Tax Insights

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Elder financial abuse: how to spot red flags

elder financial abuse, estate planning, taxThe National Committee for the Prevention of Elder Abuse (NCPEA) defines elder financial abuse as “the illegal or improper use of an older person’s funds, property or resources.” Elder financial abuse comes in many forms, ranging from promises to care for the elder in exchange for money or control over property to outright forgery, theft or fraud. Consumer Reports estimates that the annual cost of elder financial abuse ranges from $3 billion to $30 billion. Elder financial abuse has increased in recent years for numerous reasons, including an increase in the elderly population; advances in health care that allow elders to live longer (but possibly with diminished capacity); globalization of banking; family members living farther from the elderly person; and the ability to transact financial affairs remotely via telephone, e-mail or the web.

Handling tax matters, particularly near or during tax season, offers family members and trusted advisors a unique opportunity to discover elder financial abuse. “Red flags” include:

  • Withdrawals or transfers between bank accounts that the elder cannot explain
  • Financial statements no longer coming to the elder’s house or e-mail
  • Unexplained termination of access to financial statements that family members or trusted advisors previously had access to
  • Unusual or unreasonable favoritism for one family member
  • New financial, legal or accounting advisors with no explanation of why the change is being made or without any change in circumstance that would justify switching longstanding advisors
  • Payments to individuals, businesses or charities that are “out of character” compared to the elder’s previous spending habits
  • Secrecy by a caregiver or seclusion of the elder by the caregiver (e.g. not allowing the elder to speak with or visit family members)
  • Financial arrangements or transactions that seem “too good to be true”
  • Unpaid bills, eviction notices or notices to disconnect utilities

In an upcoming blog, there will be prevention ideas and information regarding reporting elder financial abuse to the appropriate state agency.

Jenny Maas