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FRAUD / PERSONAL FINANCIAL PLANNING

Elder financial abuse:

A true cautionary tale

CPAs providing services to elderly individuals play a role
in protecting their clients from financial exploitation.

By Jefferson T. Davis, CPA, Ph.D., and Halston T. Davis, J.D.

inancial exploitation of elderly individuals THE TRUE STORY
challenges CPAs who provide financial plan- (The following story is true. Names have been changed About the
F ning, prepare tax returns, or provide account- to preserve anonymity.) authors
ing and reporting services to recognize potential At 90 years old, George could talk intel- Jefferson T. Davis,
exploitation and to help their elderly clients identify ligently with others but five minutes later could CPA, Ph.D., CISA,
or prevent abuse and exploitation. not remember the conversation. Mary, his wife, was is professor of
Financial exploitation of elderly individuals 80 years old. The marriage was a second marriage accounting at
includes a range of fraud types. According to a for both. George and Mary had been married for Weber State
2020 AICPA survey, CPAs who work as financial about eight years and had separate bank accounts, University in
planners for the elderly have seen various frauds, each receiving their Social Security and retire- Ogden, Utah.
including the inability to say no to relatives (60%) ment benefits separately. They lived in a recently Halston T. Davis,
and scams or abuse from adult children (43%). purchased condo. Sue, Mary’s daughter, had a J.D., is an attorney
Other evidence also indicates that elderly power of attorney for Mary. Sue made sure Jack, with Davis &
individuals fall victim to people they know and George’s oldest son, knew the condo was in Mary’s Sanchez in Salt
trust, including family members. Verified cases in name only. Lake City.
a 2016 study from the New York State Office of Mary had recently asked Jack to get George into
Children and Family Services found that 67% of a care facility. So, Jack obtained a power of attorney
elderly fraud perpetrators were family members; for George and took a brief look into George’s fi-
16% involved more than one perpetrator; and 26% nances. Jack, a CPA, was floored to see that George
included using the elderly victims’ money without had just a little under $3,000 in his bank account,
approval (the most common method of elderly even though he received about $3,800 income each
exploitation identified). month from Social Security and retirement benefits
The following true story converts statistics to combined. Jack also knew that George previously
IMAGE BY KOMUNITESTOCK/GETTY IMAGES irregularities and thus uncovered family members’ the income was going and said the bank balance
real experiences. One party in this story was, by
had a fairly good nest egg, having sold his condo
coincidence, a CPA. The CPA identified financial
about seven years earlier. Jack asked Mary where
financially exploiting an elderly individual’s
needed to be built up if George was going to be
placed in a care facility. Mary responded that Jack
situation. While CPAs might identify financial ir-
and his family either needed to take George in or
regularities after they occur, this true cautionary tale
also indicates CPAs can help their elderly clients
pay for the care facility themselves.
Soon after Mary’s request that Jack find a care
prevent exploitation with “internal controls” and
other practices that safeguard their finances.
journalofaccountancy.com facility for George, Jack learned that Mary and November 2022 | 13