Know the Signs
By Rick LeNoble, CPA
Although the number of violent crimes in the U.S. is decreasing, financial crimes against the elderly are increasing, largely owing to an aging population and a greater concentration of wealth among senior citizens.1 A recent MetLife study estimated that financial exploitation cost elders nearly $3 billion in 2010,2 and the 2010 Census indicates that 13 percent of the total population (40.3 million people) is 65 or older.3
Recognition of, and mechanisms for dealing with, elder abuse are many years behind similar strides in child-abuse awareness and protection. According to a senior forum report by the 2005 White House Conference on Aging, only 1 in 100 cases of financial abuse is reported and there are millions of financial abuse victims annually. Experts say most cases go unreported because of embarrassment; confusion about the events that occurred; and fear of alienation from family members, as most abuse occurs at the hands of relatives. Perpetrators – regardless of genealogy, profession, friendship or prior criminal activity – are everywhere.
Our profession faces the ethical quandary of defining the CPA’s role in preventing the exploitation of our clients.
Common exploitation techniques
Elderly abuse may be physical, emotional and/or financial. This article, however, focuses on financial abuse as the other two manifestations are beyond the scope of this discussion.
Financial exploitation is widespread and victims typically experience one or more of these symptoms, making them increasingly vulnerable:
- Limited or impaired physical or mental functions
- A sense of isolation
- Loneliness after the loss of a spouse, significant other or close social contact
“Many seniors are losing their lives prematurely as a result of financial abuse,” wrote Detective Joe Rubicek of Coral Springs, author of Financial Abuse of the Elderly. “It is rare, if ever, that an autopsy is performed on someone over 60, opening the door for murder by medication.”
The U.S. Government Accountability Office (GAO) has identified several ways the federal government is, or could be, supporting state and local efforts to combat elder financial exploitation. Mass-marketing scams, for example, are a common abusive activity. The GAO has recommended that the Department of Justice reach out to state and local law enforcement to clarify how they can obtain federal assistance to investigate and prevent interstate or international mass-marketing frauds.
Fraudsters commonly use schemes that involve using undue influence or duress to:
- Obtain access to financial accounts or other property as a joint owner
- Gain access to credit and ATM cards
- Misuse an appointment pursuant to a durable power of attorney
- Convince an elder to transfer ownership of the residence
- Influence an elder to access home equity and converting the proceeds
- Persuade the elder to change the will or beneficiaries for life insurance, financial or retirement accounts
- Misappropriate funds while performing as a guardian or conservator
- Steal items in the elder’s home
- Forge checks or other financial instruments
- Commit identity theft and the associated criminal opportunities
Perhaps my most interesting elder-care case began while
I was completing a 1040 for the daughter of a married couple who are my clients. I could see she was upset, and I asked if I could help. She said her father’s Parkinson’s disease and dementia were getting bad.
I asked, “How bad?”
“He no longer can carry on his secret 30-year relationship with his mistress,” she said.
Because I had a relationship with the family, I assured her I would help any way I could.
I spoke to her parents separately, to identify their needs and desires. After several months of negotiating, we hammered out an agreement. There would be no divorce, because he didn’t want his wife of 50 years to lose benefits. He would live with his mistress and his daughter would pay his expenses to the mistress each month.
After paying the woman $4,000 in a two-month period, the daughter received a call from the couple’s landlord, who said they hadn’t paid their rent from two months earlier. Because the woman wouldn’t live up to the agreement and the man couldn’t take care of himself, his daughter and wife had to put him in a nursing home. He remained there until he died.
The common “red flags” of exploitation
There are several indicators of financial exploitation relating to the elderly. One of these is erratic, atypical, uncharacteristic or inconsistent bank activity, particularly when compared with the elder’s mental or physical capacities and abilities. Property title changes, changes to trusts or wills and other documents and unusual gifts all may be indicators of potential abuse. This is especially true if the elder is confused and/or the documents favor new acquaintances or in-home caregivers. Suspicious credit card activity often is a warning sign.
More difficult to spot and examine are potentially forged or suspicious signatures on documents. Other signs include the eviction, disconnected utilities or unperformed contractual or prepaid services, such as an unkempt residence when cleaning arrangements have been made.
More subtle flags include a lack of amenities when the elder can afford them, or something as obvious as missing property, as well as untreated medical conditions. The latter clearly may point to physical neglect and may lead to discovery of financial exploitation.
Financial exploitation is known as a “hidden offense.” Because the outside world – truly caring, family and friends of the victim – often is clueless about what is occurring, the abuse may occur for a longer period of time or go uninvestigated altogether. This is exacerbated because the victim may be unaware that his or her assets are being depleted.
Victims may not cooperate if they lack the capacity to remember or explain what happened. They also may be so embarrassed by their own perceived “stupidity” that they just want to forget the entire matter. Even in the few instances when good information is brought to the proper authorities, follow up by our watchdogs – police, judges, guardians and attorneys who actively pursue financial elder abuse – is rare.
An initial impression of financial exploitation may, in fact, be legitimate. Perhaps the price actually was right, and the elder actually paid the fair market value for goods or services. The elder may even have had the capacity and the intent to enter into the transaction. There even are instances where an alleged perpetrator merely made a mistake and lacked any intent to commit a criminal offense.
The CPA’s (and the client’s) opportunity
CPAs can attempt to assess whether the elder simply needs help handling normal financial transactions, or if it is likely that financial exploitation has occurred.
With your client’s help and permission, review his or her checkbook, bank statements and canceled checks. Such a review simply may indicate that the client would benefit from the services of a money manager, or custodial account relationship, to organize and keep track of financial records; establish a budget; write checks and balance his or her checkbook; and properly use benefits.
If there appears to be a case of financial exploitation, it probably is time to enlist an attorney’s assistance.
“One option might be to include execution and implementation of a durable power of attorney by the elder,” said attorney Sherri Greenblatt of Boca Raton, “so a trusted family member or professional adviser has the legal right and authority to sign on the elder’s behalf.
Alternatively, a co-signatory on the elder’s accounts may reduce further risk of exploitation.”
The Florida Power of Attorney Act, which became effective on Oct. 1, 2011, added major protections for individuals. An agent acting pursuant to a durable power of attorney must act in the principal’s best interests and may not act contrary to the principal’s reasonable expectations. An agent may do no more than that which has been specifically delegated. To be effective, the delegation of certain authority must be separately signed or initialed. The law also establishes personal liability to the agent for violations.
Establishing a trust, with a third-party trustee or co-trustee to help protect against exploitation, also is a feasible solution. This would allow an “extra set of eyes” to keep watch over the elder’s assets. If there are more serious concerns about the elder’s legal capacity, guardianship proceedings should be considered, so the court also will be involved in efforts to protect the elder client.
Greenblatt, certified by the Florida Bar in Elder Law, is a strong advocate of “guardianship avoidance.”
“If professionals work as a team with the client and his or her family (if that is the client’s wish), they can develop a plan to take care of the individual’s needs without a guardianship,” he said.
That team should include a CPA; an attorney; a financial advisor; and, perhaps, a geriatric care manager, among others. The CPA’s opportunity is to provide additional services to a client who needs them – and the client has an opportunity to benefit from enhanced security and well-being. FCT
Rick LeNoble, CPA is a sole practitioner in Broward County. He is a former long-term care ombudsman appointed by Gov. Jeb Bush and a past chair of the FICPA Elder Planning and Support Services Committee.
1 Financial Abuse of the Elderly: A Detective’s Case Files of Exploitation Crimes, Joseph Roubicek, 2008.
2 The MetLife Study of Elder Financial Abuse: Crimes of Occasion, Desperation and Predation Against America’s Elders, June 2011.
3 U.S. Census Bureau, 2010 Census.
Consider these resources for professionals:
- For information about recognizing elder financial abuse, visit the Consumer Financial Protection Bureau’s website at www.consumerfinance.gov/blog/recognizing-elder-financial-abuse/
- To confirm the qualifications of individual certified financial planners, visit the Certified Financial Planner Board of Standards website at www.cfp.net/utility/verify-an-individual-s-cfp-certification-and-background
- The Centers for Medicare and Medicaid Services, at www.cms.gov/, provide grants to fund background checks for in-home caregivers who are employees of agencies that provide these services
- For more information about elder exploitation, read Detective Joe Rubicek’s book, Disposing of the Elderly for Profit.