Taking Financial Care
By Kelly Walters
As kids, many of us had piggy banks that our parents hoped would teach us how to save the change we earned from weekly chores, our birthday, or other special occasions. As we grew older and our piggy banks began to fill, we deposited that money in a bank account where we watched that money grow. Our parents, in the meantime, were doing the best they could to save too. Over the course of many years, their savings grew in the hopes of affording them a comfortable retirement. Unfortunately, as they age, our parents also become more vulnerable and are increasingly becoming the victims of those who will try to rob them of their savings. And once that piggy bank is broken, it is difficult if not impossible to get those savings back. We can help prevent this. It is our turn to teach them how to protect their savings, their quality of life, and their dignity.
Michigan recently enacted the Financial Exploitation Prevention Act, which defines financial exploitation as:
a fraudulent or otherwise illegal, unauthorized, or improper act or process of an individual who uses or attempts to use the financial resources of another individual for monetary or personal benefits, profit or gain; or… that results or is intended to result in depriving another individual of rightful access to or use of benefits, resources, belonging or assets. MCL §487.2083
In 2020, the Consumer Financial Protection Bureau (CFPB) reported that financial institutions alone reported over $3.4 billion of suspected financial exploitation. Scams include romance scams, lottery scams, and sure-fire investment deals. These scams play on emotions and emphasize the urgency to act quickly. They try to coerce disclosure of social security numbers, banking information, Medicare numbers, and other personal information. Sadly, the criminals are not always strangers. Many involve a family member, caretaker, a new “friend” or long-lost relative.
The best way to avoid a loved one falling prey to these fraudsters is to prepare well in advance and always remain vigilant for signs of financial exploitation. At First State Bank we encourage account holders to add a “trusted contact” to their account. Ideally more than one should be designated. These trusted contacts do not have authority to conduct financial transactions but can be contacted in the event something does not look right. As a community bank, we know our customers and might become concerned if mom comes in with her granddaughter to make cash withdrawals for a new car that we know grandma will not drive. Or maybe dad brings his new “friend” along who does all the talking and attempts to get a cashier’s check for a great investment opportunity. Sometimes it is seeing ATM transactions occur more frequently or at a time when we know our customer is in the hospital. When it looks suspicious, we investigate. Having a contact person on file can help to verify the legitimacy of an unusual transaction.
Durable powers of attorney can also help prepare for possible future diminished capacity that can make the elderly become vulnerable. A power of attorney assigns authority to a trusted family member or friend to manage financial and other decisions on the principal’s behalf. A “durable” power of attorney can be drafted now and will remain in effect even if you or your loved one becomes incapacitated later. If you or your parents have such an instrument, be sure to let your financial advisors, accountants, and trusted agents know about it. At First State Bank, we will accept them now and keep them on file for future use. Knowing who our customers trust while they are mentally strong better enables us to identify a change in such an instrument later in life as possibly suspicious. Any sudden change in trusted contacts, beneficiaries, trust instruments, pension benefits or social security fiduciaries, or property deeds can all be signs that someone is influencing your parents and who may not have your parents’ best interests at heart.
Other signs of possible financial exploitation include late notices and unpaid bills, changes in spending patterns, unusual large purchases, checks that are drawn out of order or the signature looks different, and the appearance of new “friend” in your parents’ life. If your parents are being exploited, they may be more reluctant to discuss their finances or may simply not seem to know about them. Victims often suspect they may have been exploited but are embarrassed to report the potential abuse.
The absolute best way to protect your parents and loved ones is to have discussions with them about their finances and estate planning. Perhaps reach out to a financial advisor to learn what assets they have and an attorney to decide which instruments might be appropriate for your parents. Share copies of those instruments with those who need to know and be sure to keep the originals in a safe place. Review them periodically and update as necessary. If your parents are joint owners on the deed to your childhood home and one of them dies, it is time to consider whether a ladybird deed or another owner should be added to that deed. Any significant life event is probably a good time to review your estate planning files.
Our parents or other loved ones were there for us and helped guide us to where we are today. It is critical that we now return the favor. We need to help them prepare for the future, protect what they have, and ensure plans and instruments remain updated. Have that discussion today and consider reaching out to professionals for advice before someone else slips in to deprive your parents of what they have worked so long and hard to attain.
Kelly Walters, General Counsel and EVP at First State Bank, finds her greatest joy working with customers who struggle and helping them to find their success stories.
