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George F. Bearup, J.D. Senior Legal Trust Advisor

5-Jun-19

Elder Abuse Statistics

Take-Away: We know that elder financial abuse is on the rise. Some recent statistics and estimates are even more eye opening and probably compel discussions with older individuals of taking even more protective measures to prevent the potential financial abuse

Definition: Elder fraud, also called elder financial abuse or elder financial exploitation, is defined as the misappropriation or abuse of financial control in a relationship where there is an expectation of trust, resulting in harm to the elder victim.

Reported Statistics:

  • “More than 200,000 scams and financial abuse cases targeting the elderly are reported every year, and most experts agree that’s just the tip of the iceberg.”
  • “Senior citizens may lose nearly 25 times more to scammers than what is reported, according to a report by Comparitech, a consumer research organization based in the U.K. Instead of the 200,000 cases of elder financial abuse that are reported annually to U.S. authorities, the actual number may be as high as 5 million, with losses of $27.4 billion a year, not the $1.17 billion that is officially reported, said Paul Bischoff, researcher and editor of Comparitech, which focuses on consumer issues in the United States, Canada, and the United Kingdom. ‘A lot of the financial abuse is perpetrated by family members or people the elderly trust, so they are reluctant to report it; they may be ashamed they got scammed, or they may not realize it’ Bischoff said.”
  • “Comaritech estimated one in 10 people in the United States over the age 65 falls victim to elder fraud in the last year. The average loss per case based on numbers reported to state Adult Protectives Services organizations is $2,415.”
  • “Statistics on the real numbers surrounding elder financial abuse vary by organization, but experts agree it is a serious problem that is debilitating to seniors. An earlier report from the New York City Department for the Aging and Cornell University done in 2011 estimated that only one in 23 cases is reported.”
  • “The number of boomers in their 60’s with living parents has risen since 1998 to about 10 million, according to an Urban Institute analysis of the University of Michigan data. The Alzheimer’s Association estimates that 5.7 million Americans are living with Alzheimer’s.

Protecting the Elders: The impact of elder financial abuse, or sometimes inheritance abuse, can be staggering. Sad to say, the traditional estate planning assumptions based on the historic view of intact families in first marriages, and family loyalty in many situations, simply no longer exist. As a result, giving another individual control of the elder’s wealth needs to be considered with the goal of preventing financial abuse, or even the temptation for abuse. Other practical steps can also be taken to reduce the risk of abuse.

  • Durable Powers of Attorney: The powers conferred on an agent need to be rethought in light of the possibility of their abuse. Co-agents should be required when significant changes to an elder’s finances is contemplated, e.g. requiring two signatures when there is a change in an IRA beneficiary, or a lifetime gift of the elder’s assets is contemplated. Any significant disposition of the elder’s assets by the agent should require as a precondition to the exercise of that power to make any lifetime gift, or any gift to the agent, an assessment by the elder’s tax advisor as to the impact of the proposed asset disposition on the elder’s cash flow needs. The agent should be required to report to named successor agents, or perhaps the elder’s lawyer or accountant,  in writing, any exercise of the agent’s power that occurred in the prior 30 days, to enable third-parties to be alerted to the actions that were taken relying upon the durable power of attorney.
  • Trusts: The elder’s revocable trust could include safeguards like including a trust director whose consent is required prior to the transfer of assets from the trust, or if assets are to be held in joint names ‘outside’ the trust. In addition,  the use of co-trustees could be required to provide a better set of checks and balances with regard to the control of assets held in trust. The power to make transfers from the trust held by the successor trustee could be suspended if there is a medical determination of the settlor’s incapacity, or in the event of transfers (gifts, sales, loans) a co-trustee’s consent would be required.
  • Financial Accounts: FINRA financial professionals can restrict distributions from accounts if they have a reasonable belief that their client, over age 65, is being subjected to financial exploitation. [FINRA Rule 2165]. This rule also authorizes a temporary hold on the customer’s account who are believed to be at risk. In addition, if such a hold is placed on transactions associated with the elder’s account, a Trusted Contact Person, named by the elder is supposed to be contacted about the account hold and suspension of account activity. While these are all good first steps, if the elder has many accounts scattered at many different institutions, it makes the identification of financial exploitation that much more difficult to detect by the investment advisor. Consolidating investment accounts would help to detect when financial abuse of the elder is afoot. The financial adviser should have the names and contact information for trusted contact persons to consult with if any concerns of financial abuse arise.

Other Practical Steps:

  • Automate every financial transaction feasible, such as having bills automatically charged to credit cards, and credit card invoices automatically paid from the elder’s checking account. This automation dramatically cuts down on the amount of mail the elder receives, which leaves less information for a bad actor to access. With less paperwork to track, more time can be spent on the oversight of the elder’s finances and financial transactions.
  • Automate accounting records on a computer program, e.g. Quicken, so that a CPA or another independent and trusted person can monitor the elder’s financial activities remotely. Better yet,  have the independent person handle all bill payments on behalf of the elder, which provides the needed objective checks and balances and oversight.
  • Have trusted family members receive duplicate copies of the elder’s consolidated financial accounts monthly, so account activity can be monitored. It is best if the trusted family member is neither the agent under the elder’s durable power of attorney, nor the named successor trustee of the elder’s revocable trust.

Conclusion: Elder abuse is more prevalent than the statistics can identify. It is a societal problem that is not going to go away. Accordingly, we the need to take proactive steps, both in the legal instruments that the elder has adopted which enable others to control the elder’s assets, and also practical steps to enable the elder’s finances to be more easily monitored.