by Mitchell Freedman

During the approximately six years that I have served on the American Institute of CPAs/Canadian Institute of Chartered Accountants ElderCare/PrimePlus Task Force, I have been told by CPAs and CAs that they aren’t sure if ElderCare/Prime Plus Services are right for their firms.

Notwithstanding uncertainty on the part of some practitioners, the task force members, to a man and woman, truly believe that there is a role for EC/PP in virtually every practice unit. As currently positioned, the suite of services that can be performed under the EC/PP brand can be provided to individuals who are in their 50s and older. While some of these services may not be those that a CPA wishes to perform, many of them depend upon the traditional strengths of CPAs.

In this article I shall explore the role of the CPA in connection with the prevention of financial elder abuse, which is rapidly growing to epidemic proportions in our society.

There are a number of reasons for this growing phenomenon. Older individuals often live on fixed incomes, and they are concerned that they might outlive their assets. They or a spouse are often in poor or declining health, which makes them more conscious of a need for money and cash flow. Much of their wealth may be in “hard assets” such as real estate, artwork, jewelry and antiques, so they may be or they may think that they are cash poor.

They may have lost or be losing some of their cognitive ability, which could cloud their judgment. They may be overly trusting of family members, friends, care providers and scam artists. And, unfortunately, they generally won’t report financial elder abuse for fear that their adult children will consider them unfit to handle their finances and take that role away from them, making them lose an important part of their independence. Therefore, it is not unusual to find senior citizens who become victims of financial elder abuse multiple times.

Since the elderly control the largest portion of wealth in this nation, they truly need to be protected from victimization. CPAs can be watchdogs and trusted advisors to the elderly. The market for this service is going to increase dramatically during the next 10 years, as the Baby Boom generation approaches its golden years. In addition, CPAs can continue to serve their elderly clients well into their retirement years, thus continuing to capitalize on the confidence and trust that has been achieved during the clients’ “productive” years.

The National Center on Elder Abuse defines financial elder abuse as financial/material exploitation. It can involve financial mistreatment, exploitation, or fiduciary, economic, or material abuse. The center goes on to explain that financial elder abuse consists of the illegal or improper use of an elder’s funds, property or assets, without the elder’s consent.

According to a 1996 study by the center, elder abuse reports increased 150 percent between 1986 to 1996. Furthermore, it is estimated that only one in every six cases of financial elder abuse is ever reported by the elder or her family. In 1996 the number of reported cases that involved financial/material exploitation was 12.3 percent of all cases of elder abuse reported. CPAs can help seniors and their adult children to proactively take appropriate steps to eliminate this growing crisis.

If CPAs provide family office services for their mature clients, a shield against financial abuse can be created. If a CPA is handling the bill-paying function, it is not likely that unwarranted disbursements will be made. If the CPA is making the deposits, then the likelihood of the misappropriation of such monies can be substantially reduced. If the CPA is monitoring the incoming mail for a senior, then offers that may be scams can be diverted. If the CPA is providing other types of concierge services, the elder can be insulated from those who might take advantage of them.

There are many forms of financial elder abuse, and this article cannot delve deeply into examples of such. Suffice it to say that anybody can perpetrate financial elder abuse on a victim. But keep in mind that the most frequent abusers are family members — adult children and even spouses. Accordingly, a clear understanding of the role of the CPA must be incorporated into an engagement letter, and the CPA must make all stakeholders aware that the elder is the client whose interest must be protected, regardless of who is paying the bill of the CPA.

Here are 10 steps that elders and their CPAs can take to protect against financial abuse:

1. Have several family members be involved with the elder, seeing her regularly.

2. Encourage the elderly person to become involved in community, religious, senior and charitable organizations, which will create a support system.

3. Have checks for income mailed directly for deposit to the bank.

4. Arrange to have certain routine, recurring bills paid directly from a bank account.

5. Consider having a CPA handle the day-to-day bookkeeping, bill paying and record keeping.

6. If loans have been made to caregivers, family members, friends or others, there should be written documentation of the terms of the loan, and the CPA should make certain that the loan is being repaid according to its terms.

7. Caregivers’ references should be carefully screened and verified.

8. After a caregiver is hired, always be alert for behavior that indicates that the caregiver is trying to isolate the elder from others.

9. Consider having two trustees rather than one agent or account signer, and consider requiring action and/or approval of both for significant financial matters.

10. If there is a springing power of attorney, consider recommending that it will take two physicians to agree that the person lacks capacity before the springing power becomes effective.

CPAs, particularly those who practice in the area of financial planning, estate planning and investment advising, can help to provide solutions and protection when financial abuse is suspected or when it has occurred. CPAs can be the eyes and ears for the family and can remove the burden of financial protection from the elder and other family members.

An observer can report actual or suspected financial abuse to a number of places. If life-threatening or other physical abuse is observed or suspected, call 911 or your local police department as soon as possible. In other cases where abuse is suspected or observed, call Adult Protective Services, the elder care or long-term care ombudsman, if one is available in the community, or the police department. Victims of elder abuse should be encouraged to contact a trusted doctor, friend, family member or their CPA.

An additional resource to consider is the Eldercare Locator help line at (800) 677-1116. They will provide a referral to a local agency that can help. A relatively recent force to prevent financial elder abuse has been the formation of Fiduciary Abuse Specialists Teams, which are interdisciplinary groups of concerned specialists from law enforcement, Adult Protective Services, the Office of the Public Guardian, prosecutors, health and mental health providers, and financial and legal professionals. They help recover lost assets and prevent further financial abuse.

In conclusion, an elderly individual can and should be encouraged to seek the advice and council of, or to turn some or all of his financial management and control over to, an EC/PP-trained CPA in order to avoid or mitigate the possibility of financial elder abuse.

Mitchell Freedman, CPA/PFS, is the founder of MFAC Financial Advisors in Sherman Oaks, Calif., and a leading member of CPAs Reforming Our Profession.

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