Many young Americans are up against the challenge of how to protect elderly parents from scams.
At present, more than 15% of the U.S. population is above the age of 65.
By 2060 that figure will be nearly one in four Americans. Meanwhile, global interconnectedness means slick financial scam artists are coming at them from everywhere — the phone, online, even through the U.S. mail.
Careful financial planning for seniors is a must in times of economic volatility.
Many unscrupulous scam artists take advantage of the cognitive decline of the elderly to rob them of hard-earned savings by promising to rescue them from financial uncertainty.
Here is a detailed guide for the children of retirees on how to protect elderly parents from scams.
Chart out a financial strategy which includes you and your parents
Financially assisting an elderly parent should be done in the same way as handling an aircraft emergency. You must put on your own oxygen mask before helping your loved one sitting next to you.
Simply put, you need to prioritize your own financial security before your parents.
There is no way you are going to be able to support or guide them, if your own financial situation is shaky.
Many adult children tend to make financial decisions for their elderly parents without first understanding and identifying their own current and future financial difficulties.
Things can get particularly rough when children take time off work to start caring for a parent.
Caregivers tend forget the impact that such a decision can have on their own long-term financial sustainability in terms of job stability, pension payouts, Social Security, and other savings.
Once you have your own financial situation in order, it is time to have a conversation with your parent about their financial security.
You should know how to take charge of their personal finances — bank account access, investment accounts, and insurance — in case of a sudden mental illness, unexpected injury, or another type of limitation that could occur for them without warning.
Be aware that obtaining financial and legal guardianship is a complex process and this conversation, however sensitive, should happen when your parents are still able-minded.
Get documentation completed and out of the way
A number of legal documents are essential to ensure a smooth financial and healthcare power transition should your parent or parents become unable to take care of themselves.
Having these completed early on, while a parent is healthy, can help avoid any emotional toll on the family. The stress of managing a health situation is enough without adding the complexity of financial concerns.
Here are some of the documents you should get signed and secured in a safe place:
A healthcare proxy
This is a legal document that gives you the power of taking life and death decisions when your parents are unable to do so. It can either be an individual or individuals.
A durable power of attorney
Your parents should use this legal document to select a trustworthy and competent person who can handle their finances when they are unable or incompetent.
A will is important to know how your parent wants the division of their assets to take place. If the assets are significant, a trust might be a better choice.
It’s possible that your parents might not want to share their financial information or give away powers just yet. Nevertheless, make sure to ask them where to find this necessary information in case of an emergency.
The last thing you want to do is play financial detective in a highly emotional event. If an event occurs, immediately document all assets, bills, and expenses.
You should ask for copies of financial statements and access to current online accounts if your parents are more agreeable. Online access is crucial to spot any irregularity that might be a sign of a scam.
Monitoring financial activity before a scammer has a chance to do any damage is a huge advantage as your parents age.
Protection against scam artists
Seniors are at a high risk of fraudulent schemes. In a large study of New York residents, 1 in every 20 elderly respondents said that they had been financially exploited.
Seniors also are less likely to report a fraud because of fear or embarrassment.
According to the Financial Industry Regulatory Authority’s Investor Education Foundation and the Stanford Center on Longevity, people above the age of 65 are at a significantly higher risk of financial scams than people in their 40s.
Take steps to ensure that your parents are educated about trending scams and frauds in order to protect them.
Never shame your parents if they fall prey to a fraudulent scheme. Remember that they are already embarrassed and scared.
Rather, take necessary steps to minimize the damage and to protect your parents from future scams.
Also, remind your parents to never share their personal or financial information with strangers and to be on their guard.
Practical financial tips on how to protect elderly parents from scams
You could take a number of steps to limit your parent’s exposure to fraudsters. Here is a checklist to get started:
- Register your parent’s phone number for the national “Do Not Call” service and put their addresses on the opt-out list of Direct Marketing Association. Inform your parents by telling them that any calls after these steps are from unscrupulous people.
- Advise your parents to open a safe-deposit box and list you as one of the persons with access to it. Make sure they keep their living trust originals or power of attorney in that safe-deposit box. If your parents are not ready to give you access to the safe-deposit box, then it may be better that you keep the documents at home in a fireproof box.
- Always keep a copy of every bank statement, check, and receipt carefully if you are handling your parent’s finances. Concerned siblings or other family members might question whether you are responsible in carrying out your duties.
- People with cognitive impairment potentially live on for many years. Needs of your parents might considerably change over this long period, so consider advice from a registered investment advisor if you end up in charge of their money.
- Consider checking to see that their Social Security is maximized. If your parents have not yet started collecting payments, waiting another year or two will qualify for higher monthly Social Security payments.
The risk of decline
According to researchers, 32% of Americans above the age of 85 and 11% above the age of 65 have Alzheimer’s disease.
People suffering from mild cognitive impairment or alternate forms of dementia are not included in these figures.
These scary statistics show that it makes sense to assume the worst and be prepared with a sound financial plan for your elderly parents before things get complicated.
Astute planning will help you and your parents remain financially comfortable and avoid financial scams as they age.