Financial criminals commonly target the elderly because issues like cognitive decline and physical limitations can seriously impair one’s ability to manage money and make sound decisions. For such reasons, many older Americans have caregivers who handle their finances.
Sadly, it’s not uncommon for these fiduciaries to take advantage of seniors’ vulnerability, but even for those with the best intentions, managing someone else’s money can be tricky.
The Consumer Financial Protection Bureau recently released guides for the millions of Americans acting as fiduciaries. According to the CFPB, about 22 million Americans 60 years and older have named fiduciaries in a power of attorney, and millions more senior citizens, as well as younger adults with disabilities, have court-appointed guardians and other financial caregivers.
Enough people struggle to manage their own money, so adding the finances of someone else — who may be at a different point in life or have different priorities — can make the responsibility especially difficult. This is further complicated by the fact that fiduciaries often have no training for this role.
Being a Responsible Financial Caregiver
The CFPB guidelines focus on four pillars of financial caregiving, many of which apply to individual personal finance: Act in the person’s best interest, manage money properly and carefully, keep the person’s money and property separate from your own, and maintain good records. The CFPB, along with other agencies, also recently issued guidance to financial service providers on how to spot and prevent financial abuse among the elderly. Such abuse can result from a fiduciary failing to uphold any of the four responsibilities outlined in the CFPB guides.
Not only is it crucial for caregivers to keep the finances separate, they need to watch out for scams.
In addition to regularly monitoring their own credit by pulling annual credit reports and using free credit scoring tools like the Credit.com Credit Report Card, fiduciaries need to maintain the same vigilance for the people whose finances they’re managing. This comes with an extra step: making sure the cognitively impaired consumer doesn’t fall victim to a thief when you’re not looking.
Things like phone scams can hit the elderly hard, but a fiduciary can’t intercept every phone call or revoke a senior’s phone privileges, so one of the most important things a caregiver can do is talk to the person about the risks of identity theft, in addition to keeping a close eye on their financial statements, credit scores and credit reports.
Image: Hongqi Zhang