Financial fraud against the elderly continues to take its toll and it is mainly an emotional one, according to a recent survey of CPA financial planners by the American Institute of CPAs.
Sixty-eight percent of survey respondents said the stress and emotional effect on older Americans who fall victim to such fraud outweighs the financial one, compared with only 16% who saw the opposite result. One percent said it had no effect.
Forty-five percent of financial planners said the financial effect of fraud was likelier to be minimal than substantial, versus 32%.
Survey participants said these were the types of financial abuse or fraud their elderly clients had experienced:
- Phone or internet scams
- Inability to say ‘no’ to relatives
- Identity theft
- Support for non-disabled adult children
- Credit card theft
- Being taken advantage of by an in-home caregiver
At the same time, the survey found that CPAs were seeing their clients victimized by many of these scams at lower levels than they were in 2015.
“Everyone is vulnerable to financial abuse and exploitation,” Susan Tillery, chair of the AICPA’s PFP executive committee, said in a statement. “However, the elderly are highly susceptible because companionship is an enticing allure for them.”
Tillery said that when someone an older person depends on for companionship abuses that trust, he or she can be emotionally distraught and withdraw from family and friends.
“One of the challenges specific to working with the elderly that CPA financial planners encounter is assessing their elderly client’s desire to provide financial help for a family member, against their own continuing financial needs,” she said.
The AICPA’s online survey, which was conducted from Nov. 26 through Jan. 20, included responses from 688 CPA financial planners.
The survey also found that 48% of all CPA financial planners had a client who had exhibited signs of dementia or diminished capacity for the first time in the past year.
The AICPA said this underscored the need for Americans and their financial planners to understand how to address these issues together, particularly at a time when Americans are living longer.
“As the trusted advisor to my clients, I am especially cognizant of mental capacity, and specifically with elderly clients, symptoms of the early signs of dementia,” Tillery said.
“At times such as this, it is essential to be proactive by having a plan in place to deal with the financial demands of long-term care and other medical expenses associated with diminished capacity.”
Awareness of the effect of aging on cognitive function may be increasing, but 28% of CPA financial planners said their clients planned to deal with diminished mental capacity in retirement on a reactionary basis, and 20% reported that clients were simply ignoring the issue.
Only 17% said their clients were taking proactive measures.
How are financial planners addressing the potential of diminished capacity in retirement?
Ninety-two percent of respondents said they were doing so by ensuring that powers of attorney and health care proxies were in place, and 66% had arranged for themselves to contact their clients’ other professionals and relatives.
About four in 10 had obtained authorization to contact a client’s attorney or move money to a trust, a third had automated clients’ annual required minimum distributions from qualified retirement accounts and a quarter had had clients move into a previously selected assisted care facility.
“As people are living longer and issues such as diminished capacity and elder financial abuse are becoming more prevalent, there is great demand for comprehensive financial planning,” Andrea Millar, director of financial planning at the Association of International Certified Professional Accountants, said in the statement.
“They act as a ‘quarterback’ — calling the plays and making sure that everyone involved, including family members and other professionals employed by their client, play the role that they are supposed to.”
Tips for Clients
The AICPA offers several proactive tips to help Americans handle issues that may arise from elder abuse and potential diminished capacity later in life. Financial planners would be well advised to pass on these tips to their elder clients.
Know a Scam When You See One
Remember, if it sounds too good to be true or remotely strange, check the Federal Trade Commission list of scam alerts.
Identify Your Team and Establish Responsibilities
Establish a trusted team of professionals, designees and loved ones who will always have your best interests in mind. Review your decisions with each one in advance so all team members will know their part if action is required. Team members should know and be formally authorized to communicate with one another, and should all have copies of any relevant legal documents.
Use Your Financial Planner as ‘the Bad Guy’
Get in the habit of saying “I run everything by my financial planner; I’ll get back to you” before making financial commitments to others. And remember to never give personal or financial information to an unsolicited caller or salesperson.
Make Hard Decisions Now
Discuss the tough planning issues head on and proactively, such as housing options and long-term care preferences for a couple of different potential scenarios.
Get Your Plan in Place and Revisit it Regularly
Once you have a retirement plan, set reminders for quarterly or semi-annual check-ins to ensure estate planning documents are in place and current. Review beneficiary designations, successor trustee, and financial and medical power of attorney.
Set Up Protections
Establish checks and balances for power of attorney, successor trustee and key professionals so that abuse can be identified early and addressed. If you are worried about competency issues or are unable say no to relatives, consider putting your assets in a Revocable Living Trust and assign a co-trustee. Ensure that all checks — or checks over a certain dollar amount — require two signatures.
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