Protecting the Elderly from the People They Trust

Ashamed that a trusted family member, friend, or caregiver might be deceiving them -- or worse, that they may be deemed incompetent to manage their affairs -- they often choose to keep these problems hidden. As a result, hard data documenting this sort of fraud is lacking.

What is known is that 80,000 such cases were reported last year, and more than two-thirds of the victims were defrauded by someone close to them. "Financial exploitation is growing out of control because we have an aging population," says Ronald Costen, director of Temple University's Institute on Protective Services in the School of Social Administration.

That's why the issue has moved to a front burner in law enforcement, government, and the banking industry. Both houses of Congress are considering versions of a comprehensive bill called the Elder Justice Act, which funds public education, better data collection, and training for law enforcement and elder care professionals to combat the problem. A handful of states from Massachusetts to California have programs that work closely with social service agencies and banks to recognize fraud and report it.

Since many financial frauds center on the durable power of attorney, it's critical that document be properly drawn. By itself, this instrument requires no regulatory or legal oversight or accounting of the spending. That's why elder fraud experts call it "a license to steal," says Lori Stiegel, associate staff director for the Commission on Law & Aging at the American Bar Assn.

To prevent such abuse, hire a lawyer to customize the document, recommends Loewy. Make sure it explicitly states what bills and other financial transactions you want the agent to handle. Some states allow agents to make financial gifts to themselves without limit or restriction. Carefully review or delete these clauses.

Insist that the agent not commingle his or her own funds with those of the person granting power of attorney. It makes it easier to monitor the finances. Another safeguard is to notify the bank of any monthly bills to be paid by the agent with power of attorney. Have the bank agree to to alert another family member if there is an attempt to withdraw additional funds.

Even a well-drafted power of attorney is not foolproof. To add additional protection, assign a third-party, preferably a lawyer or other nonfamily member, to review all spending and monthly financial statements.

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