarantee their performance and duties as provided under court guidelines in order to enter into a guardianship surety bond agreement, ensuring peace of mind for family members who may otherwise worry about financial exploitation. This type of bond acts as an additional layer of protection should other forms fail; serving as an insurance policy against any misappropriation, misuse or fraud associated with any estate property belonging to a ward.

Additionally, prevention of financial exploitation of people under guardianship can be achieved through education and awareness, combined with effective procedures and safeguards.

Education and awareness are central to preventive efforts. It is important to educate the general public, guardians, and other professionals on what constitutes financial exploitation, including means of identifying potential victims.

Families must also be educated on the value they can play in reporting suspicions of financial exploitation, which could prevent costly legal intervention at a later point. Public campaigns, such as media campaigns or community outreach workshops, focusing on awareness regarding financial exploitation can help set expectations for appropriate behavior by all parties involved – guardians/family members or any professional connected with the person’s affairs.

Family members can petition to the court for the removal of the guardian committing the exploitation. With evidence, they can choose to take on the guardianship themselves or nominate a third party non-profit organization to take the responsibility.

Financial Literacy Training

Financial literacy training is a key component of protecting those under guardianship from the risk of financial exploitation by family members. Instilling a sense of financial responsibility in guardians can help them better understand their own money and learn effective strategies to keep assets safe.

When considering financial literacy training, it’s important to focus on topics specific to the work of being a guardian and understanding one’s rights as an individual under guardianship – such as understanding access to public benefits, budgeting, finance basics (interest rates, taxation,) and investing. Offering guidance and support from experts in the field can also be beneficial for attaining knowledge about how proper signatures should be obtained, steps necessary for significant transactions (such as opening accounts or transferring funds,) common scams that aim to exploit guardianship status – like using checks marked “gift” when establishing trusts – and other typical deceptive ploys adopted by family members who wish to financially exploit individuals under their care.

In addition, strategies for properly maintaining records and monitoring accounts for potential misuse can also be included in financial literacy education. Regular communication around any changes made regarding the account holder’s finances or guardianship status is critical, especially if there are multiple people involved in the account holder’s finances. Providing continuous education on these topics can help reduce the risk of exploitation and theft which could result in devastating losses if not timely detected or addressed properly.

Monitoring and Oversight

To protect individuals from financial exploitation by family members, it is important to vary monitoring and oversight processes. To ensure that unnecessary spending and potential misappropriation of funds do not occur, the guardian should provide regular financial reports to relevant parties, such as the court or appointed professional third-party oversight or the surety provider if a guardianship surety bond is in place. In many instances, the surety provider will require an annual accounting for the estate. These reports should include line items detailing any transactions that have occurred during the reporting period.

In some jurisdictions or situations, additional measures – such as a restrictive spending order imposed by a court – may be appropriate to help prevent misuse of guardianship funds.This can be done by petitioning for a supervised guardianship. Such arrangements would typically involve one or more family members closely monitoring purchases made on behalf of the person under guardianship and providing written accountability to other persons designated by the court. In addition, restrictions may also be placed on withdrawing cash unless for an explicit purpose identified in advance in another written form to be signed by another designated responsible party.

Finally, it is also important for responsible parties overseeing accounts held on behalf of someone under guardianship to update beneficiaries when large gifts are made from such funds. Such notifications can help ensure an appropriate momentary balance between providing support for those who need it and appropriately monitoring assets for potential risks associated with nepotism or undue influence from relatives who stand to benefit from acts taken indirectly through proxies such as guardian authority.


There is a wide range of financial abuses that guardians should be aware of when deciding how to protect and manage the finances of someone they are appointed to take care of. Financial exploitation by family members can be difficult to detect, but it is important to be vigilant to preserve the assets and well-being of those under guardianship. A combination of a guardianship surety bond, establishing screening or assessment procedures, educating family members on the legal requirements for guardianship litigation and how to behave ethically when dealing with a loved ones finances, overseeing ongoing financial activity for any signs or red flags of exploitation, and having periodic evaluations done by an unbiased third person can all help in preventing financial exploitation from occurring. With proper safeguards in place, one should be able to live out their golden years free from unnecessary worries about the integrity of their wealth.

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