This Insights was contributed by Richard Pasquantonio, CPA/CFF, CFE, CDFA (N.C. License Number 33577), an associate at Adam Shay CPA, PLLC, and Jennifer Roden, an associate attorney with Craige & Fox, PLLC.
Part I Recap
In our first installment on this topic, we defined financial elder fraud and discussed three categories of schemes and scams that fraudsters use to swindle their victim: telephone/mail, health-related frauds, and financial institution scams.
In this installment, we will cover three more categories of financial elder abuse: sweetheart scams, utility terminations and home construction schemes. We also will highlight measures that family members can take to safeguard their loved ones, including preventive measures that family and service providers can employ as part of their care.
Seniors frequently fall prey to scams that peddle in affection. A sweetheart scam is conducted in two primary forms: face-to-face and over the Internet or telephone. In a face-to-face sweetheart scam, a senior, often a widow or widower, is targeted and befriended by someone who eventually pretends to be in love with them. The fraudster exploits the senior's loneliness to secure gifts and loans. The “sweetheart” ultimately intends on securing total control of the senior's estate or financial affairs. Financial control is accomplished by convincing the target to grant the sweetheart power of attorney or primary beneficiary in the senior’s will.
In an Internet or telephone sweetheart scam, the senior is contacted by someone who has obtained personal information, often through social media or dating websites. The fraudster is often conducting the scam from overseas. Once the sweetheart has formed a bond with the senior and a romance is established, the scammer requests money for airfare to visit. After the money is wired, the fraudster pretends to become hospitalized and requests that the senior wire them more money.
Seniors are targeted by utility termination scams in person and over the telephone. In both cases, a fraudster claims that the senior's gas, water or electric bill is past due. The scammer convinces the senior that to prevent disconnection of service, he or shemust pay the bill and late payment penalty.
Home Construction Schemes
Door-to door home repair frauds come in many forms. Here are a few common schemes:
How to Help
- Falling chimney. A fraudulent contractor claims that the senior's chimney is separating from the house and offers to secure it. The person installs a useless metal strap to the senior’s chimney and charges hundreds or thousands of dollars.
- Rotting roof and meal worms. A fraudster offers to clean a senior's gutters for a small fee. After gaining access to the property, the scammer shows the senior pieces of rotten wood and claims that the roof is rotting. After convincing the senior that the entire roof needs to be replaced, the crew comes and lays new shingles over the perfectly good roof. They charge the senior thousands of dollars.
Adding a scam on top of a scam, the same roof repair crew may show the senior a bag full of worms. They claim that the worms are consuming the wood in the attic, and offer to kill the pests by spraying. In fact, the critters are mealworms commonly used to feed small pets. The scammers spray the attic with a mixture of water, kerosene and other smelly substances. They add several thousand dollars to the bill.
- Attic bracing. As an alternative to the mealworm scam, the roofing crew claims that the roof repairs have weakened the rafters in the attic. After convincing the senior that the roof will collapse without the repairs, the crew proceeds to nail 2 x 4s between the rafters at $100 a brace.
- Floor jack. Once invited in the senior's home, the fraudster claims that the floor is vibrating when walked on. The fraudster asks to inspect the floor from the crawl space and claims that the floor could collapse unless it is braced with floor jacks. The scammer proceeds to install inexpensive and unnecessary screw jacks and charges several hundred dollars for each jack installed.
- “You have not paid us.” In this scheme, the fraudsters confront a senior and angrily demands payment for thousands of dollars for work that they claim to have performed months ago. To convince the target, they may threaten lawsuits and property liens. If the fraudster detects that the target appears confused, they may employ a softer approach: “Don't you remember telling me to come back today to get paid?”
Having supportive and engaged family members may help protect seniors from financial exploitation. Family members can assist their loved one in paying bills, reviewing bank statements, discussing investments and large purchases, and advising them of popular scams. Some argue that having trusted family members who assist in reviewing bank statements or managing and paying bills will protect a senior from becoming a victim. However, others disagree on whether family involvement helps. True Link Financial, a San Francisco, California-based financial services firm, released a Report on Elder Financial Abuse in January 2015. True Link found that people who have a family member who reviews their finances at least once a month actually suffered greater financial losses than people whose family members rarely or never review their finances.
North Carolina consumers are also eligible for a free security freeze on their credit. The Identity Theft Protection Act of 2005 gives all North Carolina residents the right to block access to their credit. A security freeze can be temporarily lifted when you are applying for credit or removed permanently. In certain circumstances, a child of an aging parent can use a security freeze to protect and insulate them from financial crimes. For information, see the security freeze information at ncdoj.gov
Attorneys can assist seniors in preparing and executing legal documents that may help prevent financial exploitation. A durable power of attorney would allow the senior to appoint someone he trusts as attorney-in-fact to manage his finances and assets. This attorney-in-fact, also known as an agent, could gain access to the senior’s financial accounts and keep an eye on inappropriate or unusual purchases, investments or transactions. A trust can also be used to protect the senior’s assets. A trust may hold title to real property and financial accounts. The trustee named in the trust would manage the assets for the senior’s benefit. An agent under a durable power of attorney and a trustee under a trust have a fiduciary duty to act in the senior’s best interest. An attorney may also be able to assist the senior and the senior’s family members and close friends in facilitating discussions about finances, the need for support, and signs of possible financial exploitation.
In addition, an attorney who specializes in eldercare law may assist the older adult and family in planning for their fiduciary needs, including the following:
- Power of attorney
- Health care power of attorney and advance directives
- Creation of trusts
- Selection and monitoring of trustees
- Guardianships and conservatorships
CPAs provide eldercare services to two primary groups: older adults and caregivers for older adults (usually their children). ElderCare/PrimePlus Services, as defined by the AICPA's ElderCare/PrimePlus Task Force, is a unique and customizable package of services offered by Certified Public Accountants to help older Americans maintain their lifestyle and financial independence.
While working closely with family members and other service providers, a CPA can assist by providing:
- An inventory of services and alternatives available in the community
- A comprehensive needs assessment, including relevant goals
- A plan of action that addresses the needs identified in the assessment and considers the client’s stated goals
- Assistance in the selection of service providers
- Evaluation of housing alternatives
- Family facilitation
Many CPAs limit eldercare services to the more “traditional” direct services. Direct services require the CPA to perform a more active role in managing an older client’s situation. These services may include:
- Receiving, depositing and accounting for income
- Paying bills and conducting routine financial transactions
- Monitoring investments and accounting for the estate
- Directly arranging for care services and paying for care
- Monitoring the provision of care services
- Filing insurance claims
- Preparing tax returns
- Financial planning
- Estate planning
- Arranging transportation services
- Managing real estate and other property
- Visiting and reporting on older clients for the benefit of children who live in distant locations
- Compiling financial statements and preparing other financial reports
While the subject of an eldercare engagement may be non-traditional, assurance services are also closer to the traditional services provided by a CPA. Assurance services in an eldercare engagement include:
- Analyzing financial transactions and testing for compliance
- Reviewing investment activity for compliance
- Verifying third-party calculations (insurance claim payments and pension disbursements)
- Managing portfolios
- Handling risk management and insurance planning
- Analyzing reports from fiduciaries
- Assuring compliance of care providers to agreed-on standards
- Evaluating the performance of outside parties such as contractors, yard maintenance companies, and meal preparation services
There are many resources on scams aimed at senior citizens, ways to prevent falling victim to a scam, and who should be notified when a senior has fallen victim to a scam. Here is a list of organizations and agencies that can provide information and help:
Richard Pasquantonio, CPA/CFF, CFE, CDFA (N.C. License Number 33577), is an associate at Adam Shay CPA, PLLC. He focuses on forensic accounting, fraud prevention and detection, and tax controversy resolution. He is also an AICPA CFF Champion. The purpose of the CFF Champion program is to inform the professional community about the vital role of forensic accounting professionals, the knowledge required to become a CFF, and the benefits of the CFF credential. For more information, visit http://www.wilmingtontaxesandaccounting.com/ or email him at [email protected]. Pasquantonio can also be reached by phone at (910) 256-3456.
Jennifer Marshall Roden is an associate attorney with Craige & Fox, PLLC in Wilmington, N.C. Roden graduated from the University of Alabama School of Law in 2012. She was a 2012-2013 Borchard Foundation Center on Law and Aging Fellow. Roden focuses her practice on elder law and estatepPlanning. She is licensed to practice law in North Carolina and Alabama. She is a member of the Alabama State Bar, North Carolina Bar Association, and the Elder Law and Special Needs Law Sections of the North Carolina Bar. She is also a member of the National Academy of Elder Law Attorneys (NAELA).
Adam Shay, CPA (N.C. License Number 35961), MBA, is managing partner of Adam Shay CPA, PLLC. He focuses on minimizing taxes and improving the financial results of entrepreneurs, and is actively involved in supporting the Wilmington entrepreneurial and startup community. For more information, visit http://www.wilmingtontaxesandaccounting.com/ or email him at [email protected]. He can also be reached by phone at (910) 256-3456.