What is Elder Financial Exploitation
Elder financial abuse or exploitation is defined in the Older Americans Act of 2006 as:
“The fraudulent or otherwise illegal, unauthorized, or improper act or process of an individual, including a caregiver or fiduciary, that uses the resources of an older individual for monetary or personal benefit, profit, or gain, or that results in depriving an older individual of rightful access to, or use of, benefits, resources, belongings, or assets.”
In other words, this type of abuse involves taking advantage of an older person for financial gain.
Elder financial abuse is big business. It’s estimated that older adults lose more than $36 billion every year to scams, fraud and exploitation.¹ It’s even more alarming that almost half of that money is lost due to tactics that – while deceptive in nature – are technically legal. With large numbers of Baby Boomers aging into retirement, experts predict the problem is only going to get worse.
The number of seniors in the U.S. who have experienced some form of financial abuse is estimated to be as high as 37 percent.² In other words, if you have three living grandparents or two older parents, there’s a good chance at least one of them has been a victim of financial abuse, and they may not even know it.
Why seniors can be vulnerable to financial abuse
Anyone can be a victim of financial abuse, but what makes seniors especially vulnerable? While an age-related decline in cognitive thinking could certainly make some older adults easier targets for abuse, there are other reasons for elder financial abuse.
Wealth
Older Baby Boomers have a median net worth of more than $241,000, and the 50-and-over demographic is responsible for 49 percent of all Consumer Packaged Goods (CPG) sales in the United States.⁴ The concentration of wealth in this generation can make them more desirable targets for scammers and thieves.
More trusting nature
MIT conducted a study in which people of various age groups were asked if most people can be trusted. Baby Boomers gave the highest percentage of “yes” answers out of all age groups surveyed.⁴ This trusting nature could be attributed to growing up in a more trusting era, and it can point to a reason why a senior might be more likely to fall for a scam. Further, older participants in the study exhibited less activity in their anterior insula while viewing the faces deemed “untrustworthy” by younger participants. This part of the brain supports interoceptive awareness, or what we commonly refer to as a “gut feeling.” The study results suggest that seniors may not as readily identify a potential risk, such as an untrustworthy person.
Declining financial capacity
Trust level isn’t the only thing that may contribute to an older adult’s vulnerability. There is also research that suggests older adults are significantly worse at making decisions related to their finances. One study conducted at Boston College suggested that a person’s financial literacy test scores decline by 1 percent every year over the age of 60.⁶ When combined, you have a demographic that on average has wealth, is more trusting of other people, has a less active “gut feeling” and is not as adept at making financial decisions as they once were but maintains confidence in their ability to do so. These factors can all lead to an increased vulnerability to financial abuse.
The effects of elder financial abuse
The effects of financial abuse can be extremely negative for a senior. In addition to financial losses, victims may also experience:
A loss of trust and an increased skepticism of everyone, even trustworthy friends and family members
Feelings of depression, fear, shame, anger and other negative emotions
Depleted physical health due to stress or the inability to afford proper care or nutrition
Alcoholism or other risky and destructive behavior
Loss of a residence, car or utilities due to inability to make payments
Dependency on government assistance
Who commits elder financial abuse
The sheer number of financial abuse victims is frightening, but what may be even worse is that the abuse is often carried out by someone close to the victim. One survey found that two-thirds of financial crimes against the elderly are carried out by family, friends or other trusted individuals.³ The perpetrators of elder financial abuse can include:
Family members
Caretakers
Neighbors
Friends and acquaintances
Attorneys
Banks and other financial institutions
Health care provider
Examples of how seniors are financially exploited
Lotteries and sweepstakes
A scammer may claim to be associated with a prize or lottery commission. They may tell the victim that they won the lottery or a special prize and that they need to send money to cover the taxes on their winnings.
Home repair
One popular scam involves a “paver” telling a senior about a job the scammer claims to have completed in the neighborhood and that they have some leftover materials to either use today or get rid of. They may then claim that they can repair or repave the senior’s driveaway at a deeply discounted price and insist on receiving payment in advance. The scammer will typically leave without completing the promised work.
Law enforcement
Thieves will sometimes call a senior citizen and pretend to be a law enforcement agent claiming that the senior owes a fine. They may also try to convince a fraud victim that one of their family members is in jail and that the victim should send bail money.
Charity
One common scam involves someone impersonating a charity foundation in an effort to collect donations.
Utility company
In some cases, an abuser may impersonate someone from a cable, electric, water or other utility company and attempt to collect an unnecessary payment.
Grandchildren
A thief will call an older person pretending to be their grandchild and ask to borrow money to take care of an unexpected hardship.
Email phishing
An email phishing scam can happen when a senior receives an email appearing to be from a legitimate entity such as the IRS requesting them to update or verify their personal information.
Predatory lenders
Older clients are sometimes pressured into taking out reverse mortgages or other predatory loans with high interest rates. It may be against the client’s best interest to take out the loan, but they may be convinced to do so due to high pressure or fraudulent misinformation.
Investments
Senior citizens are popular targets for pyramid schemes and other “get rich quick” schemes.
Identity theft
When a victim’s identity is stolen, it can be used to open up fraudulent credit cards or other lines of credit in their name. A senior’s Social Security number is a popular target for scammers.
Power of attorney
Someone who has been granted power of attorney can sometimes abuse that designation in order to acquire money, assets and possessions.
Bank cards or checks
A caretaker who has access to a senior’s bank cards or checks can use them to withdraw money or make fraudulent purchases.
Threats of violence
An older person who cannot defend themselves can be an easy target for a threat of violence in exchange for money or assets.
Withholding of care
A friend or family member might threaten to not pick up the person’s groceries, not mow their lawn or withhold any other service unless they receive an exchange of money or a paid caretaker might neglect certain responsibilities while still collecting their full payment.
Tips on How seniors can protect themselves
Remain socially active
Isolation is one thing that can contribute to a senior’s financial vulnerability, as being cut off from the outside world can make it more difficult for others to detect warning signs. An isolated individual may also feel that they lack the resources and relationships they need to feel financially secure.
Avoid joint bank accounts
Some seniors might open a joint bank account so that a family member can more easily make payments or withdrawals on their behalf and help manage their finances. But a joint bank account can also serve as an easy way for theft and abuse to occur.
Don’t give up your home
Particularly when moving into an assisted living facility, an older adult might consider signing over their home to a trusted family member in order to let that person handle the selling of the home. A home can be among a senior’s most valuable assets, however, and it may not be a safe idea to sign the home over to another person, no matter how trustworthy they might be.
Invoke a power of attorney
The risk of financial abuse heightens after a person develops a decreased capacity to make independent financial decisions. Invoking a power of attorney can be one proactive way to prepare for the future of one’s wealth and assets. Seniors can consider getting legal advice to help in this process.
Set up a revocable trust
Placing a senior’s assets in a revocable living trust and naming a fiduciary can be one way to protect against outsiders getting access to any of the senior’s assets that are of significant value.
Establish a budget.
Identify all current obligations (e.g., mortgage payment, supplemental health insurance, prescription drugs). Determine the amount to spend each month and develop an appropriate budget.
Determine the appropriate products for you.
Institutions offer a wide variety of products to respond to consumer needs. Investigate the products and determine which will benefit your lifestyle. Ask questions if you do not understand a product’s features and make sure you understand any fees and, especially for investments, risks associated with the product before agreeing to purchase it. Your bank or financial institution or the local Area Agency on Aging can offer you educational information on financial products. Financial institutions offer resources to explain these.
Plan for your estate.
To assist your family when decisions must be made, it is helpful to have the following legal documents: a durable power of attorney in the case of incapacity, living will for health care decisions, and a will for property distribution decisions. You should seek the assistance of a lawyer to complete these documents. If you cannot afford a lawyer, many communities offer free or low cost legal services for seniors.
Be ready for the unexpected.
No one can predict when tragedy will strike, but all should plan accordingly. Establish an emergency fund with enough for three months’ expenses.
Choose a trusted individual when providing power of attorney.
Your attorney can discuss the benefits of appointing a power of attorney so someone can make decisions on your behalf when you are no longer able. Carefully review the authority the power of attorney document grants your designee, especially regarding the ability to perform financial transactions and make gifts.
Stay active and engage with others regularly.
Fraudsters prey on individuals who have infrequent contact with others. Stay active in your community. Most communities have senior centers that offer social activities.
Respond cautiously to in-person, mail, Internet or solicitations.
No one should ask you to send them money unless you purchased or bought a product or service. Likewise, legitimate organizations offering contests or lotteries would never ask you to send them money to “claim your prize.” Be cautious of any deal that sounds too good to be true. Discuss with a trusted friend or family member any request you get to send someone you do not know money. For instance, you cannot win a lottery, if you have not entered.
Know that wiring money is like sending cash.
Con artists often insist that people wire money, especially overseas, because it is nearly impossible to get your money back or trace the money. Do not wire money or write checks to strangers, to sellers who insist on wire transfers for payment, or to someone who claims to be a relative in an emergency.
Contact your bank or financial institution if a request looks suspicious.
Fraudsters may contact you claiming to be your bank or financial institution. Before providing any information, especially private information like your social security number, bank account numbers or passwords for your computer, contact your bank or institution through your regular channels (e.g., in-person visit, phone call) to confirm the request is from your bank or institution.
Protect your passwords and account numbers.
Do not share your passwords and / or account numbers with others. If you think someone has obtained your password, immediately notify the institution.
Do not let embarrassment or fear keep you from discussing suspicious activities.
We all make mistakes and often do not realize we have until after we have. If you think you have made a mistake with your finances, the situation could become worse if not escalated. Discuss any suspicious activity with someone you trust (e.g., family member, bank manager, attorney, local Area Agency on Aging, police).
Monitor your financial affairs.
Actively track your financial accounts so you will be able to recognize quickly when a fraudulent transaction appears. Read your bank and credit card statements. Look for things that you did not authorize or do yourself. If you find activity you did not do, call your bank or credit card company immediately.
Check your credit report regularly.
Checking your report can help you guard against identity theft. Visit www.ftc.gov/idtheft if you spot accounts that are not yours. Visit www.AnnualCreditReport.com or call 1-877-322-8228, the only authorized website for free credit reports. You will need to provide your name, address, Social Security number and date of birth to verify your identity.
Do not deposit checks you receive from strangers.
Fraudsters may ask you to deposit a check and then require you to send a portion back. They do this to gather information about you that they then use to impersonate you. Ask your institution for help to prove the legitimacy of a check before you send any money to a stranger.
Keep details of all deals in writing.
When making a financial decision always ask questions to ensure that you feel comfortable and confident where your money is going. Keeping a record of this information may help remedy a situation if the deal was in fact a fraud scam.
Look out for common scams.
Criminals have similar tactics that they often use. These include posing as a repairperson that you did not call for, claiming to be a relative in emergency and stating that you have won a sweepstakes or lottery that you did not enter.
Ask for assistance.
Many financial institutions have programs specifically designed to help. Beware of advisors claiming special qualifications and certifications to advise seniors. Contact your state securities regulator to check on specific licenses.
TIPS FOR FAMILY MEMBERS AND FIDUCIARY
Discuss financial wishes.
Before capacity is diminished, discuss financial plans with your family members in a non-confrontational setting. Reassure him or her that you want to learn about their plans and concerns, not impose your own ideas upon them.
Learn about estate documents.
These documents may include a will, durable power of attorney and health care proxy. It will be important that you know where these are stored in the event of an unfortunate circumstance. If the family member involved does not have these documents, encourage them to get them through a qualified attorney. If the family member cannot afford an attorney, many communities offer free or low cost legal services for seniors.
Act on behalf of the individual.
When given the Power of Attorney, it is your fundamental responsibility to act in the best interest of the individual. You must use the elder’s funds for the care of the elder. No funds should be used for your own desires.
Watch for signs of mental changes or abuse.
• Confusion over simple concepts; disorientation
• Failure to remember basic facts or recent conversations
• Difficulty performing simple tasks
• Drastic shifts in investment styles or investment objectives.
• Unexplained withdrawals, wire transfers or other changes in financial situation
• Erratic behavior or dramatic mood swings
• Over-reliance on a third-party
• Inability to make decisions
• Diminished hearing
• Diminished vision
• Memory Loss
Third Party Financial Abuse
• Account withdrawals that are unexplained or not typical
• Inability to contact the older adult
• Signs of intimidation or reluctance to speak, especially in the presence of a caregiver
• Sudden or highly increased isolation from friends and family
• Checks written to strangers or to parties to whom the elder has never written a check.
• Someone forging signatures
• Improper use of conservatorships, guardianships or powers of attorney
Stay connected
Keep in touch with older loved ones through regular phone calls, visits or emails.
Develop a relationship with your parent’s caregiver.
They’ll be less likely to financially exploit because they know you’re paying attention.
Sign up for a service such as EverSafe
Track financial activity and notify an advocate of unusual withdrawals or spending.
When to Report Checklist
Contact your local Adult Protective Services agency any time you observe or suspect the following:
Termination of vital utilities such as telephone, water, electricity / gas, or garbage
Unpaid bills and liabilities despite adequate income
Oversight of finances surrendered to others without explanation or consent
Transferring assets to new “friends” assisting with finances
Checks written to “Cash”
Does not understand his/her current finances, offers improbable explanations
Unexplained disappearance of cash, valuable objects, financial statements
Unexplained or unauthorized changes to wills or other estate documents
Giving-away money or spending promiscuously
Appearance of property liens or foreclosure notices
Promise Senior Solutions Policy
Category: Client Services
Subject: Use of Client Funds
Applies: All Staff
Purpose: To define the agency procedures regarding employee handling of client finances. To ensure the financial protection of client funds, and properly record use of client funds.
Policy: Company employees who are given authority by a client to purchase goods or services using funds provided by the client, are required to follow the procedures listed below.
Procedure:
1. The agency requires clients currently on service to review and sign policies regarding the distribution, use, and record keeping of client finances.
2. Employees scheduled or assigned to agency clients that have pre-authorized the use of client funds will be informed of the authorization. Employees will be required to review and acknowledge agency policies regarding the use and record keeping of client funds.
3. Any use of funds provided by an agency client to an employee, must first be authorized by the agency Administrator or PAS Supervisor. If an agency client approaches or makes a request of an employee to purchase anything using client funds, the employee is required to text or call the Administrator or PAS Supervisor to inform them of the request.
4. Agency employees will under no circumstances accept a signed check with no amount or recipient recorded on the check, or a bank card that requires a PIN number for use, or a clients personal / company credit card that has an available limit over $250. Agency employees will not accept a check from an agency client made out to the employee for any amount regardless of the circumstance. Any employee who violates this provision of the policy is subject to suspension or immediate termination.
5. The following steps must be followed by employees to ensure the proper use and recording of client funds:
Accept funds only in an agency authorized manner from the client
Text or Call the PAS Supervisor and report the amount received, and the reason for use
Utilize the funds provided by the client for the specific items requested
Take a picture of the receipt for the items purchased using the client funds
Text a copy of the receipt to the PAS Supervisor
Record the date, amount, item purchased, and reason in the client journal
6. Any employee who fails to follow these procedures will be subject to disciplinary action up to and including suspension or immediate termination.
Pre-Authorized Use of Client Finances:
1. Clients or Responsible Parties will be required to review and sign an agency policy and waiver if agency employees will be required to utilize client funds for any of the following:
a. Purchase of household goods or services
b. Purchase of clothing or personal materials
c. Purchase of food or groceries
d. Purchase of food To Go or Dine In at a food establishment
e. Purchase of medications or presc.riptions
f. Purchase of medical equipment
g. Purchase of any item on-line or at a brick and mortar establishment
h. Use of client funds to pay household / personal bills
2. Clients “Use of Client Funds” policy agreement will include the following information:
a. Information regarding What is Financial Exploitation
b. Information regarding Who is capable of Financial Exploitation of the Elderly
c. Information regarding What are the different types of Financial Exploitation
d. Information regarding How Financial Exploitation can be limited / prevented
f. Information regarding When & Whom to report Financial Exploitation
g. State and Federal resources for information or help with Financial Exploitation