By Donna M. Wood, CPA/PFS, CFP®
If an elder family member was experiencing financial abuse, would you know it? A 2016 study by Allianz Life Insurance Company of North America found that 40% of seniors experience financial abuse more than once and lose an average of $36,000. In addition, Consumer Reports estimates that Americans lose approximately $30 billion a year to these scams. Many of these crimes go unreported, because victims are ashamed or unable to speak up for themselves.
In addition to losing their money, many seniors also experience emotional and mental trauma from the stress, sadness, and shame of their experience. The worst part is the vast majority of reports to Adult Protective Services involve perpetrators who are related to or in a trusting relationship with the victims. Scam and fraud by strangers are also common.
Common financial abuse schemes used by trusted individuals
- Power of attorney– Power of attorney is provided by the victim to the trusted perpetrator to act on their behalf in handling financial and business transactions. The perpetrator uses this authorization to steal the victim’s money.
- Financial access– Perpetrators take advantage of access to bank accounts, ATM cards and checks to withdraw money from the elder’s accounts.
- Elder manipulation– In this case, the scammer threatens abandonment or refuses needed help or medical care in order to maintain control of the victim’s assets.
- Elder vulnerability– The perpetrator charges money for unnecessary services, keeps the change from errands/services, falsifies time sheets for hours worked, doesn’t perform tasks paid for, etc.
Common financial abuse schemes used by professionals and criminals
- Identity theft– Using elderly victims’ personal information, criminals can potentially drain bank accounts, run up credit card charges, open new utility accounts, or receive medical treatment.
- Professional scammers – In these cases, predatory scammers pressure the elderly into taking unsuitable reverse mortgages or loans or buying expensive annuities, which may not mature until the victim is over 100.
- Pyramid schemes – These schemes promise seniors unrealistic returns on investments or securities.
- Common scams – Lottery, sweepstakes, charity, or grandparent scams all solicit money in order for the elder to receive something in return.
- Repair cons – Fraudsters promise to do yard work, housework or home repair work cheap, then run off with the victim’s money.
Spotting elder financial abuse
The key to spotting elder financial abuse is noticing any changes in the victim’s established financial patterns.
- Unusual bank account activity, sudden unpaid bills, suspicious signatures, altered wills or trusts, and loss of property are all signs of financial abuse.
- Refusing to make eye contact, shame, or reluctance to discuss finances are also signs that someone may be taking advantage of the elder.
Preventing elder financial abuse
- Discuss their financial plan– Have a discussion regarding their overall financial plan including retirement and assets, estate planning and any health care directives or power of attorney.
- Educate on financial abuse– Educate seniors on various risks, solicitations, and scams.
- Identify trusted professionals– Get to know the team of professionals handling your elder’s legal, financial and medical information.
- Establish checks and balances– Vigilant monitoring across all accounts can help minimize the chance of fraudulent activity.
- Update agencies and organizations of status– Contact credit reporting agencies and flag the deceased person’s account as “deceased.”
- Watch what you share – Information from obituaries may be used to steal the elder’s identity and obtain credit in their name after death.
Addressing elder financial abuse
- Contact Adult Protective Services (APS) in your area. You don’t have to prove that abuse is occurring. APS will investigate your report regardless.
- Contact the victim’s bank to report and stop the abusive activity.
- Report all instances of elder financial abuse to the local police.
- Visit the Department of Justice Elder Justice Initiative online (Justice.gov/ElderJustice) for help and to report abuse.
Seek step-by-step support
When elder financial abuse is suspected, sometimes loved ones feel too paralyzed to act, which is normal. A trusted financial advisor can provide step-by-step support to tackle the problem. Advisors often belong to organizations that provide ongoing education, resources, and networks, so they’re able to connect clients with the right professionals when another industry expert is needed. A good advisor will also serve as an objective resource to help the client get what they need.
Wood Smith Advisors, a Registered Investment Advisor (RIA), is a fee-only financial services firm that partners with its clients to simplify their financial lives. Wood Smith focuses on women, entrepreneurs and individuals with complex financial situations, providing objective and competent advice, education and services to help them develop and build their businesses and reach their financial goals.