Do you worry about what’s going to happen to your parents as they get older? Are you concerned that at some point, they’re going to think that there really is a Nigerian prince holding their unclaimed money? Anxious that a less than scrupulous salesman is going to sell them a high commission variable annuity product they don’t need? Would you like to
- Be able to identify when they’re susceptible to fraud and scams?
- Learn how to have “the conversation” with your parents?
- Rest easy that your parents’ bills are being paid on time?
Read on to see the steps that you can take to help ease the transition into the autumn years.
It’s not just scammers who are after your parents’ money, but the scammers do take a lot of it.
When my grandmother got older, her mental capacity diminished as she aged. When my parents finally had to move her into a care facility, they went through her records to assist in their Medicaid application for her. Much to their surprise, they found several credit cards and tens of thousands of dollars in credit card debt. This was for a woman who lived on Social Security and had no other assets. So, when my parents got conservatorship over my grandmother, they called the credit card companies and told them to go jump in a lake. Good luck suing an indigent woman in a care facility and on Medicaid for debt collection. I hope that the analysts who decided that she was a good credit risk have discovered their true career calling outside of credit risk analysis.
Elder fraud, true fraud as differentiated from the issuance of credit cards to poor old ladies who do not need credit and can’t repay it, is a serious problem in the United States. According to a study by Virginia Tech, elder fraud cost over $2.9 billion in 2011. This fraud isn’t just from strangers, who comprise 51% of the fraud. Friends, family, and neighbors commit 34%, with unscrupulous businesses taking 12%, and Medicare/Medicaid fraud accounting for 4%.
Some of these instances of fraud include:
- Unclaimed funds scams, or 419 scams, usually perpetrated by e-mail
- Being significantly overcharged for items which have much lower values
- “Loans” to people who claim hardship of their own
- Being sold inappropriate financial products such as variable annuities with long lock-in periods and high commissions
It’s Time to Have the Conversation
Being ignorant of your parents’ financial situation will serve you no good. In fact, in many states, family members who have assets can be on the hook for the nursing home care of their relatives. You will need to check what your individual state’s laws are regarding filial piety. The general rule of thumb for when it’s time to have “the conversation” is that either you’re 40 or your parents are 60. This isn’t an easy conversation to start. As the child, you’re very wary of trying to seem like you’re interfering with your parents’ business. The parents remember that they changed your diapers. Many times. Still, just as your parents had the fortitude to have the birds and the bees talk with you when you were young, you need to have the fortitude to have this discussion with your parents.
There are many approaches to broaching the conversation. I’m an advocate of the direct but reassuring approach. You want to make sure that they’re taken care of, and you’re not after their money. Here some of are the things you need to cover:
- Where are all of the accounts and the important paperwork? The last thing you want to do when you’re grieving is to have to do a CSI investigation to try to find everything while the estate gets tied up in probate.
- Long term care insurance. Do they have it? What does it cover? If they don’t have it, they should seriously consider it.
- What’s in the will? The fewer surprises there are at the opening of the will, the better. (To read about how estate sales should affect your downsizing decisions, you can subscribe to receive my 52 week Financial Game Plan.) Furthermore, if you can’t wait to receive an inheritance, you’re sick. That means you’re looking forward to someone else dying.
- What are their bills and how do they get paid? More on this further down.
- What are their desires for when they can no longer independently take care of themselves? Do they want to live in assisted living facilities, or do they want in-home care? In either instance, they should be scouting out their options. You do not want to have to try to find an assisted living facility when they need to move there now, as you’re going to be leaving it to chance hoping that there’s an available spot in a place where they want to go (or you’d want them to go).
- Who are their medical care providers? Oftentimes doctors will have the first inclination of functional cognitive ability decline, and they need a pathway to talk to you if required.
Spot the New Guy
Sadly, greed is innate in many people, and there are those who get overcome by it. They’ll look for easy targets, and often the easy targets are the elderly. How can you tell if your parents are in the crosshairs of these scum?
- New, unknown friends of a different age demographic suddenly appear in your parents’ lives. They might be legitimate. They might not be.
- Similarly, new e-mail connections pop up. If your parents mention new friends they found on the Internet, something may be amiss.
- Complaints about higher bills. Do they mean the electricity bill was $10 higher this month, or do they mean that they’re sending a bunch of money to Nigeria? It’s time to ask.
- They come to you for money. If you had “the conversation” above, you should know about your parents’ financial means. If you didn’t expect them to need money yet they now are asking for it, that’s a sign that someone is siphoning their money.
Automating Finances Can Help Mitigate the Risk
Early stage cognitive decline is not easy to detect, yet can have serious financial impacts. “Senior moments” where one momentarily forgets where the keys were aren’t just limited to finding the keys or the glasses. They can often include managing the checkbook. As the Drs. Triebel, Martin, Griffith, and others point out in the journal Neurology, the functional capability to manage finances can decline rapidly, even in a one year period, long before full-blown signs of dementia or Alzheimer’s show up.
What this means for you is that it’s entirely possible for your parents to appear to be functioning quite well while they’re unaware that they’re letting their finances slip. They can carry on conversations, go to the store, go out to eat, and take care of themselves, but the cognitive sharpness required to handle finances is no longer there, and sometimes it’s not apparent until the electricity is shut off or there’s a foreclosure notice on their home.
The best way to prevent this from happening is to automate the finances as much as possible. By setting up a funnel of money, they will also be somewhat insulated from scammers.
- Set up a funnel of funds. One flow of funds should go to an account where all bills are paid automatically. The other flow of funds should go to the spending account, where variable expenses occur.
- Set up automatic bill pay. Get the mortgage, HOA fees, utilities, insurance, and any other recurring payments set up with an automatic bill pay.
- Set up payment alerts which also go to your e-mail. That way, if a payment is missed, you know about it and can engage your parents in a discussion about what happened.
- Set up transfer alerts which go to your e-mail. If there’s suddenly a big transfer into a spending account, you’ll find out and you can ask why the transfer occurred.
Setting up these monitoring systems sounds a little Orwellian. You’re not looking to micromanage your parents’ lives. What you are looking to do is to identify anomalies and stop potential problems before they become big issues.
All of these steps will represent a big change in the relationship between you and your parents. They will take time and trust and will not occur overnight. Start having the discussions at an appropriate time so that you can ensure that it is all in place long before potential problems may arise. Neither you nor your parents want their hard earned retirement funds going to pay for the “problems” of their “new friends” in Nigeria.
Have you had “the discussion” yet? How did it go? Tell us about your experiences in the comments below!