Familiarity Fraud: Common Scams Targeting Seniors

Why It Matters:

• Cases of financial fraud against seniors continue to rise, with 1 in 20 older adults reporting some kind of financial mistreatment in the recent past.

• While stranger scams make headlines, familiarity fraud (perpetrated by a person of trust) is a real danger for many seniors.

• Knowing the types of fraud, what to look for, and where to find help is your best defense.

Ryan Johnson tkc.profilePicture Written by: Ryan Johnson | Transamerica
April 20, 2020

7 Min readClock Icon

We hear all too often of nefarious conmen creating scams targeting seniors in dubious ways. Whether it’s a subtle telemarketing ploy aimed at accessing financial information, a “too good to be true” foreign lottery claim, a fake charity, or countless other crafty deceits, there are no shortage of crooks looking to victimize unsuspecting seniors.

However, faceless criminals and hidden internet predators aren’t the only perpetrators to be wary of.  It’s inconceivable to consider, but a harsh reality exists: Many seniors could be financially bilked by those closest to them. All individuals—especially the elderly—become vulnerable when giving unchecked financial account access and information to family and friends. According to the National Adult Protective Services Association, one in 20 older adults indicated some form of “perceived financial mistreatment occurring in the recent past.” The NAPSA also notes that only one in every 44 cases of financial abuse is ever reported.

It might be easy to assume that you could never possibly be duped. But there may be some science working against you as you age. A NextAvenue article by a researcher at the MIT AgeLab suggests that, as you age, changes in the brain may make you more trustworthy and therefore more susceptible to fraud. “Decreased activity in the anterior insula portion of the brain in older adults may suggest that their awareness or assessment of risk is not as strong as that of their younger counterparts, which in turn may contribute to a greater vulnerability to fraud and scams,” the article states.

So knowing how you may be leaving yourself vulnerable to what’s termed “familiarity fraud,” understanding how to prevent it, and knowing where to turn for help can prevent monetary losses and lower your stress level. It may also help you protect a loved one.

Here are some common familiarity scams, how they work, and actions you can take in some instances to avoid becoming a fraud victim:

Misappropriation of income

Someone you probably know accesses your Social Security income and uses it for his or her own benefit. This can happen when the perpetrator becomes a “representative payee” of Social Security benefits; it’s similar to an agent under a power of attorney.

• Remember, it’s your money. Never hesitate to ask the payee what he or she is doing with it. If you suspect a representative payee is misusing your benefit, contact the Social Security’s Office of the Inspector General immediately.

Adding name to bank account

A friend or family member suggests it will be easier to help with your day-to-day expenses if you add the person to your bank account. The individual then withdraws money for his or her own benefit.

• Instead, consider giving the person a limited power of attorney, which establishes a legal obligation for the individual to access funds only for your benefit. Your bank may offer alternatives, such as a convenience account, to meet your needs.

Power of attorney abuse

A power of attorney can be an important tool when preparing financially. It gives another person legal authority to act on your behalf. It can also give that person access to virtually all your financial assets.

• When giving someone a power of attorney, be sure to work with an elder law attorney to ensure you grant your agent only the powers you want them to have. Visit the National Academy of Elder Law Attorneys to find a local attorney. Other helpful resources include the American Bar Association and the American Association of Trust, Estate and Elder Law Attorneys.

Transferring title to or re-encumbering real property A friend or family member may suggest you get your house “out of your name.” For example, many people think that transferring home ownership will help them qualify for Medicaid if they need long-term care.

• Before transferring real estate — even to a family member — it’s recommended you talk to an attorney who works for you, not the person suggesting the change.

As we age, it’s natural to ask friends and family for help with our finances. But understanding familiarity fraud basics, and being aware of potential ploys by people we may trust, can make all the difference in gaining a helping hand without becoming a victim.

Things to Consider:

• Safeguard your Social Security income and be cautious of someone wanting become a “representative payee” in order to claim your benefits.

• If a friend or family member asks to be added to your bank account to help with day-to-day expenses, consider only giving them limited power of attorney.

• When giving someone power of attorney, work with an elder law attorney to protect yourself.  Helpful resources to check out: The National Academy of Elder Law Attorneys, the American Bar Association, and the American Association of Trust, Estate and Elder Law Attorneys.

Transamerica Resources, Inc. is an Aegon company and is affiliated with various companies which include, but are not limited to, insurance companies and broker dealers. Transamerica Resources, Inc. does not offer insurance products or securities. The information provided is for educational purposes only and should not be construed as insurance, securities, tax, legal or financial advice or guidance. Please consult your personal independent advisors for answers to your specific questions.



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