ASK THE EXPERT
Elder fraud is rampant. Millions of older Americans become victims of scams or financial abuse each year, according to the FBI. And they lose more than $3 billion annually to these crimes.
That’s why it’s so important for older adults and those who help care for them to be aware of the ways they might be exploited and to take steps to protect themselves. To get advice on how to guard against elder fraud, Carefull family finance expert Cameron Huddleston reached out to board-certified elder law attorney Shannon Miller, of The Miller Elder Law Firm in Gainesville, Fla.
Below is an edited version of Cameron’s interview with Shannon. To watch the entire interview, visit the Carefull Community.
How are the elderly exploited financially?
Cameron Huddleston: I'm sure as an elder law attorney that you've probably seen examples of this in real life. I'm hoping you can share some of these examples.
Shannon Miller: I would say some of the most common examples are a caregiver really kind of coming in and exploiting someone who's vulnerable. We often think about the exploitable brain, which is different than someone being in a bed unable to care for themselves. The exploitable brain can be someone who appears very normal. They can drive, they can go to the grocery store, they can live independently, but they may not have the ability to assess risk or to tell the difference between the truth and a lie.
We know from the science that the exploitable brain is a thinning of the cortical insula. What we find is that that person who is having some of that exploitability is very suggestible. So a lot of times, whoever speaks the loudest to them and the most frequently, that becomes their belief system.
We know that one in five people over the age of 70 has been exploited. The average dollar amount for exploitation we know is somewhere between $15,000 for your online scam to $50,000 for a caregiver or family member committing that act. And usually the victim is exploited seven times before anybody takes notice.
We had a gentleman who was from New York who would come to Florida, and he was exploited over 10 years to the tune of $10 million by a family member. We had one where it was a veteran, a decorated Korean war veteran. Mr. McCadden was exploited by his daughter, who actually set up a trust. That was a trust in his name but didn't benefit him. So all of his money went into this trust, but he wasn't the beneficiary of his trust. He was actually kicked out of his home. She cut off all of his income, and he ended up being on something called aid and attendance through the VA, which is for the poorest of the poor.
Exploitation really it's not just about losing your money. What happens emotionally to the victims of exploitation is that they feel very traumatized.
We've seen a lot of really terrible things happen to people. Exploitation really it's not just about losing your money. What happens emotionally to the victims of exploitation is that they feel very traumatized. They're embarrassed.
Usually, the exploiter is someone that they know. So they don't always want to prosecute the case against the exploiter. Then they're in a situation where they have no money. They don't want to recover the money that's been stolen from them, and they suffer a lot medically. Oftentimes, we will actually see a death event.
What are signs that someone is a victim of fraud?
Cameron: It's so tragic. I want to go back to a number that you mentioned, though—that victims are often victimized seven times or seven events before it's even noticed. What are some signs that adult children should be looking out for that their parents might be victims?
Shannon: What we see is a change in behavior of that parent or loved one. They may become more secretive. They may hide things like bank statements, whereas before they might've been very open about sharing their financial situation. They may change banks. They may change where they have their accounts. And then we'll notice that bills are not getting paid. Or bills were getting paid one or two times more than they normally would be because, with the exploitable brain, oftentimes we'll also see, you know, a lack of ability to kind of manage.
We'll also see other things start to happen. Perhaps a lack of personal care, perhaps some things that you just kind of take your head and go, that doesn't seem right. They're getting very thin. Why aren't they eating on a regular schedule?
When an activite exploiter is involved—so we have a perpetrator who has targeted our loved one—they will isolate that person. We've seen situations where a neighbor comes on the scene, and all of a sudden Mom doesn't want to return phone calls … It's a very meticulous process. Someone who is experienced at exploitation, it's like they go to training school, and they learn how to really establish trust. And then they start this whole process of lies: “Your children stole from you. I'm the only one that will keep you out of a nursing home facility. They want to put you in a nursing home.”
We know there's not a single client who comes into my office that says, “I want to go to a nursing home as soon as possible.” They don't want people to know that they're having financial difficulty or medical difficulty because they want to maintain their independence. So the predators will feed on that.
They will get in their head and make them believe by repetition, by telling lies and isolation, that their people just don't care about them anymore. And they will get them to sign documents like powers of attorney, get their names added to bank accounts. All of a sudden, we have a situation where we really can't access our person anymore. They may take them out of state.
All of these things obviously are red flags and really send up a flare. Take action as soon as you start to see any of these problems because, before you know it, the money will be gone and it will be untrackable. So it's really important once we start to see these things happening to really do an intervention as quickly as possible.
How do you help fraud victims?
Cameron: So how do you intervene? How do you take action?
Shannon: Hopefully, before we have to take action, there is a good estate plan in place. For example, when our people are fully capacitated and not suffering from exploitation from an exploitable brain, we hope to have a good solid estate plan in place. As part of that estate planning, either through drafting of trust instruments or through a will, we would also have a durable power of attorney. Who they've designated on that durable power of attorney document is the one who can then take financial action if our principal, the person who signed the power of attorney document, starts to decline. So that would be step one. At the very beginning, we want to set our stuff up.
We have some provisions in Florida that actually allow us to do something called a pre-need consent against exploitation.That pre-need consent against exploitation basically gives permission to our trusted contacts to lock our money down if, later on, we start to give it away.
Another technique is using injunctions to freeze assets when we see them going out the door. In Florida, we have a specific statute that is an injunction against exploitation that's very useful in locking assets down. But injunctions are available in every state in the United States. So there's always the option, when we see that there's a financial risk of harm, to go into any court in the U.S. and ask the court to freeze assets if you can prove that there's some shenanigans going on. So I would encourage you to really look at your state's laws on exploitation, become familiar with them and then take the action to lock assets down.
When we go to talk to a victim in the middle of them being exploited, you may not be the loudest voice. You're definitely not the voice that has been repeating over and over again, “Your daughter Shannon is trying to exploit you. Your daughter Shannon has stolen money from you. Here, look at this bank statement.” Even though, you know, the bank statement may not be clear.
They just grab onto these things and repeat, repeat, repeat, and talk louder and louder. And then that becomes belief. So what we have to do is separate the exploiter from our victim. What we have in Florida is the ability to separate or create a no-contact provision with that exploiter from our victim as part of the injunction process.
So a separation from the perpetrator is the key, and sometimes it's very easy by doing the injunction against exploitation. Sometimes it's more challenging, and sometimes it requires good, old fashioned, “Mom, how would you like to come on vacation with me for a week?”
It took a long time for them to get exploitable by this stranger. It's going to take you a little time to get them back. But the key is repetition. Coming back to the truth of what is really happening, repeating it. And, hopefully, by the end of the stay that they've made with you, you'll make some progress in explaining what the real facts are that are going on.
Sometimes the only alternative is guardianship. What we have to do is actually go into court and show the judge, “Look, this person really cannot manage their assets anymore. They're giving it away to all these scammers. This person exploited them. We have caregiver exploitation over here.” And at that point, the assets will go into a protected guardianship or into a trust. If you have a trust-based plan, the successor trustee can step in and become the gatekeeper of the assets.
So there are a lot of tools to use. The best tools are the ones that are done when our person is not exploitable, encouraging them to get their estate plans in place. But if it's too late or if the estate plan has changed by the exploiter … it does sometimes require a guardianship or engaging in other types of civil litigation in order to undo those things that have happened.
Do you need guardianship to protect parents?
Cameron: If you are already your parents' power of attorney, would you need to go through the court to get a guardianship?
Shannon: Normally you don't. But if what we're dealing with is someone who did another power of attorney after yours, then you would have to go through a process to set aside their later dated power of attorney to show that it was invalid in order to go back to your previous power of attorney document.
Normally, most states in the United States have something called a less restrictive alternative to guardianship, which would allow an agent under power of attorney to be the financial decision maker. And we like that because that allows us to avoid having a court supervise every dime that goes in and out of a guardianship. And you've said in advance, I want my loved one to be the one who manages my finances, not the court.
In those situations where we do have a previous power of attorney, sometimes it can take a little effort to separate their assets from the later signed power of attorney that was done either under duress or by fraud or when someone really wasn't capacitated anymore to execute that document.
How can you protect against financial exploitation?
Cameron: Clearly, using the legal system will help when there is serious exploitation like this. What about the smaller scams that any of us could easily fall prey to, especially if you are dealing with a parent who is starting to forget things?
Shannon: What we know now is that organized crime across the entire world has gotten really sophisticated and involved with exploitable victims. And so what that means is, if you are exploitable and you fall victim to this, to a scam, like one or two times, your information is sold. And because the criminal enterprises are so sophisticated, now they may, say, send someone to your house.
So if you're someone who's exploitable and they've seen that you have sufficient assets, they will put boots on the ground where you are and send somebody out to say, “Your tree is gonna fall on your house. I'm a licensed contractor. Here's my card. It's $15,000 upfront. And then you pay us another $15,000 when we cut it down.” And then you never see them again.
So once they've targeted you, the sophistication of the organized crime related to these enterprises will continue to target you until your assets are made safe.
So what can you do? It's really hard. That's why I personally was so excited to see the Carefull app come into play. It was something that I'd been looking for for a long time because I have so many sad stories about people and their families who felt powerless over preventing this type of situation.
What the Carefull app does is it allows for our person to maintain complete control over their assets. No one can step in and lock their assets down. They maintain control. But an alert is sent out to our trusted loved ones when you pay a bill twice, or when you don't pay a bill, or when you're sending money to a suspicious entity.
So having that notification and monitoring really provides that sense of safety to our client that they're not going to be exploited. Or they might get exploited one time, but that’s going to be it. But it also allows them to maintain their independence and their sense of like, “I'm still in charge. I can still manage my stuff as long as I can make good decisions.” That is a very valuable tool and one that we've been excited to start using with our clients. I have yet to have a client come in and say they didn't want to have that added protection against exploitation.
You cannot step back and say, “I'll deal with it later.” You've got to get in there, and you've got to really start to lean into the problem.
So that app is one product that we use a lot. And then also trust-based planning, making sure that you have successor trustees who can step in and become gatekeepers for your assets.That is another very valuable tool.
FINRA, which is a national organization, has a rule now that allows [financial institutions] to actually freeze assets for up to five days. If they see something that looks like it's fraud or it's some sort of financial scam, they can actually freeze assets down now. And in the state of Florida, we have something called the prudent investor law that allows people to, again, freeze assets down when they think a scam is occurring in Florida.
There are some more tools that are coming online. But, in general, we just have to be super alert, get good estate plans in place, and then use tools like the Carefull app to monitor what is happening. And then to take action. You cannot step back and say, “I'll deal with it later.” You've got to get in there, and you've got to really start to lean into the problem. Even though initially you're going to get a lot of pushback from our victim.
Who should you choose to be your power of attorney?
Cameron: Let me ask you one more question. You mentioned several times the importance of planning and having those estate planning documents in place, drafting them while you're still mentally competent. However, you also mentioned that you had a client, whose daughter was taking advantage of her trust, using it for her own benefit. What advice do you have for people when it comes to choosing that trusted person to be your power of attorney, to be your trustee, to be the executor of your will? How do you choose the right person?
Shannon: That is such a great question. And the answer is it's hard. So, oftentimes, what I do is I say, “Why not choose both your kids?” We have a process in Florida, and I'm pretty sure this is the same across the nation, where you can have two powers of attorney at the same time operating independently of each other.
In cases like that, I can have both of my daughters be my agents under power of attorney, and they operate independently. So it doesn't require two signatures on every check. But, at the same time, they can divide and conquer. So one can pay my bills. One can manage my contracts or do the day-to-day stuff. And then there's a check and balance there, right? So one of them does not hold all of the information. They both can access information. They both can kind of watch each other to make sure that no one is engaging in money’s coming for their own benefit.
If you have family members that struggle financially, or they're in a marriage where the spouse is very controlling and may be the one directing your agent to do things that you've never really been comfortable with during your full capacity, it's best not to choose those types of people. You always want to choose someone who's done well financially for themselves, who has been above board, who's honest, doesn't have any crime situations in their history. Someone who's not struggling from drug or alcohol addiction is always important. Someone who you could imagine today could take over for you.
A lot of people say, “Well, if I need it, then it should be this person. Hopefully they'll get their affairs in order by then.” You know, no, it could happen tomorrow. And when you sign your power of attorney, guess what: The authority vests immediately when you sign it. Your agent gets the power.
In Florida, and I think it's true in most states, a copy is just as good as the original. So you want to keep your document very safe. You don't want to leave it lying around where someone could white out the name and put their name in, you know, cause the copy is just as good as an original.
You also want to really kind of have a conversation with your agent and say, “I've selected you, but I want you to understand that if you abuse it, it's a crime.” Under every single state in the nation, if an agent steals money for their own self, it is a crime, and they will be prosecuted today.
Choose your people very wisely. Sometimes there are fiduciaries like banks or there are independent fiduciaries like professional guardians who may be willing to serve in that role. If you don't have any family members that you trust, there may be a fee that's required as part of that process, but sometimes it's worth it to have somebody who's a fiduciary bonded, insured to manage your affairs because it's just that important.
Cameron: I think, too, it's important for people to realize that once they name a power of attorney, it's not set in stone. If they've chosen the wrong person, they can name someone else. Right?
Shannon: That's right. That's right. You can always change it.
[Keep Reading: The Ultimate Guide to Financial Power of Attorney]