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  • Writer's pictureAspen Investment Management

Protecting Loved Ones Against Financial Scams

Protecting your loved ones from financial fraud and scams is a crucial responsibility, especially as scam artists tend to specifically target older adults. It is essential to be proactive and take preventative measures before it is too late. Let’s examine some expert-recommended steps you can take to protect your parents and other older adults you care about.

Raise the Topic: Initiate an open conversation about scams and fraud. Approach the subject with empathy and understanding, sharing your own experiences or recent news stories to highlight the prevalence of scams. Explaining specific scams and their tactics can help raise awareness and reduce the likelihood of falling victim to them.

Lean on Anti-Fraud Tools: Implementing simple anti-fraud measures can make a significant difference. Set phones to send unknown numbers to voicemail and consider using a credit freeze to protect against identity theft. Adjust privacy controls on social media platforms to limit the amount of personal information available to potential scammers. Signing up for financial account monitoring and transaction alerts can provide an extra layer of protection.

Utilize Legal Tools: Legal instruments like a durable power of attorney or a revocable trust can be powerful tools in safeguarding an older adult's finances. These legal arrangements allow a designated individual, such as a family member or trusted advisor, to step in quickly if they suspect someone is taking advantage of your parents/loved one’s finances.

The Legal Tools You Need to Know About: Durable Power of Attorney (DPOA) and Revocable Trusts

The use of legal instruments may become necessary as your loved ones get older and their financial literacy and technological abilities start to fall behind.

One of the most effective ways to safeguard an older adult's money is by utilizing a durable power of attorney (DPOA).

A durable power of attorney (DPOA) is a legal document that grants someone the authority to act on behalf of another person, known as the principal, in financial matters. It is essential to establish a DPOA while your parent is still mentally competent and able to make sound decisions. By doing so, you ensure that there is a designated individual (the agent or attorney-in-fact) who can manage their financial affairs if they become incapacitated or unable to handle financial matters independently.

While a DPOA doesn’t eliminate the possibility of a financial scam, it does allow financial institutions to contact the power holder if it suspects fraud due to unusual activity. Having a DPOA in place before a scam happens is important so the power holder can act quickly upon discovery.

Another legal tool that can mitigate the risk of financial fraud is setting up a revocable trust. If your parent or loved one agrees, you (or a bank or trust company) can serve as co-trustee. This will allow you to see changes in spending patterns, unusual withdrawals, excessive loans or gifts to friends/family, and other behavior that might cause concern on accounts that are titled in the name of the trust. Additionally, after your parent or loved one passes away, their assets would pass to the remainder beneficiaries and skip the probate process.

Having conversations with your parents or loved ones about their money is rarely an enjoyable or comfortable conversation. Additionally, it is normal for them to be reluctant to give you some control over their finances. However, health and memory declines often happen quicker than one expects. Having these conversations and putting in legal safeguards sooner rather than later could potentially save your loved ones from significant financial distress.

There is no “one size fits all” solution to safeguarding the assets of older adults. Please consult with a legal professional before deciding to implement any legal tools.

Even with all of these measures in place, though, there are additional ways to mitigate risk and stay vigilant:

Know the Warning Signs: Stay vigilant for signs that may indicate potential fraud. If your parent becomes reluctant to discuss finances, experiences difficulties paying for everyday expenses, or receives an unusually high number of incoming phone calls or text messages, these could be red flags. John Breyault of the National Consumers League advises paying attention to false sense of urgency created by scammers, as they often pressure their targets to act immediately.

Report Fraud: If you suspect or encounter fraud, don't hesitate to report it to the authorities. Contact your local police department and utilize the Federal Trade Commission's online reporting portal. Additionally, the AARP Fraud Watch Network Helpline offers a toll-free number (877-908-3360) to report scams and receive assistance.

Avoid Shaming: If your parent falls victim to a scam, approach the situation with kindness and empathy, refraining from anger or belittlement. Show them that you are there to support them and find solutions together. The emotional toll of being scammed can be significant, and your reassurance will go a long way in helping them overcome the ordeal.

As our loved ones get older, it becomes imperative to ensure their safety and well-being in every aspect of life, especially when it comes to their finances. Knowledge is the first line of defense against financial scams. Many older adults are not aware of the diverse range of fraudulent schemes that exist today. Caregivers and family members should take the initiative to educate their elderly loved ones about common scams, such as phishing emails, fraudulent phone calls, fake lottery winnings, romance scams, and investment fraud.

Additionally, legal tools such as a durable power of attorney and a funded revocable trust can be powerful allies. These tools allow you to step in and protect your parent's assets if you suspect exploitation or scams, providing invaluable peace of mind and financial security for your loved ones.

With proper planning and vigilance, you can create a strong defense against financial fraud and scams, allowing your parents to enjoy their golden years with confidence. Don’t hesitate to reach out to us to get the best plan mapped out for you and your loved ones, and together we can work towards ensuring a safer financial environment for your loved ones.

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