Tips to Help Your Loved Ones Avoid Fraud
Several weeks ago, one of our clients told us that an elderly neighbor was recently a victim of fraud. One day, this neighbor got a call from someone who said that “your financial accounts have been compromised” and it went from there, which resulted in this person being defrauded of a lot of their life savings, with a remote chance to recover any of it.
While all of us must be wary these days of every email, text and phone call received, there are criminals specifically focusing on the elderly community.
Below are some tips to help at risk loved ones reduce the risk of being defrauded.
The first tip is easier said than done. Help your loved ones help themselves, which means asking them to share information with you. If they are reluctant, at a minimum, have a conversation with them about financial fraud and make sure they understand that if they receive one of these types of calls/emails/texts, they should contact you or someone else they trust to discuss BEFORE moving any money.
However, it is best that you convince them to share information with you. When a loved one is the only one who knows anything about their finances, with no support system in place, they are an easy target of fraud. Moreover, as all of our estate planning clients will attest since we are strong advocates for letters of instruction providing high level “roadmaps” to loved ones, this secrecy can also lead to post-death chaos if such loved one dies (or becomes permanently incapacitated) with this confidential structure in place.
Now, to go one step further with this conversation. To truly aid your loved one with financial matters when they eventually need you, you need to convince him or her to put in place a financial Power of Attorney (POA) document, naming you (or someone else close and trustworthy to him or her) as an agent, who can act on his or her behalf from a financial perspective in case he or she becomes incapacitated and/or disabled, whether temporarily or permanently, and can no longer speak or act for themselves.
One of the benefits arising from doing this is that this also gets you closer to the financial accounts and the adviser(s), if any, putting you in a position that could allow you to help your loved one if someone tries to victimize them. [1]
You can alternatively seek to be co-owners on financial accounts with your loved ones, but there are downsides to this approach.[2]
And that brings me to the next suggestion as I am a believer in the proverb that sometimes “it takes a village.” While there is a cost, a good financial adviser is so important to have in this regard, among other positives, as the adviser adds another layer of protection.
For several of my elderly clients, the financial adviser’s team provides the client with their monthly cash flow after they have met and discussed. And when that client, out of the blue, says they need an additional $30,000 when they have not requested extra money out of their account for the last 10 years, that is a red flag to such adviser and he or she will ask questions to make sure that the client is OK.
I am not saying that tips (i), (ii) and/or (iii) are foolproof, but when advisers and loved ones are in the circle of trust, that person is not alone and can ask others “does this make sense” as to what the criminal perpetrators are telling them. This is how a lot of this fraud is identified and stopped.
Finally, we get to the final and most extreme situation. If your loved one cannot manage his or her affairs and money, for example advanced dementia, you can legally try and take control of a loved one’s finances by initiating guardianship/conservatorship state proceedings and ask the court to appoint you to make financial decisions on behalf of that person. This can be a very costly option as courts put the burden of proof on you to prove this and this is not great if your loved one objects to this action; but, if your loved one is giving away funds to these criminals and is unable to understand what is occurring and protect themselves, this may be the only way to stop it and help your loved one.
[1] A trust structure can also be helpful for this purpose.
[2] See our July 23, 2023 blog, “Discussion(s) to have with Elderly Parents Before it is Too Late” on the Articles page of our website for more detail.
