10 Dec 2017
It seems barely a week goes by that I don’t hear a story about theft of assets from seniors. While forensic accounting can go a long way to find missing funds, the real problem with this type of fraud is getting the money back. We’ve all heard the stories:
• Dad is healthy and of sound mind, but hard of hearing. He relies on emails to communicate. Daughter places Dad in senior living and fails to repair his broken computer. Daughter loses her job and begins to use Dad’s funds as her own. Out-of-town son visits and discovers over $200,000 in assets are missing.
• Mom traditionally handled the family finances but is now on pain meds battling cancer. Youngest son visits often and cheers Mom who writes him checks and even co-signs a business loan for him. When Dad takes over the finances, he thinks the bank made a mistake because their home mortgage was paid off, but they now have a $300,000 30-year mortgage – and their investment accounts are short $300,000.
• Mom, a wealthy widow who is legally blind, enjoys a wonderful aide who takes her to lunch daily. Son is glad that Mom bought a new Tempur-Pedic bed to ease her back problems. But when he visits, there is no new bed though it’s shown on the Macy’s bill. Upon further checking, son also discovers Mom has made daily $200 withdrawals from the ATM – for over a year. Mom doesn’t know how to use an ATM.
What do all these scenarios have in common? They could have been avoided. With better planning, preparation and oversight, managing the financial responsibilities of a vulnerable senior can be done safely.
Here are seven ways to prevent financial abuse:
- Provide Clear Instructions to Agent: Instructions for the agent are buried in the power of attorney form and rarely discussed. Make sure to give separate written instructions to the agent about what is and isn’t permitted. For example, the power only permits $500 in gifts if there is no gift tax rider. This is not $500 a year or $500 per person. This is a total of $500 for the life of the power.
- Require Two Signatures. Whenever possible, appoint two agents who must sign together. This works well among siblings and tends to keep people honest.
- Appoint a Monitor. Like a “trust protector,” a monitor appointed by the power of attorney can provide valuable oversight. A CPA, attorney or trusted family friend can receive electronic copies of bills and statements to make it easier to check the agent’s activities.
- Communication Among Advisors. If your attorney, CPA, banker and investment advisor communicate with one another, they can share what they learn about family dynamics or concerns affecting a client’s funds. Together they can stay on top of things and prevent fraud.
- Third Party Bill Payment. Instead of having the agent pay bills or putting bill paying in the hands of a caretaker, turn over bill paying responsibilities to a professional service. These services, which are often bonded, are becoming more common.
- Split up the Responsibilities. When all caretaking and financial responsibilities are in the hands of one child, there is greater risk of fraud. Vulnerable seniors, afraid of angering or losing a caretaker child, will go along with changes to a will or deed. Sometimes compensation for the agent discourages resentment and theft, especially if one sibling is doing the lion’s share of the caretaking.
- Background/Criminal Checks: When you hire an aide with financial responsibilities, go the extra mile and run a background check.
It’s far easier to work to prevent the fraud than to be stuck with the aftermath. When one sibling robs the others of their legacies, family rifts may never heal. And the parent may not get the care or housing they’d planned for when their assets are stolen.