As your older loved ones age, it’s important to talk with them about finances. Adult children may be hesitant to discuss issues of estate planning and budgeting with their parents. On the other side of the spectrum, some elderly parents fight against discussing these topics with their grown children, refusing to embrace the fact that they may not be able to handle their finances alone.
Whatever the case may be, if you have an aging loved one you should strongly consider having a discussion with them about their finances before someone else with nefarious goals in mind does instead. Let’s discuss elder financial abuse.
Elder financial abuse is big business. It was journalist J.F. Wasik who characterized elder financial abuse as the “crime of the 21st century.” It’s estimated that elder financial abuse costs older Americans more than $2.6 billion annually. What’s worse is that for every known case of this abuse, it is estimated that 4-5 cases may go unreported. Many seniors might not recognize when it happens or are too ashamed to tell someone.
With the number of baby boomers retiring, elder financial abuse is estimated to only get worse. Now is the time to educate yourself and talk to your older loved ones.
Who are committing crimes against the elderly?
According to the National Adult Protective Services Association, sadly 90% of abusers are family members or trusted others, such as caretakers or neighbors. Many of these violators use excuses such as “She would want me to have it” or “I’m going to get it all eventually anyway” to reason as to why they commit these crimes.
Financial exploitation of vulnerable seniors can take many forms.
Common ways family members and other trusted individuals take financial advantage:
- Using a Power of Attorney as a license to steal the victim’s monies for the perpetrator’s own use
- Taking advantage of joint bank accounts in the same way
- Using ATM cards and stealing checks to withdraw monies from the victim’s accounts
- Threatening to abandon, hit, or otherwise harm the victim unless he or she gives the perpetrator what he/she wants
- Refusing to obtain needed care and medical services for the victim in order to keep the person’s assets available for the abuser
- In-home care providers charging for services; keeping change from errands, paying bills which don’t belong to the vulnerable adult, asking the vulnerable adult to sign falsified time sheets, spending their work time on the phone and not doing what they are paid to do
Common scams by strangers and “professionals”:
- Lottery and sweepstakes scams “You’ve already won! Just send $2,500 to cover your taxes.”
- Home repair/traveling con-artist scams including:
- “We’re in your area and can coat your driveway/roof really cheaply.” The scammers demand payment up front, and then often claim that their initial investigation reveals a more serious problem, with a more expensive solution. The “work” they do is unlicensed and subpar.
- “I’m from the utility company. I need you to come outside with me for a minute.” One “worker” might distract the elder while another enters the house to steal money and other valuables.
- Telemarketing/phone scams including:
- The pigeon drop – the con-artist tells the individual that he/she has found a large sum of money and is willing to split it if the person will make a “good faith” payment by withdrawing funds from his/her bank account. Often, a second con artist is involved, posing as a lawyer, banker, or some other trustworthy stranger.
- The fake accident ploy – the con-artist gets the victim to wire or send money on the pretext that the person’s child or another relative is in the hospital and needs the money.
- Charity scams – money is solicited for fake charities. This often occurs after natural disasters.
- Internet scams including:
- Pop-up browser windows simulating virus-scanning software will fool victims into either downloading a fake anti-virus program (at a substantial cost) or an actual virus that will open up whatever information is on the user’s computer to scammers.
- Email/phishing scams – A senior receives email messages that appear to be from a legitimate company or institution, asking them to “update” or “verify” their personal information. A senior receives emails that appear to be from the IRS about a tax refund.
- Predatory lending – seniors pressured into taking out inappropriate reverse mortgages or other loans
- Investment/securities schemes – pyramid schemes; unrealistic returns promised; dealer is not licensed
- Identity theft – credit cards opened fraudulently, etc.
- Medicare scams – perpetrators may pose as a Medicare representative to get older people to give them their personal information, or they will provide fake services for elderly people at makeshift mobile clinics, then use the personal information they provide to bill Medicare and pocket the money.
- Funeral and cemetery scams including:
- Scammers may read obituaries and call or attend the funeral service of a complete stranger to take advantage of the grieving widow or widower.
- Another tactic of disreputable funeral homes is to capitalize on family members’ unfamiliarity with the considerable cost of funeral services to add unnecessary charges to the bill.
Whatever the case may be, if you have an aging loved one you should strongly consider having a discussion with them about their finances before someone else with nefarious goals in mind does instead.
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What’s being done about this crime epidemic?
In 2016, the North American Securities Administrators Association (NASAA) adopted the Model Act to Protect Vulnerable Adults from Financial Exploitation. The act mandates reporting to a state securities regulator and state adult protective services agency when a qualified individual (such as broker-dealers or investment advisors) has a reasonable belief that financial exploitation of an eligible adult has been attempted or has occurred.
In 2018, the Senior Safe Act was signed into law. The Senior Safe Act protects “covered financial institutions” which include investment advisers, broker-dealers, and transfer agents and their eligible employees, from liability in any civil or administrative proceeding in instances where those employees make a report about the potential exploitation of a senior citizen.
What can you do?
Spectrum Retirement offers practical ways to prevent fraud. Help your senior loved one follow the strategies below to ensure the protection of their assets.
1. Stay involved in your financial matters and remain cautious.
At the very least, monitor your account statements, credit card bills, and bank balances. Meet with your financial advisor at least once a year and be sure to notify your attorney or accountant of any major life changes, such as the sale of an asset, a move to a new home, the loss of a loved one, or an inheritance.
2. Seek professional and trustworthy counsel before making financial decisions.
If something sounds too good to be true, it probably is. Don’t be taken in by promises which don’t pass the “smell test.” You can begin by checking references at your local Chamber of Commerce or Better Business Bureau. Here are a few other places to check out professionals before engaging their services:
- finra.org allows you to research brokers, brokerage firms, investment advisor representatives and investment advisor firms
- cfp.net allows you to check the registration of a certified financial planner
- naela.org allows you to find attorneys that specialize in elder care
- caregiver.org allows you to do background checks on caregivers
3. Avoid isolation and stay in touch with trusted family members.
As one ages, our circle of family and friends shrinks. A natural desire for connection can put us at risk if we trust the wrong people. People who are isolated face a greater risk of financial abuse because they are often more vulnerable. It is important to maintain a sphere of healthy and trusted relationships.
4. Beware of people who ask to take charge of your financial matters or become your legal representative.
When someone asks to have their name added to your bank accounts and property titles, it should be a major red flag. Be careful sharing control of your assets.
5. Keep your legal and financial documents in a safe place.
A recommended safe place is a fireproof safe. Share the combination with someone you trust.
6. Beware of telephone solicitations or e-mail scams.
One popular scam is the “grandparent scam.” Scammers will place a call to an older person and when the mark picks up, they will say something along the lines of: “Hi Grandma, do you know who this is?” A grandparent will answer the name of a grandchild and the scammer with go along with it. They will usually say they are traveling or at school and have gotten into trouble and that they would prefer not to tell their parents. The grandparent is then directed to send money to the child via some money transfer agent.
Another scam involves people calling and saying they are from the IRS. This is extremely popular near tax season. The caller explains they are from the IRS and that you owe back taxes. They threaten to lien your assets, bank accounts, and your home if you do not pay immediately. They will accept payment by credit card to “solve your tax problem.”
7. Protect your e-mail addresses and passwords.
You need to guard this information and only share it with your most trusted family members or financial advisors. Do not leave it in public view or write your passwords on a Post-It note next to your computer.
If you have any concerns that your loved one may be a victim of elder financial abuse, do not hesitate to report it. If you are unsure who to report the issue to the National Center on Elder Abuse has helpful resources available to you.
Infographic courtesy of Comparitech.com.
A Study on Elder Financial Abuse Prevention, MetLife Mature Market Institute, March 2009
Protecting Mom and Dad’s Money, ConsumerReports.org, January 2013
Practical Ways to Prevent Fraud, Spectrum Retirement Communities, LLC., Samantha McCue, April 2015
Elder Abuse Prevention Resource Guide, Sixtyandme.com, November 2020
Header photo credit to: Jeremy Wong
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