Elder Financial Exploitation: Why “Competent” Is Often the Wrong Question
In elder financial exploitation litigation, witnesses often answer a question that is too broad to be useful: Was the older adult competent?
The answer may be sincere and still reveal very little. “Competent” may mean that the person was pleasant, coherent, oriented, able to recognize family members, or not subject to a guardianship. “Incompetent” may mean that the person carried a diagnosis, needed help with finances, or declined later. None of those propositions necessarily answers the question presented by the disputed transaction.
The more useful inquiry is narrower. What decision was made? What abilities did that decision require? What did the person understand and appreciate at the relevant time? And what, if anything, did another person do to shape the decision?
What Does “Competent” Mean?
The word is commonly used as though it describes a single, stable condition. In litigation, it often conceals several different ideas.
A witness may say that an older adult was competent because the person carried on a normal conversation. A treating clinician may mean that the person was alert and oriented. A banker may mean that the customer answered routine security questions. A lawyer may mean that no obvious impairment was observed during a meeting. A family member may mean that the person was still living independently.
Each observation may be relevant. None should be converted automatically into an opinion about capacity for a particular deed, beneficiary change, guarantee, trust amendment, annuity exchange, loan, or transfer of control.
The opposite error is equally serious. A diagnosis of dementia, depression, delirium, or another disorder does not establish incapacity for every act. Dependence on others does not eliminate autonomy. Poor judgment does not, by itself, prove exploitation.
Financial Decisions Do Not All Require the Same Abilities
Financial functioning ranges from familiar daily tasks to complex, novel, and consequential decisions. The ability to purchase groceries, pay a recurring bill, or recognize currency is not the same as the ability to understand a concentrated investment, a deed transfer, an irrevocable trust amendment, a substantial gift, or a personal guarantee.
Research on financial capacity has therefore treated it as multidimensional rather than as a single all-or-nothing skill.[1] Other work has emphasized the need to examine the particular decision, the person’s understanding of that decision, and the context in which it was made.[2]
For litigation purposes, the controlling legal standard remains a question for counsel and the court. The forensic task is to connect the available evidence to the abilities that standard requires. Depending on the transaction, those abilities may include understanding the nature and essential terms of the act; appreciating its practical effect; comparing alternatives; reasoning about risk, benefit, and foreseeable consequences; and communicating a sufficiently stable choice.
Social Fluency Can Mislead in Both Directions
Some people with significant cognitive impairment remain socially skilled. They may greet visitors appropriately, use familiar phrases, discuss remote memories, and appear more intact during a brief encounter than they are when required to manage unfamiliar or complex information.
Other people are quiet, anxious, physically frail, hearing-impaired, slow to respond, or dependent on assistance, yet retain the ability to understand and make the decision at issue.
This is why impressions such as “she seemed fine,” “he knew who I was,” or “she was not confused” should be examined rather than accepted as conclusions. What did the witness actually ask? What did the person explain in response? Could the person describe the transaction in his or her own words? Could the person identify who would benefit, who would lose, what would change, and what alternatives were available?
Capacity and Exploitation Are Not Opposites
A common error is to treat the case as a binary choice: either the person had capacity and therefore could not have been exploited, or the person lacked capacity and therefore exploitation occurred.
Neither proposition is sound.
A person may possess enough ability to make a legally valid decision and still be vulnerable to deception, dependency, fear, isolation, selective disclosure, or misuse of trust. The person may understand the formal nature of a transaction while operating from false information supplied by another person. The person may know that property is being transferred yet fail to appreciate the practical consequences because access to contrary information has been restricted.
Conversely, impaired capacity does not prove that another person caused or exploited the impairment. The record must still address conduct, opportunity, benefit, mechanism, and causation. Vulnerability is not exertion. A suspicious result is not proof of how the result was produced.
Formalities Are Evidence, Not Substitutes for Analysis
A signed document, notarization, recorded statement, lawyer’s participation, or bank employee’s observation may be important evidence. None is conclusive merely because it occurred.
The weight of the formality depends on what happened around it. Who selected and contacted the professional? Who supplied the background information? Was the older adult interviewed privately? Were material terms explained accurately? Were alternatives discussed? Was the person asked to explain the transaction rather than merely assent to it? Was the benefiting individual present, nearby, or controlling transportation and access? Did the older adult retain a copy and later describe the act consistently?
A professional’s participation may strongly support the validity of a transaction when the instructions were independent, the meeting was private, the explanation was accurate, and the person demonstrated understanding. The same formality carries less weight when the professional relied on information supplied by the beneficiary, had limited contact, did not test understanding, or documented only that the person appeared alert and agreeable.
The Better Question Is Functional and Transaction-Specific
The analysis should begin with the disputed act, not with a global label.
For a beneficiary change, the relevant questions may include whether the person understood the account, the existing designation, the effect of the change, and the practical consequence for prior beneficiaries. For a deed transfer, the inquiry may include ownership, retained rights, control, tax or financing consequences, and the difference between a gift and a testamentary disposition. For a loan or guarantee, the person may need to understand repayment obligations, collateral, default risk, and the relationship between the transaction and personal resources.
The complexity of the instrument matters, but complexity alone does not decide capacity. Familiarity, prior experience, the quality of the explanation, sensory limitations, fatigue, acute illness, medication effects, and the opportunity for independent review may all affect performance.
How to Examine a Witness Who Says the Person Was “Competent”
The most useful examination moves from conclusion to observation. The witness should be asked what was actually seen, heard, explained, and documented.
How long did the witness speak with the older adult, and under what circumstances?
Was the alleged beneficiary or influencer present before, during, or immediately after the conversation?
What did the witness ask the person to explain in his or her own words?
Could the person identify the property, account, amount, or legal interest involved?
Could the person describe the effect on prior beneficiaries, ownership, control, or future security?
What alternatives were discussed?
Did the person understand that the transaction could not easily be reversed?
Did the explanation remain consistent over time and in the absence of the benefiting individual?
What information did the witness receive from someone other than the older adult?
Did the witness review medical, financial, or estate-planning records, or was the opinion based on a brief encounter?
Was the witness expressing a clinical opinion, a legal conclusion, or simply a lay impression?
These questions do not presume incapacity or exploitation. They determine whether the witness’s conclusion is supported by observations that bear on the actual decision.
The Same Discipline Applies to Claims of Incapacity
A witness who says the older adult was “incompetent” should be examined with equal care.
What function was impaired? When was it impaired? Was the impairment continuous or fluctuating? Did it affect memory, appreciation, executive control, judgment, language, reality testing, or another ability relevant to the transaction? Was the witness describing the person on the operative date or at a later stage of illness? Did the person perform better with hearing aids, written information, rest, treatment of delirium, or removal of an interfering individual?
Retrospective opinions become less reliable when they rely on diagnosis without function, later decline without temporal analysis, or broad family descriptions unsupported by contemporaneous evidence.
Evidence That May Strengthen or Weaken the Claim
No single fact resolves the case. The significance of each fact depends on the legal theory, the transaction, and the surrounding evidence.
A claim may be weakened when the older adult originated the transaction, expressed the same rationale before the challenged relationship developed, obtained genuinely independent advice, accurately described consequences, repeated the decision privately over time, retained substantial benefit, and acted consistently with longstanding values or prior plans.
A claim may be strengthened when the idea originated with the beneficiary, access to information or advisors was controlled, the person acted from demonstrably false beliefs, explanations changed with the audience, important consequences were not understood, prior intentions shifted abruptly without a credible independent explanation, or the person could not describe the transaction after execution.
These are not mechanical factors. They are evidentiary propositions to be tested. The analysis should identify contrary evidence rather than treat it as an inconvenience.
What a Forensic Psychiatric Opinion Should—and Should Not—Do
A forensic psychiatric opinion may address mental and functional condition at the relevant time; the abilities required by the decision; the effects of cognitive, psychiatric, medical, or medication-related factors; vulnerability to deception or coercion; and whether the behavioral evidence supports or undermines a proposed mechanism.
It should not substitute for forensic accounting, document authentication, valuation, digital forensics, or legal interpretation. It should not convert a cognitive-screening score into a legal conclusion. Research instruments can structure inquiry, but no score proves exploitation or incapacity in a particular case.[2][3]
The expert should state what the evidence supports, what it does not establish, what alternative explanations remain, and how missing information limits the opinion.
The Practical Consequence for Counsel
The phrase “competent or incompetent” often causes discovery to develop around the wrong issue. It invites witnesses to offer global conclusions and encourages experts to debate labels rather than analyze the disputed act.
A more useful case formulation identifies the operative transaction and date, the required abilities, the information available to the older adult, the person’s actual understanding, the conduct of others, and the consistency of the result with prior intentions and values.
That approach does not favor the party alleging exploitation. It does not favor the party defending the transaction. It improves the quality of the inquiry in either direction.
Attorneys confronting a disputed transfer, beneficiary change, deed, gift, guarantee, trust amendment, or similar transaction may also review Dr. Blum’s Elder Financial Exploitation consultation and expert-witness services.
Attorney Case Inquiries
For selected complex matters, attorneys may submit a brief, non-confidential inquiry through the Contact page. Dr. Blum provides litigation consultation and accepts selected expert-witness assignments involving elder financial exploitation, mental and testamentary capacity, undue influence, and related questions.
Do not send records or confidential information before conflicts have been checked and a written engagement agreement is in place.
This article is educational and is not legal advice. Capacity standards, exploitation statutes, fiduciary duties, burdens of proof, and evidentiary rules vary by jurisdiction. Counsel should identify the controlling law; the court determines the ultimate legal issues.
References
1. Marson DC, Sawrie SM, Snyder S, et al. Assessing financial capacity in patients with Alzheimer disease: A conceptual model and prototype instrument. Archives of Neurology. 2000;57(6):877-884. doi:10.1001/archneur.57.6.877.
2. Lichtenberg PA, Ficker LJ, Rahman-Filipiak A. A person-centered approach to financial capacity assessment: Preliminary development of a new rating scale. Clinical Gerontologist. 2015;38(1):49-67. doi:10.1080/07317115.2014.970318.
3. Lichtenberg PA, Teresi JA, Ocepek-Welikson K, Eimicke JP. Reliability and validity of the Lichtenberg Financial Decision Screening Scale. Innovation in Aging. 2017;1(1):igx003. doi:10.1093/geroni/igx003.