Your elderly mother has a new best friend who accompanies her everywhere. She has always been frugal but now lavishes pricey gifts on her new pal. And although you used to speak with her every few days, she never seems to answer your calls anymore.
Are these simply the signs of a senior living it up in her later years? Or is something sinister happening? Those are the difficult questions that can arise in cases of "undue influence," in which a perpetrator takes advantage of his position of trust or power to gain control over the victim's decision-making, usually to line his own pockets. The perpetrator could be a new "best friend," financial adviser, adult child or someone else close to the victim. And while anyone can fall victim to undue influence, those most vulnerable include older, more isolated individuals.
Undue influence plays a role in many-if not most-cases of financial abuse, says Dr. Bennett Blum, a physician specializing in forensic and geriatric psychiatry who serves as an expert witness in elder abuse cases. Seniors lose about $6.7 billion a year to family members, friends, caregivers, financial advisers or other trusted associates who exploit their roles for financial gain, according to a report by San Francisco financial-services firm True Link Financial.
The problem is growing, elder abuse experts say, as the population ages. And it may be far greater than any statistics can demonstrate. "At best, 80% of cases are never reported to anyone-and at worst, 95%," Blum says. In many cases, victims are only manipulated, rather than threatened or coerced, so they don't even realize they're victims. And if they do realize what's happening, they may be hesitant to speak up for fear of retribution from the perpetrator-or fear that government authorities or family members will think they can no longer take care of themselves, Blum says.
As concern over the issue grows, new rules may help prevent some of the financial fallout. Financial Industry Regulatory Authority rules that took effect this year, for example, require brokers to ask clients for the name of a trusted person they can contact and allow them to place a temporary hold on disbursements from an older client's account if they suspect the client is a victim of financial exploitation.
Such rules, of course, can't prevent every case of undue influence. John Waszolek was a broker at UBS when one of his elderly clients, a widow, was diagnosed with Alzheimer's disease in 2008. Shortly thereafter, Waszolek took the client to meet an estate-planning lawyer who prepared a health care power of attorney and living will naming Waszolek as the widow's agent, according to a 2015 FINRA complaint against Waszolek. In 2009, the complaint alleges, Waszolek referred the client to a second attorney, who prepared an amendment to her trust, naming Waszolek as beneficiary of about $1.3 million in trust assets. When Waszolek later went to work for Morgan Stanley, the widow's trust account moved with him-and after her death in 2010, Waszolek attempted to collect the cash, which by that time had grown to about $1.8 million, according to the complaint.
He didn't succeed. The trustee refused to distribute the cash without Morgan Stanley's approval-and Morgan Stanley did not approve, according to FINRA. In 2015, without admitting or denying the allegations, Waszolek consented to a settlement that barred him from the industry. He did not respond to our request for comment.
Safeguards to Help Thwart Senior Scammers
How can seniors and their loved ones prevent such a scenario? One defense is to stay connected, says Lisa Nerenberg, executive director of the California Elder Justice Coalition. If a loved one suddenly withdraws from social circles, or someone seems to be interfering-such as a caregiver telling visitors that the senior doesn't want to see them-that's a red flag, she says.
Watch for other changes in behavior, such as when someone who has always been cautious with money suddenly starts doling out large gifts. Be particularly vigilant if a senior has just lost a spouse. "There are scammers who follow death announcements" and try to befriend survivors, Nerenberg says.
Another preventive step: Create some checks and balances if you're asking other people to help manage your money as you age. When designating a financial power of attorney, for example, you can name two people to serve together-perhaps one family member and one trusted adviser, says Hyman Darling, an elder law attorney in Springfield, Mass. If someone is helping you with day-to-day money management, regularly review your bank and brokerage statements for any unusual transactions. Online services may help. EverSafe , for example, helps monitor financial accounts for changes in spending patterns or suspicious activity, and you can name a trusted friend or adviser to help you keep tabs on your accounts.
If you suspect a senior is falling victim to undue influence, try enlisting the help of a friend or relative whom the senior really trusts, Nerenberg says. Even when questioned by caring friends, the senior may deny anything is wrong and defend the influencer. If you're concerned the senior is being abused, report the issue to Adult Protective Services.
The growing prevalence of undue influence raises another issue for seniors who are not victims of abuse: False accusations of undue influence can derail your estate plan. Let's say your adult daughter quits her job to become your primary caregiver. You had originally intended to divide your estate equally between your daughter and son, but given your daughter's sacrifice, you later change your will to give her a bigger piece of the pie. Nobody has done anything wrong-but after you're gone, your son contests your will, claiming your daughter had undue influence over you.
Such issues can arise if seniors don't communicate their intentions when changing their estate plans, says Thomas West, partner at Signature Estate and Investment Advisors, in Tysons Corner, Va. "Make sure all the affected parties know what the decision is and how it was arrived at," West says. In addition to discussing your decision with your heirs, you might include a brief explanation in your will and a longer explanation in a letter to your executor. In any case, West says, "try not to make it a secret."