Protecting Your Parents: Identifying and Preventing Elder Financial Abuse
We look at our parents and think about how they’re the epitome of financial stability and draw motivation from them for our own financial goals upon retirement. Yet, this also makes them targets of financial exploitation perpetrated by a caregiver, family or relative, lawyer, financial advisor, or scam artist.
Nobody likes to think of their parents getting older and needing assistance, but it’s the reality that many people face. An important part of caring for your parents as they age is identifying and protecting them from elder financial abuse. Baby Boomers and the Silent Generation are getting older, and with their accumulated assets, they have a higher chance of being defrauded than those who are younger. According to one estimate, seniors collectively lose up to $36.5 billion a year to elder financial abuse.
As a concerned child, how can you help combat this? Below are seven ways to spot financial abuse and tips to protect your parents and their financial futures.
7 Signs of Elder Financial Abuse
Protecting your parents from scammers is crucial, especially as they get older and have a harder time managing their finances.
Some warning signs may include the following:
- Unusual activity in their bank accounts, such as large or unexplained withdrawals
- Withdrawals from an inactive account
- A newly opened joint account
- New credit card balances
- Bank and credit card statements sent somewhere other than your parents’ home
- Suspicious signatures
- Closing a Certificate of Deposit or savings account without worrying about penalties
Protecting Your Parents from Financial Abuse
Reach out to your parents and make sure that you are staying in touch with them regularly. Make sure they are paying their bills and, if applicable, find out who is doing it for them. Your parents may not want to share this information or admit that they need help, so you can ease them into it by asking them for advice or speaking about your own money worries. Once this becomes more comfortable, they may let you help with more, as it becomes necessary.
One way to help them pay their bills is by automating the process. Automating your parents’ payments with direct debits from their accounts can help keep things organized while lessening the odds that they will become the victims of scams.
Similarly, you can automate transfers into their checking account because they may have funds coming from various sources, such as social security, pensions, annuities, and so forth.
Are your parents’ legal documents in an accessible location?
These could include the following:
- Healthcare proxy
- A HIPAA release form
- Power of attorney (POA)
- Make sure your parents are careful when choosing their power of attorney because this person will be responsible for managing finances once your family member is no longer able to do this. Having more than one is also a good idea because this is a good way to be able to act together and consult with each other.
Consolidate your parents’ finances, when possible, because many older people have more than one account. Practice caution when consolidating and moving accounts to make sure that you don’t incur any penalties. Additionally, you need to respect beneficiary designations, and if you fail to do this, you could face legal action.
If your parents sent cash to a scammer, then it would be much more difficult to trace than if they had paid with a credit card.
If they were to make a purchase with a credit card, the credit card company could do any of the following:
- Protect against identity theft
- Allow past transactions to be reviewed
- Reimburse any money that was stolen
A trust is a great way to manage and protect your parents’ assets; however, they can still withdraw from this account, making it easy for them to fall prey to scammers. If you set up an irrevocable trust, they will not be able to withdraw money from this account without consulting the trustee, making it much more secure.
Many older people do not like giving up this type of control, but if you speak to them about the importance of their safety, they may be more open to it.
Your parents may insist that they’ve got everything under control and wouldn’t want to impose on you. If you’re left with no other choice than to respect their wishes, you can refer them to a trusted financial advisor or planner who can help them manage and handle their finances.
This way, they won’t feel like they’ve given up their financial control and at the same, you can rest assured that they’re taken care of and their finances are secured.
If you can establish a system of checks and balances by utilizing the above tips, your parents will be much more protected from fraud. Take a proactive approach so that you can get ahead of them before it becomes an issue, instead of waiting until your parents become the victim of financial abuse.
What If Your Parents Have Already Fallen Victim to Financial Abuse?
Prevention is the ideal path, but in case you’ve stepped in a little late and your parents have already succumbed to financial abuse, the course of action that you should immediately take is to report the fraud to the proper authorities.
The U.S. Department of Justice has established a financial elder abuse resource roadmap which, in summary, provides for the appropriate authorities (and their hotlines) in different instances of financial exploitation.
1. Committed by Someone You Know and Trust
- Theft/ Pressured out of Money/ Misuse of Legal Documents - Local and state Adult Protective Services (APS) agencies handle this kind of fraud when committed by someone close to you.
- Lost or Stolen Government Benefits
- Social Security – Social Security Administration (SSA)
- Veterans – Veterans Affairs (VA)
- Medicaid – Your state’s Medicaid Fraud Control Unit (MFCU)
- Identity Theft – You can file a report at IdentityTheft.gov and get a recovery plan for stolen or misused information related to credit cards, tax returns, medical records, government benefits, or any other information that has been subject to identity theft.
2. Committed by a Financial Profesional
- Credit Cards, Bank Accounts, Loans – Consumer Financial Protection Bureau (CFPB)
- Stocks, Bonds, Mutual Funds, or Other Securities – Securities and Exchange Commission (SEC)
- Commodity Futures, Commodity Pools, Currencies, Options, or Precious Metals - U.S. Commodity Futures Trading Commission (CFTC)
3. Committed by a Stranger or Unknown Person
- Demanded Money
- Scammed By Phone, E-Mail, Text Message, Mail, On The Internet, Or Other Means – Federal Trade Commission (FTC)
- Unwanted Calls and Text Messages – Federal Communications Commission (FCC)
- Problem with a Contractor or Handyman – State Attorney General’s offices
- Impersonation of Federal Employee
- Impersonation of Internal Revenue Service (IRS) Employee – Treasury Inspector General for Tax Administration (TIGTA)
- Impersonation of SSA Employee – SSA
- Internet Crimes (Computer Hacked, Online Extortion, or Money Laundering) – Federal Bureau of Investigation (FBI)
- Took Money without Permission
- Lost or Stolen Government Benefits – SSA, VA, MFCU
- Identity Theft – IdentityTheft.gov
- Mail Theft - United States Postal Inspection Service (USPIS)
4. Committed by Someone Connected to Your Nursing Home
• Medicaid or Nursing Home Billing Fraud –MFCUs
• VA Extended Care Or Home Care Fraud – Veterans Affairs
• Lost or Stolen Government Benefits – SSA, VA, MFCUs
• Financial Crimes Against Nursing Home Residents – MFCUs
Your ability to protect your parents from financial exploitation may be limited due to your distance from them or for fear of overstepping your boundaries as their child. Thus, it’s best to check with your financial advisor if there are foolproof strategies you can use to protect your parents from fraud.
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