Author: James I. Goldman, CPA

Parent Finances, a Family Discussion

It’s better for parents and their children to discuss how to financially plan for later years than to wait until financial and health issues arise.  These discussions can be emotionally difficult but it is important that children and parents agree how critical matters such as housing, caregiving, estate planning, and inheritances are to be decided.

Family discussions between parents and children can often be eye opening and serve as a reality check to both the parent and children.

Should the discussions take place now or later?  Ideally, it’s best to have the conversations before any issues arise.  Try not to delay and to have these conversations sooner than later.

Areas of discussion should include…

Long-term care and housing alternatives.  Surveys indicate a small percentage of parents and children have had this conversation.  In addition, there is much misconception between parents and children of what the alternatives are and what makes the most sense.

Wills and estate planning.  A proper will and estate plan will often help to avoid the unexpected.

Income and expenses at retirement.  Parents and children often do not correctly understand what their income and expenses will be at retirement.

Guide to important documents, assets, and debts.  It’s important for loved ones to know where wills, trusts, and health directives can be found: and, a complete listing of all assets owned and debts owed should be maintained.

Financial Crimes Against the Elderly

Financial crimes affecting the elderly fall into one of two groups:  exploitation by outsiders, and financial exploitation by family members, friends, and caregivers in Rhode Island.  The aftermath can’t be understated both financially and emotionally.

Financial Exploitation and Fraud Committed by Outsiders

  • Contests and sweepstakes.  These crimes involve the elderly being notified they have won a prize and to claim the winnings they must send in money to cover taxes and other handling costs.
  • Charitable contributions.  A play on a senior’s  sympathy to help others. Often the charitable organization is a scam and non-existent.
  • Unscrupulous investment advisors.  The selling of inappropriate investment products to an elderly person with the promise of high returns.  These products often include high investment and management fees which drastically lowers the rate of returns.  Example:  A  tax-deferred annuity to a senior in a low tax bracket with current liquidity needs.
  • Contractors and repairman.  Unnecessary renovations and repairs.  The work may subsequently not be finished or involve substandard materials or workmanship requiring correction.  Examples:  Driveway re-pavement, roof repairs, kitchen and bathroom renovations, dishonest auto mechanics.
  • Telemarketing, mail, and IRS scams.  Unsolicited telephone calls and mail promising false winnings, selling fraudulent investment products, charitable giving scams, IRS scams.  The likelihood that the elderly person was so lucky to win or to have been fortunate to have been contacted is small.  The elderly person should seek to determine its authenticity and consult with others before acting.

Financial Exploitation and Fraud Committed by Family Members, Friends, and Caregivers

Unlike financial crimes committed by outsiders – family members, friends, and caregivers are often in a position of trust.  It is a sad commentary but family and friends are often the biggest perpetrators of elderly exploitation and fraud.  Often the elderly person is not aware of the manipulation and fraud committed against them due to the close ongoing relationship that exists.  The methods include:

  • Simply taking the elder’s money, jewelry, and valuables.
  • Improper use of credits cards and ATM machines.
  • Changes to wills and trust documents making the perpetrator a beneficiary or increasing a beneficiary inheritance.
  • Borrowing money and not repaying it back
  • Improper cashing and signing of pension checks, social security, and other third-party receipts.

Elderly Parent’s Money: A Case of Too Little Too Late

Children often have little knowledge of what their parent’s financial situation is.  Sometimes even the surviving spouse is left in the dark.

Poor communication often creates unintended consequences and the results can be detrimental to a surviving elderly spouse.

Studies have shown that most families recognize the importance of having an open discussion about a number of issues concerning a parent’s situation as they approach their later years.  Unfortunately, for many families, and even between spouses, this discussion never occurs and the result is not knowing how to deal with situations as they arise.

The discussions may not be pleasant, but the consequence of not knowing can be both emotionally and financially burdensome for the elderly person and their family.

How to address these problems – Framing the discussion

  • Assets – What assets exist and where are the assets located? In whose name are they in and their value?
  • Liabilities – What liabilities and debts exist? The amount owed? In whose name are they in?
  • Insurance policies. What policies exist?  The amount of coverage?  Where are the policies located?  And, are the premiums being paid?
  • As the situation changes should we consider assisted living or a nursing home? If the need arises – who should have a financial power of attorney? A need for a durable power of attorney for health care?  Does a will exist?  Is the will current?  Is there a need to create a trust and what would be the benefits of creating such a trust?

When is the timing right to begin the discussions.

Here are some helpful tips:

It’s never too early to start the discussions.  The earlier you begin the better you and your family members will be prepared.

The majority does not control.  It should be the parent who has the final say about finances and health care.

Maintain control and discipline.  Family dynamics can be troubling.  Know what roles everyone should play.

Elderly Financial Abuse

Financial fraud (aka) abuse is increasing and the elderly are the most common victims.  Here are some common causes of elder abuse and steps you can take to help someone you know.

  1. Family members: It’s distressing but children are often the most common perpetrators of financial fraud.  It often starts quite innocently when they become the responsible person over Mom or Dad finances.  In time, the child starts dipping into the accounts for their own needs.  Over time a significant amount of assets disappear.

Steps you can take:  It’s best to be transparent by having other family members stay involved.  If there are more people involved in the process you have a better system of checks and balances.

  1. Internet, telephone, mail and IRS scams:  They are becoming a daily annoyance and many are very good at conning their victims out of their money.  A caller may be asking for money for a relative in need or to stop collection on a false IRS debt.

Steps you can take:  Protect your personal information.  Never give out information over the phone.  Be very selective who you will release your social security number to.  Don’t pay out money unless a trusted friend or advisor is involved.

  1. Romance scams:  Remember, many older adults, both woman, and men, are victimized in this manner.

Steps you can take:  Be especially vigilant.  Be aware of your environment.  Try to look beyond the superficial.  Limit your use of social media.  Pursue relationships face-to-face.  Unfortunately, in this day and age, deception comes in all shapes and sizes.

  1. Caregivers financial exploitation:  This is a type of abuse that is difficult to prevent.  These caregivers range from personal care aides who provide non-medical assistance such as helping with the laundry and cooking to home health aides.  Older adults often rely on and trust in-home caregivers, and some caregivers have used that relationship to exploit their clients.

Steps you can take:  Limit a caregiver access to an older adult’s ATM or credit card. Don’t leave valuable papers open and on tables for caregivers to see.  Always have a criminal background check before hiring.

Taking Care of Elderly Parent’s Finances

Physical or cognitive changes to a parent’s health can thrust children who have little knowledge of their parent’s finances to take control.  Here are some steps a family can take to prepare for the unexpected.

  1. Take notice of changes in a parent’s health. The earlier you recognized physical and cognitive changes in your parent health the earlier you can plan.
  2. General Discussions. Parent – child discussions should take place early rather than at the time of a crisis.  Preserving wealth and transferring wealth are reduced when decisions are made under stress.
  3. Prepare a listing of all items of value and documents. Include a written detailed listing showing names of bank accounts, brokerage accounts, life insurance, real estate, collectibles, jewelry, and other assets.  Include vital documents in the listing, such as wills, insurance policies, tax returns, trusts, health directives, power of attorney, and where they are kept.
  4. Prepare a power of attorney. In the event, a parent is no longer able to handle their financial affairs an assigned power of attorney will allow another person to oversee the finances.  Don’t wait, for a power of attorney to be valid, your parent must be competent at the time of signing.
  5. Validate the will. Make certain the will correctly stipulate how a parent wishes their assets to be divided after they are gone.
  6. Signs of financial abuse and exploitation. Unfortunately, older adults are often the victim of financial abuse and exploitation. Perpetrators include spouses, children, relatives, friends, identity theft, IRS scams, caregivers, contractors, unsolicited emails and telephone calls.   Factors such as loss of a spouse, loss of friends, sickness both physical ailments and mental changes, and loneliness all contribute to increasing the chances of a parent becoming a victim of financial abuse and exploitation.

Daily Money Management for Seniors

Daily Money Management (DMM) services may be as simple as paying bills and reconciling the checkbook, or the issues may be more complex.

It has been estimated that 5-10% of all older adults living in the community could benefit from some form of DMM.   Elders who have the following conditions are often in need of DMM.

  • Cognitive impairment
  • Physical conditions that limit a person’s ability to write.
  • Visual impairment.
  • The loss of a spouse, family member or friend who previously handled the person’s finances.

DMM can prevent abuse and neglect.

  • By eliminating opportunities to abuse.
  • Blocking access to assets, or removing the motive to abuse.
  • Ensure that all bills are paid and critical service needs are met.
  • Ensure that rent, debts or other revenues owed to elders are collected.

ELDERLY FINANCIAL EXPLOITATION

Financial exploitation occurs when a person misuses or takes the assets of a vulnerable adult for their own personal benefit.

Older adults are vulnerable if they require assistance with their daily tasks either due to a physical or cognitive condition. The assets are commonly taken via manipulation, coercion, threat, deception, false assertions, or duress.

Predators often include:

  • Family, friends, caregivers
  • Telephone and internet scams
  • Romance scams
  • Financial advisors
  • Contractors

AID & ATTENDANCE PROGRAM – A BENEFIT FOR SENIORS

Eligible veterans and their surviving spouses who require the aid and attendance of another person, or are housebound may be entitled to additional monetary benefits.

Any one of the following must be met:

  • You require the aid of another person to assist you in bathing, feeding, dressing, and attending to the wants of nature
  • You are bedridden due to disabilities
  • You live in a nursing home due to a cognitive or physical condition
  • Your eyesight is limited

Most often a veteran must have at least 90 days of active service, with at least one day during a wartime period to qualify or for their surviving spouse to qualify.

Maximum Annual Pension Rate can be as high as $34,050.

BUYING TIPS WHEN SHOPPING FOR LONG-TERM CARE INSURANCE

Before buying a long-term care insurance policy ask the following.

  1. Not all policies are the same. Contact several insurance companies and compare the benefits.  For instance what’s covered and what’s not covered, limitations of the coverage, and the premium cost.
  2. Carefully read the policy to make sure you know what you are purchasing and you’re clear as to what the policy covers and does not.
  3. Review the application for correctness. You don’t want to be denied coverage due to an incomplete or inaccurate application.
  4. Is the insurance company financially stable?  Obtain its rating by the rating agencies.
  5. Obtain the company premium increase history and what the premium is today and for the future.
  6. Be careful of advertisements. Don’t be mislead.

HOW TO HELP AN OLDER ADULT WITH THEIR FINANCES

As older adults, age, sickness to their physical condition and their mental state of mind make it difficult for them to handle their financial issues.   Overwhelmed by their finances they often feel confused and lost.  Children, friends, and relatives will often offer their advice and support.  Here are a few important facts you should be aware of before providing assistance.

  1. Be transparent and open will all who are involved including the older adult, siblings, and financial advisors.
  2. Organize all records. This may involve tracking down assets, finding lost documents, securities, financial statements, insurance policies, power of attorney, health care directives.
  3. Be alert to fraud and exploitation. It is not uncommon for older adults to be taking advantage of by relatives, friends, caregivers, and others.

Be careful undertaking more than you can handle.  Often the task is too difficult for even a child, relative, or friend with the best intentions.  Know when you need to step back and seek