Approximately 7.3 million elderly Americans — or one in five over age 65 — have been the victims of financial abuse by family, friends, healthcare professionals, trusted advisers and even strangers, according to the Metlife Investor Protection Elder Fraud Survey. And an update to the study reports that 82 percent of doctors and nurses consider financial fraud to be a serious ongoing problem among their elderly patients.
The Fraud Triangle
Like other types of fraud, three elements need to be present for elder financial abuse to occur. Often referred to as the “fraud triangle,” these elements are the opportunity, motive and rationalization to commit fraud.
Motives to steal include greed, drug and gambling addictions, and an uncertain economic environment. Low wages paid to caregivers and nursing home workers might lead them to rationalize stealing.
The growing opportunities to defraud are due to:
- The Growing Older Population. Elders comprise a growing proportion of U.S. residents. The Census Bureau reports that there are currently more than 41 million Americans age 65 or older.
- Relative Affluence. After a lifetime of working and investing, older people often have substantial wealth compared to other demographic segments. Instead of relying on pensions like generations-past, many of today’s elderly population have large sums of marketable securities sitting in investment accounts, ripe for the taking.
- Easy Prey. People older than age 60 may have old-school values and ethics, causing them to trust their advisers without question. Some also suffer from dementia or mental impairment, leading to confusion and impaired decision-making.
- Weak Internal Controls. Many states don’t require nursing homes or home health providers to conduct criminal background checks on administrative employees or to audit their financial records. Annual surveys of nursing homes that are required in most states are conducted by healthcare professionals who tend to focus on residents’ health and well being, not their finances.
Moreover, there are few controls in place to stop caretakers who are convicted of stealing from the elderly from obtaining similar jobs elsewhere. Successful predators often strike again — but the second or third time around, they’re likely to be better at hiding their trails.
Stopping the Abuse
Stopping elder financial abuse starts by minimizing these opportunities. No one can stop the demographic trends, but it’s important to educate elderly people and their families about the latest scams and prevention techniques.
Financial professionals and attorneys who specializes in elder care can help seniors take steps to protect their assets from fraud, including assigning trustees, executors, and powers of attorney with people who can be trusted — and who are unbiased and financially secure themselves.
Relatives can also help in the fight against elder financial abuse. Older individuals should discuss financial matters with family members long before they lose the capacity to make decisions. This includes sharing account numbers, names of advisers and personal balance sheets. Then, relatives can watch for these warning signs of financial abuse:
- Sudden changes in account balances, banks or professional advisers;
- Unusual purchases or gifts to caregivers;
- Unauthorized ATM withdrawals;
- Unfamiliar signatures on checks or legal documents;
- Unexplained disappearances of valuable possessions;
- Unpaid bills, despite adequate financial resources; and
- Deteriorated credit scores.
If you notice these red flags, notify your financial adviser or attorney immediately. He or she can advise you on how to proceed.
Above all, listen to and investigate a parent or grandparent’s allegations of theft. In some cases, it may be tempting to dismiss complaints as part of a faltering mental condition. But the costs of elder financial abuse go beyond monetary losses and may include feelings of insecurity or loss of self-worth — especially if no one believes the elderly individual.