Financial Advice for Retirement, Social Security, IRAs and Estate Planning

Avoiding Scams by Loved Ones

Though it does not get much attention, a high percentage of the scams and thefts perpetrated on older Americans are com-mitted by their loved ones. The number of scams on the elderly and how much money is involved are unknown, but experts suspect that family and friends take advantage of retirees more than strangers do. But the problem is widespread enough that many states authorize financial institutions to report possible elder abuse.

The motives for family members and friends to steal from those close to them vary. Some believe that they are devoting more time and attention to the loved one than others in the family are, and that they deserve extra compensation for that. Others harbor some grudge against the individual or other family members; some others simply are greedy.

The types of crimes committed against older Americans by those who know them also vary. There are the cases of simple theft, such as taking cash or writing checks made out to cash. Sometimes an adult child will use a parent’s credit card to make personal purchases. Or an adult child with a financial power of attorney will use it to enrich himself.

There also are the more elaborate schemes. A caregiver might convince a person to either give the caregiver assets now or adjust the estate plan to leave a significant portion of the estate to the caregiver. Sometimes a younger relative makes a case that it would be a good financial move to put the deed to the house in the younger person’s name. Another classic ruse is for the person who arranges care to line up substandard care, or simply not pay the care bills, so more money can be inherited.

The financial abuse of older Americans can be detected and prevented, by both the victim and by other relatives and friends. Various safeguards should be part of an estate plan, and most estate planners can help create the safeguards.

A financial power of attorney is an essential part of an estate plan, but it can be abused as we have seen. One way to prevent abuse is to limit the scope of the power. The power might be limited to certain accounts, certain dollar amounts, or certain types of actions. The disadvantage is that we do not have perfect foresight, and the excluded powers might turn out to be essential. A remedy is to give different individuals different powers.

A better approach is to arrange for copies of account statements to be sent to or be accessible to a third person. Most financial institutions make statements available online to authorized persons. The third party can be a lawyer, accountant, or another friend or family member. Duplicate copies of any trading statements or other transactions also can be sent to the third party.

Attorneys who are experienced in working with older Americans often can recognize warning signs, such as the friend or relative who arranges appointments with the attorney, stays with the person at the appointments, and takes the lead in suggesting changes in the will.

Even if these safeguards are in place, everyone should be looking for other warning signs.

The retiree should be suspicious of a caregiver or helper who prevents or discourages ready access to account statements. Another person to be suspicious of is one who is persistent about recommending changes in wills, beneficiary designations, and access to financial accounts. Another red flag is the person who insists on being part of meetings with attorneys or financial advisors.

Of course, friends and relatives should be alarmed if they see that a caregiver or other person who spends a lot of time with the older person has a sudden, unexplained lifestyle improvement.

Even more disturbing is a change in the older person’s lifestyle, especially social contacts. New difficulty in contacting or seeing the person is a sign he or she is being isolated. Another warning sign is cessation or curtailment of regular social functions and activities.

Most friends and family members who help older Americans are selfless. But a few abuse those they are supposed to be helping. Older Americans and their friends and relatives should look for warning signs of these scams and set up safeguards to prevent them. Friends need to help, because many older people are hesitant to complain about theft or mistreatment. They are afraid of looking foolish or having their independence taken away. January 2007.

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