Recently, my younger son and I watched a fun animated movie called Thunder & the House of Magic. In the movie, a nice, old wacky magician, who has some cognitive decline, is in jeopardy of losing his home. Why? The magician’s scheming nephew sees his chance to cash in by selling his uncle’s mansion, tricking the old man into signing what turns out to be a power of attorney. But Thunder the cat saves the day.
It wasn’t the greatest movie and hasn’t won any awards, but it was entertaining for us. Moreover, it touched upon a growing epidemic in the U.S.: elder abuse.
Elder abuse is an intentional act, or failure to act, by a person in a position of trust, that creates a risk of harm to an aging adult. It can be physical and/or emotional. From a financial perspective, exploitation occurs when there is unauthorized, illegal, or improper use of an aging adult’s resources by a person in a position of trust. According to the National Adult Protective Services Resource Center, 90% of elder abusers are family members (like the movie) and less than 5% of cases get reported to any agency. (For related reading, see: Who Commits Financial Crimes Against the Elderly?)
Elder Abuse and Diminished Capacity
Elder abuse is prevalent because of “diminished capacity” in our senior population. Diminished capacity is a mental condition that affects a person’s ability to understand their own decisions or acts. One of the most common examples of diminished capacity in aging adults is dementia. Dementia describes a set of symptoms that may include confusion, memory loss, emotional disturbances (e.g. anxiety, paranoia, depression) and difficulties with thinking, problem solving, and/or language. Alzheimer’s is the most common form of dementia and impacts 1 in 9 Americans over age 65. It’s diagnosed among 20% of Americans over age 70 and 33% over age 85. It’s a slow, progressive, irreversible disease with, so far, no cure.
Unfortunately, there are bad, greedy people that take advantage of these seniors, and like the nephew from our cat movie, are on the lookout for what they think is an easy payday. Sometimes it’s a “new friend” that spends a lot of time developing the relationship and justifies in their heads that their behavior is okay because of their time spent paying attention to the aging adult. Unfortunately, in all cases, potential elder abuse is something we need to monitor. (For related reading, see: Elder Financial Abuse: How to Protect Yourself.)
Common Signs of Elder Abuse
- Physical or emotional abuse
- Blocked access to assets or belongings (e.g. the wacky magician was stuck in the hospital not knowing that the nephew was showing the house to would-be buyers)
- Changes in the aging adult’s regular habits
- A previously uninvolved relative, caregiver, or “new friend” making decisions on the aging adult’s behalf
- The aging adult becomes isolated from professional advisors and even family
- Unexplained disappearance of valuable objects, financial statements, cash
- Unexplained or unauthorized changes to wills or other estate planning documents
- The aging adult exhibits strange behaviors, such as:
- Unpaid bills and changes in spending habits
- Unexplained change in professional advisors (e.g. a doctor or attorney)
- Unexplained asset transfers
- Atypical cash withdrawals/wire transfers
- Checks written to “Cash”
Wealth managers can often serve as the first line of defense for addressing some aging client issues. But that doesn’t mean loved ones shouldn’t be on alert. If you suspect an incident of elder abuse, contact your local Adult Protective Services, and they will investigate.
Regulation and Protection
Given the increased focus on elder financial abuse prevention, regulators are adding enhanced scrutiny in this area, and laws and regulatory monitoring are progressing. The SEC came out with a recent bulletin encouraging investors to plan for possible diminished financial capacity, stressing the importance of such planning tools as:
- organizing important documents
- providing financial professionals with trusted emergency contacts
- creating a durable financial power of attorney
The good news is that people are living longer. The bad news is that some of the older population, particularly the ones with serious cognitive decline, are vulnerable to this elder abuse phenomenon. Be sure to keep your eyes and ears open to prevent this from happening. Stay in touch with your elderly loved ones and look for the common signs. And if you do see the signs, take action immediately, just like Thunder the cat, so there is a happy ending!
(For more from this author, see: 6 Questions Frequently Posed to Financial Advisors.)