Beware Senior Financial Abuse

When the elderly widow showed up with a young man who was not related to her, ready to sign over her home to him, New York eldercare attorney Anne-Margaret Carrozza immediately grew suspicious. She refused to draw up the paperwork.

But six months later she discovered that the young man had taken her client to another attorney, who did transfer ownership of her home. Carrozza immediately alerted the District Attorney and Adult Protective Services, and the man was forced to return the home to his victim. The courts also appointed a guardian to pay the widow’s bills and make sure her assets were protected.

“The young man had taken her client to another attorney, who did transfer ownership of her home”

This story has a happy ending. But according to the National Council on Aging, up to five million older Americans are abused each year and the annual financial loss is estimated at up to $36.5 billion. The Senate Special Committee on Aging has had multiple hearings on senior financial abuse and released a report that said legal guardianships were being used to abuse the seniors they were meant to protect.

Guardianship needs oversight

Although guardians provide an essential service for many in need of support and protection, the report said, “unscrupulous guardians with little oversight have used guardianship proceedings to obtain control of vulnerable individuals and have then used that control to liquidate assets and savings for their own personal benefit,” according to Ensuring Trust: Strengthening State Efforts to Overhaul the Guardianship Process and Protect Older Americans.

“Often, an adult child will basically drag a parent into my office and ask me to advise the parent on what a good idea it would be to put the house into the child’s or the children’s names”

Carrozza says that whenever an older person visits her office for a consultation, if they are accompanied by a younger family member, she apologizes and asks the younger family member to wait outside for a few minutes. This gives her time to make sure the senior is not being coerced into something. “Often, an adult child will basically drag a parent into my office and ask me to advise the parent on what a good idea it would be to put the house into the child’s or the children’s names,” Carrozza said.

That’s a common mistake, she said, often instigated by younger family members with a misguided notion that it will help the family avoid future possible nursing home expenses. “But once the home is removed from mom and dad’s name, their property tax exemptions are going to be lost, and the kids are going to have a capital gains tax problem later. Also, the parent could well end up homeless if the child turns out to be a bad guy. They (children) have their own legal liabilities, which now could result on a lien on the property.”

Carrozza says whenever a senior is thinking about doing any estate planning, it’s critical that they reserve for themselves a set of “handcuff keys.” “They want to be in a position to change their minds, and not be permanently handcuffed into something that might not make sense five years from now.”

Recognize the signs 

There are signs that can alert you to possible financial abuse happening, says Vincent Catalano, wealth planning advisor and vice president at KCA Wealth Management in Camp Hill, Pennsylvania. “Typically, it’s going to be a dramatic change in their cash flow needs, where they’re more frequently asking for money from their accounts and using it to buy things that typically you and I wouldn’t think are appropriate.”

“The financial advisors asked for a meeting with the family members, and those requests stopped”

He said it may be tricky, because the money ultimately belongs to the client, and they can do with it what they want. But if a financial advisor suspects that a client is being abused, the conversations are documented, and it is reported to the management team. “If it escalates, we know we can get a plan of attack on how we’re going to address it,” he said.

Catalano said he had a case where client who had lost her husband was convinced by her son and daughter-in-law to sell her home and use the proceeds to build an addition to their home so she could live with them. But after a few years they started charging her rent, and the mother was making frequent withdrawals at the request of her son. The financial advisors asked for a meeting with the family members, and those requests stopped.

It may not necessarily have been a case of elder abuse, he said. It is possible that they just weren’t aware of where their mom’s finances were. “To me it seemed a little excessive. It ended well in that case. But otherwise, she probably would have gone to zero (assets) pretty quickly.”

What You Can Do

To help keep abuse from happening to your elderly relatives, he recommends that you make sure that they have the proper estate planning documents so you can step in and help, if necessary.

The Senate Special Committee on Aging said that if an older adult is in immediate, life-threatening danger, you should call 911. Anyone who suspects that an older adult is being mistreated should contact a local Adult Protective Services office, Long-Term Care Ombudsman, or police.

Rodney A. Brooks writes about retirement and personal finance issues. His column currently runs in U.S. News & World Report. He has written columns on retirement for The Washington Post and USA TODAY. He has also written for National Geographic, Next Avenue and Black Enterprise magazine. He retired as Deputy Managing Editor/Personal Finance and retirement columnist for USA TODAY in 2015. 

Your use of any financial advice is at your sole discretion and risk. Seniorplanet.org and Older Adults Technology Services makes no claim or promise of any result or success. 

Photo: Dmitry Demidko for Unsplash