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Monday, May 13, 2019


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CPAs, Tax Preparers, and Financial Advisors May See Elder Financial Abuse

Tax preparers have the unique opportunity to see senior's or elder's financial affairs at least once a year. The elder financial abuse aware CPA would look out for:

  • Missing or incomplete documentation. Does the client have full and complete documentation regarding transactions?

    Missing documents resulting from recent transactions may be hiding the real change.

  • Has the senior's finances changed substantially since the prior year(s). Have interest or dividend income changed significantly? Are significant declines explainable?

    Reduced investments, of course, result in lower interest. This could be the first clue to financial abuse.

  • Has the client made gifts to unknown people? Repeated gifts to the same family member?

    The client spend a lifetime building retirement nest egg. They will most likely not be willing to just give it away.

  • Has the client loaned money to family members or to questionable third parties?

    Loans can be desguises for financial abuse. Once the senior passes on, will the loan be repaid?

  • Has the client engaged in investing in exotic forms of investment that they don't understand and cannot explain?

    High pressure sales tatics can make the senior feel guilty that they don't understand.

  • Does it appear from year-end brokerage statements that an excessive number of trades are occurring that may result in excessive fees?

    Most of us, and especially seniors, don't view the statement in the detail necessary to spot such activity. The total investment value remains aproximately the same, but the specific holdings change, benefiting only the broker. In a rising market, the portfolio may be rising, but reduced by the excessing trading fees.

  • Does it appear the client has new investments that are not suitable given the client’s age and financial situation?

    Just one example is purchasing annuities at age 80.

  • Are there unusual amounts of capital gains or losses compared to prior years? This is just another variation on the excessive number of trades paragraph above.

  • Has the client engaged exchanging annuities that are not suitable for their age or investment strategy and may have resulted in merely generating fees?

    A common tactic is to "sell" this new-and-approved annuity, trading one annuity for the new one. This results in high fees, more commissions and a smaller annuity benefit.

                        Senior Financial Abuse, Fraud and Forensic Accounting

                                            Jim Colville, CPA, CFE
                                                San Diego, California

                                                           James M. Colville, CPA, CFE