Taking steps to avoid financial abuse

One of the 10 signs of Alzheimer’s is decreased or poor judgment. This can put people at higher risk for financial abuse, even in the early stage of the disease. Proper planning and an understanding of available resources can help people reduce this risk.

Some signs of Alzheimer’s relate to finances
Problems in managing money can be one of the early clues of a cognitive impairment. Signs may include:

• phone calls to a financial advisor or loved regarding the same subject matter
• an inability to recall signing paperwork
• forgetting prior conversations about finances
• expressing an unusual interest in risky investments and/or
• trouble understanding basic financial concepts that the person understood in the past.

It is valuable for everyone to create legal and financial planning documents and share the information with trusted individuals. This is even more critical for those living with Alzheimer’s and related disorders. As the disease progresses, the person living with Alzheimer’s may no longer have the ability to make legal decisions.

Risk for exploitation
Fraud directed at older Americans is estimated at $50 billion per year, not counting legal expenses and related costs. A 2014 study estimated the prevalence of elder financial fraud to be approximately 14% for those above age 60 in Florida and Arizona.

Fifty-six percent of financial planners report having an older client who was a victim of financial exploitation, with an average loss of about $50,000. These individuals are also at risk for repeated exploitation – serial scamming.

Although cognitive impairment is a risk factor for financial exploitation, it is by no means the only one. Anxiety about keeping their retirement savings, social isolation and cognitive impairments may cause a person to accept advice or help from people looking to commit scams, fraud or theft.

Steps to protect
Sometimes family members are reluctant to discuss finances with their loved one. They may fear family conflict or be uncomfortable talking about money. The illness or death of a family member or friend may open the door to having the discussion.

Advance planning can help protect persons living with Alzheimer’s and other dementias from financial abuse. It can also help to reduce the need for expensive and time-consuming legal procedures.

Estate and trust attorneys advise clients to consider whom they would appoint to make decisions for them if they were unable to make their own decisions. Proactive estate planning often includes documents such as:

• Wills and living trusts
• Health care directives
• Powers of attorney

Tools
It is easy to feel overwhelmed by the task of providing clear and thorough information to family members or trusted friends so they can step in if needed. There are tools available to help.

Some may find it helpful to use an online tool to securely store the information. This may include details and locations of wills, accounts, insurance policies, log in credentials, real estate, advisors, funeral wishes, and so forth – even information about pets.

Some online platforms allow people to share certain details with trusted family members and advisors, while keeping other pieces private. When the person can no longer make their own decisions, trusted friends, family or advisors can access what they need. This can help to reduce the emotional and financial stress of the situation on loved ones.

There are also offline tools to help individuals prepare and organize their documents. The Alzheimer’s Association and other groups provide written resources to help individuals plan and discuss their wishes.

Regulations designed to reduce risk of fraud
Some family members use systems that allow them to monitor financial transactions and/or receive alerts if their loved one forgets to pay bills or makes unusual purchases.

New federal rules that took effect in 2018 give individuals the ability to name a trusted contact whom financial advisors can notify if they suspect cognitive decline or possible financial abuse. The rule also permits financial firms, under certain conditions, to place a temporary hold on a disbursement of funds or securities from the person’s account.

Signs to watch for
Some tell-tale signs of fraud that financial advisors or others may notice include:

• sudden changes in beneficiaries
• rapid increases in debt
• inability of advisors and staff to recognize handwriting on documents approving transactions
• unusually large withdrawals from bank accounts or investment portfolios (especially when coupled with an inability to explain the purpose), and/or
• introducing a “new best friend” to financial discussions.

New scams and schemes arise all the time. The complexity of financial decisions – especially when transactions can occur rapidly over the internet – can create a confusing and disorienting environment for any investor. When cognitive impairment, overconfidence, and elder abuse find their way into this mix, bad things can happen.

Consumer protection groups, law enforcement agencies, financial institutions and advisors strive not only to alert people to these dangers; but to provide barriers against fraud and abuse.

Note: if you suspect that someone may be the victim of financial or other abuse, please call 911 or your local Adult Protective Services.

We would like to thank Jennifer Weir of Schultz Collins, Inc., for her contributions to this post.

Learn more:

• Legal planning
• Financial planning
• Legal and financial planning for caregivers
• Center of Excellence on Elder Abuse: Protect Yourself From Elder Abuse (available in multiple languages)
• Choosing a trusted contact
• Abuse of people living with Alzheimer’s
• National Center on Elder Abuse: Get help for suspected abuse