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What Is Financial Exploitation and How Can I Protect Myself?

If you’ve watched the recently released Netflix movie “I Care A Lot,” you may have wondered if such outright financial exploitation of older adults is a reality. It is indeed very real and in fact, it’s on the rise. Financial exploitation of older adults leads to an average loss of $2.9 billion a year, according to a 2017 report in Clinical Gerontologist. One in 20 older adults have reported perceived financial mistreatment, according to the National Adult Protective Association.

What is financial exploitation exactly? It’s not the same thing as financial fraud, although fraud is often part of the exploitation. Financial exploitation is when a person misuses or takes the assets of a vulnerable adult for his or her own benefit, the National Adult Protective Services Association reports. This exploitation often happens without awareness from the vulnerable older or disabled adult.

There are several types of financial exploitation. Let’s take a closer look at the different types and then share some ways on how you can protect yourself. Note that different geographical areas may use different definitions for financial exploitation, so these are general descriptions from the National Adult Protective Services Association and other sources.

Different Types of Financial Exploitation With Older Adults

  • Contractor exploitation: A building contractor gets paid to do repairs or remodeling work but does not complete the project. Sometimes, they may not even start the project. A person may start to receive fraudulent liens from the contractors saying that the client still owes them money.

  • Electronic exploitation: Older adults are notoriously targets for email or text phishing scams, which try to prompt the person to share private financial information or to make payments to the fraudster. 

  • Fraud: The creation of false records, forgeries, unauthorized check-writing, and Ponzi-type financial schemes are all examples of fraud that can fall under the exploitation umbrella.

  • Insurance: Inappropriate insurance products are sold to someone, such as 30-year annuity for someone in their 90s. 

  • Investment exploitation: A fraudster makes investments without the knowledge or consent of the person involved. The investments may involve extra commissions for the financial advisor. Bloomberg Wealth published in February the story of 93-year-old Beverley Schottenstein, who sued JP Morgan and her two financial advisors–who happened to be her grandsons–for investment exploitation. 

  • Lottery scams: You’ve won big! Or maybe you haven’t. Lottery scams prompt someone to make a payment or transfer funds to receive a prize from a lottery or sweepstakes. Of course, there is no real prize involved.

  • Mortgage exploitation: Someone offers a financial product that the target person can’t actually afford, or the mortgage is not in compliance with regulatory requirements. 

  • Real estate exploitation: Sales, transfers, or changes to property titles are made without someone’s knowledge or consent. This type of exploitation may include unauthorized changes to estate documents.

  • Theft: A fraudster takes assets such as cash, valuables, and other personal property without authorization, consent, or knowledge.

Who Is Most Vulnerable to Financial Exploitation?

As you can see, that’s a lot of ways to exploit someone financially. Although these types of exploitation aren’t exclusive to older adults, they are the most likely target for many of these scams because cognitive decline also may play a role in financial decision-making.

Here is who is at greatest risk for financial exploitation, according to New York Department of Financial Services:

  • Older adults between ages 80 to 89
  • Females
  • Those with cognitive decline or cognitive incapacity
  • Those who are older and living alone, relying on others for care, or those who have limited social relationships

4 Ways to Protect Yourself Against Financial Exploitation

how to protect yourself from financial exploitation

Now that you know more about what financial exploitation is, the next logical step is to think about how you can protect yourself from it. After all, financial exploitation isn’t just limited to those who are in cognitive decline. Anyone could fall victim. Even astronaut Buzz Aldrin and comic book maker Stan Lee fell victim to financial exploitation. Here are several things you can do to help lower your risk:

1. Set Up Power of Attorney

Power of attorney gives another trusted person the ability to make financial decisions for you when you can no longer do so. However, it’s still possible to get scammed even when you give someone power of attorney. Some ways to set up a power of attorney while still protecting yourself include:

  • Requiring a second signature (in addition to the person with power of attorney) for certain large transactions, such as those involving vehicles or real estate.

  • Limiting and defining gift authority. This is important because financial exploitation often falls under this area. The power of attorney document should state these limits.

  • Use a third party to handle accounting. This trusted extra set of eyes can monitor ongoing financial transactions to make sure nothing suspicious is going on.

  • Include the power to revoke in the power of attorney document. This allows power of attorney to end if abuse, neglect, or exploitation are suspected. 

2. Discuss Your Finances With Someone You Trust

Many of us have been taught to keep our financial information under wraps. That may be a good principle to follow but as you get older, you want to let someone else know about your financial situation. That way, if you were no longer able to manage your finances, a trusted person could get involved to help manage your money. Have a frank discussion with an adult child/children or another person, such as a financial professional. Set up that person to become a contact who can monitor your banking activity so you have another set of eyes involved with financial transactions.

3. Talk With Someone Before Making a Big Financial Decision

It’s easy to get caught up in a new investment or other plan that involves your hard-earned money. Before moving forward, discuss the plan with someone you trust. Make sure what you have in mind is really a wise decision. 

4. Know When to Contact Local Adult Protective Services

If you suspect financial exploitation against yourself or someone else, get in touch with your local Adult Protective Services. Here are a few warning signs that you should get in touch:

  • Someone else now oversees finances without any explanation.
  • The older adult is transferring assets to the new person/friend who is helping with finances.
  • The older adult doesn’t understand his or her finances.
  • Cash, personal property, and financial states are gone without any explanation. 
  • There are unexplained changes to a will or other estate documents.

In Conclusion

Young or old, financial exploitation can affect us all, but as we age, we become greater targets due to the fact that we have greater wealth and can be more susceptible to modern fraud techniques. The most important thing that we can do as older adults is to protect ourselves by creating a circle of trust amongst our family and advisors to ensure that potential fraudsters, scammers, and other bad elements are kept at bay.

If you’re looking for ways to protect yourself, consider using an app like WayWiser to help develop a level of support that will help protect you and your bank accounts from fraud.

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