5 Ways to Protect Pensions from Nursing Homes

It's a sad fact of modern life: Senior citizens are often targeted by thieves and financial tricksters, and those residing in nursing homes can be the most vulnerable of all.  If your loved one is in a facility, or will soon be entering one, how can you make sure that his or her pension plan payments, Social Security income, annuity income or other funds are protected from unscrupulous employees? Here are a few pointers.

The Do's

1. Set Up a Power of Attorney

Have the senior legally appoint a trusted relative or friend to act as a representative with the authority to manage money and make financial decisions by having a lawyer draw up a power of attorney (POA) document. In fact, you can do this long before you think your loved one might ever end up in a nursing home; the POA can be written to go into effect only if, and when, the patient enters a facility or can no longer make his or her own decisions. POAs can act as a deterrent: If a sticky-fingered staffer at a facility knows John’s son has control over his finances, he or she might be less likely to target John. (For related reading, see Power Of Attorney: Do You Need One?)

2. Ask About Safeguards

Another important step is to interview the appropriate nursing home staff prior to admission. Ask about how they respond to late or missed payments (unpaid bills can be a sign of hanky-panky), how they handle cash for residents, how they release money from residents’ accounts and whether they allow salespeople to make onsite presentations. Also ask what the facility’s policies on theft are and what measures they take to safeguard residents’ checkbooks, ATM cards, federal benefit cards and other sensitive documents against financial and identity theft.  Finally, ask what the facility’s procedures are if they suspect that a resident is being financially exploited or a victim of theft or fraud. A trustworthy facility will have clear procedures in place to prevent and detect problems. (For related reading, see How Seniors Can Fight Identity Theft)

3. Use Direct Deposit

Don’t have checks mailed to the nursing home; have payments directly deposited to the resident’s bank account. Nursing home residents will also want to receive their bank statements electronically to prevent someone from gaining access to their financial information by stealing their mail. Residents should also avoid logging into sensitive accounts from any public or shared computer, where account security could be compromised (see Tips For Keeping Your Financial Data Safe Online). If you suspect mailed checks have been stolen and fraudulently cashed, notify the US Postal Inspection Service as well as the facility.  And, as always, watch out for fake mail and email that pretends to be from a financial institution. but is really a ploy to steal money. 

The Don'ts

4. Don’t Let the Facility Receive Disbursements

A nursing home can be appointed a patient's representative payee; this means the facility can directly accept federal benefit payments from the Social Security Administration, Department of Veterans Affairs, Department of Defense, Railroad Retirement Board and the Office of Personnel Management on a resident’s behalf. The facility is then supposed to use those payments for the resident’s benefit – to pay legitimate bills he or she is responsible for, for example.

The potential for financial elder abuse is obvious with this arrangement (if not from outright fraud by the nursing home, then from administrative snafus). There have been cases of nursing homes overpaying themselves with that income. “If a resident has dementia to the extent that it limits his or her ability to handle finances, a trusted authorized representative, often a family member, should handle income and bills,” says Eric Carlson, directing attorney of Justice in Aging, a national organization that uses the power of law to fight senior poverty.  “Some residents do not have such representatives, and these are the residents at greatest risk.” 

5. Don't Bank with the Facility

Nursing homes may offer resident trust funds into which patients can deposit their pension checks, Social Security checks and other monies. The problem is that unscrupulous nursing home employees can potentially steal from these accounts. And they have.

As a 2013 investigation by Peter Eisler for USA Today revealed, “Nearly half the states do not require background checks for nursing home office workers who handle residents’ trust accounts, and only a handful of states require that those accounts be audited.” The investigation found that business managers, bookkeepers and other office workers had stolen from thousands of residents’ accounts; the lack of audits made it easier for thefts to go undetected. Some of these thefts were in the hundreds of thousands of dollars. 

Nursing homes cannot require residents to deposit funds in resident trust funds and have no legal right to manage residents’ money, according to the Atlanta Legal Aid Society.  Even if a resident does put money in one of these funds, he or she must authorize every transaction or appoint a representative to do so (unless the resident or the represent directs the nursing home to release some or all of the funds on an "as needed" basis). 

If you are going to deposit your funds in such an account, know whether your state requires audits and background checks; if not, find out if the nursing home  conducts its own criminal background checks on the people who will have access to residents’ accounts, and if it performs voluntary audits of accounts.

The Bottom Line

Given that they may not be able to feed themselves or get out of bed, let alone manage their finances, nursing home residents are especially vulnerable to exploitation. Taking steps to prevent having income stolen means avoiding not just financial losses but also emotional distress, and the ultimate irony: being evicted from the facility because they can no longer pay the bill.