Elder financial exploitation is the illegal or improper use of an elderly adult’s funds, property, or resources by another individual. This exploitation can take many forms, including scams, abuse by trusted individuals such as family members or friends, and predatory products and services marketed specifically to the elderly.
A 2011 MetLife study estimated that financial exploitation costs seniors at least $2.9 billion annually. In a 2014 study conducted by Allianz Life, Safeguarding our Seniors, it was estimated that elder fraud victims have lost an average of $30,000. Despite such substantial financial losses and resulting suffering, the financial exploitation of elders is persistently underreported and under-recognized.
Governor Cuomo’s 2015 Opportunity Agenda directed the Department of Financial Services (DFS) to redouble its efforts to protect elderly New Yorkers from financial exploitation. DFS has issued guidance to financial institutions on steps they can take to prevent elder financial exploitation. DFS has also conducted a survey of a number of state-chartered financial institutions asking about their practices regarding the prevention of elder financial exploitation. But all New Yorkers can take proactive steps to prevent elder financial exploitation. The tips and resources below provide important information on identifying forms of elder financial exploitation and reporting suspected abuse to the proper authorities.
The 2010 Elder Fraud Survey by the Investor Protection Trust estimated that 1 in 5 Americans over 65 has been victimized by a financial fraud. Elder financial exploitation schemes seek to take advantage of vulnerabilities common among the elderly. These are some risk factors in particular to consider:
- Elders most vulnerable to abuse tend to be between the ages of 80 and 89.
- The majority of abused elders are women.
- A significant number of elderly individuals experience cognitive decline or cognitive incapacity.
- Elders are at a higher risk of abuse if they live alone, are isolated from their communities, rely on others for care, or have limited social relationships.
Signs of Diminished Financial Capacity: Cognitive Impairment Facts
According to the Alzheimer’s Association, 10-20% of elders 65 and older have some type of mild cognitive impairment. Mild cognitive impairment causes a slight deterioration of cognitive abilities, which may affect memory, thinking, and reasoning skills.
As of 2015, approximately 5.3 million Americans have Alzheimer’s disease and, as a consequence, either a decline or susceptibility to a decline in financial capacity.
- 11 percent of people age 65 and older have Alzheimer’s disease and about one-third of people age 85 and older have it.
According to the United States Department of Justice, the following are common signs of diminished financial capacity:
- Forgetfulness: results in the failure to perform financial responsibilities.
- Declines in Management Skills: less ability to use a checkbook and other financial tools to carry out everyday transactions.
- Arithmetic Mistakes: deterioration of everyday math skills, such as when using change to pay for things or when calculating a tip in a restaurant.
- Confusion: confusion and loss of understanding regarding elementary financial terms that you used
No one single thing is proof of elder financial abuse – the following are only possible warning signs. Still, you should be on the lookout for:
- Unpaid bills which the elder should have the means to pay;
- Purchasing or spending behavior that appears to be out-of-character;
- New “best friends” (people who have recently become close to the elder) who are not promoting the elder’s best interests or are claiming a right to funds;
- Sudden changes in an elder’s will, trust, insurance or other financial documents;
- Abrupt or unexplained transfers of assets;
- Confusion about recent financial arrangements or changes.
General Prevention Tips
- Talk about your finances. The Allianz Life Study, Safeguarding Our Seniors, found that those who talk about their finances to “third-party resources” such as friends, family, and financial professionals felt better equipped to prevent elder financial abuse than those who don’t.
- When possible, use checks and credit cards instead of cash.
- Exercise caution when providing your financial or other personal information over the phone or Internet, and resist pressure to give someone financial information or access to your financial accounts.
- Always ask for more information in writing and get a second opinion before changing your power of attorney, wills, trusts, or any of your personal financial information.
The following are some of the most common types of elder financial exploitation and how to protect yourself or an elder you know.
Scams have distinguishing factors that you should be aware of:
- A “Hook”: something to attract you and cause you to pay less attention to the details.
- Manipulation: scammers manipulate people into trusting them.
- A Deadline: if a solicitation has a strict deadline that gives you little time to make a decision, it is likely a scam.
- Notifications that you’ve won a sweepstake are often scams. One way these notifications trick elders is by using a name which sounds like a government agency or official-sounding authority.
- If, as the “winner” of a sweepstake, you are asked to pay taxes and fees by sending a check or wiring money, this is likely a scam.
- A sweepstake may ask for your banking information to direct deposit your “winnings.” This is an attempt to steal your identity and access the money in your bank account, not deposit money.
Remember that legitimate sweepstakes do not ask for money upfront from winners!
- Identity Theft occurs when someone steals your personal information to gain access to your credit, bank accounts, medical care, or other aspects of your finances.
- For information on preventing identity theft, see http://www.dfs.ny.gov/consumer/idtheft.htm
Home Improvement and Home Repair Scams
- For information on avoiding home improvement and home repair scams, see http://www.dfs.ny.gov/consumer/homeown/home_repair_scams.htm
- Grandparent Scams: A caller claims to be the elder’s grandchild by saying something like “Grandma, it’s me...please don’t tell my parents.” This often prompts the elder to supply their actual grandchild’s name. The caller will say that they are out of town and in desperate need of money either to make bail, pay for hospital bills, or to come home. The caller will ask the elder not to tell the parents and just to send the money.
- Scammers sometimes use actual relatives’ names and information taken from social media and internet sites.
- Charities: Scammers might slightly change the name of a well-known charity to trick or confuse elders and will pressure them to give on the spot.
For more information on charity scams, see http://www.dfs.ny.gov/consumer/charityscams.htm
- If you receive a phone call asking for help, speak to your family to find out if your grandchildren are actually out of town and in need of assistance.
- Never give any personal information to strangers over the telephone. Always withhold your birthdate, social security number (even the last four digits), bank account information, or anything that might be used as a password or other identifier.
- Remember that legitimate charities will give you time to make a decision.
Health Care and Prescription Drug Scams
- Health Care Scams take a variety of forms. You might see an ad on TV telling you about a new law that requires you to get a new health care card. Maybe you get a call offering you discounts on health insurance or from someone claiming they work for the government and they need your Medicare number to issue you a new card.
Stop and do research before you share your health care information.
- Counterfeit Drug Scams mostly occur on the Internet, when elders research how to get better prices on their medications. Elders may end up paying for something that won’t help their medical condition or may purchase unsafe drugs.
- Do not sign blank insurance claim forms.
- Give your insurance and Medicare information only to people who provided you with medical services.
- Examine drug packaging and ask your pharmacist or physician to examine the drug if you are skeptical about the packaging.
“Trusted Person” Abuse occurs when friends, caregivers, family members or others in a position of trust with the elder abuse that trust.
- Because family members have a unique relationship with the elder and can often access the elder’s financial information, family members commit a large portion of financial abuse.
- Trusted person abusers may threaten to put the elder in a nursing home if they don’t comply with the person’s wishes.
- A trusted person abuser will often isolate the elder from other friends and family, make important decisions for the elder, and try to leave the elder out of conversations.
Power of Attorney Abuse
Forgery and Changing Legal/Financial Documents
A power of attorney is a written authorization that gives someone legal authority to make financial and medical decisions on behalf on another.
A friend, family member, or caregiver forges the elder’s signature on financial documents to transfer ownership of property, assets, or other valuable resources.
When an elder is hospitalized or away from their home and unable to pay bills, they may sign power of attorney over to a relative or friend to take care of their finances. This person may then take the elder’s property, close their bank accounts and investments, and steal their money.
Trusted people can also exploit elders by convincing them to change their wills, trusts, and sign over their homes and other assets.
They claim they have the elder’s best interests in mind and will protect them when in reality they steal their assets.
Abusers will try to use the fact that they were given power of attorney to show that the elder trusted them and justify major changes to the elder’s affairs.
A trusted person may have access to an elder’s bank account in order to pay their bills but they may spend the elder’s money for themselves.
Financial advisors can take certain measures to prevent against financial abuse by trusted people, including:
- Looking out for changes in investment style, attitude, or caregiver activity.
- Frequently asking questions and paying close attention to older clients.
- Getting to know the family members and caregivers of your client.
Elders and family members can take other measures to prevent exploitation by trusted people, including:
- Have an objective third party look over financial statements.
- If you feel pressured to give up information or sign documents, talk to another family member that you feel comfortable with or contact a financial advisor.
- Be suspicious about anyone who has recently gained an interest in your life and/or finances.
When Hiring Caregivers:
- Hire through a certified agency.
- If you feel something isn’t right about the relationship between the caregiver and the elder, be prepared to fire the caregiver.
- Ask for and check references.
If the answer to any of the following is yes, it is likely an investment not in your best interest.
- Is a broker or advisor pressuring you to make a decision right after some change in your life, such as death of a spouse?
- Is the broker or advisor telling you the investment has no risk?
- Is the broker or advisor telling you that the investment is too complex to explain to you?
- Do not invest in anything unless you understand it. If you don’t understand, do research and don’t be afraid to ask questions.
- Get a written description of the investment.
- Be wary of an investment that promises high yields.
- Get background information on the salesperson (even if they are a friend).
- Be cautious about investing in companies that you learn about through unsolicited information. Also be cautious about sending money abroad.
- Get advice from an objective third party.
- If you use the Internet or social media as a tool for investing, be careful to protect your personal information.
- Do not let your financial advisor do all of the paperwork. Make sure you sign-off on everything and ask for copies of any final documents.
Scammers may also offer money or a free home to elders in exchange for the title to their property.
For more information on preventing homeowner and mortgage scams, see http://www.dfs.ny.gov/consumer/foreclosurescams.htm
An annuity is a contract between an individual and an insurance company where the company makes periodic payments to the individual, sometimes for the rest of the individual's life. Annuities are often used as part of retirement plans – they allow one to put away a large amount of cash, defer paying taxes on that cash, and they provide recurring payments.
The amount of the payout for a variable annuity depends on the time period and investment option that the elder chooses. The options are usually mutual funds, which invest in stocks, bonds, money market instruments, or all three.
There are usually large penalties for withdrawing money before a certain date – which is often 10 or 15 years after the purchase of the annuity – and high annual expenses. Because of this, variable annuities are often not a smart choice for elders.
- Consider the financial capacity of the insurance company issuing the annuity. This may affect the company's ability to pay.
- Ask for information regarding the mutual fund investment options.
- Ask if you can get your money when you need it, if you will pay a fee to get your money, and how much the financial advisor makes if you buy the annuity.
Pension Advance Schemes
A pension advance is an arrangement where, in return for some or all of your monthly pension payments, you receive a lump-sum payment.
- Although marketed as an “advance” instead of a loan, in reality these schemes bear a strong resemblance to illegal payday loans that often cause borrowers to get caught in a vicious cycle of debt.
- Pension advances frequently charge expensive fees that amount to sky-high interest rates, often above 100%, and as a result significantly erode the value of a retiree’s pension income.
- Avoid taking out a pension advance or other similar products, such as payday loans.
- Talk to family and friends about your finances if you are having trouble making ends meet.
If you or someone you know has been or may be the victim of elder financial exploitation, contact the New York Adult Protective Services. Adult Protective Services (APS) is part of the New York State Office of Children and Family Services and their services are available to adults 18 and older. APS investigates and evaluates adults’ needs and risks of harm, counsels victimized adults and their families, and provides case and financial management services.
- To find your local county Department of Social Services Adult Protective Services search here: http://ocfs.ny.gov/main/localdss.asp
- To find specific telephone numbers for your local APS unit, call 1-800-342-3009 (press 6), available 24 hours.
- You can also report abusive financial products or services targeting the elderly by contacting the Department of Financial Services at 1-800-342-3736 or by filing a complaint on the DFS website: http://www.dfs.ny.gov/consumer/fileacomplaint.htm
- To report potential criminal conduct, you may contact your district attorney or the Attorney General’s Office at 1-800-771-7755.
- For questions related to investments, FINRA has launched a toll-free FINRA Securities Helpline for Seniors, offering assistance from FINRA staff. The Helpline number is 844-57-HELPS or 844-574-3577. FINRA staff are available to answer questions from 9am – 5pm ET, Monday through Friday.