Dear Readers,

It’s often said that the best defense is a good offense, and this is definitely the case when it comes to preventing financial fraud and exploitation. You can be the victim of financial abuse at any age, but older Americans are often the most vulnerable. So, because today is World Elder Abuse Awareness Day, I’d like to provide some steps you can take now to protect your loved ones—and yourself.

It’s a big problem and getting bigger

As financial fraudsters become increasingly more sophisticated, their scams are proliferating and threatening the well-being of our aging population. It’s an unfortunate fact that as we age, we can suffer from what is often gradual but significant cognitive decline, often so subtle that it goes undetected for an extended period of time. Older adults who live alone can be the most vulnerable of all.

In fact, nearly half of children with parents aged 65 or older say they are “very” or “somewhat” worried their parents have already become or will become less able to handle their personal finances over time.

Even people with dementia, for example, can continue to feel confident about handling financial matters. The Federal Trade Commission reports that 37% of its consumer fraud complaints are received by those 60 and older. Yet, 97% of individuals over the age of 65 report that they are “very confident” or “somewhat confident” in their ability to make sound financial decisions.

Defense checklist

Here are a few steps you can take to protect your loved ones and yourself from becoming a victim.

1. Add a Trusted Contact Person to investment accounts

Establishing a Trusted Contact Person is an important first step because it can help your financial institution move quickly and effectively when they suspect financial exploitation. A Trusted Contact Person is someone you designate to be your financial advocate. This person has no authority over your accounts, but is someone your financial institution can contact to discuss issues such as the status of your mental or physical well-being; activity on your accounts that might indicate possible financial exploitation or other limited circumstances as permitted by law. You can learn more about trusted contacts at FINRA.

2. Create or update a Durable Power of Attorney and a Revocable Living Trust

A Durable Power of Attorney, unlike a Trusted Contact Person, authorizes a third party (referred to as your Agent or Attorney in Fact) to act on your behalf. The term “durable” means that it becomes active upon execution and remains active during periods of incapacity. There’s also a Springing Power of Attorney, which means that the power for a third party to act on your behalf only “springs” into effect when you are declared incapacitated.  

A Revocable Living Trust, sometimes called a living trust or inter vivo trust, is a way to title assets that can help you manage and protect your assets should you become ill, disabled or start to show signs of diminished mental capacity. While you’re living, the trustee (who might be you, although a co-trustee might also be named) is generally responsible for managing the property placed in the trust as you direct for your benefit.

You can specify the powers and responsibilities of the trustee and contingent trustee. Some individuals choose a corporate trustee for continuity, expertise and impartiality, but you can also choose any individual you want. Regardless, the most important thing is that it’s someone you trust. Integrity, not financial acumen, is often the most important trait of a potential agent or trustee.

3. Shut down telemarketers

Signing up for the National Do Not Call Registry at DoNotCall.gov can help reduce unwanted telemarketers (but not surveys, political calls or charities) from contacting you on your home or mobile phone. The DNC registry is managed by the Federal Trade Commission (FTC). There is no cost for this service.

4. Block spammers

The DNC registry is effective in blocking marketers, but doesn’t stop spammers and fraudsters. My advice is to approach all calls, text messages and emails from unknown senders with extreme care. If you suspect a fraud, don’t answer or respond. Learn how to block these calls and emails in the future and delete them immediately.

5. Protect your credit

If you’re concerned about identity theft, reported data breaches or someone gaining access to your credit report without your permission, you can freeze your credit report with the three major credit rating agencies (Equifax, Experian, TransUnion) for free. And if you're someone’s guardian, conservator or have a valid power of attorney, you can get a free freeze for that person, too.

You can also place a fraud alert on your credit report, which can stop someone from opening new credit accounts in your name, but not prevent the misuse of your existing accounts. You still need to monitor all bank, credit card and insurance statements for fraudulent transactions.

A credit freeze locks down your credit whereas a fraud alert allows creditors to get a copy of your credit report as long as they're able to verify your identity. The length of time for a credit freeze to remain in effect varies by state. You can lift the freeze temporarily, either for a specific time period or for a specific reason; for example, to allow a potential landlord, lender or employer to get the information they need. You can still get access to your free annual credit report with a credit freeze in place.

6. Trust but verify

It can be difficult to judge whether a request for information or financial help is legitimate—whether that’s from a business, app, or even a charity or a friend or family member. So take all the time you need to identify the parties you're dealing with and the reasons they're requesting personal information, financial access or your financial help. Don’t allow yourself to feel pressured or hesitate to get a second opinion from a trusted friend or family member.  

Bottom line

Being a victim of financial fraud or exploitation can be financially and emotionally devastating. The stakes and risks increase as we age, so always be on the lookout for red flags.

The good news is that we can all take steps to protect ourselves and our loved ones. Being vigilant and working with a team of trusted advisors, family members and friends can help establish meaningful safeguards. And remember that financial literacy isn't just for kids! It also empowers adults of all ages with the information and skills we all need to make better financial decisions.

Have a personal finance question? Email us at askcarrie@schwab.com. Carrie cannot respond to questions directly, but your topic may be considered for a future article. For Schwab account questions and general inquiries, contact Schwab.