As your parents age, elder financial abuse is something to be aware of. Anyone is at risk for fraud, but scammers often target senior citizens. In 2018, Congress was so concerned about the problem that it enacted the Senior Safe Act. The law gives financial representatives more freedom to take action to try to block attempts to defraud or exploit their older clients.
If you have an aging parent, there are some things you can do to try to help protect their finances.
Starting the Conversation About Financial Abuse
The first step is to get your parents on board with sharing information about their finances. That may help open the door to conversations about financial fraud, the many forms it can take, the latest scams, and how to avoid becoming a victim — this may even include having your parents talk with you before making any important financial decisions. The conversation will likely cover more than the basics about their insurance policies, bank, retirement and other investment accounts. You'll want to consider covering your parents' intentions for basic estate planning matters and their Social Security benefits. Having information on these topics might help you identify significant changes and provide a basis for asking questions.
It's a delicate matter to imply that your parents may soon need help to protect themselves from elder financial abuse. But if you ask them about how their own parents handled their finances as they aged, and how times have changed since then, your parents might be more open. Also, if you have siblings, consider getting together as a family and deciding who is best able to help your parents with their finances.
Knowing the Red Flags
Once your parents are ready to share their financial information and accept a degree of involvement, you may be in a better position to watch for potential signs of financial elder abuse. You'll likely want to watch for any signs of diminished mental capacity, but some of the other signs may include:
- Unusual substantial purchases
- Change in a long-time financial advisor
- Changes in beneficiary designations
- Abrupt changes in spending and investing patterns
- Substantial or unusual withdrawals or wire transfers
Note: Automated financial account monitoring services may be available that send out an alert when unusual account activity is detected.
Taking the Right Financial Safety Measures
Assuming that your parents are willing, there may be some steps you can take to help protect them from elder abuse. Here are a few:
Consider Joint Ownership of Accounts
You could consider limiting unfettered access to your parents' money by setting up a bank account with only enough funds to cover routine expenses. Then you may want to look into whether you can require your approval, along with your parents' approval, for account disbursements from other bank or investment accounts. Alternatively, you could change the payment or distribution-authorizing authority on your parents' principal bank and investment accounts to require dual authorization (yours and a parent's) for payments above a designated limit.
Another option to consider is opening a living trust account. This legal agreement can appoint you, or another person in your family, to manage your parents' finances and assets, and may be an effective way to specify your parents' wishes in writing.
Build Relationships With Your Parents' Financial Representatives
It's important for you to try to establish relationships with all bank officers, investment advisors, tax accountants and estate attorneys who assist with your parents' finances. The purpose is two-fold: to help you feel comfortable with them, and vice versa, so they can share information about any suspicious activity or requests with you. Just make sure to have the proper documentation in place to help ensure that anyone involved in your parents' finances can share concerns with you.
Set Up Power of Attorney
You may need to secure a power of attorney to give you, or another trusted contact, the authority to request and receive such information from your parents' advisors, and perhaps eventually take charge of all of your parents' financial affairs. A power of attorney can be written in different ways to establish varying degrees of authority. For example, a limited power of attorney gives you (as the agent) the authority to make decisions for your parents in specific scenarios that are listed in the agreed upon contract.
Though it might be impossible to completely eliminate the risk of elder financial abuse in your family, you could help mitigate it by keeping these tips in mind, and adopting a proactive and comprehensive strategy.