Sandra Reed’s Life Care Planning: What seniors can do to avoid exploitation schemes and scams

Attorney Sandra W. Reed answers your life planning questions.

Attorney Sandra W. Reed answers your

life planning questions.

What Is Exploitation?

The Texas Human Resources Code defines exploitation as illegal or improper acts of anyone with an ongoing relationship with an elderly person who uses the elderly person’s resources for monetary or personal benefit without the elderly person’s informed consent.

How Bad Is It?

Marion Rosen, a Houston Elder Law attorney, presented a paper last year to educate her colleagues regarding the perils of elderly exploitation. This article summarizes its contents. The estimated financial loss to seniors in 2010 was at least $2.9 billion and expected to rise above $3 billion by 2012.

These estimates are based upon reported cases. Experts tell us the actual losses are far greater because five out of six victims fail to report out of fear, shame, or lack of knowledge of where to turn for help.

Who Commits It?

Although more than 50 percent of financial exploitation is estimated to be committed by strangers, sadly, 34 percent  of it is attributed to family, friends and neighbors.

Who Is Most Affected?

The majority of financial fraud victims are 80 to 89 years old, living alone and female.   However, this group is not the only vulnerable one.  Even the sophisticated and worldly are taken in.

The legendary actor Mickey Rooney testified before Congress in 2011 regarding his step-son’s taking control, not only of Rooney’s assets, but his person, withholding food and medication from him and essentially reducing him to servitude.

 Major Areas of Financial Abuse of Seniors

Trusted Caregiver

Seniors alienated from their families often are vulnerable to caregivers who assist with housekeeping, running errands, and shopping. Brazen caregivers may, under the guise of helping, convince an elderly person to sign papers giving the caregiver access to bank accounts, safe deposit boxes and stock.

Identity Theft

The ready availability of Social Security numbers through a wide variety of sources has facilitated identity theft.  This crime can be perpetrated through a letter or telephone call from someone claiming to be a bank or credit card company requesting information which often includes date of birth and Social Security information.

Identity thieves hover to observe or hear PIN numbers, Social Security numbers or credit card numbers when  transactions are performed utilizing  these.


Flashy telemarketing schemes entice vulnerable individuals into purchases they don’t need. It is not uncommon for grown children of an elderly parent to report finding packages have arrived at Mom’s or Dad’s containing such purchases. So calculating are these sales enterprises, they will often offer to issue a credit card if the caller is without one.

Financial Theft and Deceit of Veterans

Veterans are targets for financial abuse.  In one case in Houston, a court-appointed guardian of at least 28 mentally incompetent veterans embezzled more than $2 million of VA benefits from them. Fortunately, most of the funds were restored and criminal charges were brought against the guardian.

Payday Loans

Beginning in March this year, all Social Security benefits must be paid by direct deposit.  This presents convenience and safety for beneficiaries whose checks can no longer be stolen during mailing.

However, the practice has opened up another peril from payday loan companies who succeed in having recipients turn their benefits over to the company which then returns a small allowance from each check. The loans bear exorbitant interest rates, creating a cycle of ever increasing debt by charging 10 to 15 percent  on a 15-day loan, which comes to over 400 percent annual interest.

Lotteries, Sweepstakes and Pyramid Schemes

Lotteries, sweepstakes and pyramid schemes are rampantly marketed through phone calls, emails and letters.

Free Lunch Seminars

State and federal investigations found that more than half of the free lunch seminars contain misleading or exaggerated claims and 13 percent include fictitious investments or other fraudulent schemes. Even those purported to be without obligation were accompanied by high-pressure follow-ups.


Annuities with high surrender charges, significant up-front fees, delay in effective dates, expiration upon demise, or restricted access to funds often are not appropriate for older citizens.  Annuities do not provide the quick access to money for emergencies needed by many seniors.

One annuity sales tactic convinces seniors to sell current annuities to purchase new ones, which can create steep surrender fees and potential tax liabilities. David Werdegard, M.D., president and chief executive of the Institute of Aging, advises, “Unless you have a life expectancy of 110, buying an annuity at age 70 or 80 is not a good idea.”

Life Settlements

An owner who sells a life insurance policy for more than its cash value but less than its face value has entered into a “life settlement.”  Often the seller pays high transaction fees.  If the seller’s health rapidly declines, the policy may be worth more than its face value.

What Should Seniors Do?

Seniors can protect themselves against identity theft by: (1) not giving out salient information unless they are certain the request is from a legitimate source; (2) being observant to protect this identity information from prying eyes and ears; and (3) carrying with them only the credit cards and checks needed and avoiding carrying PIN numbers or Social Security cards.

Seniors can avoid scams by remembering the adages there is no free lunch and if an opportunity seems too good to be true, it probably isn’t. Seniors should become aware of the traps set to snare, then remain constantly alert and cautious to avoid them.

Seniors should urge lawmakers to improve legislation. Texas is behind other states with large senior populations – California, Florida and Arizona – in providing protective civil and criminal laws.

Finally, seniors who have experienced problems should report these to Adult Protective Services immediately.

Sandra W. Reed is an attorney practicing in Glen Rose.  She is of counsel with the Elder Law firm of Katten & Benson in Fort Worth.  If you have any questions, you may contact her by phone at 254-797-0211 or by email at

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