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Elder Financial Abuse: How CPAs Can Help – Part 3

Shutterstock_293152349The face of America is showing its age: According to the National Institute on Aging, the number of Americans age 65 and older is expected to double in the next 25 years, with those 85 and older constituting the fastest-growing segment of the U.S. population. These Americans are increasingly becoming targets for elder financial abuse.

Extent of the Problem

The phenomenon of elder financial abuse is not new. But today, increasingly sophisticated tactics are being used with significantly higher stakes. Assets totaling approximately $23 trillion are the target.

The National Adult Protective Services Association (NAPSA) reports that the rate of elder financial abuse is extremely high, affecting 1 in 20 older adults. However, at the same time, only 1 in 44 cases of elder financial abuse is reported. The greatest number of reported abuses were perpetuated by family or others known to the victim.

Who Takes Advantage of Seniors and Why?

Abusers may be friends, acquaintances, total strangers, professional con artists, paid caregivers or even a family member.

According to NAPSA, the following factors contribute to the prevalence of senior financial abuse:

  • A high percentage of seniors live alone and may be more vulnerable to scams.
  • Age 60 is the optimal age for financial decision making, and the ability to make financial decisions declines from that point on. In contrast, a senior’s perception of their financial decision-making abilities does not decline. This widening gap creates an opportunity for abusers to exploit.
  • Seniors can be very trusting, and may have trouble spotting fraud.
  • Seniors on average have a net worth substantially higher than younger consumers.
  • The population of seniors is increasing rapidly, providing a tempting target for abusers. The fastest-growing demographic cohort in the country is single women age 85 and older.

A critical step in helping older clients is to look at ways to help them avoid abuse in the first place.

Avoiding Abuse: Prevention

Our second post in this blog series discussed indicators that should raise red flags, and steps that CPAs can take to safeguard client assets. However, abusers of all stripes are always coming up with new scams.

It’s important to become educated about the growing variety of scams and methods used by abusers, and impart this knowledge to your clients. Look for signs that might indicate abuse: Does your elderly client have a new boyfriend? Does her son insist on sitting in meetings and seem overly interested in her finances? Is money inexplicably disappearing from her bank account? Did she just sign over Power of Attorney to her neighbor?

There are several steps to take to help protect your client proactively:

  • Educate 1040 clients that you can do much more than compliance. Develop 1040 clients into clients for whom you provide bookkeeping and elder consulting services. Recognize opportunities to protect the aging client.
  • Keep the lines of communication open with your clients and their family members.
  • Arrange for more than one family member to receive bank statements, brokerage reports and other financial reporting documents.
  • Consider setting limits on check amounts and account charges.
  • Set up notifications for activities that affect credit, including credit application filings.
  • Help build a safety net or team and incorporate a care manager. A collaborative effort including all of a client’s advisers: CPA, attorney, insurance consultant, trust officer, etc. will provide more protection. Coordinate with the client’s estate planning attorney as safeguards can be built into legal documents as well (e.g., co-agents, co-trustees, a monitor or trust protector).
  • Establish a revocable trust and have a trust protector named who is not the trustee.
  • Help your clients understand that a Power of Attorney is insufficient to protect them from abuse, and that they should plan more broadly by having an independent person (i.e., independent of the person serving as agent under the power of attorney) receive financial documents. Have yourself as the CPA named as that independent person.
  • Take concrete steps before your client exhibits signs of decreasing cognitive ability.

The National Council on Aging offers a variety of consumer resources that you can share with clients to educate them about scams and fraud.

Taking Action

CPAs are in an exceptional position to protect their clients from elder financial abuse. As a trusted advisor, you have a broad overview of your client’s finances. If you suspect any type of elder abuse, report it immediately. Mandatory reporting requirements vary by state. For example, care managers are mandated reporters and must report any suspected abuse. According to the Department of the Treasury Financial Crimes Enforcement Network, elder abuse, including financial exploitation, is generally reported and investigated at the local level. Adult Protective Services, District Attorney's offices, sheriff's offices and police departments play key roles in these cases.

Along with a growing number of seniors in the United States, there comes increasing business opportunities for CPAs to specialize in this segment of the population. Adding services such as bill paying, tax preparation and long-term-care planning can help CPAs better serve their senior clients. The AICPA has numerous resources that can assist with elder financial planning and help you determine whether focusing on these services is right for you and your practice.  In addition, you can learn more in the AICPA Forensic and Valuation Services report on fraud trends and topics.

Martin Shenkman, CPA, MBA, PFS, AEP, JD, Shenkman Law. Martin is the founder of Shenkman Law, where he focuses on estate and tax planning. He is the author of more than 42 books and 1,000 articles, and is a quoted expert on tax matters. His work appears in well-known publications, including The Wall Street Journal and The New York Times. Martin is also known for his active charitable work, which has been profiled in Forbes. See his blog post at www.shenkmanlaw.com.

James Sullivan, CPA/PFS, MedicareAware. Jim has been a personal financial planner for almost 30 years. His practice focuses on clients who are chronically ill and their families. He has written several books including one on Medicare for the AICPA and over 70 articles on planning and paying for health care in retirement. He can be reached at jim@medicareaware.com.

Randal Wolverton, CFE, CPA, CFF. Randal is a retired FBI Special agent, after 28 years of services. He has developed and provided training relating to fraud detection, investigation and prevention to numerous law enforcement agencies, college undergraduate and graduate programs, auditors, accountants in private practice and other professional organizations. Randal is past chairman of the AICPA Fraud Task Force, and currently provides forensic accounting services as a Sole Practitioner.

Senior woman on phone image courtesy of Shutterstock.


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