Managing someone else’s money: How to do it right and prevent elderly financial abuse

It started when an alert broker called to let Alan Sims know that $3,360 was being withdrawn weekly from his 103-year-old friend’s brokerage account. Turns out that a live-in caretaker was padding her hourly wages, writing checks of varying amounts that could have pushed her annual salary to more than $165,000 a year.

Sims, executor of his elderly friend’s estate, and her attorney had to step in and confront the caregiver, who was immediately fired.

“It was devastating,” said Sims, recalling the events eight years later. “Not only the amount of money that was taken, but the trust that was broken.”

Sadly, it’s not unusual. Every year, thousands of examples of elderly financial abuse occur, often at the hands of friends, family or caregivers. In 2010, the annual amount of losses due to financial exploitation of seniors was estimated at $2.9 billion, according to a study by the MetLife Mature Market Institute and the National Committee for the Prevention of Elder Abuse.

“Unfortunately, it’s a lot more common than we like to think,” said Marylou Robken, a Carmichael CPA who has worked as a forensic investigator on dozens of elderly abuse cases in the last 15 years. “So many elderly people are isolated, and they may not even know that something’s wrong.”

Certainly, financial exploitation of seniors is nothing new. In recent years, local, state and national organizations have attacked the problem on numerous fronts, encouraging more awareness, better reporting and stiffer penalties.

Plenty of older Americans are more than capable of handling their own affairs and value their independence. But for many, “admitting that we can no longer manage our financial affairs can be as traumatic as having to give up driving,” notes Eleanor Blayney, consumer advocate for the Certified Financial Planner Board in Washington, D.C.

Getting help

An estimated 50 million-plus U.S. residents are 62 and older. As cognitive abilities fade or health issues intervene, it’s a given that many of us will be – or already are – picking up the financial reins for aging parents, family, friends or neighbors.

That role is what’s known as being a fiduciary, someone who puts another person’s best interests above their own. It takes many forms. It could be a daughter who has power of attorney for financial or medical decisions on a parent’s behalf. It could be a trusted friend who’s the designated receiver of veterans’ or Social Security benefits for someone unable to do banking. It could be the trustee named to manage assets in a person’s living trust.

It’s up to the “caregiver generation” to be sure that aging parents and others get the help they need to manage their financial affairs and avoid becoming victimized, said Richard Cordray, director of the Consumer Financial Protection Bureau, in a statement last week.

On Monday, Cordray’s consumer bureau issued a series of free how-to guides, “Managing Someone Else’s Money,” that spell out what’s required of those who: have power of attorney to make someone’s financial decisions; are court-appointed guardians or conservators; are trustees of someone’s revocable living trust; or are government appointees handling someone’s income, such as Social Security or veterans’ benefits.

The guides are intended to “walk these caregivers through their financial duties and provide practical tips, like explaining common consumer scams,” Cordray said.

All too often, seniors fall victim to fraud or financial exploitation. “They make attractive targets because they often have tangible household wealth – whether it is in retirement savings or home equity – but they may be isolated or lonely or otherwise susceptible to being influenced by a predator in disguise,” he noted.

Keep good records

Fiduciaries are expected to act in the other person’s best interest, manage the finances carefully and maintain good records.

Keep a detailed list or a file of all money you receive or spend. Include the date, amount and purpose of checks paid or deposited, as well as names of people/companies involved. Keep receipts and notes, even for small expenses. For example, write on the receipt: “$50, groceries, AllBrands Grocery Store, May 2.”

After Sims was given power of attorney for the financial affairs of his 103-year-old friend, for instance, he maintained a written journal and took meticulous notes of every financial transaction he made on her behalf. Also, checkbooks and other financial documents were safely put away where they weren’t accessible to caregivers.

Avoid conflicts

No matter what kind of fiduciary role you’re taking, it’s imperative to keep the senior’s money separate from your own, says the CFPB. For instance, it might be OK to buy a car with the senior’s funds to drive to doctors’ appointments or to do banking, but if you’re using the vehicle mainly for personal use, that could be a conflict of interest. Same with paying your relatives to do work at the senior’s home or apartment.

Get signed up

No matter our age, all of us should designate someone to act on our behalf, in the event we’re incapacitated due to illness or other impairments. Some financial advisers recommend that anyone reaching 18 or college age should fill out a power-of-attorney document for financial or health care reasons.

In a Federal Reserve Bank survey earlier this year, only 22 percent of those age 40 and up said they’d created a power-of-attorney document, naming someone to handle their financial affairs in the event they’re ill or mentally incapacitated. Another 12 percent said they’d considered it but never followed through.

Health care power-of-attorney documents are easily found online through medical and government agencies and must be signed by two witnesses. Power-of-attorney documents for financial affairs are a bit more involved. They can be obtained online, at a bank, brokerage or through an attorney but usually must be notarized.

Report financial abuse

In a 2012 national survey of certified financial planners, more than half – 56 percent – said they’d worked with older clients who were victims of “unfair, deceptive or abusive” financial practices. In its new guide, “Financial Self-Defense for Seniors,” the financial planner board outlines 10 common financial frauds that may entrap seniors, such as “free lunch” seminars or inappropriate investments.

According to the board’s survey, only 5 percent of seniors report financial abuse, either due to embarrassment, fear of naming the perpetrator or uncertainty about exactly what occurred.

Perhaps the most insidious type of financial abuse occurs at the hands of someone’s own children.

As a certified fraud examiner for 15 years, Robken has seen more than her share of financial abuse targeting seniors. The most upsetting was a Placer County case in 2008 where an adult son moved his elderly mother out of the family home, put himself on the property deed and lived a cushy lifestyle with his girlfriend. His mother, in the early stages of Alzheimer’s, was essentially abandoned in a neglected apartment.

It wasn’t until a granddaughter blew the whistle on the situation, Robken said, that law enforcement got involved. By the time the son was found guilty at trial and sentenced to prison, his mother had died.

“It tugs at your heart strings,” said Robken. “How could someone do this, especially to (their) mom?”

Whether it’s a bank, a trusted friend or an adult child, those who step in as fiduciaries to help manage someone’s financial life have a built-in responsibility to report suspicions of elder financial abuse, said CPA Stuart Robken, a forensic auditor for 30 years. He and his wife, Marylou, both are retiring this year. “People just need to be aware. They don’t have to prove anything, but just suspect it.”


Among the warning signs:

• Money or property is missing.

• Unexplained withdrawals from bank accounts, frequent ATM use or large wire transfers;

• Unable to pay normal bills;

• Bank statements or bills stop arriving in the mail;

• Purchases of merchandise or services that seem unnecessary;

• Names are added to bank accounts that they’re unable/unwilling to explain

• Unusual gifts to caregivers, family members or a new “best friend;”

• Changes to beneficiaries on a will, life insurance policy or retirement funds;

• A caregiver, friend or relative suddenly begins handling the money without documentation of the financial arrangement

Source: Consumer Financial Protection Bureau


“Managing Someone Else’s Money”

Four free guides covering how-tos of being a financial fiduciary, as well as potential signs of elderly financial abuse, provided by the Consumer Financial Protection Bureau. For copies, go to: ConsumerFinance.gov or call toll-free: (855) 411-CFPB (2372).

“Financial Self-Defense for Seniors”

Free booklet from the Certified Financial Planner Board covers 10 “red flags” of financial abuse and how seniors can avoid getting scammed. To download a copy, visit LetsMakeAPlan.org. For a mailed copy, go to mail@CFPBoard.org or call (800) 487-1497.

“Citizen’s Guide to Preventing & Reporting Elder Abuse”

Free consumer advice in English, Chinese or Spanish from the state Attorney General’s office: www.oag.ca.gov.

Adult Protective Services

Every California county has an APS office to help seniors and their families with financial and other matters. To locate local offices nationwide, call (800) 677-1116 or go to: www.eldercare.gov.

National Center on Elder Abuse:


To report abuse:

If you suspect financial abuse of a senior, contact local law enforcement agencies, the state attorney general’s office at (800) 722-0432, or your county’s Adult Protective Services agency (see above).