This article focuses on financial abuses, dealing with the most common situations we have seen in our office in recent years.
As background, the General Laws of Massachusetts require certain professionals to report suspected “Elder Abuse” to the appropriate protective service agency. Those agencies in turn conduct an investigation which may refer the case to the local District Attorney. An “Elder” or “Senior” is anyone over the age of 60. “Abuse” broadly refers to physical abuse, emotional abuse, sexual abuse, financial exploitation, neglect, abandonment and in situations where a person lives alone and is not properly taking care of his or herself, self-neglect.
This well-known from bank robber Willie Sutton. When asked why he robbed banks, he replied, “I rob banks because that’s where the money is.” The quote explains why Elders are targets. Elders have money, they are home; they open their mail, and, they answer their phone. Further, they have access to money that’s close at hand via an electronic key stroke or a plastic credit or debit card.
Not only are Elders easily available via telephone and mail but circumstances often mean that a spouse is deceased leaving the survivor more vulnerable and lonely. Also consider that cognitive decline may have affected judgment.
These are the scams and techniques we have seen that have separated you from your money. Perhaps surprisingly, elder abuse is most often perpetrated by someone the senior knows and trusts and is dependent upon for care, often friends and family members. Following are two scams, both by telephone and both common to New England this year.
“Granddad, do you know who this is?”
That’s the voice my client heard when he picked up the telephone and the grandfather, age 89, answered with “Christopher?” Hearing the reply, the scammer then had a name—Christopher. “Christopher” recounted his sad story that he had been arrested and “please don’t tell my mother, but I need money now to get out of jail.” Our client followed “Christopher’s” instruction and sent money via a wire transfer—money never to be seen again. Law enforcement could do nothing.
What to do: If you receive a call from a relative in distress and you’re unsure of the voice on the other end, tell him or her that you’ll call back. Call other friends or relatives to verify the story. “Christopher” may tell you he needs the money now, but, there is no such thing as an immediate money emergency. If someone—anyone—is pressuring you for immediate money, something’s suspicious.
This is the IRS.
We have seen an enormous increase in the numbers of the IRS scam recently. This scam starts with a telephone call from a representative from IRS calling to tell you that there are taxes owed and there is a lien or levy about to be served against you. The caller will ask that you immediately send money via prepaid cash cards or wire transfer.
The IRS will never:
• Call all to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Again, there is no such thing as an immediate money emergency.
• Threaten to bring in police to have you arrested for not paying.
• Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
• Ask for credit or debit card numbers over the phone.
In the unlikely event that an IRS representative visits you, he or she will always provide two forms of official credentials called a pocket commission and a HSPD-12 card. HSPD-12 is a government-wide standard for secure and reliable forms of identification for Federal employees and contractors. You have the right to demand to see these credentials.
What to do: If the IRS calls, ask the caller for his ID number and the tax year that is the subject of the liability. Then, simply tell them that you will follow up with the local IRS office. If you think you do not owe tax, you’re probably right. Simply hang up. Why be polite to someone who is trying to steal from you? If you think you owe tax, also simply hang up, and then call your tax preparer or the IRS at 800-829-1040.
The next two scenarios are recent situations between friends and family. It’s the hardest abuse to identify and harder still to prevent:
The “Sugar baby,” or “When the bank balance is zero, the girlfriend’s gone”.
Recently a gentleman in his early 90s was befriended by a woman in her early 50s. She shopped for him, visited him at his home, eventually spending the night. He wrote more than one check to her in excess of $10,000 for a significant car repair. She was attentive to him. In turn, he made her feel appreciated, and was generous to her. After all, it was his money. Eventually, he named her as the holder of his health care proxy and power of attorney.
Consider this situation: An elderly man lived alone and was in declining health. His children helped him when they found the time, but he insisted on staying in his home and the children did not live close. He met a local lady who helped him out at home. She was clever and pretended that she has fallen in love with him. She was actually taking advantage of his failing health and persuaded him to name her as the beneficiary to his wealth and as his financial power of attorney.
If you haven’t guessed, the two examples are the same situation viewed first from the perspective of the elderly man, and second, from the perspective his adult children.
If you are aware of a similar situation and you, a friend or family member, think you should intervene, then proceed, and do so at your peril. The affairs with which you are about to concern yourself is meddling at the very least—justifiable perhaps but nonetheless meddling. Loneliness is typically an enormous factor in matters such as these, and even if the person is aware of the significant financial sacrifice he or she is making, the elder doesn’t wish to give up the relationship.
As a friend or child of the elderly person, the calculus of the situation is this: does the cost of meddling into the affairs of your elder parent or friend equal or exceed the cost of damages to be wrought by this person who is potentially a predator.
What to do:
• (Advice for adult children or friend) Encourage the person to consult an attorney regarding a prenuptial agreement. A contract such as a prenup can protect assets from a gold digger, and a third party such as an attorney may be able to evaluate the situation more dispassionately than family or friend.
• Do your homework. Seek information on the person and his or her background to see if there are clues in the person’s past regarding similar situations. (In the situation we described, a telephone call to a prior employer revealed that the Sugar Baby had worked in a nursing home and was terminated because of inappropriate relations with a resident at the facility).
• If marriage is being discussed and the elder is not willing to get a prenup or ask their future spouse to sign one, their lawyer may be able to persuade them to execute a new will. A new will might include a bequest to the new girlfriend, but could appropriately limit any inheritance. Another option is to arrange significant assets, such as the family home, to a trust, so that they will remain in the family.
The First National Bank of Grandpa.
Family members are lenders of last resort. That is, family turns to family when the banks have said no.
Consider the story of Ms. S and her adult child, Jane and Kim. There is no obvious elder financial abuse in this story but great distress nonetheless. Ms. S was a widow in her early 80s, living in a very nice lake front home in Central Massachusetts. Ms. S. managed to save a nest egg and her house, worth nearly $600,000, was paid for.
Daughter Jane has no money of her own and sought to open a business—a health club. Ms. S considered loaning her money but instead, added her daughter to the deed of her lakefront home and entered into a mortgage turning over the proceeds from the mortgage to Jane with the understanding that Jane would pay the monthly mortgage payments. It was Ms. S’s intention to leave the home to Jane at death and to leave her savings to the other daughter, Kim.
The financial crisis of 2008 hit; Jane’s business failed and Jane sought Chapter 7 Bankruptcy protection. Jane’s situation was a source of great anxiety for Ms. S who was afraid to closely question Jane about the matter. She was afraid that discussing the matter would cause problems in their relationship and perhaps in Ms. S’s relationship with her grandchildren.
At the time, what was unknown to Ms. S and Jane was that non-residential real estate (Jane did not live in the mother’s home) is unprotected in Chapter 7. Had the Chapter 7 bankruptcy proceeded, the Trustee would have possibly sold the home with the proceeds to pay the Jane’s debts. Ms. S, in order to save her home, was compelled to pay off all the daughter’s creditors rather than risk losing her home.
When Ms. S died the home went to Jane because her name was on the deed. Kim received no inheritance because Ms. S had exhausted her savings using the money to pay off Jane’s creditors. Ms. S’s story illustrates how a parent’s desire to use accumulated wealth for the benefit of adult children can have terrible outcomes.
What to do when a family member asks for a loan:
• Remember that you are a lender of last resort. If a bank refuses to lend money to your family it’s because the bank fears it will not be paid back. You too should not assume you’ll be paid back if you are making a loan to a family member. Think of it as a gift. And, if making a gift in that amount causes you stress or puts you at financial risk, don’t do it.
• Remember that money doesn’t solve all problems. If you were witnessing your son or daughter drowning in a lake and the child yelled to you “Dad! Throw me some money,” would you do it? Of course not, you would attempt to save him, but not by listening to a bad solution (“Throw me money.”) but rather by understanding the problem to better come to a solution.
• Remember this recurring theme: there is no such thing as an immediate money emergency. If asked for money, take your time. It took you a lifetime to accumulate your savings; don’t give it away quickly or easily.
• If the reason for the loan is complicated, don’t do it. It’s your money and you have a right to understand how it’s going to be used.