Updated: Mar 16
When an elderly person engages in a financial transaction that results in their property being misappropriated or stolen the result is an unconscionable violation, a degradation for the individual and for the mental health of society in general. These acts include forging checks, taking retirement proceeds such as social security, using a person’s credit cards or bank accounts, misappropriating personal and real property, skimming rents, etc. The list is very long. It also includes modifying wills and trust, bank accounts, insurance policies, and modifying titles or encumbering financial assets such as real property. Eroding a person’s equity gained over a lifetime of work sounds like an unheard-of-terrible act.
The Consumer Financial Protection Bureau reports that one in five or 1/5 of all elders are victims of some form of financial exploitation. My generation, baby boomers, born between 1946 and 1964, all 80,000,000 of us older folks are now poised to be the collective rich and fruitful targets. I have only mentioned the boomer generation because it represents the largest subset.
Over the next generation approximately $30 trillion in boomer wealth will be transferred to the next generation. Financial Influence with this group extends far and wide in securities, real estate, collectibles, etc. Estate Planning was and still is a must. This is a titanic shift of capital that needs to be managed appropriately. The receiving group will consist of various levels of financial literacy from the relatively high to very low, with scoundrels, scalawags, and entitled parasites laced all about.
When boomers were roughly the same age as millennials, they owned about 21% of US wealth. Today millennials own 3%. Lots of reasons for the fall-out including recession, student-loans, non-financially prioritized value systems, and, not to be left out, the outrageously high cost of living today. This high cost is only accelerating in intensity.
The entire mortgage industry needs to teach awareness programs to recognize financial elder abuse and how to avoid letting family members and friends from getting directly or indirectly drawn into this ugly quagmire. Individual companies must develop prevention and protection programs to teach their employees to recognize and prevent such acts.
Examples of financial elder abuse are unlimited. Here is the one that I recently witnessed: A mortgage broker was tasked with the job of obtaining a loan for a 94-year old lady in a retirement home. The husband had passed away. The property title was held in family trust where the grandson was the successor trustee and possessed the authority to borrow or hypothecate the property. There were multiple beneficiaries. When grandma passed away the estate was to be settled and proceeds distributed to the multiple beneficiaries. The subject property was a free and clear single-family home valued at $800,000. The grandson desired to borrow the maximum possible to purchase a franchise business. The other beneficiaries had no knowledge that their future financial benefits were going to be taken away from them by only one of them.
The mortgage broker who represented possible investors to originate the loan asked the procuring mortgage broker if there was counsel involved who would provide a letter which stated that grandma understood the ramifications of this transaction and that it was an appropriate financial decision. The mortgage broker responded that yes there was a lawyer involved who represented the grandson. Major red flag! The lawyer does not represent the elderly borrower but rather the greedy-parasitic grandson who plans on extracting unearned benefits from the estate to the detriment of grandma and all the other beneficiaries. Any equity or proceeds from loans should be reserved to pay for grandma’s housing and care until she dies.
This sounds almost unconscionable but occurs daily understanding with baby boomers along transfer 20% of the total, or $16,000,000,000 assets to future of beneficiaries, and will experience some form of financial abuse. The world in which we currently dwell entitlement and parasitic behavior occurs at epidemic speeds. A simple estimate of average baby boomer family wealth might be $1,000,000. This means there would be an estimated 16,000 incidents of financial elder abuse. The prudent and knowledgeable mortgage broker who represented the investor’s money declined to get involved. The procuring mortgage broker went elsewhere and found another mortgage broker who agreed to arrange the sale of the property with a buyback provision within 24 months. All participants in this transaction are scoundrels. Equity gone, grandson takes money for personal use, other beneficiaries screwed, potentially no money to take of grandma, etc. Could it be that a few scoundrels are waiting for grandma to die to cover up this fraud? Yes, fraud, elder abuse, negligent misrepresentation will all be brought to surface when the beneficiaries who were left out of the scheme file a lawsuit against the grandson, both mortgage brokers, and the investor who purchased the property from the old person. Remember that she never had counsel representing her interest.
Home Budget Loans vs Jacoby Meyers Law Offices was a classic read on the subject. The outcome was decided by the Court of Appeals in favor of the mortgage broker who was approached to make a loan to an elderly borrower with caution by requiring her to seek out legal counsel to review the documents and to issue a statement that the documents were acceptable and that the terms of the loan where both acceptable and appropriate in the borrower’s circumstance. This is a must read for the technical minded.
In the USA we have many “protected classes” of people. 65 years of age is the magic number for those classified as elderly. Many are legitimately special needs folks with disabilities that warrant protection and advocacy, while many in this subset of elderly are totally phony. This allows some in the protected class to engage in nefarious acts exploiting the system and get away with lies and deceptions because they are protected. So, it goes with the elderly protected class as a weapon used by many. There are instances where elders may be extraordinarily sharp, with a keen business skill for transactional negotiating, and a with a mile-long history of success. But when things go wrong, they are first to take off their shark mask and replace it with a victim mask when they show up in court demanding to be protected from their bad decisions. They are willing participants to successfully play the system to their advantage and claim elder abuse when indeed they may be predators looking for a sting.
How about an individual who portrays himself as a simple elderly investor, somewhat naive to the functions of the business world? As time goes by the salesperson discovers that the person is essentially a predator looking for the next sting. The elder person’s daily activity could even be networking the neighborhood and surrounding golf clubs to locate the next victim to sue. The person could learn to play the protected class system like a finely tuned Stradivarius. For those don’t relate to this instrument, how about a Les Paul guitar made by Gibson or an eloquent recital of the Shakespearean play of Romeo and Juliet? Brilliant actors, yes, all while orchestrating and maneuvering for self-gain, playing the system to its fullest. They may even prepare by showing up to court wearing old clothes, fold-up walker with wheels, and of course to looking distraught and disheveled. Some judges will take the bait, hook, line, and sinker, as those poor simple folks could only have been taken advantage of by the ferocious businessperson.
So much for theatrics in court. In many cases It works.
Dan Harkey Business and Private Money Finance Consultant