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How to Protect Your Parents From Financial Fraud

Older Americans lost nearly $3 billion due to financial exploitation last year, so their children need to watch for telltale signs of scams

By Sheryl Nance-Nash | August 30, 2012

June 15 is World Elder Abuse Awareness Day, which makes this an appropriate time to offer advice on protecting your parents from financial fraud.

More than four in five experts say that financial abuse of the elderly is getting worse, according to a new survey of securities regulators, financial planners, law enforcement officials and others by the Investor Protection Trust, an investor education nonprofit. The federal government hopes to combat the problem with a new Elder Justice Coordinating Council announced by U.S. Health and Human Services Secretary Kathleen Sebelius at a June 14 White House symposium on elder abuse. "We've never had a coordinated federal response to elder abuse," she said.

(MORE: Top 10 Financial Scams Aimed At Older Adults)

The frauds can happen in many ways: A shady contractor shows up at your dad’s home and applies high-pressure tactics to sell an unneeded, overpriced water purification system. Or a caregiver gets $50 to pick up groceries for your mom and keeps the $15 change. And the cumulative impact is enormous: Last year, older Americans lost nearly $3 billion because of financial exploitation, and the number of victims continues to rise.
 
Karen Roberto, Ph.D, director of both the Center for Gerontology and the Institute for Society, Culture and Environment at Virginia Polytechnic Institute and State University, talked with Next Avenue about the growing problem of elder financial abuse and how you can protect your parents from becoming targets. (Next Avenue also has a related article from the National Council on Aging about the most common financial scams aimed at older adults.)
 
Q: Who is most vulnerable to becoming a victim of elder financial abuse and why?
 
A: Those whose cognitive abilities — conceptual, procedural and judgment skills critical to independent functioning — are failing. People who are isolated are also at risk. Perpetrators are good at cultivating relationships, and can be charming to someone who is lonely. Generally, people 80 to 90 — and especially women in that age group who are alone — are particularly vulnerable.
 
Q: How does financial abuse of the elderly occur?
 
A: There are many ways. For instance, it can stem from undue influence by a family member who tries to intimidate, confuse or frighten them — an adult child who helps himself to his parent's money or takes some possessions and sells them. It can be a high-pressure salesperson, even a stockbroker or a financial adviser, getting someone into an inappropriate investment. Then there's the sweetheart scam where the young woman sweeps the elderly man off his feet, and before long he has no money left. Those are just a few examples. These scams can be initiated in person, by phone, by mail, or online.
 
Q: What are the best ways to protect your parents from becoming victims?
 
A: Have conversations with them early, long before they get preyed upon. Be sure they have up-to-date wills and that you have a durable power of attorney, so you can handle their finances if they can’t. Conduct a yearly checkup of your parents’ finances, reviewing their insurance and banking information and their investments. You can tell them to ask you questions they have about their money and investments.

(MORE: Seven Signs of Dubious Financial Advisers)
 
Q. What are signs that your parents may already be victims?
 
A. Look for significant changes in their spending patterns; unusual cash withdrawals or transfers from their bank accounts through tellers or ATMs; unusual, suspicious or unnecessary household repairs; and a sudden transfer of assets to a family member or someone outside the family.
 
Q: What should you tell your parents to help them stay safe?
 
A. Remind them to keep their computer passwords confidential and not to give out their credit card or Social Security numbers or the numbers of their bank accounts. Also, tell them not to make snap decisions when they get callers claiming to be from charities. Explain that it's okay to say that they need to think it over and that the charity should send information in the mail.
 
Q: If you suspect your parents have been victims of financial abuse, what should you do?
 
A: Don't be afraid or embarrassed to take action, even if the perpetrator is a family member. You can go to the police or Adult Protective Services, a state-operated social service agency responsible for investigating and addressing issues of abuse, neglect and exploitation of older adults. Your area Agency on Aging can refer you to places for help, too.
 
Q: What's the impact of financial abuse of the elderly?
 
A: Even a small financial fraud can have serious effects, because when you're on a fixed income, any loss can be significant. But it's more than just the money. Elder financial abuse has long-term consequences affecting how the person feels about himself and the quality of his life. What's most troubling is that rarely do you see financial abuse in isolation; there can often be emotional intimidation and physical abuse as well.