Managing Finances and Guarding Against Financial Elder Abuse and Fraud
Over time people who have dementia lose their ability to manage their own financial affairs. Usually the first signs are difficulties counting change, calculating a tip, or understanding the bank statement. You might start noticing new purchases on credit cards and unpaid and unopened bills lying around the house. This can be an early sign of Alzheimer’s disease and dementia, and it can drain financial resources quickly.
Another major concern is increased vulnerability to being taken advantage of by strangers as well as by people known to the impaired person. Some types of fraud to watch for include the following:
- Home repair fraud, such as repairs to foundations, roofs, driveways, and trees;
- Dishonest door-to-door solicitations and scam charities;
- Long distance fraud through telephone, email, and mail;
- Credit card misuse and identity theft; and
- Abuse of a power of attorney by taking funds for personal use, or family members frightening the senior into giving up financial resources.
You may see indications that a person is being victimized, such as:
- Unexplained changes in bank balances and investments and/or large cash withdrawals;
- Payment overdue notices, unpaid utilities, and lapsed insurance policies; and
- Signs of physical or emotional abuse.
Planning Tip from Dennis Toman, Certified Elder Law Attorney: Be alert to changes in your parent’s or spouse’s spending behavior that can precede actual detection of dementia. I’ve seen too many times where the person with dementia changes their spending and investing behaviors even before anyone notices a problem. They begin spending money on unnecessary, big-ticket items, or incur large credit card debt, or makes risky stock investments. The family’s retirement nest-egg can be quietly devastated before anyone finds out. It is heartbreaking to hear the spouse and children telling me that they’ve learned too late about this, and now they are searching for how the ill spouse wasted money for years, leaving the couple financially compromised. While making an occasional unnecessary purchase at the grocery store is not going to matter, this can become a very serious concern if the person buys expensive items or makes extremely risky investments that devastate the family finances.
When and how to address these financial issues are just as difficult as dealing with safe driving issues, and often even more difficult. Proactive steps should be taken, which include planning in advance for delegating financial decision making through a power of attorney that names a trustworthy agent. In addition, moving money and investments into protected trust and banking arrangements can help. At a minimum, there should be increased supervision of finances to avoid the larger problems.
Another practical step to reduce the risk of fraud is to get an unlisted phone number. Also, you should reduce the amount of direct mail soliciting subscriptions and contributions, and perhaps use a service that will remove the senior’s name from various “junk mail” lists. Make sure that someone is checking in with the senior on a regular basis by creating a care network that can include family members, neighbors, paid caregivers, lawn care service providers, house keepers, and even the postal delivery person and local fire fighters. If any new construction is seen at the house, someone should notify the family immediately.
It is also important that Social Security and other checks be direct-deposited as much as possible. A trusted family member can review finances and even help with paying bills through online computer banking. Even if the senior should no longer be in control of his or her own checkbook, this transition may be easier if the senior has a small amount of cash or a checkbook with a modest amount of cash in it. In some cases, the person may feel better with having voided checks on hand. The credit limit on credit cards should be reduced, or the cards cancelled altogether.
If an impaired senior reaches the point of endangering his or her own finances and future security due to cognitive impairment, action needs to be taken. If the senior is not willing to allow his or her family to help, or if there is no power of attorney in place and the senior lacks the capacity to sign one, or if the agent under the power of attorney is acting inappropriately, it may be necessary to begin a guardianship to protect the senior through court intervention.
If you suspect that someone is losing the capacity to manage his or her own financial affairs, pay close attention. This can be the first noticeable sign of dementia, indicating that the person may be losing the ability to live independently. Often the senior will be suspicious and resist efforts of help, regardless of earlier agreements and existing power of attorney arrangements. No matter what, it is critical to approach the transfer of financial authority with respect, compassion, and understanding.