Even though an elderly person may be feeling just fine, medical research has linked accelerated cognitive aging and being vulnerable to financial difficulties, according to SBJ in “Be prepared to avoid financial exploitation.”
One of the first signs of cognitive decline is diminished financial capacity, or the progressive loss of a person’s ability to manage banking and investment decisions. If you have an aging parent, you may have seen them struggle with tasks that were previously easy for them to do, like balancing a checkbook or tracking investments.
It’s estimated that for every 44 cases of senior financial abuse, only one is reported to authorities. In a 2010 study by a nonprofit, one in five adults 65 and older have been a victim of financial fraud or manipulation.
There are several actions that can be taken to mitigate the risk of financial fraud and exploitation. However, the first one is planning before signs of cognitive impairment are seen. Here’s how:
Financial preparation. First, designate a trusted emergency contact for all financial accounts to receive information, if the institution suspects exploitation. Have an estate planning attorney create a durable power of attorney to appoint a trusted individual to act on your behalf. “Durable” means that it will remain in effect, even if you become incapacitated.
Prepare a will to dispose of assets after your death. Don’t discuss your will or any financial matters with people who are new in your life. That includes caregivers, the new neighbor down the street or people who call claiming some distant connection.
Monitor your credit report and stay up to date with the latest in scams. Seniors are now being targeted by thieves presenting themselves as calling from the Social Security Administration and threatening to cut off benefits. The SSA does not call to threaten individuals, and it never asks for payment in gift cards.
Plan how to transition your financial accounts. That may mean having a professional manage your finances, but make sure they are a licensed fiduciary, so that your interests must come first. Your estate planning attorney may know of these services.
Not all financial institutions have addressed the issue of safeguarding customers from financial fraud and exploitation. Find out what your bank, financial advisor and investment companies are doing. Do they monitor accounts for unusual transactions? What tools are available to account holders to detect suspicious activity?
An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances, as well as preparing for the possibility of cognitive decline.
Reference: SBJ (June 10, 2019) “Be prepared to avoid financial exploitation”