A recent article suggests that, while senior citizens should plan inheritances and give gifts of money or property if they are willing and able, they should put their foot down when family members ask them to co-sign or guarantee loans. Otherwise, senior citizens may be left with nothing.
A little discussed but serious problem facing senior citizens today is elder financial abuse. Elder financial abuse occurs when someone uses a senior’s money or property in an illegal or unauthorized way. According to senior fellow at the Canadian Centre for Elder Law Laura Tamblyn Watts, as many as one in eight seniors experience financial abuse. Between one-half and two-thirds of seniors who experience elder financial abuse experience it at the hands of their family members.
In 2009, victimized senior citizens in the United States lost $2.6 billion. The housing market crash hit senior citizens particularly hard. As a rule, seniors should not be asked to co-sign or guarantee a loan unless they are financially able to pay the entire amount. As Tamblyn Watts states, “Most people don’t realize that when you guarantee or co-sign a loan, you’re as good as taking out the loan yourself. You’re completely liable for that sum.”
I like to tell clients that there’s a reason why the bank won’t lend the family member the money without your signature…they don’t think it’s a good financial bet. The bank is in the full-time business of making these kinds of decisions. How good are you at it?