As the American population keeps growing grayer, senior financial fraud has become a hot-button issue for politicians and regulators.

Three bills designed to protect seniors from financial fraud are moving through the Senate Judiciary Committee with bi-partisan sponsorship and support.

A new model state law adopted by the North American Securities Administrators Association (NASAA) requires financial advisors and firms to report suspected financial exploitation of seniors to regulators and adult protective services offices.

NASAA also has proposed model state legislation that would allow financial institutions to place a 10-day hold on disbursements whenever firms or advisors believe harm may result to an investor age 60 or older. FINRA has requested comments on a proposed rule that would do the same for accounts of people age 65 and older.

Stronger legal protections are: 1) expanding and clarifying the definition of senior financial fraud; and 2) expanding the audience of potential victims to include anyone above a certain age (e.g., 60 or 65). In the past, some statutes have focused only on fraud against mentally impaired seniors or those living in institutions.

Claims of financial fraud often are made against family members, including those closely involved in senior caretaking. Consider these situations, and ask yourself whether they involve senior fraud:

A husband is caring for his 66-year-old wife, who is temporarily incapacitated following a stroke. The husband wants to liquidate funds from the wife’s checking account, in her sole name, to pay for care. He writes and dates the check and guides the pen in her hand as she signs. Several weeks later, their daughter files a charge against him, claiming forgery.
A son is caring for his 85-year-old father in an assisted-living facility. The father does not have access to a computer, but does have an online account at MySocialSecurity.com. The son goes to the site, verifies the father’s identity, and logs on with the father’s username and password. The son then changes the bank account for receiving the father’s Social Security benefits, so the son can access benefits to pay for the care facility. Weeks later, a family member sees this change, asks the father if he authorized it, and files a claim of senior financial abuse against the son.

These are possible cases of senior financial abuse – even though the caregiver has good intentions – and both situations could have been avoided with planning. Here's how:

In the first case, the spouses could have set up a joint checking account while both were healthy. In the second case, the son could have had his father execute a general power of attorney in his favor, granting authority to make changes in Social Security and other accounts.

Joint accounts and powers of attorney can be useful tools for helping to sustain care for seniors delivered by trusted family members. However, there also are potential problems in these arrangements.

For example, many banks will not allow a beneficiary or contingent beneficiary to be named for a joint checking account.

Some financial institutions will not allow a person holding a power of attorney to be named an account beneficiary.

You can help clients protect themselves against claims of senior financial fraud by: 1) recommending joint accounts and general powers of attorney, when appropriate; and 2) helping clients identify financial institutions that can accommodate their planning wishes, especially in regard to primary and contingent beneficiaries.

Instant Insights /

Protect clients and caregivers against claims of senior financial fraud

More From HR Executive

Related Stories

Recommended For You