We know all too well that con artists prey on the elderly - commit elder financial abuse - in order to hijack their savings, trusts and estates. They use a wide array of scams, ploys, and phony financial programs from supposed annuities to highly dubious "investments." Swindling seniors is a $2.9 billion-a-year illegal industry, according to MetLife, with each victim losing an average of anywhere from $100,000 to $150,000, money that rarely gets recovered.
Why are senior citizens more vulnerable to manipulation? The harsh reality is that as we enter old age, our cognitive and reasoning abilities decline - sometimes elders will suffer from Alzheimer's or dementia. Pair this with an increase in available income from retirement funds and pensions, and you've created the circumstances in which elder financial abuse thrives. California, our nation's most populous state, is no exception.
All of this has been documented in a landmark study by for the Brookings Institution by researchers Xavier Gabaix of NYU and David Laibson of Harvard. Their research, entitled The Age of Reason, shows that rates of financial literacy decline one percentage point from age 53 onward. In addition, half of our population from age 80 to 89 suffer from dementia or cognitive impairment. What doesn't seem to decrease, however, is one's sense of confidence at making sound financial decisions. Providing scientific data, another recent study by Boston College has concluded:
We find that overconfidence is a significant risk factor for becoming a victim of financial fraud. A one standard deviation increase in overconfidence increases the odds of falling victim to fraud by 26%. Financial knowledge, not just general knowledge, protects against fraud: years of education is not a significant predictor of the likelihood of being victimized by fraud.
In addition, that overconfidence will generate risky moves with money and a willingness to sign on with scammers. Many elderly Americans don't comprehend that they need sound financial guidance, and when they do seek out advice, they're liable to be tricked by dishonest brokers, Ponzi schemers, and other bad actors.
How can we help keep our aging relatives and friends from falling victim to fraud? Some of the usual tips apply: look out for suspicious bank withdrawals and transfers, unfamiliar or unauthorized signatures on checks, irregularities in financial documentation, and expenditures that raise eyebrows. Most of all, be attentive to your elderly loved one: being there for them when they need you means they're less likely to turn to a supposed "new friend" in confidence. Fighting back against loneliness goes a long way in fighting elder financial abuse.
If you have a loved one who has suffered from elder financial abuse in an estate or trust case, call us at Hackard Law. We're devoted to protecting the integrity of our clients' trusts and estates. You can reach us at 916-313-3030.