The growing epidemic of financial elder abuse (and what CPAs can do about it).

• Author: Freedman, Mitchell

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The incidence of financial abuse perpetrated against the elderly in the United States is growing to epidemic proportions. Because the elderly are the fastest-growing segment of our population, more and more victims and their families are beginning to report its occurrence. Most alarming, according to the National Center on Elder Abuse (NCEA), it is being committed on a substantially increased scale.

According to "Current Population Reports: 1998 and 2000" (May 2003), pp. 70-88, and related tables published by the U.S. Bureau of the Census, the mean net worth of married individuals with a householder over the age of 65 is approximately $109,000 (as compared with $55,000 for the total population). Because the elderly control larger amounts of wealth, they are more likely to be targeted for financial abuse. Because many of them are frail or in poor health and may have cognitive disorders, they are ripe for victimization. Potential victims also may be enticed if they feel financial pressure because their spouses need costly care. In addition, because their wealth is often tied up in real estate, artwork, and other collectibles, they may be cash poor and concerned that they will outlive their assets. Unless there are societal changes or greater protections, the reported incidents and extent of financial elder abuse will increase dramatically as the oldest of the baby boom generation begin to enter their senior years. CPAs and CPA financial planners, as watchdogs and trusted advisers for families, are in a unique position to protect elderly clients from financial abuse.

What Is Financial Elder Abuse?

The NCEA defines financial elder abuse as financial or material exploitation. It can involve financial mistreatment, exploitation, or fiduciary, economic, or material abuse. The center explains that financial elder abuse consists of the illegal or improper use of an elder's funds, property, or assets, without the elder's consent (see www. elderabusecenter.org). It is often difficult to identify elder abuse because when elders make decisions, such as giving large gifts or contributions, those decisions may seem reasoned and rational to them. However, family members, with their own biases and agendas, may view such decisions as squandering their inheritances.

What is financial elder abuse? Here are just a few examples:

1. A child is given a power of attorney and uses it to divert cash from her parent's bank account.

2. A lonely elderly man speaks to a telemarketer because this is one of his few contacts with the outside world. The telemarketer persuades the man to purchase an inappropriate and risky investment, promising unrealistic investment returns.

3. A financial salesperson inappropriately convinces an elderly woman to purchase a variable annuity with high commissions to the seller and high...