Use these tips to help you protect your loved ones from financial threats that increasingly target older Americans
SUPPOSE YOU HAVE A PARENT or grandparent who lives alone. They hire someone to replace the roof on their aging house and give the roofer half the money up front. And that’s the last they see of the roofer. No matter how close your relationship, can you be sure they’d let you know what happened?
Elder fraud is on the rise, but it remains a vastly underreported crime. “Older people are often reluctant to report being duped to either authorities, friends or family,” says Thomas Blomberg, dean of Florida State University’s College of Criminology & Criminal Justice. “They may fear appearing foolish or worry that well-meaning family members will pressure them to give up their independent living arrangements. Moreover, as the population of elder adults continues its rapid growth, it is likely that the number who are targeted and fall victim to financial fraud will increase substantially. Although available statistics underestimate the true extent of the problem, by 2050 the number of elders who are targeted for financial fraud will likely exceed 36 million and the number of actual victims will be greater than 22 million.”
Here are six common elder fraud scams, along with strategies you can use to help protect your loved ones.
Pros who aren’t legit: Con artists often advertise “foolproof” investments or claim special expertise in working with retirees or older clients. In California, a thief advertised inexpensive will-preparation services. After gaining clients’ trust, he talked them into investing with him by promising 12% annual returns. Checks from investors went straight to his personal offshore account, and he made off with $11 million before he was finally caught.
What you can do: Remind family members that legitimate businesses will happily wait while you check their references. If they’re unsure about a company, it’s also wise to ask for a second opinion from someone they trust.
Unscrupulous billing practices: After storms or other natural disasters, scam artists often go door to door, telling homeowners that their properties have been damaged and offering to make repairs at a big discount, says Blomberg. Then they only may pretend to do the work and demand payment. Similarly, auto mechanics may charge for parts not installed and work not performed, he adds.
What you can do: Help older relatives keep their properties and cars in good repair and urge them not to hire anyone who can’t provide clear identification and references.
Internet and telephone fraud: These scam artists may be thousands of miles away, and they often play on people’s trusting nature and desire to help others. A caller may ask for a donation for a worthy-sounding cause. And yet another congratulates you for winning a $1 million prize — and says to claim it, you only need to provide your Social Security number to confirm your identity and pay a special collection fee.
What you can do: Set a firm policy not to give personal information over the phone and remind older relatives to do the same, suggests Debra Greenberg, director, Retirement & Personal Wealth Solutions, Bank of America. “And if you want to make a pledge to a charity, ask to receive something in writing first,” Greenberg says. Ignore internet offers with obscure origins and prizes that come out of the blue and require a fee to collect.
Not-so-free lunches: Older Americans are often targeted by opportunistic salespeople offering a free lunch or dinner in return for listening to a sales pitch. As often as not, that pitch turns out to be a very hard sell. They can find themselves being pulled into a dubious purchase before the “free” meal is over.
What you can do: Make sure that family members know not to sign a contract, make an agreement or pay any money unless a trusted friend or family member is involved, says Blomberg.
“Friends” with ulterior motives: Good friends are priceless, but con artists posing as friends can cost you dearly. Someone who lives nearby may offer to assist with chores and errands, or even to serve as a home health aide — and soon may begin “helping” with financial transactions, gaining access to accounts.
What you can do: These cases can be among the most difficult to prevent, with lonely victims forming an emotional attachment to the perpetrator. Try to get your retired parents or grandparents to talk openly with you about their finances, especially if you know there are cognitive issues, and offer to review checking accounts for signs of trouble. If you see a lot of checks made out to cash, or to someone you don’t know, consider that a red flag.
Other red flags: Strange signatures on checks and financial or legal documents, or sudden, unexplained changes to powers of attorney, wills or trusts can all be signs of potential fraud. Maybe a certificate of deposit has been redeemed early, despite penalties, or you notice unusual wire transfers. Are checks bouncing or bills going unpaid? Is there suspicious ATM activity — such as withdrawals that took place when the account holder was bedridden? These all could be clues that something isn't right.
One way for family members to get an early warning about potential red flags is through the Merrill Trusted Contact Person Form, notes Cynthia Hutchins, director of financial gerontology at Bank of America. “It authorizes an advisor to reach out to a family member or trusted family friend if they spot unusual financial activity,” she says.
Family fraud: Perhaps the most distressing form of fraud involves other family members. Problems may start innocently, when a son or daughter gains control of a retired parent’s accounts to help pay bills. After a while, the line between the finances of the parent and the child may become blurred and the temptation to dip into the funds becomes irresistible. When the parent dies, other siblings could find that their expected inheritance has vanished.
What you can do: Even if one sibling takes on the job of helping with a parent’s finances, try to build transparency into the process from the beginning, with other family members staying involved through regular, open conversations. You might also consider asking your financial advisor to set up a multigenerational family meeting to discuss financial concerns.
Another useful precaution may be to have parents assign power of attorney to a trusted lawyer. If the parents become unable to handle their own affairs, this can add legal formality to the process and may help prevent abuse.
In all of these cases, the best offense is usually a good defense. Criminals usually look for the path of least resistance, so if you make it clear you won’t be fooled, chances are they’ll move on.
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