Eight ways to protect yourself against elder financial abuse

Elder abuse is a rapidly growing problem in the U.S.

Or at least so say experts who testified before a Senate Special Committee on Aging hearing in November. In fact, one in 10 seniors age 60 and older, some 5 million elders, who live at home experiences abuse, neglect or exploitation, according to one expert, Jaye Martin, executive director of Maine Legal Services for the Elderly. Watch Trust Betrayed: Financial Abuse of Older Americans by Guardians and Others in Power.

And financial abuse – perpetrated by mainly be family members, many of whom are guardians – is one of the most common types of elder abuse, according to a Government Accountability Office (GAO) report released for the hearing. Read The Extent of Abuse by Guardians Is Unknown, but Some Measures Exist to Help Protect Older Adults.

According to GAO, a guardianship may be necessary as an older adult becomes incapable of making informed decisions. “Generally, guardianships are legal relationships created when a state court grants one person or entity the authority and responsibility to make decisions in the best interest of an incapacitated individual — which can include an older adult — concerning his or her person or property,” the GAO wrote in its report. “While many guardians act in the best interest of persons under guardianship, some have been reported to engage in the abuse of older adults.”

So, what can you do to avoid financial abuse by family members, guardians and others in power?

1. Know the risk factors. Social isolation and cognitive impairment are among the known risk factors for elder abuse. “Stay socially active and engaged,” said Martin. “Social isolation increases the risk of becoming a victim. If someone is isolating you from your friends, family or others in your community, seek help.”

2. Don’t succumb to pressure. Don’t let anyone rush or pressure you into signing a document, purchasing something, or giving away your money or property. “Take your time,” said Martin. “Consult with others. If you feel rushed or pressured to act, don’t act. Instead, talk to others including trusted friends and family members, your banker or attorney, or other professionals such as clergy members or social workers.”

3. Avoid joint accounts. Don’t’ set up joint accounts as a method of planning for incapacity or getting help with paying your bills. “Both parties are equal owners and have equal access,” said Martin. “Instead, talk to your banker about your options for getting assistance with your finances.”

4. Keep your home. Don’t give your home away to someone in exchange for a promise to care for you or allow you to live there as long as you live. “These kinds of promises are broken every day and you could find yourself without a home or the help you need,” said Martin.

5. Involve your financial team in your affairs. “The most important thing elders can do to address elder financial abuse is to involve multiple parties in helping them manage their financial affairs,” said Walter White, president and chief executive officer of Allianz Life Insurance Company of North America. “Having a third party involved can provide an additional layer of oversight, providing the necessary checks and balances that can help identify potential problems before they happen.” Read Allianz Life’s 2016 Safeguarding Our Seniors Study.

Others agree. “Financial advisers can be very helpful,” said Robert Mauterstock, author of Passing the Torch, Critical Conversations with Your Adult Children. “They often can notice if money is being withdrawn from client's accounts surreptitiously.”

For her part, Martin also recommends building relationships with the professionals who advise you or handle your money, such as your banker and attorney. “They can help to detect changes in your financial activity that may signal exploitation and be available to advise you if you are being pressured to act,” she said.

Mauterstock also noted that each state has a protective services department. “Financial advisers or family members can call in to protective services anonymously and report a problem,” he said. “Protective services will often then follow up with the family.”

Elders can also hire a bookkeeper to pay their bills and manage their bank accounts, said Mauterstock, who noted there’s a bill before Congress called the Senior$afe Act of 2015 which would protect financial advisers who report an abuse.

Among other things, those involved in watching over your affairs – be it a banker, CPA, attorney, or lawyer – should look for red flags such as unusually high guardian fees or excessive vehicle or dining expenses, according to the GAO.

6. Beware of family members. According to the Allianz Life study, a large percentage of elders that have suffered financial abuse were victimized by people that are close to them - either a family member, friend or another professional caregiver.

7. Set up a revocable trust. Consider a revocable trust with a corporate trustee. “There is no better protection for a (senior),” said Mauterstock. “Corporate trustees are the most regulated financial entities in our industry; they’re regulated by the OCC, the FDIC, and the state banking commission.”

8. Execute a durable power of attorney. A durable power of attorney is an important estate-planning tool, said Mauterstock. In essence, it’s a legal document that gives someone you choose the power to act in your place should you become mentally incapacitated. Note, however, the person with the durable power has unlimited access to your finances. So, make sure the person with the durable power sends copies of all transactions, as well as duplicate banking, investment and credit card statements, to your financial team each month.

For her part, Martin said powers of attorney are useful and important tools, but can be misused. “Only execute a power of attorney after consulting with an attorney and only appoint someone you trust completely,” she said. “Beware of gifting clauses in power of attorney documents. You can and often should limit the power you give your agent. Grant no more authority than is needed.”

WAYS TO PROTECT YOURSELF

If you’re a family member or caregiver, here are some ways you can help protect yourself or loved ones in your life:

• Plan ahead to protect your assets and ensure that your wishes are followed
• Consult with a qualified financial professional or attorney before signing complex agreements or anything you don’t understand
• Build relationships with professionals who are involved with your finances – they can assist in monitoring for suspicious activity
• Limit your use of cash – using checks and credit cards leaves a paper trail
• Trust your instincts and feel free to say “no” – remember, it’s your money
• To find more tips for prevention and red flags to watch for, read Preventing Elder Financial Abuse Tip Sheet from the Better Business Bureau.

Source: Allianz Life

Robert Powell is editor of Retirement Weekly, contributes regularly to USA TODAY, The Wall Street Journal and MarketWatch. Got questions about money? Email Bob at rpowell@allthingsretirement.com.