Nobody likes to think of their parents getting older and needing assistance, but it’s the reality that many people face. An important part of caring for your 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 than those who are younger. According to one estimate, seniors collectively lose up to $36.5 billion a year to elder financial abuse. This abuse can come from strangers or even friends and 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.
7 Signs of Elder Financial Abuse
Protecting your parents from scammers is crucial, especially as they get older and have a harder time managing their finances.
Some warning signs 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 accounts without worrying about penalties
Protecting Your Parents from Financial Abuse
Tip #1: Talk to Them About Money
Reach out to your parents and make sure that you are staying in touch with them regularly. Make sure they are paying their bills and, if applicable, find out who is doing it for them. Your parents may not want to share this information or admit that they need help, so you can ease them into it by asking them for advice or speaking about your own money worries. Once this becomes more comfortable, they may let you help with more, as it becomes necessary.
Tip #2: 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 victims 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, and so forth.
Tip #3: 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
Make sure your parents are careful when choosing their power of attorney because this person will be responsible for managing finances once your family member is no longer able to do this. Having more than one is also a good idea because this is a good way to be able to act together and consult with each other.
Tip #4: Condense Your Parent’s Finances
Consolidate your parents’ finances when possible because many older people have more than one account. Practice caution when consolidating and moving accounts to make sure that you don’t incur any penalties. Additionally, you need to respect beneficiary designations, and if you fail to do this, you could face legal action.
Tip #5: Encourage Credit Card Use Over Cash
If your parents sent cash to a scammer, then it would be much more difficult to trace than if they had paid with a credit card.
If they were to make a purchase with a credit card, 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
Tip #6: Create a Trust
A trust is a great way to manage and protect your parents’ assets; however, they can still withdraw from this account, making it easy for them to fall prey to scammers. 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 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 much more protected from fraud. Take a proactive approach so that you can get ahead of them before it becomes an issue, instead of waiting until your parents become the victim of financial abuse.