Nobody likes to think about their parents getting older and needing assistance, but it’s the reality we face. And, as they age, they rely on us for more of the day-to-day tasks they used to handle.
An important part of caring for parents as they age is identifying and protecting them from elder financial abuse. Baby Boomers and the Silent Generation are getting older, and with their accumulated assets, they have a higher chance of being defrauded. According to one estimate, seniors collectively lose up to $36.5 billion a year to elder financial abuse. This abuse can come from anyone ― strangers, friends, or even family members.
As a concerned child, how can you help combat this? Below are seven ways to spot financial abuse and six ways to protect your parents and their financial futures.
Signs of Elder Financial Abuse
Protecting your parents from scammers is crucial, especially as they age and have a harder time managing their finances.
Some warning signs of trouble may include the following:
- Unusual activity in their bank accounts, such as large or unexplained withdrawals
- Withdrawals from an inactive account
- A newly opened joint account
- New credit card balances
- Bank and credit card statements sent somewhere other than your parents’ home
- Suspicious signatures
- Closing a Certificate of Deposit or savings account without worrying about penalties
Protecting Your Parents from Financial Abuse
Talk to Them About Money
Reach out to your parents regularly. Make sure they are paying their bills on time. If they aren’t handling their bill paying, find out who is. Your parents may not want to share this information or admit that they need help, so ease them into the conversation by asking for advice or speaking about your own money worries. Once the topic becomes more comfortable, they may let you help with more as it becomes necessary.
Automate Their Bills or Deposits
One way to help them pay their bills is by automating the process. Automating your parents’ payments with direct debits from their accounts can help keep things organized while lessening the odds that they will become the victim of scams.
Similarly, you can automate transfers into their checking account because they may have funds coming from various sources, such as social security, pensions, annuities, etc.
Have the Necessary Documents Ready
Are your parents’ legal documents in an accessible location?
These could include the following:
- Healthcare proxy
- A HIPAA release form
- Power of attorney
Keep in mind that the person designated as power of attorney will be responsible for managing your parent's finances when they are no longer able to. Make sure your parents use caution when assigning this responsibility. Some people choose to designate more than one power of attorney so that one party does not have all of the control of their assets.
Condense Your Parent’s Finances
Consolidate your parents’ finances when possible. Many older people have more than one account, which can cause confusion as they age. Be careful that consolidation and account changes don’t incur penalties. You’ll also need to respect beneficiary designations. If you fail to do this, you could face legal action.
Encourage Credit Card Use Over Cash
Credit card activity is much easier to track than cash. If your parents sent cash to a scammer, it would be more difficult to trace.
If an unauthorized user were to make a credit card purchase the credit card company could do any of the following:
- Protect against identity theft
- Allow past transactions to be reviewed
- Reimburse any money that was stolen
Create a Trust
A trust is a great way to manage and protect your parents’ assets; however, withdrawals can still be made from this account. If you set up an irrevocable trust, they will not be able to withdraw money from this account without consulting the trustee, making it much more secure.
Many older people do not like giving up this type of control, but if you speak to them about the importance of their financial safety, they may be more open to it.
If you can establish a system of checks and balances by utilizing the above tips, your parents will be more protected from fraud. Take a proactive approach to fraud prevention instead of waiting until your parents become the victim of financial abuse.
Eric Braund is the Founder and Chief Financial Officer at Black Walnut Wealth Management, a financial advisory firm providing financial counsel and fiduciary investment services to individuals, families, and private foundations throughout the Traverse City and Northern Michigan region. He is a CERTIFIED FINANCIAL PLANNER™ professional and a Chartered Retirement Planning Counselor™ with 25 years of experience. He also has a bachelor’s degree in finance from Hillsdale College. Braund is passionate about offering services rooted in hard facts and sound reasoning combined with meaningful, long-term relationships so that his clients can experience less stress and have more time and energy to invest in what they love.
Braund is a Northern Michigan native who truly enjoys all that the area offers, including hiking, biking, swimming, skiing, volleyball, and boating. He loves spending time with his family — his wife, Jodi, and his two children — and maintaining a balanced life. To learn more about Eric Braund, connect with him on LinkedIn.
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