Elder Financial Abuse: Stopping Fraud in the Family

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In October 2018, a Potsdam, New York, couple was indicted in New Hampshire on charges of theft. It wasn’t a stranger or casual acquaintance Kile A. Madsen and Debra A. Madsen were accused of ripping off. It was Kile’s father, who had died six months earlier at age 86.

Prosecutors allege the couple used the father’s bank account to make unauthorized purchases, payments and withdrawals amounting to more than $31,000. They are scheduled to stand trial in January 2022 and face up to 15 years in prison if convicted, according to the New Hampshire attorney general’s office.

Unfortunately, such cases are not unusual. In reports of elder financial exploitation where victims knew the suspected perpetrator, more than two-thirds involve a family member, a 2019 review by the federal Consumer Financial Protection Bureau (CFPB) found.​

Assessing the financial threat

Financial exploitation collectively costs older adults an estimated $6.3 billion a year, according to a 2020 analysis of state and federal case data by cybersecurity research company Comparitech. And that’s just from known incidents; experts say the true toll is likely far higher, as most cases go unreported.

Compared to fraud by anonymous scammers, older adults typically suffer greater financial losses when they know the perpetrator, the CFPB found, with an average cost of $42,700 in cases involving family members.

Certain risk factors can make an older adult particularly vulnerable, says Peter Lichtenberg, director of the Institute of Gerontology at Wayne State University in Detroit and an expert on elder financial exploitation.

This category includes older people who feel less confident about their money management skills due to memory loss or failing health, Lichtenberg says. Those who long for someone to help them make financial decisions could unsuspectingly welcome the attention of a person who exploits them.

“When people feel they have no one to talk to about their finances, they'll often choose the wrong person to talk to,” he says.

Isolation also increases risk, says Thomas West, a financial adviser in northern Virginia and creator of the Lifecare Affordability Plan, a program that helps families plan for long-term care. For example, a senior who does not have immediate family living nearby may need to depend on a distant relative with whom they don’t have a close relationship.

Identifying the warning signs 

Pay close attention to big, sudden changes in an older adult’s personal or financial life. “The priorities a senior has may change,” West says. “New relationships may come into their life, or an older relationship may take on new significance.”

Be wary if your loved one is helping this new person financially, especially if they’re being cagey about it, Lichtenberg says. They may be less forthcoming about the situation because they are being influenced by someone who is exploiting them under cover of forging a close bond.

And be on the lookout for someone who acts as a gatekeeper. “That’s a significant red flag, when someone is trying to control the communication between the person and everyone else,” West says.  

Often the person being exploited will get an inkling that something isn’t right. That’s what happened when a client of Chambliss, Bahner & Stophel, a law firm in Chattanooga, Tennessee, agreed to let a niece help with her finances but later noticed bank withdrawals that she had not authorized.

“We see that a lot when we review bank records,” says Rebecca Miller, an attorney with the firm who specializes in elder law. “Either charges that are much larger than normal or charges for things that maybe that person would not need.”

In this case, the client had no children, “so she was drawn to this niece who said, ‘I'll help you,’ ” says Sally Brewer, an elder care paralegal with the firm. “It was a befriending.”

Minimizing the risk

Although elder financial exploitation is a growing threat, there are ways to decrease a loved one’s chances of being targeted.

The financial services industry can play a role. For example, the Financial Industry Regulatory Authority (FINRA), an industry group that works to protects investors’ interests, has rules requiring brokerage firms to seek the name of a “trusted contact” from anyone opening an account so the company has someone it can notify of suspicious activity.

Families can protect their loved ones by taking the following steps, experts say.

Keep multiple people in the loop

Often an older person will ask one family member or friend to help them manage their money, but nobody else in the family will know about it. “That kind of isolation can lead to exploitation, and it can also lead to perceptions of exploitation,” Lichtenberg says.

To avoid that, he suggests families create a formal arrangement in which one person does the heavy lifting but gives an accounting of their actions to the rest of the family periodically.

Ask questions

Respect older loved ones’ right to make their own decisions as long as they are cognitively able, but keep the lines of communication open. You might bring up the topic of financial exploitation and segue into asking what they are doing to protect their money.

Don’t be afraid to broach tough topics, such as how often they are giving another family member or friend money, Lichtenberg says. If financial conversations among family members become difficult or tense, mediation might be helpful.

Report suspected cases

If you believe a family member or friend has exploited a loved one, place a call or write a letter to Adult Protective Services in your area, and contact local law enforcement. An elder law attorney may also be able to help — the federal government’s Eldercare Locator can point you to legal assistance in your area.

Don’t blame or shame

Victims of elder financial exploitation have done nothing wrong. “It’s not shameful if you get taken advantage of this way,” West says. 

Even if they suspect something is wrong, fear of being judged or deemed incapable of running their own lives can keep an older adult from admitting it, he adds. Reiterate to them that it’s not their fault. 

Tamara E. Holmes is a Washington, D.C.-based writer and editor. She has written extensively about money, entrepreneurship and careers for more than two decades. Her work has appeared in such publications as USA Today, Working Mother and Essence.​

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