Protecting Elders with Dementia from Financial Fraud: A Guide for Caregivers

Financial exploitation of older adults is a growing concern, particularly for those with cognitive impairments like dementia. Conditions like Alzheimer’s disease and other forms of dementia cause cognitive decline, making it harder for older adults to manage finances and leaving them more vulnerable to poor financial decisions and exploitation.1

As dementia progresses, affected individuals may struggle with tasks that require clear thinking, like managing finances, recognizing scams, or remembering basic information. This decline in cognitive ability can make them especially vulnerable to financial exploitation. 

Here's what you need to know about the signs of dementia, and steps you can take to protect your loved one from fraud, especially as their cognitive health declines.

Signs Your Loved One May Have Dementia

There are multiple signs of dementia that are common with different types. Here are the most common ones that the National Institute on Aging (NIA) has identified:2

• Memory loss and confusion: Struggling to recall recent events or recognize familiar people and places.
• Difficulty with language: Trouble finding the right words, expressing thoughts, or understanding written and spoken language.
• Wandering and disorientation: Getting lost, even in familiar environments.
• Challenges with finances: Difficulty managing money, paying bills, or making sound financial decisions.
• Repetitive behavior: Frequently asking the same questions or repeating stories.
• Reduced interest or motivation: Losing enthusiasm for activities, events, or social interactions.

The NIA has a more extensive list of dementia symptoms. To determine which type of dementia your older loved one has, they'll need to be professionally evaluated.

The Limitations of Power of Attorney (POA)

One of the first protections people with loved ones diagnosed with dementia consider setting up is a Power of Attorney. In fact, if their loved one was proactive about setting up paperwork for end-of-life needs, they may have already given someone POA. But POA has limits in this situation. Although POA grants someone authority to manage your elder's financial affairs, it doesn’t restrict the elder’s access. Because the elder still has access, they're still at risk of financial abuse or exploitation.

If a neuropsychologist determines that your loved one is still able to make their own decisions (common during the early stages of dementia), it is hard, if not impossible, to limit access to their financial accounts. (Below we'll show you more about what to do until that time comes, and what to do after it does.)

Preventative Steps Primary Caregivers Can Take Now

If your loved one hasn't been evaluated by a neuropsychologist yet — or if they've deemed still capable of making their own decisions — that doesn't mean you can't still take steps to help protect them. Here are a few steps you can take to help ensure your loved one’s financial security and minimize stress for all involved. 

Simplify Financial Management

For elders with some form of mild dementia, simplifying financial management using these methods can reduce risk and allow your older loved one some control over their finances. Choose the methods that work best for your family — and your elder's stage of dementia. 

• Consolidate accounts: Minimizing the number of accounts can help reduce complexity and improve oversight.
• Set up automatic payments: Paying bills automatically can prevent missed payments and late fees and prevent your senior from trying to manage payments themselves, leading to mistakes. However, be mindful that they may still have access to passwords and could change them and automatic bill-paying options if they become forgetful or confused.
• Use prepaid debit cards: Setting spending limits with a prepaid debit card helps control daily expenses and prevents overspending.
• Create separate payment accounts: Separate spending money from money used to pay bills by creating different accounts. You should have access to both, but your older adult should only have access to the account with the debit card attached. Add money to the debit card linked to the spending account as needed. This separation of accounts can prevent unpaid bills and overdrafts. 

For those with advanced cognitive decline, appointing a trusted caregiver as a financial guardian may be advisable. The Alzheimer’s Association provides resources on financial planning for caregivers and offers guidance on steps like this.3

Create Limited-Access Accounts for Caregivers

It’s not unusual for elders to have multiple people providing care for them. That can be both someone hired to assist and extended family. Unfortunately, it's not uncommon for caregivers, especially those outside the family, to commit financial theft if they have access to your loved one's accounts. (And oftentimes, some level of access is needed so that those caregivers can most effectively help your loved ones!)

To reduce the risk of fraud, work with your loved one's financial institutions to set up accounts with restricted access. This means only you and perhaps one or two other trusted caregivers who you expect to be around long-term have access to the accounts. This can help limit unauthorized or fraudulent transactions.