Nobody likes to think of one's parents getting older and needing assistance, but it’s a reality many of us face. An important part of caring for parents as they age is identifying and protecting them from elder financial abuse. Baby boomers and the Silent Generation are getting older. Given their accumulated assets, they have a higher chance of being defrauded than those who are younger. According to one estimate, seniors collectively lose up to $30 billion a year to elder financial abuse.1 This abuse can come from total strangers, or even friends and family members.
As a concerned child, how can help you combat this? Here are seven ways to spot financial abuse and six ways to protect your parents and their financial futures.
7 Signs of Elder Financial Abuse
Protecting your parents from scammers is crucial, especially as they get older and may have a harder time managing their finances.
Warning signs may include:2
- Unusual activity in their bank accounts, such as large or unexplained withdrawals
- Withdrawals from an inactive account
- A newly opened joint account
- New credit card balances
- Bank and credit card statements sent somewhere other than to your parents’ home
- Suspicious signatures on financial documents
- Closing a Certificate of Deposit or savings account without worrying about penalties
Protecting Your Parents From Financial Abuse
Tip #1: Talk to Them About Money
Reach out to your parents. Make sure that you are staying in touch with them regularly. Verify that they are paying their bills or, if applicable, find out who is doing it for them. Your parents may not want to share this information or admit that they need help. You can ease them into a discussion by asking them for advice or speaking about your own money worries. Once this topic becomes more comfortable, they may be more open to letting you help as it becomes necessary.
Tip #2: Automate Their Bills or Deposits
One way to go about helping them pay their bills is by automating the process. Automating your parents’ payments with direct debits from their checking account can help keep things organized while lessening the chance that they will become victim to a scam.
Similarly, you can automate transfers into their account, as they may have funds coming from various sources, such as social security, pensions, annuities, etc.
Tip #3: Have the Necessary Documents Ready
Are your parents’ legal documents in an accessible location?
This could include:
- Wills or Trust documents
- Healthcare Proxy
- A HIPAA Release Form
- Power of Attorney
Make sure your parents are careful when choosing a power of attorney, as this person will be responsible for managing finances once your family member is no longer able to do this. Having more than one may also be a good idea, as this is a means by which the representatives have to act together and consult each other.
Tip #4: Reduce the Complexity of Your Parent’s Finances
Consolidate your parents’ finances when possible, as many older people have more than one account. But practice caution when consolidating and moving accounts to make sure that you don’t incur any penalties. Additionally, you need to respect beneficiary designations or you could face legal action.
Tip #5: Encourage Credit Card Use Over Cash
If your parents sent cash to a scammer, then it would be much more difficult to trace than if they paid with a credit card.
If they were to make a purchase with a card, the credit card company can:
- Protect against identity theft
- Allow past transactions to be reviewed
- Reimburse any money that was stolen
Tip #6: Create a Trust
While a trust is a great way to manage and protect your parents’ assets, they can still withdraw from this account, making it easy for them to fall prey to scammers. If you set up an irrevocable trust, they will not be able to withdraw money from this account without consulting the trustee, making it much more secure.
Many older people do not like giving up this type of control, but if you speak to them about the importance of their safety, they may be more open to it.
If you can establish a system of checks and balances by utilizing the above tips, your parents will be much more protected from fraud. Take a proactive approach before it becomes an issue rather than waiting until your parents become the victim of financial abuse.
Disclaimer: The information provided here is general and intended as educational in nature. It is not intended nor should it be considered as tax, accounting, or legal advice. Investec Wealth Strategies and its advisors do not provide tax, accounting, or legal advice. We recommend you seek the counsel of your attorney, accountant or other qualified tax advisor concerning your situation.