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Jean-Luc Bourdon
Jean-Luc Bourdon
 

Responding to Senior Financial Abuse

What’s a CPA to Know (and Do)?

September 7, 2010
by Jean-Luc Bourdon, CPA, PFS

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:

  • Extended life expectancies contributing to a growing aging population;
  • Current economic downturn (the grifters are coming out of the closets);
  • The nation's wealth is held by 70 percent of persons over the age of 50;
  • Changes in the family structure, leaving more seniors isolated or with complex family dynamics; and
  • New technology that facilitates financial fraud.

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:

  • Unusual investment activity; e.g., liquidating a portfolio;
  • Sudden drop in investment income;
  • Unpaid service or tax bills;
  • Clients’ inability to get access to their financial records (no longer coming in the mail, changed password, etc.);
  • Unusual activity in bank accounts, e.g., sudden withdrawals of large sums, withdrawals from automated banking machines when the elder is homebound, online transactions if senior has no computer;
  • Signature on documents that does not resemble the elder's signature;
  • Changes to investments that have not been used in years, e.g. annuities;
  • Clients do not remember reported financial transactions (IRA distributions, investment sales, etc.);
  • Unusual loans against equity in property or life insurance policies;
  • New relationships expressing interest in the client’s financial situation;
  • Missing documents like a will or stocks, bonds, mutual funds or CDs;
  • Change of beneficiary status on investment accounts or life insurance policies;
  • New will or change in will, such as the creating powers of attorney for finances or property transfers when person lacks capacity to make decisions;
  • Utilities or telephone disconnected;
  • Inclusion of additional names on bank and other financial accounts;
  • Changes in a power of attorney from a long-time friend or family member to a person new to the situation;
  • Refusal or reluctance of family or legal representative to spend money on care;
  • Caregiver or provider tries to isolate elder from other relationships.

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.

Rules

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:

  • Is the client isolated?
  • Who are the closest relatives who may be contacted?
  • Who is the client’s attorney?
  • Who does the client trust?
  • To whom did the client assign power of attorney?

Plan Ahead

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.

Conclusion

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

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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.