Caring for aging loved ones is more than providing physical and emotional care. Older adults are vulnerable in various ways, and some predators attempt to reach them from all directions.
An estimated 37% of older adults in the United States have experienced financial abuse. While that’s an alarming number, it’s even worse, considering that family, friends, or other trusted individuals commit senior financial abuse most.
Older adults lose more than $36 billion annually to scams, fraud, and other forms of exploitation. You must learn to identify senior financial abuse and know what to do if it happens.
What Is Senior Financial Abuse?
Elderabuse.org defines senior financial abuse as someone taking money or property from an older person without their knowledge, understanding, or consent.
While one form of senior financial abuse is using a debit card to take out cash or forging a signature on a check, it can be much more extensive and extreme.
Financial abuse can go as far as getting a deed to the older adult’s property, spending down an inheritance or retirement savings, or complete identity theft to take control of their assets.
Senior financial abuse can also manifest itself in the following ways:
- Stolen valuables—jewelry, medications, or other personal property
- Legal document abuse—tricking the older adult into signing over power of attorney or making changes to their will
- Fraud—lottery or sweepstakes scams, telemarketing scams, email phishing, etc.
- Misuse of authority—being sold into investment or annuity scams
- Manipulation and extortion—threatening or intimidating the older adult into giving up assets
- Taking advantage of senior’s good nature—playing on their emotions to provide assistance that no one else can supply.
Who Commits Senior Financial Abuse?
Alarmingly, the most common perpetrators of senior financial abuse are those closest to the victim, specifically, the adult children.
Why would a family member do something like this to their loved one? For some, it could be a fear that the elder will use all of their savings and not leave anything to the family. Other examples are:
- They feel like the older adult’s belongings are rightfully theirs (inheritance)
- They are having their own financial difficulties, gambling problems, or an addiction
- They are attempting to keep other members of the family from inheriting the older adult’s assets
Other common perpetrators of senior financial abuse are strangers (conducting scams) or in-home care providers. Financial abuse can happen within a long-term care facility, but it’s considered nursing home abuse.
Why Older Adults Are Targeted
Generally speaking, older adults tend to be more trusting. This baseline level of trust can come from old habits (not locking their doors, playing outside until nightfall, etc.). Because of this, seniors tend to be less likely to recognize a scam.
They may respond to one request feel compelled to keep giving more. Additionally, many “must” open every piece of mail (postal and emails), further tugging at their emotions and good nature.
But additional research suggests that the part of your brain triggering your “gut feelings” has less activity the older you get. So older adults might not be as quick to identify a potential risk, like an untrustworthy person.
Diminished capacity may also be a factor, especially early when it’s not apparent to family members.
People also target older adults simply because they have accumulated wealth (pensions, retirement savings, etc.).
We have a method that attempts to protect against this which we’ll discuss more below.
How Senior Financial Abuse Is Harmful
In most cases, senior financial abuse is a felony. But what makes senior financial abuse so harmful?
- Decline in quality of life: Money is essential for food, shelter, medical care, and other necessities. If an older person loses their savings, this leaves them in a complicated and vulnerable situation, leading to anxiety, depression, and more (conditions they are already more likely to develop in retirement).
- Small chance of financial recovery: It takes a long time to accumulate your retirement savings. If it suddenly disappears, older adults don’t have the time to recuperate lost funds.
- “Gateway” to further abuse: Financial abuse can lead to other forms of elder abuse like physical abuse, neglect, psychological abuse, etc.
- Withdraw from friends and family: Someone that suffers from financial abuse will likely become more skeptical of everyone, including their family and friends. They also may withdraw due to embarrassment or shame.
How to Detect Senior Financial Abuse
So, how can you detect when senior financial abuse might be occurring? There are a few key factors to watch out for:
- Sudden changes in the older adult’s bank accounts (like adding names or additional cardholders to the account)
- Large bank withdrawals or transfers to a person or other account
- Sudden changes in spending habits (no longer wanting to go shopping, travel, or go out to eat)
- Spending excessive amounts of money on “odd” items, like gift cards
- Missing property
- Unpaid bills or discontinued utilities
- Mail or bank statements stop arriving at the older adult’s home (they can be re-directed to another person)
- Suddenly changing a will or other estate planning documents
- Making new risky investments or buying new financial products
- Mood changes (if the older adult is suddenly worried about money or showing signs of anxiety or depression)
In addition to watching out for signs from your loved one, it’s important to keep tabs on the other people in their life.
Keep an eye on any caregivers, former business associates, family members, new friends, and strangers to see if you can spot any signs that they might be financially abusing your loved one.
Here are some signs to check out:
- If the person has financial troubles
- If the person suddenly shows a keen interest in the older adult’s finances or how much they’re spending
- If the person uses the older adult’s credit cards, checks, or property without their consent
- If the person forces the older adult to make changes to their bank accounts or will
Preventing Senior Financial Abuse
There are things that older adults can do to help protect themselves from financial abuse.
First, it’s critical to stay socially active. Predators love isolation because it’s more difficult for others to detect warning signs. Staying socially active can include joining a club, meeting with friends, pursuing hobbies, etc. Build a routine that helps keep you engaged and safe.
Second, identify and create a power of attorney (POA). As you age and potentially develop a decreased capacity to make financial decisions, delegating the tasks via a power of attorney may be beneficial.
A power of attorney is a legal document that gives a designated person the authority to act on your behalf. If you cannot make decisions for yourself, your POA can make decisions about your finances, property, investments, or medical care. If you have questions about designating a POA, your financial advisor and estate planning attorney can facilitate the process.
In addition to a POA, we can help you secure a “Trusted Contact.” This person is not a POA, rather they are someone you give us pre-approval to contact if we suspect something or can’t reach you. Think of this person as your financial emergency contact—they are someone who we can contact but they have no legal authority over you.
The third is to be careful about who you list on a joint bank account. Joint ownership may be convenient if you are having someone pay your bills or make withdrawals for you. But, it can leave you vulnerable to abuse if the wrong person has access.
As loved ones, there are also things you can do to help prevent financial abuse.
- Reduce the opportunity for phone scams: Register the older adult with the national “Do Not Call” Registry.
- Protect personal information: Assist the older adult with shredding important documents or storing financial records in a safe place. This also applies to digital assets, like email and social media logins, phone, digital picture frames, cryptocurrency accounts, investment accounts, and more. You don’t want to be locked out one day if you can’t remember your passwords. Perhaps help your loved one set up a password manager.
- Lean into technology: Banks can notify you of each transaction on your account. Consider helping your loved one enroll in these services to help them stay informed.
- Help organize their finances. Being a trusted person to help pay bills, set up automation, organize the estate, and ensure their finances are in order can go a long way.
What To Do If You Suspect Senior Financial Abuse
If you suspect your loved one might be financially abused, don’t wait! You can do things to help stop the abuse in its tracks and keep your loved one safe.
Reporting Senior Financial Abuse
One of the best things you can do to combat senior financial abuse is report it. You can report senior financial abuse to several resources like:
- Adult Protective Services
- Long-term care Ombudsmen
- Social workers
- Local Police or Sheriff’s office
- District Attorney’s office
- Your financial advisor
By reporting senior financial abuse, you may not only help your loved ones but others too.
Getting Help From A Financial Advisor
A fiduciary financial advisor is a great person to have on your team if you suspect someone of senior financial abuse. They have unique connections to help protect older adults like:
- The ability to put a hold on the distribution of funds from the older adult’s accounts
- Help the older adult create a revocable trust (allow the grantor to change or remove assets or terminate the trust)
- Act as a third-party person to help delegate responsibilities
- And, above all else, be an extra layer of support for your loved one.
What If It’s Not “Abuse”?
While the area is grey, there is a difference between senior financial abuse and a senior that is being taken advantage of financially.
For example, an adult child lives rent-free with their parents and doesn’t contribute to household expenses. While this individual is taking advantage of their parents, they’re not explicitly financially abusing them.
We’ve also seen seniors who feel they need to swoop in and support their adult children due to poor choices that the child makes. In this type of situation, sometimes the best thing to do is the hardest: cut the chord. Even if it’s challenging, not bailing your child out can help them gain independence and learn how to stand on their own two feet.
Make no mistake, taking advantage of older adults can also be detrimental to their well-being. Even though it’s not “financial abuse,” people exploiting an older adult’s finances, trust, etc., is still problematic and can hurt their retirement plan and cause unnecessary stress.
In these situations, it’s essential to set boundaries where possible, even if it’s painful!
If you find yourself or your loved one dealing with this, a financial advisor can be a helpful person to bring into the conversation. They can act as a third-party person wherever necessary to help resolve the issue.
You and your family members work hard to save for retirement. Help protect them from predators by being vigilant.
At TFS Advisors, we care deeply about our client’s well-being. If you are concerned about yourself or a loved one, reach out to us today.