Responding to Senior Financial Abuse
What’s a CPA to Know (and Do)?
September 7, 2010
As the U.S. population lives longer, more people reach a period in life in which they face a diminished ability to guard their personal finances. To protect clients in that vulnerable stage of life, CPAs must know how to recognize and respond to senior financial abuse.
What Is Senior Financial Abuse?
The National Center on Elder Abuse (NCEA) defines senior financial or material exploitation as “the illegal or improper use of an elder's funds, property or assets.”
Examples include, but are not limited to, cashing an elderly person's checks without authorization or permission; forging an older person's signature; misusing or stealing an older person's money or possessions; coercing or deceiving an older person into signing any document (e.g., contracts or will); and the improper use of conservatorship, guardianship or power of attorney.
Why Should CPAs Be Involved?
CPAs are in a unique position of trust. The relationships built with their clients lead to an intimate knowledge of their financial, business and family circumstances. Consequently, we are often best positioned to detect, prevent and report elder financial abuse, and to help in its aftermath.
The role of CPAs is particularly important due to the scope and nature of the problem. According to an MMI study, elder financial abuse may affect up to one million older Americans yearly — at a cost of over $2.6 billion per year — and is most often perpetrated by family members and caregivers.
The problem is exacerbated by current trends:
To make matters worse, elder financial abuse is one of the most underreported crimes. Victims fear losing their independence, are embarrassed, intimidated by the perpetrator or simply lack awareness that a crime has been committed.
What to Look for?
Red Flags noticeable to CPAs could be:
What Should You Do?
CPAs can find themselves balancing the need to protect a client by reporting a troubling situation with the need to protect the client’s privacy. To manage this balancing act and effectively protect clients, you should know the rules, know your client’s state of affairs and plan ahead.
CPAs should be aware of the applicable elder protection and reporting laws to follow them diligently. All 50 states and the District of Columbia have laws establishing adult protective services (APS) in cases of elder abuse. However, such laws vary greatly from state to state. Some states impose a duty to report and/or provide immunity for reporting elder abuse.
Getting legal advice specific to your state, and maybe your practice, is the best course. For general information, look up your state’s resources on the National Center on Elder Abuse (NCEA) website under State Directory of Helplines, Hotlines and Elder Abuse Prevention Resources. It includes an Analysis of State Adult Protective Services Laws.
The American Bar Association (ABA) Commission on Law and Aging has information about immunity for good faith reporting on its website under:
Applicable state laws usually supersede codes of professional conduct. Of course, everyone has an ethical duty to help protect our seniors.
Know Thy Client
As clients get older, it becomes particularly important to become familiar with their overall financial circumstances and to find answers to:
Familiarize yourself with client circumstances and knowledge of the specific legal and regulatory environment. Incorporate authorizations into firm work documents (privacy statements, engagement letters, Section 7216 consent forms, etc.) to report suspected fraud to designated individuals or agencies.
CPAs may consult with specialized legal counsel, state societies, local Financial Abuse Specialist Teams (FASTs), Adult Protective Services (APS), and professional liability insurance carriers to setup both a pro-active approach and a response plan.
Having a response plan which lays out proper and appropriate procedures for your firm, including reporting agencies to contact, will make CPAs more effective and confident should they need to swing into action.
The stage in life at which people have generally accumulated the most financial security, and certainly most need it, is paradoxically the stage when it is most at risk. Americans count on CPAs to help build financial resources, preserve them and possibly pass them on to succeeding generations. Twenty percent of Americans over the age of 65 say they have already been taken advantage of financially. It therefore becomes incumbent upon us as trusted advisors to form a first line of defense in preventing and responding to elder financial abuse.
|Additional Resources||CPA ElderCare — PrimePlus: A Practitioner's Resource Guide, 3rd Edition|
|Adviser's Guide to Counseling Aging Clients and Their Families|
Jean-Luc Bourdon, CPA, PFS is a wealth manager with Walpole Financial Advisors, LLC (WFA) in Goleta, CA. His opinions and comments expressed within this column are his own and may not accurately reflect those of WFA. This information is being provided for informational purposes only and does not constitute investment or tax advice. Nothing in these materials should be interpreted as implying the performance of any client accounts or securities recommendations. Bourdon volunteers as financial literacy advocate. All members of the AICPA are eligible to join the PFP section. For CPAs who want to demonstrate their expertise in this subject matter apply to become a PFS Credential holder.