What Is Elder Financial Abuse and How to Protect Yourself from It?
One of the biggest drivers of elder financial abuse is “inheritance impatience” Studies have revealed that this form of abuse is often carried out by close friends and relatives in positions of trust. According to SIFMA, more than 5% of seniors (60 and older) in the US were financially exploited by a family member in 2009.
What Is Elder Financial Abuse?
Elder financial abuse as defined by the Federal Elder Justice Act of 2010 is “the fraudulent or otherwise illegal, unauthorized, or improper act . . . that uses the resources of an elder for monetary or personal benefit, profit, or gain, or that results in depriving an elder the rightful access to, or use of, benefits, resources, belongings, or assets.”
Elder financial exploitation is very prevalent and is the most reported form of abuse to the elderly according to the US Department of Justice. Older adults lose close to $2.9 billion every year to financial exploitation, and estimates say the number will rise as the elderly population continues to grow.
Ways to Protect Yourself or Your Dear Ones from Elder Financial Abuse
Naturally, seniors are easy targets because of their vulnerability. As you grow old, you become more susceptible to illness which may impair your physical ability. But most importantly, your cognitive abilities may decline rendering you mentally incapable of handling money or understanding your financial situation. Here are various steps that you can take to protect yourself from financial abuse.
1. Execute a durable power of attorney
It is a document that gives someone the legal authority to act on your behalf in case you become mentally incapacitated. However, this gives the person unlimited access to all your financial accounts, and you should demand that they send you copies of financial statements and transactions every month.
Some people are likely to misuse the powers of attorney, and you may end up falling into the same trap you were trying to avoid. Before handing over such powers to anyone, therefore, consult with your attorney and only pick someone you trust completely. The power of attorney documents also contain clauses that you can use to add or limit the powers of your agent. Don’t give them more power than is necessary.
2. Protect Personal and Financial Records
To prevent identity theft, you need to protect any documents that may contain valuable information that you may not intend to share with anyone else. Shred such documents if you no longer need them. They may include receipts that contain your credit card number and credit cards and bank statements.
You should not carry your social security card in your purse or wallet and should only provide the social security number when necessary. Protect personal computers by installing the latest anti-virus software. Don’t share passwords to your online accounts with anyone and make sure to change them routinely.
3. Know your rights
Elder financial abuse is illegal. There are laws, both federal and state, that exist to protect you from elderly financial fraud and that provide the steps for recourse should you become a victim. If any crime such as identity theft is committed against you, you have every right to press charges. Although federal law does not explicitly address elder abuse, various states have taken it upon themselves to develop statutes providing criminal penalties for different forms of elder abuse.
4. Involve your financial team in your affairs
One of the best ways to prevent elder financial abuse is to incorporate multiple parties in managing your financial affairs. Most elders are defrauded because of living in isolation, away from prying eyes. It is, therefore, easy for someone to take advantage of their physical or mental condition. Incorporating a third party in your financial affairs provides an additional layer of protection and oversight. It creates checks and balances that can quickly detect potential problems before they occur.
5. Don’t Fall for Scams
Criminals will try to impersonate credit card companies, banks and the IRS in the hope that they will steal valuable personal data. You should learn to pick out such fake communications. Remember the IRS will never contact the taxpayer through phone, text or social media to threaten them with lawsuits or arrests and to demand immediate payment. The IRS will usually communicate to you via mail. It is also easy to know whether you owe any money to the IRS by viewing your account on their website.
6. Don’t succumb to pressure
Never do anything under pressure. No one should force you to sign a document, buy something or give out your money or property. You should never be in a hurry to do anything suspicious. Take your time and consult with others before making important decisions about your finances. If anyone is pressuring you to act, don’t succumb easily. Talk to other family members and trusted friends and your attorney or banker instead.
7. Set up a revocable trust
A trust is a legal entity that provides conditions on how particular assets should be distributed in the unfortunate event that you die or become unable to manage your finances. You should set up a revocable trust with a corporate trustee. A revocable trust offers the best financial protection for a senior. The corporate trustees are among the most regulated financial formations in the industry. They are regulated by the FDIC, the OCC, and the state banking commission.
8. Beware of family members
A significant percentage of adults who undergo elder financial abuse experience victimization from members of their families and close friends. Be careful who you trust regardless of how trustworthy or honest they may seem. Never make hasty financial decisions before consulting your banker or attorney.
Mentally challenged elders are not the only ones who face the risk of financial exploitation. Fraudsters may use social isolation to manipulate victims into submission. The measures above are just examples of actions you can undertake to protect yourself from elder financial abuse. But the most efficient way to protect yourself from financial exploitation is to get the whole family and your social network involved.
Image from depositphotos.com.