Warning signs of elder financial abuse–and how to stop it

Many of today’s “senior citizens” are living independent lives longer than past generations. They’re active in their communities, help with the grandchildren and keep physically fit. They browse the internet and participate in social media. But they can still be subject to scams, frauds and other financial crimes.

The number and complexity of elder financial abuse incidents has grown significantly over the past decade. Older Americans lose $36.5 billion each year to fraud, according to 2015 estimates from True Link.

The North American Securities Administrators Association states that these are the most common factors in elder financial abuse cases:

• Third-party abuse/exploitation: 27%
• Account distributions: 26%
• Family member, trustee or power of attorney taking advantage: 23%
• Diminished capacity: 12%
• Combined diminished capacity and third-party abuse: 12%
• Fraud: 6%
• Elder exploitation: 6%
• Friend, housekeeper or caretaker taking advantage: <1%
• Excessive withdrawals: <1%
   

The problem is growing—and it can’t be simply chalked up to a “decline in faculties.” Older adults in cognitive decline are just a segment of the victims. In fact, in a given year, 1 in 18 “cognitively intact” older adults falls prey to financial scams, fraud or abuse, according to a 2017 article in the American Journal of Public Health, “A Typical Day with Mild Cognitive Impairment.”

How do you know if elder financial abuse is happening?

The National Committee for the Prevention of Elder Abuse offers these warning signs of possible exploitation:

• Unpaid bills or notices of eviction or discontinued utility services.
• Unexplained withdrawals from bank accounts or transfers between accounts.
• Missing bank statements.
• Shortfalls in quality of care.
• Missing personal property.
• Suspicious signatures on checks or other documents that doesn’t match the elderly person’s handwriting.
• Strange or implausible explanations about financial transactions from the elder or their caregivers.
• An uptick in mail and credit offers—a signal that someone else is misusing the address to apply for loans and credit cards.

Signs of financial abuse by family members and other trusted individuals

• Misuse of power of attorney. Rather than using it to handle the elder’s finances, some caregivers may use it as a license to steal money for their own use.
• Lack of needed care and medical services. Abusers might try to keep the elder’s assets for themselves.
• In-home care providers charging for unauthorized services, keeping change from errands, paying bills that aren’t the clients, asking their client to sign falsified time sheets, spending their work time on the phone and not doing what they are paid to do.

Common scams by “professionals”

Some third-party professionals such as credit card companies, lenders and unfamiliar “financial advisors” can also exploit older people:

• Predatory lending, practices such as inappropriate reverse mortgages or other loans.
• Expensive annuities—sometimes using equity from a reverse mortgage or other liquid assets—which may not mature until the person is well into their 90s or even older.
• Internet phishing that tricks people into giving bank account access.
• Identity theft resulting in credit cards opened fraudulently, etc.
• Medicare scams—the costliest in terms of dollar amounts.

How can you prevent or stop elder financial abuse?

• Employ a neutral third party for your loved one or yourself, such as a member of the American Association of Daily Money Managers, to monitor bank accounts and credit requests. A trusted, independent, financial advisor (who has nothing to gain beyond their normal fee) can also alert you if something seems amiss.
• Hold quick monthly meetings between family members to go over your relative’s finances. Send each other quarterly reports as a checks-and-balances measure.
• Grant a trustworthy and reliable friend or family member a financial power of attorney can help assure that bills are paid, and other matters are properly handled.
• ​​​​​​​Report suspected elder financial abuse to the U.S. Department of Justice’s National Elder Fraud Hotline at 833-372-8311. Its case managers can guide you through local, state and federal reporting procedures and connect you with other assistance.

The bottom line

While it’s important to understand the signs of elder abuse, it may be more productive to take steps to prevent abuse from occurring in the first place.

Older people should continue to educate themselves on current scams and financial pitfalls.

If you’re advocating for an elderly friend or relative, family conversations can help you gain insight into your loved one’s affairs and mental state. Begin by discussing their overall financial plan, including their plans for retirement income and transferring assets. You may also want to discuss estate planning and related documents such as an advanced health care directive and/or a durable power of attorney for financial affairs. From there, you can transition into a conversation about the potential for fraud or abuse.

Discussions like these can be difficult for both sides. You want to respect your loved one’s independence and autonomy. They might feel suspicious that you’re “prying” into their business. However, financial missteps at this point in a person’s financial journey can bring worry and embarrassment for them at a time in which they should be enjoying life—and can even extend into probate for years afterwards. Assure them that addressing these issues regularly and candidly can avoid painful pitfalls.

For more information, speak to your Associated Bank relationship manager or one of our financial advisors.