Financial Elder Abuse and Diminished Mental Capacity

A growing concern of gerontologists, financial regulators, and law enforcement is the increasing number of cases of elder financial abuse, often due to diminished mental capacity.  This includes mild cognitive impairment as well as dementia and in the beginning it is not easy to recognize.  It can accelerate quickly or slowly.  Every case is different.  

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Many of our clients are providing care for their aging parents.  Care encompasses a variety of situations, whether it is assisting with the activities of daily living, managing healthcare needs, or overseeing financial affairs.  Knowing when to step in and provide assistance is not always obvious. Also, the offer of care from a child can sometimes feel hurtful to independent folks.  Many of our senior generation feels that their financial affairs are deeply personal and resent any attempted intrusion into their privacy.

Warning Signs of Diminished Mental Capacity
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Warning signs can include difficulty with:

• Communicating or finding the right words
• Reasoning or problem-solving
• Handling complexities
• Planning and organizing
• Coordination of motor functions
• Confusion and disorientation

(Keep in mind, these can also be signs due to stress, injury, or other disorder.)


Types of Financial Elder Abuse

Diminished mental capacity can make someone an easy target for predators.  In particular, those elders who are socially isolated, have recently lost a spouse, or have been hospitalized are attractive and vulnerable to predators.  Believe it or not, predators are most often family members, followed by scammers and caregivers.

AARP, along with the Virgina Tech Center for Gerontology, published a study that suggests one in five older adults become a victim of financial exploitation. On average, the victim loses $120,000.  

Financial elder abuse is the illegal or improper use of their assets, including:

• Cashing checks without authorization
• Forging signatures
• Stealing or misusing possessions
• Coercing or deceiving an elderly person into signing a document
• Improperly using a guardianship, conservatorship, or power-of-attorney

If you believe that you or a loved one is being victimized, contact your local law enforcement as well as the appropriate state agency.  In Illinois it is the Adult Protective Services hotline at 866-800-1409.  It is also appropriate to contact your attorney.

As your financial partner, Mosaic Fi believes our responsibility includes monitoring our own policies and procedures to make sure we are following all fiduciary guidelines.  Through our compliance process we regularly review client situations for any out of the ordinary indications of potential fraud or abuse. 

Red flags we will look for include:

• New ‘best friends’
• Family/friends, previously distant, now appear to be more involved
• Suspicious signatures on accounts
• New names added to accounts or property titles
• Recently signed legal documents that an elderly person cannot explain
• Recent revisions to an estate plan
• Withdrawals/transfers that an elderly person cannot explain
• Mail for senior’s financial accounts redirected to a new address 
• Billing and/or charges for new and unnecessary services
• Confusion and lack of understanding regarding financial arrangements
• Constant need to consult with a new person before making financial decisions
• Embarrassment or feelings of guilt
• Increased levels of stress/anxiety

​Red flags for family members (in addition to those listed above)

• Possessions go missing
• Unpaid bills or notices of default
• Isolation from loved ones due to pressure from perpetrator

Protective Measures for Clients
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Preemptive measures can help avoid or mitigate the potential opportunities for financial elder abuse.  We suggest you:

• Review and update all estate planning documents for yourself and/or your parents.  Make sure there is a durable power-of-attorney for property.
• Use direct deposit for all checks
• Remind your parents (and kids!) not to give personal information over the phone or the internet 
• If one family member is managing funds for a senior, use “dual control” such that another person is overseeing all financial activities as well as reconciling accounts.
• Use paperless statements
• Check their computer for current virus protection like Norton
• Review online accounts daily, if possible
• Set up all accounts to receive alerts for any activity, including checking and savings accounts
• Periodically check their credit to see if any credit cards or loans have been taken out in their name; or consider a credit protection subscription such as Lifelock.
• Keep track of sign-on info (and changes), including user id's and passwords
• If there is an in-home caregiver, remove all financial documents, valuables, and jewelry
• Speak with your financial and legal advisors to express any concerns

As fiduciaries, our ethical and legal obligation to our clients is to act solely in their best interests.  We welcome the opportunity to partner with you when or if you are helping a parent or loved one.