Advisors and family members can team up on a loved one’s behalf.
- The vast majority of financial elder abuse is perpetrated by family members and caregivers—not by strangers and professional crooks.
- Only a tiny fraction of elder abuse is actually reported.
- Look for the warning signs of financial elder abuse.
As many of you with aging parents or close relatives know, financial abuse of the elderly is on the rise. Unfortunately, this trend is likely to continue as fraudsters become increasingly sophisticated and as record numbers of Boomers join the over-65 crowd—the nation’s largest cohort.
According to the Alzheimer’s Association, more than one in ten people over age 65 show some signs of impaired memory or cognitive ability. Loneliness and isolation, combined with diminished capacity and the technological generation gap make the elderly easy targets for financial abuse.
A recent study by the state of New York estimated that approximately 5 million older Americans are financially exploited each year to the tune of nearly $3 billion. Experts believe this figure may be conservative since victims are too often embarrassed to report the crimes or admit even to family members that they’ve been scammed. In addition to shame, elders fear losing their independence and the freedom to make their own financial decisions.
Elder abuse most often close to home
What many don’t realize is that perpetrators of elder financial abuse are typically NOT crooks, but financially dependent children, unscrupulous caregivers or children/close relatives who have substance abuse issues. In a recent Investment News survey of financial advisors, nearly two-thirds (65%) said they had seen clients’ family members engage in financial elder abuse and 30 percent of respondents said they had seen clients’ friends, acquaintances or caregivers engage in financial elder abuse. Those findings mirror a 2016 Bank of America Merrill Lynch survey that found 71 percent of the firm’s advisors had seen children of their clients engaging in financial elder abuse and one-third of respondents (32%) had witnessed other family members trying to take advantage of their clients. Only one in five respondents (18%) identified anonymous fraudsters as the perpetrators.
Studies have shown that as we age, we naturally become less skeptical and more trusting of others, often triggered by feelings of loneliness and isolation. The elderly victims of financial abuse tend to be female and white according to the New York state study mentioned earlier. The study also estimated that over 90 percent of financial elder abuse cases go undetected and can easily eat into retirement nest eggs.
Warning signs of financial elder abuse
The National Committee for the Prevention of Elder Abuse offers the following warning signs:
- Bills aren’t paid, and notices of eviction or discontinued utility services arrive.
- There are unexplained withdrawals from bank accounts or transfers between accounts.
- Bank statements stop coming.
- Care isn’t commensurate with the size of the estate.
- Personal property goes missing.
- Signatures on checks or other documents look suspicious. (Check the handwriting against a sample from the elderly person.)
- Either the aged person or the caregiver gives strange or implausible explanations about financial transactions.
- An uptick in mail and credit offers may signal that a caregiver or someone else is misusing the address to apply for loans and credit cards.
In Part II, we will talk about how to work with the elderly once they have become victims and how to prevent elder financial abuse.
Source: Investment News April 3-7
Special thanks to Hank Berkowitz who edited this blog and provided research.