As your parents age, you may be challenged to answer questions about their care. While maintaining good physical health is a priority, it's equally important to consider their financial health. That includes protecting them against elder financial abuse.
Elder financial abuse involves the misuse or misappropriation of a senior's financial resources by a third party, such as a caregiver, neighbor, friend or family member. An estimated $36.5 billion is lost annually as a result of elder financial abuse.
In a 2018 Wells Fargo survey, 38 percent of adult children say their parents are vulnerable to financial scams and 51 percent say they're concerned that someone could try to gain access to their parents' money. If you have older parents, here's how to recognize and protect against elder financial abuse.
What Does Elder Financial Abuse Look Like?
Elder financial abuse can be subtle and it may take close scrutiny to identify any misuse of your parents' assets. Different types of scams can be carried out by different people. For instance, some of the most common elder financial abuse scams involving strangers include:
- Lottery or sweepstakes scams
- Home repair and yard work scams
- Telemarketing scams
- Charitable donation scams
- Door to door sales scams
- Reverse mortgage or predatory lending scams
- Medicare fraud
- Fraudulent investment schemes
- Annuity fraud
- Identity theft
- Phishing scams
In these instances, the scammer may have the appearance of being legitimate, which convinces an aging senior to hand over their money or access to their finances. In some cases, the scammer may use high-pressure tactics to achieve their goal.
When elder financial abuse involves someone that's known to the victim, it may take a different form. Caregivers, friends or family members can misuse assets by:
- Establishing power of attorney under false pretenses to gain access to your parents' financial accounts
- Setting up a joint account with your parents for the purpose of stealing money
- Using their ATM or debit card without their knowledge or cashing checks from their bank account
- Using their credit cards to make fraudulent purchases
- Overbilling for their services in the case of caregivers
- Threatening to withhold care or cause physical harm unless they're granted access to their finances
These types of scams are more common than those involving strangers. According to the Wells Fargo survey, two-thirds of elder financial abuse is committed by friends, family members or someone else the victim trusts.
What Makes Aging Parents Vulnerable to Elder Financial Abuse
There are certain factors that can make aging parents more susceptible to being targeted for elder financial abuse. Knowing what those are is one way to keep parents and their assets safe.
First is a general lack of knowledge about their finances. In the Wells Fargo survey, 41 percent percent of older Americans said they didn't know how much money they had. They're not talking finances with their kids either. One-third of adult children in the survey said they didn't know if their parents had key financial protections in place, such as a will or power of attorney for financial decisions.
Isolation and poor health can also open the door to elder financial abuse. It may be easier for strangers or caregivers to take advantage of aging parents if there are no friends or family members close by who can check in with them regularly. Physical health issues or mental deterioration can also be problematic. If an aging parent's mental capacity is declining due to Alzheimer's, dementia or a similar condition it may be easier for a caregiver or a stranger to convince them to sign over assets or grant access to financial accounts without raising questions.
Protecting Aging Parents Against Elder Financial Abuse
There are several things you can do to stop elder financial abuse before it begins. The first is having regular money discussions with aging parents.
In the best-case scenario, you and your parents should be reviewing financial accounts together to check for any signs of suspicious activity. If they're not comfortable sharing their all financial details with you, at least discuss whether bills are being paid on time and whether they have any concerns about their finances.
Next, make sure your parents have the right legal and financial protections in place. That includes a will, as well as a power of attorney for financial decisions. This document should spell out who your parents would like to have access to their financial accounts and what decisions they're comfortable having that person make if they're unable to manage their money.
Helping them to close unused accounts and streamline their finances can also help prevent elder financial abuse. The fewer accounts they have to manage, the easier it should be for them to keep track of where their money is going. If they're comfortable using their mobile device to track their finances, setting up banking and credit card email or text alerts can also be helpful for monitoring transactions.
Encourage them to review their credit reports at least once a year to look for any inaccuracies or accounts that may be fraudulent. Ask them if they'd be comfortable signing up for free monthly credit monitoring and giving you access to that account so you can help them keep an eye on their credit.
These steps can help you put up a stronger defense but you should still be aware of what to watch out for. Some of the signs that can tip you off to elder financial abuse include:
- Assets or property that goes missing without explanation
- Notices for unpaid bills or accounts that your parents don't recognize
- Unexplained withdrawals or purchases from bank accounts
- Missing bank or credit card statements
- Signatures on checks or other financial documents that don't match your parents' handwriting
If you see any of these warning signals, you can contact the Administration on Aging for help. This federal agency can help you take the necessary steps to resolve elder financial abuse issues.