August 10, 2013
Protecting Seniors from Financial Abuse
by RONALD E. ROEL. Special to Newsday
Featuring: Dr. Maria Carney, Chief, Geriatric and Palliative Medicine, North Shore-LIJ Health System
When Michael signed on to assist an elderly Great Neck couple several years ago, they thought he was a godsend. "He became like a son to them," recalls their son-in-law, Steven.
The couple -- she was in her late 80s, he was in his early 90s -- first hired Michael to help out with a few daily chores. But over time, Michael, who was in his late 20s, gained the confidence of the family and assumed a greater role, living with the couple and taking on responsibilities such as driving them to the doctor and paying monthly bills.
"It was an enormous relief to my wife," says Steven, a retired business owner. "He was part of the family; he was part of everything."
Then one day, Steven stopped by for a visit. No one was home, but as he was leaving, he spied an American Express bill in the mail. He didn't think his father-in-law had an Amex card, so he took the bill home to examine it. He was right; his father-in-law had never applied for the card, yet he had a balance of about $20,000 for dozens of charges, ranging from clothing to furniture -- all purchases Michael had made for his personal use. The couple was in disbelief, but the father-in-law, a retired attorney, finally contacted police.
Michael was arrested, convicted on theft and identity fraud charges, and served six months in jail. The couple did not suffer any financial losses, says Steven, who didn't want his last name or his in-laws' names used. But there was "grave emotional loss," he said. "It was a very sad ending."
A COMMON PROBLEM
This is just one of hundreds of thousands of cases each year, researchers estimate, where vulnerable seniors find themselves victims of financial elder abuse -- often at the hands of family members, friends, caregivers or financial advisers. "It doesn't happen with casual strangers," says Bernard Sandler, an accountant in Great Neck. "It's the people you know, the people you trust."
Financial exploitation accounts for the highest rate of abuse involving seniors, and that includes physical or emotional abuse and caregiver neglect, according to a 2011 report, "Under the Radar: New York State Elder Abuse Prevalence Study." The study -- conducted by researchers from Cornell University, the New York City Department of Aging, and Lifespan of Greater Rochester, a nonprofit group -- found that 41 per 1,000 people surveyed reported instances of financial abuse over the course of a year, compared to an incidence rate of 46 per 1,000 people for all other types of abuse combined. (Financial abuse can take many forms, from outright theft of money or property, to rerouting assets without a victim's knowledge, or forcing them to change wills and trusts.)
Such findings echo those from several previous studies, dating to the mid-1990s. A 2009 study, conducted by the MetLife Market Institute and the National Committee for the Prevention of Elder Abuse, estimated that each year 1 million seniors nationwide lose more than $2.6 billion from financial abuse. Family members and caregivers are the culprits in 55 percent of the cases, the study found, and the "typical" victims were elderly women -- frail, cognitively impaired and often isolated.
"Parents are often bullied by their [adult] children," says John Ryan, a financial adviser in Garden City. He says some older clients have told him privately that they've been pressured into making certain financial decisions. "They didn't want to do it, but their kids kept saying, 'You have to, you have to.' So they gave in to keep the peace," says Ryan, who organized a recent public conference on elder abuse at the Unitarian Universalist Congregation at Shelter Rock in Manhasset.
Experts acknowledge that it's often hard to combat such abuse because many seniors are reluctant to reveal it. "This population is very stoic. They don't self-disclose," says Dr. Maria Carney, chief of the geriatric and palliative medicine division at North Shore-LIJ Health System in Manhasset. "We need to help them overcome the fear and shame of being a victim."
AN AT-RISK POPULATION
So, increasingly, geriatric specialists are developing screening processes to detect whether seniors may be at risk or suffering from some form of exploitation. "It's not always clear-cut, but there are some red flags," Carney says. "We ask them [patients] a series of questions. Are you depressed? Are you able to manage? Is your caregiver financially dependent on you or are they independent?" Carney also assesses whether a person's health could affect their judgment or capacity to make complex decisions. "We want to make sure they're thinking clearly," she says. "It can be as simple as adjusting medications."
Ultimately, the best way to combat abuse, experts agree, is to devise an effective strategy before anything happens. "Plan while you can," says Gerald Wolf, a Mineola attorney who specializes in elder law and estate planning. "Incapacitation can come on very quickly. You want to avoid having the wrong people put in charge of your affairs at a time when you no longer capable."
One of the first steps in any plan is creating a list of all your assets, so you (and several other people) are aware of them. "It's easier for an abuser to take control of your assets when no one else knows what they are," Wolf says. Next, devise a legal structure that will protect your assets as much as possible. One option, Wolf says, is putting your assets into a revocable living trust that enables you to maintain control of your finances, while also designating one or more trustees to handle these assets, should you become incapacitated.
Wolf also recommends that people review the provisions they set out in their power of attorney, which allows them to delegate authority to an "agent" or "attorney-in-fact" to make financial decisions on their behalf. A POA can give very broad authority to an agent, or limit the authority to certain specific acts. In addition, changes in the New York Power of Attorney law in 2009 provide some greater protections, such as requiring a special rider to allow an agent to make property transfers and "major gifts" of more than $500.
CHOOSE THE RIGHT WATCHDOG
Even with such protections in place, one of the most challenging decisions for many parents is picking the right adult child as a trustee or POA. "It has to be done lovingly, but honestly," Ryan says. Understandably, parents are concerned about hurting their children's feelings. But not choosing a child as your fiduciary doesn't mean "I don't love you," Ryan says. "It means, 'You're not the appropriate person to handle this.' "
Financial advisers and other professionals can serve as watchdogs against potential elder abuse, spotting unusual behaviors, such as adult children writing fraudulent checks to themselves from their parents' bank accounts. But sometimes the watchdogs themselves need to be watched.
Consider the case of Joan, 83, who asked that her last name not be published. When she was widowed three years ago, she looked for a way to increase the monthly payment from the annuity in her IRA to make up for the decrease in Social Security income after her husband's death. Joan, of New Hyde Park, turned to a financial adviser at her bank. The adviser said it would be no problem, Joan recalls. "She was a widow, like me. I trusted her."
The financial adviser rolled over the annuity into another investment, which she said would yield a higher return than the 5 percent to 6 percent the annuity was earning. But the new investment was a government-income fund that the adviser's company offered -- and it was not a qualified tax-deferred vehicle. A few months later, the adviser left the bank to join another financial firm.
It was not until Joan was preparing her annual tax return that she learned the new fund was actually generating a 3 to 3.5 percent return. Worse, her accountant informed her that she owed $186,000 in federal income taxes.
It's unclear why Joan's bank adviser made such a move. She should have rolled the IRA into another qualified tax-deferred account to avoid having Joan pay taxes on the funds, says Ryan, who is now her financial adviser. Presumably, Ryan says, the bank adviser received a commission for placing the money into a fund offered by her bank, "but her supervisor should have stopped it -- it was just bad advice."
TALK TO FRIENDS AND FAMILY
This could happen to anyone, Ryan adds, but seniors should get other opinions before they make major financial decisions. "Talk to your accountant. Discuss it with your friends," he says. "Ask them, 'Have you had any dealings like this?' "
In the end, Joan paid the tax bill, wiping out a substantial portion of her retirement savings. "I thought she was my friend," says Joan. "She did me wrong. But I can't do much about it now. It's done."
And that, too often, is the case. Once financial elder abuse happens, it's difficult to remedy, experts say. The best defense is to avoid becoming a victim, says Marshall Trager, chief of the government and consumer fraud bureau at the Nassau County district attorney's office. "You need to be vigilant," he says. "Use your common sense about whom to trust. And think with your head, not your heart."
WHAT THE EXPERTS ADVISE
Here are tips from experts to help avoid financial elder abuse:
--Plan while you can. Once you're incapacitated, there's nothing you can do -- you'll get a court-appointed guardian. Create a strategy to protect your assets while you're still healthy; talk to an elder law attorney, banker and financial adviser to determine your best options.
--Share your key financial information. When several trusted people know what's going on in your life, it's more difficult for someone to take advantage of you. Create a system of checks and balances, so everybody knows there's a group watching over you.
--Don't be bullied. Never allow anyone to rush you into making an important financial decision. Before signing a document you don't understand, consult a financial adviser or attorney. If something doesn't feel right, just say "no." It's your money.
--Build a relationship with your bank and financial advisers. They can help spot suspicious activities related to your accounts. But also be wary of professionals who profit (consciously or unconsciously) from the advice they give you.
--Before you hire any financial professional, find out how they get paid. Investment advisers may be paid in several ways, including sales commissions, fixed fees, hourly fees or a percentage of your total portfolio value. To learn more about fee-only planners, check the National Association of Personal Financial Advisors (napfa.org).
--Ask advisers about credentials and specific services they provide. Is he or she a Registered Investment Adviser with the Securities and Exchange Commission? This fiduciary standard requires such advisers to serve a client's best interest before their own.
--Keep your checks and credit cards in a secure place. Even if you have someone taking care of your bills, never sign checks in advance -- that's just a license to be exploited.
--Stay connected. Abuse is sometimes the result of enormous stress and isolation. Call friends, join groups, visit family or a clergy member. You're not alone.
--If you think you're a victim, don't be afraid or embarrassed to complain. Your situation will only become worse if you do nothing.
Nassau County Dept. of Social Services
Adult Protective Services 516-227-8083
Suffolk County Department of Social Services
Adult Protective Services: 631-854-3195, -3196, -3197
New York State Office for the Agingaging.ny.gov
Help Line: 800-342-9871
New York State Attorney General's Office
Nassau County Regional Office: 516-248-3302
Suffolk County Regional Office: 631-231-2424
Nassau County District Attorney's Office
Criminal Complaint unit: 516-571-3505
Suffolk County District Attorney's Office
Crime Victim Advocates:
Central Islip: 631-853-4138
National Center on Elder Abuse
The center's website offers resources on elder abuse and exploitation