Elder Financial Exploitation

Financial exploitation of elders is disturbingly common today, but sometimes a civil action can lead to recovery.

What is financial exploitation?

At the federal level, first enacted in 1965, The Older Americans Act defines elder financial abuse, or exploitation, as:

 [T]he fraudulent or otherwise illegal, unauthorized, or improper act or process of an individual, including a caregiver or fiduciary, that uses the resources of an older individual for monetary or personal benefit, profit, or gain, or that results in depriving an elder of rightful access to, or use of, benefits, resources, belongings, or assets.

Stated more simply: financial exploitation happens when an individual takes advantage of an elder’s vulnerabilities for personal financial gain.

It’s a crime

In 2015, New Hampshire became one of a growing number of states to make the financial exploitation of elders a crime. The legislation provides law enforcement officers and prosecutors clear guidance to help support efforts to investigate and prosecute the crime successfully.

New Hampshire law defines the criminal financial exploitation of an elder to be when an individual:

 … knowingly and recklessly uses undue influence, harassment, duress, force, compulsion, or coercion to acquire property (real, personal, or financial), of an elderly adult, or to establish a fiduciary relationship that gives the person control of the elder adult’s property…

The New Hampshire law is similar to statutes in other states, but some states have passed special provisions that codify civil actions for recovery. For example, Maine has enacted the Improvident Transfer of Title Act, which provides a framework for undoing transfers of real estate and other property, as well as ordering other relief.

If you or an elder who you are close with is a victim of financial exploitation, retaining an attorney early in the process can make a big difference in a civil case to recover stolen assets and to undo other damage. An attorney will also help you coordinate your civil case in concert with any related criminal proceedings.

In many cases of elder financial exploitation, there are associated legal issues to address — including unfair Medicaid or other insurance denials, federal tax consequences for early withdrawal of retirement funds, and unpaid credit card bills. An attorney can help make certain that all losses are accounted for and addressed in the asset recovery process.

Why are elders vulnerable?

Age-related decline in physical health and mental acuity and increased dependency on others to perform various tasks are some of the reasons elders can become vulnerable to financial exploitation.

Research conducted at UCLA (2012) considered why older adults are disproportionately vulnerable to fraud. The researchers examined both the behavioral and neurological aspects of the issue and found a clear and significant pattern. The adult sample represented a wide range of ages. Researchers showed each subject the same series of faces, which had clear visual cues regarding trustworthiness or untrustworthiness.

While young and old participants rated the faces high in trust cues similarly, significantly more older adults than younger adults rated faces with untrustworthy cues as more trustworthy and approachable.

This age-related pattern was mirrored in the brain. Younger adults showed significantly more anterior insula activation to untrustworthy versus trustworthy faces. Older adults showed “muted” activation of the anterior insula to untrustworthy faces. The anterior insula has been linked to interoceptive awareness, which is the awareness of how one is feeling (i.e., one’s “gut reaction” to the world). A diminished “gut reaction” to untrustworthy cues in older adults may explain one facet of their greater vulnerability to financial exploitation.

Elders also become a target for exploitation because they have amassed a lifetime of assets. According to a recent Consumer Finances Survey (2019) published by the Federal Reserve, individuals over age 65 have a higher net worth than any other age group. But it’s not just the wealthy who are targeted. Low-income elders are also targets because they oftentimes receive regular checks each month from the government and through their retirement funds.

Scammers know this. One of the more common scams aimed at elders (see below) involves a perpetrator posing as a government official — often someone from Medicare, the Social Security Administration, or the Internal Revenue Service — seeking to confirm some personal information “to avoid delays and/or interruptions in benefit payments.” The information obtained during such phone calls is then misused in various ways, like making unauthorized withdrawals from an elder’s bank account or using fraudulently obtained Medicare information to bill the government for sham services.

When the perpetrator is known

Elder financial exploitation can take many forms. When the perpetrator is a family member — or someone in a trusted position, like a caregiver, trustee, or financial advisor — some of the most common forms of financial exploitation are:

Power of Attorney abuse can happen after a perpetrator acquires access to the elder’s assets with the fiduciary duty to manage those assets on the elder’s behalf. Instead, in some instances, the perpetrator uses the elder’s assets for personal expenditures and enrichment. A perpetrator can sometimes abuse a joint bank account in the same way.

Unauthorized use of an ATM card — or stealing checks — to withdraw funds from an elder’s checking account is a widespread form of financial exploitation.

Threatening violence, abandonment, or other harm to the elder unless the perpetrator’s demands are met is more common than you think. Family members or acquaintances may threaten an elder in a variety of ways — like refusing to pick up groceries, provide transportation to medical appointments, or denying services — as part of an orchestrated attempt to extort money from the elder.

Refusing medical treatment and other healthcare services for the elder to keep assets available to the perpetrator is also a form of financial exploitation.

While most financial exploitation cases involve family members, neighbors, “friends,” or others known to the elder, an alarming number of financial scams targeting elders involve unknown perpetrators.

When the perpetrator is unknown

The various financial scams that target seniors have become so prevalent and so sophisticated that Congress passed the Elder Justice Act and Elder Abuse Victims Act to support the coordination of state and federal resources in the complex work of identifying, pursuing, and prosecuting perpetrators. Financial firms and regulators have collaborated in several ways to adopt new security measures that send up red flags when large transfers of money occur. But the unfortunate truth about the financial exploitation of elders is that it usually isn’t reported at all.

Common scams targeting elders, as summarized by the National Council on Aging, include:

  • Lotteries and sweepstakes. Perpetrators contact elders and tell them that they won the lottery and need to send a check for a certain amount to cover taxes on the winnings.
  • Utility company. Sometimes scammers pose as a power, water, or cable/communications company representative and attempt to collect some kind of payment.
  • Fake accidents. Perpetrators tell elders that their child, grandchild, or other relative is seriously injured, is in the hospital, and needs money. Some perpetrators have accomplices that will pose as the injured relative, and he/she will speak directly with the elder/target on the phone and request assistance.
  • Counterfeit prescription drugs. These scams are Internet-based and growing in popularity as the cost of prescription drugs continues to rise. Seniors looking for better prices may be purchasing ineffective and unsafe substances.
  • Email/phishing. An elder gets an email that appears to be from a legitimate company, agency, or other organization. They are requesting that certain vital information be updated. A prevalent phishing scam is when the perpetrator claims to be from the IRS. The elder must provide bank routing information so the government can process a tax refund.
  • Charity scams. Particularly common in the wake of a natural disaster or other highly-publicized tragedy, a scammer will impersonate a nonprofit organization collecting relief money.
  • Investment scams and predatory lending. Elders are targets for “get rich quick” schemes and fraudulent reverse-mortgage or other predatory loans with high-interest rates.

Financial scams like those described above often go unreported and can be challenging to prosecute.

Signs of financial exploitation

Understanding the many ways that financial exploitation can occur is key to preventing it. Everyone with aging loved ones should familiarize themselves with the warning signs and talk with their family members to make sure they understand the risks.

According to the National Center on Elder Abuse, some of the common warning signs of possible financial exploitation are:

  • Sudden changes in bank accounts or banking practices, including unexplained large withdrawals
  • The inclusion of additional names on the elder’s bank signature card
  • Unnatural changes in a will or other financial documents
  • The sudden and unexplained disappearance of valuable possessions
  • Unpaid bills, despite the availability of adequate resources
  • Discovery of an elder’s signature being forged on financial papers or other documents
  • The sudden appearance of uninvolved, unknown, or distant relatives
  • An unexplained, sudden transfer of assets to a family member or someone outside the family

Do you suspect something?

If you suspect the financial abuse of an elder, there are several actions you can take. You can contact Adult Protective Services, local law enforcement, and the elder’s financial institution. You can also contact legal counsel. Getting help and advice as early as possible can make a big difference in terms of minimizing damages and enhancing the prospects for recovery. An attorney’s advice can be extremely helpful in these situations. Feel free to contact us if you have questions or concerns.

About the Author: Jonathan Eck

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