To con artists, down-on-their-luck relatives, or opportunistic acquaintances, are gold mines. People over the age of 50 control 70% of the country's wealth, and seniors between the ages of 65 and 74, with an average net worth of $1.06 million, have more assets than any other age group.
“That’s where the money is,” says Jay Haapala, AARP associate state director of community outreach in Minnesota. “If college kids had a bunch of disposable income lying around, criminals would be trying to figure out how to scam college kids.”
Dementia, disability, and decline can make it even easier for criminals. All told, it's a problem that costs American seniors billions of dollars every year.
Common forms of exploitation
There are myriad scams, unethical businesses, and unscrupulous individuals preying on seniors all the time. While the details vary, there are a few familiar scenarios.
Breach of trust
The vast majority of elder financial abuse—as much as 90%, according to the National Adult Protective Services Association—is committed by caregivers or close family members. A son is added to a checking account to help manage Mom’s bills and then starts using the account to pay off gambling debts. Or Grandpa gives valuables to the housekeeper and eventually—at her suggestion—names her in the will.
Attorney Ellen Morris, who practices in Boca Raton, FL, and serves as the chair of the Elder Law section of the Florida Bar, says these types of situations are common.
Morris cautions against adding a child to an account because that can give the child complete ownership of assets and leave the senior with no legal recourse if the child drains the account. A better option, Morris says, is to name someone a legal fiduciary or agent. It is a more involved process requiring the assistance of an attorney, but it does not give the relative any ownership of the assets, which protects seniors.
In the case of caregivers, she notes that families that hire household workers independently can expose families to exploitation. “The senior becomes attached to the caregiver and, over time, the caregiver gets the senior to transfer money to them, buy a car for them, and pay off their credit cards."
That is why Morris recommends using licensed, bonded agencies for services. While that, too, can be more costly, most agencies have contractual limitations that prevent workers from accepting large gifts.
Someone calls, ostensibly from the IRS, saying that an individual has a tax bill that is going to rise with interest and fees unless paid immediately. Or someone calls with news that there is a problem with a credit card and he or she needs a Social Security number and birth date to access account information to clear things up.
“These are typical red flags,” says Amy Crowe, a financial education specialist with Summit Credit Union in Madison, WI.
Most phone scams, she explains, are fear-based and include a timing deadline that will escalate consequences. Pay now or pay even more later.
Crowe advises individuals to ask for the name of the person calling and to inquire where they are calling from. A Topeka, Kan., resident who has a credit card issued from a local credit union most likely will not get phone calls from Tallahassee, Fla. Then Crowe encourages individuals to hang up and find a phone number for the agency or financial institution from a reputable source, such as an account statement, and then call to inquire about the situation.
As more seniors head online, they grow more susceptible to phishing scams. Crowe says phishing emails look as though they come from legitimate sources such as banks or credit card issuers. They ask seniors to click on a link to enter account information in order to verify recent transactions or to rectify problems with accounts. Unfortunately the links are fake, and criminals use them to gather personal account information, which they use to drain accounts or steal identities.
“Financial institutions are not going to be communicating this way through email,” Crowe says.
She advises seniors to resist clicking on links and to instead contact a trusted adviser, perhaps an adult child, for advice or to call the financial institution directly using a number obtained from a statement or other reputable source.
An ounce of prevention
There are some things seniors and their loved ones can do to limit their exposure.
Do Not Call lists prevent businesses from contacting registered individuals and provide clues about the calls that do come through. “It gives you a hint that whoever is calling you either doesn’t know what they’re doing or they don’t care what they’re doing,” Haapala says, “and either way you should not do business with them.”
Haapala also reminds seniors to conduct their personal business within the financial services system and to distrust any individuals or businesses that insist otherwise. Financial institutions have fraud protection services that limit an individual’s risk. They also have systems that make it possible to trace funds back to criminals in some instances.
“Con artists want victims to use wire transfers that there are no consumer protections for. They want their victims to use cash, which can’t be traced,” he says. “By all means, use your checking account to make payments.”