Before you holler about those phone scammers who prey on the elderly, you might be surprised to hear who the real bad guys might be: Family caregivers.
More than $6 billion a year is stolen from seniors by those close to them -- family caregivers and trusted advisors, reports TrueLink. Annually, TrueLink found, only 3 percent of seniors lose money to exploitation by a family member, but exploitation by family members represents approximately one fifth -- 20 percent -- of financial losses. A MetLife study found that family members or close caregivers are the culprits in 55 percent of the fraud cases involving elderly victims. Even celebrities such as Mickey Rooney claim to have fallen victim.
Kai Stinchcombe, the CEO of TrueLink, said these are the six most common ways seniors can get ripped off by their families.
1. Slippery-slope caregiving expenses
This starts out innocently enough. A family member who is taking care of an elderly parent or grandparent starts to incur routine expenses for which they feel justified passing along to their elderly charge. It generally starts out small: You take Grandma out to lunch and use her credit card to pay for your meal. Or maybe you do her grocery shopping and throw in a few items for yourself, because, after all, who has time to shop twice. At that level, said Stinchcombe, the dabbling into her money is small.
But then you start to get used to it. You have her credit card in your wallet and maybe you gave her one ride in the car, but she has all this money anyway and so what's the harm in just filling up your tank? Or you're grabbing diapers for your baby and mom always had a soft spot for her granddaughter and probably would have offered to pay for the diapers if you were out together anyway, you reason. You're shopping for a new outfit and it's the kind of thing she used to give you for your birthday but she's not "there" enough to remember your birthday anymore. "You need a car to get over to her place and yours is getting old, maybe you'll go car shopping together and she'll get a new car for you to use even though she has dementia and doesn't drive anymore," said Stinchcombe.
"The problem is, when there's nobody else's eyes on the ball, you start to believe your own convenient truths and give yourself the benefit of the doubt," he said. Stinchcombe said that whenever there is an in-home caregiver spending money – whether it's a paid caregiver, a family member, or at a retirement home – you want two sets of eyes on the money being spent." His rule: Transparency is always the best remedy. Make sure everybody knows where the dollars are going.
2. Not enough third-party support
Closely related, one good source of transparency is having a professional involved, Stinchcombe said. If you have an accountant, a lawyer, a professional trustee or fiduciary in the loop, you're protected from interested parties. And that person doesn't necessarily need to have control of the assets or be the primary decision-maker, you just want someone keeping their eyes on the situation and making sure Mom's best interests are being protected.
Stinchcombe recommends that seniors set this up themselves ahead of time -- before they need it. He says, "Find an attorney or accountant or other professional that is well-respected in the community and get them involved before it's too late."
It makes sense: "If you're not planning for an overlap, you're planning for a gap, and when there's a gap in your ability to make financial decisions it means things are going to be out of your control," he advises.
3. Too much bank account access
Making a family member a co-signer on your account is often the wrong step – what you want is to enable them, for example, to monitor your spending or pay bills on your behalf. Banks are a big part of the problem – they often see things as black and white, either you have access to the account or you don't, rather than offering shades of gray to fit the family's needs, says Stinchcombe. Seniors should think about lightweight monitoring tools like EverSafe or Mint.com or True Link's monitoring tool as ways to set up financial safeguards without turning over the keys to the car, he said..
4. Advancing the inheritance
Here is a frightening example of what happens, says Stinchcombe, something his office sees occurring regularly: A family member or paid caregiver shows up every morning and asks Mom if he can borrow $200, knowing that the next morning she won't remember having made the loan. It might be just plain stealing, or the caregiver might justify it thinking he will inherit the money anyway and right now he could really use it, so why not give himself an advance?
Stinchcombe says a good bank should be able to spot this pattern using the right algorithms. His opinion: Do not collect $200, go directly to jail!
5. The dingy retirement home
This is an easy one to spot. Mom has a million dollars saved up and her kids are shopping for the cheapest retirement home they can find. Before a senior gets to that point, he needs to speak with a financial planner and figure out his options. Seniors need to remember that this is their money and they should spend it however it maximizes their happiness. "That might mean giving it to your kids, or putting it aside for grandkids to go to college – but it might also mean traveling, having a nice place to live, or whatever else makes you happy," Stinchcombe says.
"One tough situation we see is people trading accusations of financial exploitation," he added. "Dad has a new, much younger girlfriend, for example. Is going on expensive vacations an example of the girlfriend exploiting him for his money, or is it just Dad having a blast during retirement in a way that is none of his kids' business?"
6. Social isolation
Underlying almost all financial losses is an underlying lack of social resources and connection. A lonely grandma is a vulnerable one. If multiple people are checking in it's much harder for any one of them to take advantage.
Stinchcombe says that while not everyone might see this as a rip-off, in his view, aging family members are entitled to quality time spent with you and if you don't give it to them, "you're ripping them off." He notes that in China, there are new laws that make it mandatory to periodically visit your parents. "I think it reflects a respect for aging that I wish we had more of in the U.S. If you know your parents' financial situation, who they are spending time with, what they are spending their money on, what their interests and hobbies are, you're much more likely to protect them from financial losses."
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