Financial Warning Signs for Elderly ParentsThis article is a reprint from the Financial Planning Association. Many of us struggle to keep our own finances together. But if you have elderly parents or a close older relative or friend, you should also be alert to signs that they may be experiencing money management problems that may require you to intervene. Here are a few of the potential problems, warning signs and steps to take to minimize problems. Money mismanagement. As parents age, they may begin to forget to pay bills, experience diminished ability to handle numbers or even be physically unable to write checks. And of course, they may simply not have the money to pay their bills. Warning signs include bills piling up at home, calls from creditors and checks that haven't been deposited. Who's doing their taxes? Most elderly people have to file not only annual taxes but also quarterly estimated taxes. Are these getting done, done accurately and done on time? Letters from the IRS might reveal a problem. If you personally can't ensure that their bills are paid and taxes completed—either because you don't live close or because your parents refuse your help—try to get them to use professional services such as a tax accountant and a bonded, licensed bill-paying service. Be sure the services are reputable and try to monitor their work. Automate bill paying as much as possible and have Social Security and pension checks automatically deposited in their bank accounts. Financial scams. The Federal Trade Commission reports that 80 percent of the victims of telemarketing scams are over the age of 65. Isolated seniors who live alone are especially vulnerable because they like the attention of phone calls and no one else is around to question the scam. Look for checks made out to unfamiliar, out-of-state companies or phone calls from solicitors (have a caller ID installed). Bounced checks or sudden trouble paying bills or may disclose that they're losing money to scams. Put them on the no-call telemarketer lists. If they have a computer, sneak a peek to see if they're responding to scams over the Internet. Watch for piles of junk mail from contests, "free trips" or sweepstakes, or such items as costume jewelry, pens and pencils, and cheap beauty products. This may signal that they are buying worthless "valuable prizes" or sending money for magazine subscriptions to enhance their chances of winning. Be alert to bills paid to questionable home-repair services or too-good-to-be true investments. Financial abuse. Sadly, the elderly are often financially abused by people closest to them: family members, friends, privately paid caregivers or a legal guardian. These people usually have access to the person's finances, and may drain bank accounts, cash checks and run up credit cards. One red flag is if your parent starts shunning all outsiders, including family and friends, relying solely on the "caregiver." This can be difficult to break through because the parent is typically set against others by the Svengali-like abuser. You may need to call in the county's adult protective services or even the police. In the case of a privately paid caregiver, run a background check for prior arrests or convictions. Unsuitable financial products. While not an outright scam, the elderly are frequently sold legitimate but unsuitable financial products. An example might be a salesperson convincing an elderly couple to roll a maturing certificate of deposit into a deferred annuity to "earn higher interest" even though the annuity is not appropriate for their financial circumstances. Convincing your parents to work with a reputable financial planner can eliminate this potential problem. Compulsive gambling. Gambling can become an addictive form of entertainment for older people. Are your parents making frequent trips to casinos, buying many lottery tickets, gambling on credit or constantly talking about "winnings"? They also may be gambling online. The challenges of spotting and preventing these and similar money management problems are frequently compounded by the tendency of older people to be secretive about their personal finances, embarrassment about having money problems, resistance to giving up their independence, and having children who live far away. You may feel uncomfortable playing detective to spot these warning signs. But the loss of their financial savings and their financial independence is far more devastating. Have Something to Say? |  ADVERTISEMENT  |
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Posted: Sep 27, 07 2:30am
How about annuity contracts in IRA's.
I cant believe that this could have been done legally.
Its amazing how many financial professionals prey on the elderly.
Posted: Oct 2, 07 2:40pm
Alan,
I'm not to sure that it is a "Financial Professional" that is preying on the seniors. A "Professional" doesn't need to resort to that kind of trickery.
TB
Posted: Oct 2, 07 2:44pm
Alan,
I have always had an aversion to this kind of activity but I know there are some good reasons to have an annuity in an IRA, I just can't think on any right now HELP!
One reason may be because the client has requested it.
Another reason may be for the creditor protection.
TB
Posted: Oct 3, 07 4:17am
The annuity contracts that I manage for my mother are fixed. They can not be sold/liquidated without substantial penalty, the management fees are excessive to the extent that investment in a money market can not cover the annual management fees and the only thing to look forward to is the death insurance payment.
The commissions to the "professional" was the incentive to place this in an IRA. These contracts have a tax deferral incentive but to have IRA money that is already tax deferred going into it? It doesn't make any sence!
The SEC should prohibit such activity.
Posted: Oct 7, 07 9:46pm
advantage, that's a great comment that these salespeople who prey on the elderly are not really "financial professionals." The good news is that the SEC has made targeting seniors one of their hot button issues this year. They are really cracking down on senior seminars. No "hot lunch seminar" is their general rule. Also, they are very cautious of designations that claim to specifically serve seniors' financial needs, such as the Certified Senior Advisor.
Sadly, they may be missing the point. Most of the financial services industry is not set up to put the clients' needs first, senior or not. The best way to make sure you are working with someone who puts your needs first is to work with someone who is a financial fiduciary.
Your CPA, attorney and doctors are all fiduciaries. Shouldn't your financial advisor be as well? Resources to learn more about financial fiduciaries:
www.napfa.org
www.focusonfiduciary.com
http://www.leonardwealthmanagement.com/about/fiduciary.htm
Posted: Oct 17, 07 10:41pm
All stock brokers, bankers, and investment advisors have a fiduciary responsibility to their clients/customers. The term is a legal term, originating in English common law. It is not necessary to seek out special "Financial Fiduciaries" when looking for investment advice.
On the website you mentioned (Leonard) I notice they ask the question "Why not your financial advisor?" That set off an alarm in my head.
If someone is in the business of providing investment advice, taking money from customers for investment purposes, etc., they have a fiduciary responsiblity to their customer under common law.
Personally, I would be a little suspect of any firm using such a play on words to lure customers to their office. That sort of ploy seems designed for customers who never took a business law class, don't know much about the stock market, or naive and easily duped ( like the elderly)
Try as I might, I couldn't find the term used on A.G. Edwards website (120 years in the business) or Merrill Lynch's either (established in 1914 and managing over 1 trillion in assets)
Eric, I'd be real careful dealing the company you mentioned. Their pitch doesn't seem to fit the client base they claim to serve. (customers with over $3 million.)
Posted: Oct 20, 07 4:32pm
What is really sad is that the majority of people who abuse Seniors financially are family members. Usually, but not always, it is children and grandchildren who have the responsibility of caring for the Senior. Many have the mindset that they are "entitled" to the money because they are the caretaker/guardian.
Also, gambling addiction is so prevalent with our Seniors these days, much more than people realize, yet it is difficult to detect.
I have personal experience with both of these situations in regards to my 85 y/o grandmother and her guardians who she lived with. Her guardians, who also had power of attorney for her, had severe gambling addictions. They gambled all their retirement savings away, and then tapped into my grandmother's. They eventually gambled it away too. Then, they sold one of their vehicles. Next, their home of over 30 years was foreclosed on. I live a good distance away from my grandmother, and upon finding all this out, I intervened on her behalf. Before the intervention, she had been living with her guardians in a small rented mobile home with peanut butter sandwiches as her main form of sustenance. She was isolated in her tiny bedroom with a tv for companionship. Now, she cannot go live in the assisted living community she had in mind because all her funds are gone. She has to rely solely on the government and is on a waiting list for a bed in a nursing facility. A LONG waiting list.
She is just one victim in many who have been taken advantage of in this way, and the burden of these crimes eventually falls on ALL of our shoulders as taxpayers. We are the ones who are paying now and who will continue to pay more as these problems continue and get worse, which they will. Every year the aged population in America grows larger and so do the problems that go along with aging.
I implore anyone and everyone to get their financial affairs in order immediately, and to choose someone you trust beyond a shadow of a doubt to oversee your financial affairs in the event you are not able to. Tell in detailed form what your wants and wishes are and how you want everything done and carried out. There are some that will not end up as fortunate as my grandmother in her tragic situation.
Posted: Oct 21, 07 11:50pm
That is so sad about your Grandmother. But it is so true, everything that you said.
Posted: Oct 23, 07 10:05am
I have seen this type of abuse all too often as a financial advisor. As previously noted I would ask someone if they would be willing to put in writing their fiduciary duty.
The other thing I would recommend is to be wary of trusting any one person for all of your information. Just like parents want to know who their kids are hanging out with I would suggest "kids" know who their parents are hanging out with especially when they get a bit older and may be more suseptible to unscrupulous "advisers" and "protectors".
Posted: Oct 23, 07 11:22am
Maybe I'm a doubting Thomas, but barring mental degeneration, such as senile psychosis or Alzheimer's Disease, I believe older people are simply extensions of what they were as younger people. Someone who would be fooled by a lottery at 85 was probably buying lottery tickets at 35. Fools age but age doesn't necessarily create fools.
My mom kept her own council and financial affairs until the day of her death at 89 as did all my relatives who advanced in age but not in stupidity.
Frankly, I would trust by own judgment with finances before I would trust my son's. He is a wonderful and loving adult child, but his track record has not been anywhere near as good as mine for living within his means.
As for professionals, they should also be judged on their track records. Most of them are not much better than their clients at deducing the future of the markets.
If you have enough capital to be safe, you need to keep your own eye on what you are doing. You are the best at judging what you need. A professional, at best, should be used as an advisor, not a decider.
My best advice to an older person is: Don't be greedy. if you can get a safe 5% return on investment, what are you gambling for at 80? Your needs are far less than your fears. Anyway, if worse comes to worse, if IAMS keeps the cat healthy, how bad could it be for you?
Most people do NOT end up in long-term care nursing homes. Look at the numbers as compared to the numbers in their own homes or apaprtments. Most basic goods and services will not accellerate in cost by 5000% If telephone calls go up to $50, who is left alive that you have to call at 85 anyway?
The issue is not who is a professional but rather who is competent to manage their own affairs. Especially for older women: Do NOT allow your husband to keep you out of financial decisions. If he dies before you - and he probably will - you will need to take over your financial affairs.
Posted: Oct 23, 07 10:00pm
Have you ever considered that if you have dementia...you won't even know it. And if you have chosen to be in total control of your affairs, you may lose that. Then what?
I resent the IAMS comment. You expect everyone to read and learn from you. Your comments are a total turn off to me.