Nobody likes to think of their parents getting older and needing assistance, but it’s a reality many of us face. An important part of caring for your parents as they age is identifying and protecting them from elder financial abuse. Baby boomers and the Silent Generation are getting older and with 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 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 your parents’ home
- Suspicious signatures
- Closing a Certificate of Deposit or savings accounts without worrying about penalties
Protecting Your Parents From Financial Abuse
Tip #1: Talk to Them About Money
Reach out to your parents and make sure that you are staying in touch with them regularly. Make sure they are paying their bills and, 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, so you can ease them into it by asking them for advice or speaking about your own money worries. Once this becomes more comfortable, they may let you help with more 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 accounts can help keep things organized while lessening the chance that they will become victims of a scam.
Similarly, you can automate transfers into their checking 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:
- 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 is also a good idea, as this is a good way to be able to act together and consult each other.
Tip #4: Condense Your Parent’s Finances
Consolidate your parents’ finances when possible, as many older people have more than one account. 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
A trust is a great way to manage and protect your parents’ assets, however, 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 so that you can get ahead of them before it becomes an issue rather than waiting until your parents become the victim of financial abuse.
Spectrum Wealth Management, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. Additional information about Spectrum’s investment advisory services is found in Form ADV Part 2, which is available upon request. The information presented is for educational and illustrative purposes only and does not constitute tax, legal, or investment advice. Tax and legal counsel should be engaged before taking any action. The opinions expressed and material provided are for general information and should not be considered a solicitation for purchasing or selling any security.