Financial scams involving our elderly parents are becoming an increasing problem throughout the U.S. Surprisingly, 90% of these financial crimes are committed by people who have personal access to your parents. They could include, relatives, caregivers, healthcare workers and attorneys. Why is it that our parents have become such targets for financial abuse?
Reason #1 Wealth concentration. Scam artists go where the money is. Forty-four percent of all wealth in America lies with older Americans. In addition, the concentration of people in this category is growing by 8,000 people per day as the baby boomers—those born after 1945 and prior to 1965—enter this peak wealth stage of their life in record numbers beginning in 2011.
Reason #2 Mental Capacity. As people get older those high-level thinking abilities required to differentiate between a fraud and a legitimate transaction diminish. Studies show that between 15% and 35% of older Americans experience some form of cognitive impairment and may not even be aware of it.
Reason #3 Desire to Stay Healthy Older Americans want very much to stay healthy and avoid chronic sickness. Some older folks will believe anything in an attempt to feel healthy again. They will pay a lot of money for cure-alls with little evidence of success.
Reason #4 Politeness People born in the 1920’s 1930s, and 1940s, were taught to be polite, and con artists will prey on these positive qualities. Politeness was taught at home; it was reinforced at school, church, and anywhere a young person went. It was an automatic response and was learned at an early age. Older Americans don’t like to question things and have a hard time saying ‘no’ to people. When aggressively approached by a con artist they are often willing to comply passively.
Reason #5 Less Likely to report abuse and fraud. Older folks are less likely to report fraud. They do not make good witnesses because of the memory issues and con artists know this. In addition, seniors fear losing care, physical harm, and embarrassment if the perpetrator is their caregiver. An older person may fear losing freedom if they complain too much—one more complaint could send them to the nursing home or cause them to lose driving privileges. They think “Maybe I should just stay quiet so I don’t lose my freedoms.”
What can you do to help your parents avoid financial abuse?
- Remind your parents that financial elder abuse is serious and they need to be on guard.
- Routinely offer to help review your parents’ transactions or discuss concerns about situations or people that may be on their mind. Make sure their important papers are safely locked away. Review credit card and bank statements looking for small transactions.
- If you are a significant distance from your parents consider having them set up a revocable trust with a corporate trustee—there is no better protection for a client. Corporate trustees are the most regulated financial entities in our industry; they’re regulated by the OCC, the FDIC, and the state banking commission.
- Durable power of attorneys are an important estate planning tool for your parents ( and you as well). But the person with that durable power has unlimited access to your parents’ finances. If you are not the person given that power make sure the individual with the power sends you copies of all transactions that they are involved in. Have them send you duplicate banking and investment statements each month..