Managing Your Parents’ Money
Erik Aho, JD, CFE, provides forensic accounting services focusing on embezzlement, fiduciary misconduct and elder financial abuse. He answers many of the questions regarding managing your parents’ money.
Frank: I'm excited about our guest today who is from Sonoma, CA... Eric Aho. Eric's career spans over 25 years of accounting and legal experience. He provides forensic accounting services focusing on business fraud and embezzlement, fiduciary misconduct, and elder financial dues. Eric is a member of the Washington State Bar Association, the California Society of Certified Public Accountants, the Association of Certified Fraud Examiners, and the Sonoma County Bar Association. He graduated from Lewis & Clark School of Law, holds two undergraduate degrees from Oregon State University, and post bachelor in accounting at the University of California, Berkeley. Eric, thanks so much for joining us.
Eric: Thank you so much for having me on, Frank, I appreciate this. Frank: Great, we've had you on when I was just doing the radio show and now with the podcast reaching out to more people, I think what you and your wife Lorraine are doing are great. We want to learn more.
Eric: Well, thank you so much!
Frank: So tell us, forensic accounting I know that's a lot what you deal with, how does this type of work relate to the elderly, what is it? What exactly is forensic accounting?
Eric: You know that's a good question. Forensic accounting, there's no single definitive answer to that. The American Institute of Certified Public Accountants, as a 50 word definition of it, I'm a member of the Association Certified Fraud Examiners, and their definition is a little more succinct. Forensic accounting is a fraud examiner. That's essentially what I do. I conduct fraud examinations, so I'm looking at financial statements, bank accounts, financial activity. I'm looking to see whether or not there may have been a theft or embezzlement or misappropriation of funds. So that if there's subsequent civil or criminal actions that my findings might be used as the form of evidence to determine whether or not some theft or embezzlements may have occurred. In other words, to sum it all up, I'm kind of a glorified dumpster diver.
Frank: I know you deal with businesses, but how does this apply to the elderly?
Eric: Well, we conduct embezzlement investigations for businesses. Also we do, and this is actually my focus, I investigate questions of elder financial abuse. My background is in Securities Analysis, Securities Fraud and also Elder Law. So the two have come together. My formal background as you indicated is Law. With accounting I focus on areas where an elder may have been defrauded or funds or items may have been stolen from the person. In California, elder financial abuse is a separate crime because it's defined under a separate statute. So, what I find due is focus on any type of financial crime that may have afflicted an elder which is defined as some of them as 65 years or older.
Frank: I know this as you know I'm involved in the business. This is a huge issue as far as elder abuse, but let's talk more about the financial side of things. So, if you're specializing in this there must be a lot going on.
Eric: Unfortunately there is. Elder financial abuse has always been with us but it has only within, I would say, the last 10 to 15 years that states have recognized this as a separate crime. The reason for doing so is multifold. But certainly one of the reasons is that an elder who suffers a financial loss from a con artist or something has had a very difficult time if not impossible for the elder to recover financially. They're on fixed income, there's not going to be additional income coming in, they can't just pick up another job. So, once they're victimized financially, it's very, very difficult for the elder to recover. And I would even add that there's studies that have been performed that indicate an elder who has suffered from elder financial abuse lives a shorter life. Their lifespan is shortened. So, you can almost make the argument that elder financial abuse is a crime against a person in a sense that it can basically kill them. That's the blunt way of putting. But the consequences can be severe.
Frank: So what do you recommend? A couple of weeks ago or a week ago I had on just a great person on the show talking about, "Is it time to take the keys away from mom or dad on driving?" He has a business just relating to that which hopefully people have listened to or will listen to. Dealing with that takes away the independence which the adult children have a tough time with and I can understand that. They don't want to take away their independence. I would think it is also difficult to deal with the parent in saying, "You know mom or dad, how about if I handle your finances," because we know why but how do you suggest the adult children handle this situation. What time should they either take it over or move over to a professional like you. What do you suggest?
Eric: Well, let me take the first part of your question.
Frank: 'Cause I think I asked about three questions.
Eric: They are great questions. I can talk about those at length. Let me see if I can condense this down in a way that abides by the short time that we have here on air. I think that most difficult problem that a son or daughter may face in trying to manage a parent's finances, it's not the accounting aspect to it. In fact, I will be conducting upcoming seminars teaching sons and daughters and family members how to manage parents' finances. I can say the accounting side of it is fairly easy to teach, I can do that. The more difficult aspect of managing a parents' finances is not the after management, it's the communication. We hear a lot of advise, just ask open-ended questions, just listen, if the elder should depart from the topic you are discussing, just go ahead and wait. That's all good advise, it makes perfect sense. The problem with that, however, is it doesn't put it in context. It doesn't explain why you should to these things. So, let me explain just very briefly what I believe an elder is going through when you hear these kind of things. First of all, an elder is faced with issues of purpose and issues of control. At the later stage of your life, you're attempting to slice and dice and put it all together, figure out what is the purpose of your life. What does this all mean? Some people talk in terms of legacy, I talk about in terms of purpose. But as an elder tries to determine what their life meant and what episodes in their life might mean, they're unwilling to give up control. Because they knew control over certain aspects in their life whether it be finances or could be something as simple as driving, they need to control these aspects in their lives so they can make sense of what their life meant or what it continues to mean. I can give you a perfect example. My mother who passed away in 2010, for years she struggled with the bad relationship with the bad relationship that she had with her father. I would hear the stories over and over again, very repetitive. What I didn't understand at that time but tend to realize later was she was trying to ascribe a certain meaning or significance to her poor relationship with her father, what it meant to her life, and how she could overcome from that. She never did until two days before she passed away when she told me that she had forgiven her father. Now, in terms of her legacy what her life meant to her, a large part of that was the relationship she had with her father. The fact that she could forgive him at that very late stage meant that she could now give up control on that issue. That is what I think is really important, that if you as a son or daughter are attempting to manage a parents finances, and they're resisting, you know what the story is. It's not a question of balancing their checking account, it's a matter of whether or not your parent is willing to let you do that. So, what I would say in the brief amount of time we have is to understand what they may be thinking in terms of purpose in their life and how that relates to whether or not they're going to give up control so that you could help them. And we can talk about that in length. But anyway, that just gives you a brief understanding of what an elder may be going through, and it may have assist the son or daughter in approaching the elder. Again, once you understand the context, you can appreciate why it is important to let the elder talk to let them dissemble what they're going to do. By the way, it's not really they're wandering off the topic because they do not understand what it is they need to talk about, it's because they're trying to make sense of something else and they're doing it in their own way. So, let them do that. Hopefully you want to reach the point where they will allow you to assist them in managing their finances and not an issue of control.
Frank: And I think that's the key point you just said. It's not that you're taking away this function that they've been doing, mother or father, handling the bills, dealing with their own credit cards, all of that, is that you're assisting them. So you still want to keep them involved in the process, correct?
Eric: You absolutely do, because at the end of the day it's their money. It's their finances it's and their life. Now how you intervene, when you intervene at what level in your intervention, it all depends on their personal circumstance and it's a dynamic target, too. People as we age, we obviously change. Though there are those who would argue well as you get older you would lose your faculties, and you can't manage your affairs as well. I would challenge that, I would simply say it may be true that a person may be suffering from a cognitive decline and can no longer manage their finances, but it may also be they're looking at their finances in a different way. Remember that ultimately everybody is allowed to make bad decisions. A short of undue influence, or a scam, or a dementia, or other cognitive or neurological impairments, parents as well as, children are allowed to make bad decisions with their money. But if it's a question of where there's a clinical reason for mismanagement or if they are victims of a theft or a crime, that changes things a little bit. That's where you want to intervene. I usually say that at the beginning, if your parent is what I call young-old as opposed to old-old, merely setting the stage for a 'systems down the road' is enough. And that is maybe just understanding what your parents' expectations are about their retirement or what they want to do with their money. Maybe that's good enough. Maybe an intermediate steps in as you approach as you go down that road, maybe simply reviewing what their finances are and understanding what their expenditures and where their income sources are, maybe that's enough. And then when they reach old-old and that demarcation I define as where a retiree or a senior devotes most attention to their health care issues. At that stage maybe actual active management is appropriate. So now how to you go from merely setting up a stage to review to active management. I think that most sons or daughters have a fairly good understanding of where they and their parents would be on that spectrum, to remember you don't want to jump the gun and do more than what your parents are willing, or would allow, and again we come back to issues of legacy and purpose and control. To sum that up like I say, it's like a moving target. It's a very doable kind of thing, but for the son or daughter to be mindful of what the process is.
Frank: I guess I want you to drive this point home even stronger because I have seen several cases and I'm sure a day doesn't go by that you don't hear about something, and you're in the business where a senior has been taken advantage of. Even if that particular senior signed up for something willingly, it's something that might've just been unnecessary, and they're being taken advantage of, and maybe you could just bring up, obviously you're not going to mention names, do you have a couple in mind to kind of drive the point home to adult children out there that they need to get involved before it's too late.
Eric: I will say this right off the bat, anytime there's a professional caregiver who becomes involved in the elder's life, most of them by far, the vast majority of professional caregivers are very conscientious. They perform a really difficult job and most of them do it very well. There are also those, of course, who are opportunistic and think of working for an elder as an opportunity to steal after that small, small subset. I would recommend that the children, first of all, do your due diligence, understand what the background of the caregiver is, assist the parent in making the choice the decision of who to hire. That is part of the larger assistance packet as it were. Think of it this way, the son or daughter is an additional set of eyes to assist the parent in making various decisions. This is really good in terms of reviewing checking accounts, good in terms of consolidating banking accounts, eliminating extra credit cards. You should want an extra set of eyes so you can understand what is happening and that the elder doesn't have to rely on entirely on themselves to make some decisions and see what's going on. So, with a caregiver, sure, go ahead and investigate the background. See if the person's appropriate. And then once the caregiver is hired just check in and see if everything is going fine and watch for certain red flags to determine whether or not elder financial abuse may be committed. In terms of specifics, there's one in many of the, I should say this, we're talking about professional caregivers but the fact of the matter is, most of the elder financial abuse is committed by family members. I can think of one in particular. We assisted as elderly mother who have lost around $40,000 to a son who he himself is retired. He owned race horses and actually raises an interesting issue of gambling. He owned race horses. He wasn't just a gambler, but he was also financing his gambling passion which has actually raised the horses he may or have not been betting on. What we managed to do was look through her finances. We've determined how he was siphoning off funds. We actually were instrumental in arranging a restitution agreement that the district attorney's office had struck. This is unusual. Hopefully, this will all be taken care of. Last I understood money had been repaid through the settlement. You know, unfortunately it's a lot as often as the case, when the money is stolen, it's spent, it's gone, and you don't have a way of getting it back.
Frank: It's too late. Right.
Eric: That's one example. There's another example where an elder woman, widow owned multimillion dollars, it was about $10 million or so in commercial property that was the subject of the bitter estate planning dispute. What we did was, this is more of a reconstruction of records to try to determine where the money had gone, who's honorship interest were who's and move this forward so a proper estate planning package could be put together by her estate planning attorneys. These things come in so many different directions, it can be as simple as sweepstakes fraud. Usually what we're seeing, we see a lot of non-profit fraud. Basically, these non-profits exist only to scoop up money. We call it the 'fat dog postcards.' You receive these in the mail, oh, go ahead and give a few dollars something like this to these non-profit and it will be great. The problem is they keep coming back and they sell the elders name, so other fraudulent non-profits can then try and seek donations from the elder. So that's another example.
Frank: So let's say the family agrees that mom or dad's money should be managed either by themselves or somebody else. The adult children are busy, they're working, they feel it should be done, they just don't have the time to do it, they live elsewhere. What do you recommend then?
Eric: There are few approaches you can take. If the son or daughter's incapable or simply unwilling to manage finances, they can hire a professional fiduciary. In California that is a regulated occupation. I think if you go to, I don't have the website off the top of my head, but the California Professional Fiduciary if you were to search for that term, you would find state agency that regulates it as well as the Professional Fiduciary Association website. You can certainly use a daily money manager. A daily money manager, as the term implies, manages the daily transactions for an elder or someone else who's incapable of managing their money. The only caveat I would add to that though, anybody can call themselves a daily money manager, it's an unregulated field. There is as an association out there, a national association, but to my understanding there's no licensing requirement or anything like that on the state level, no states that I'm aware of licensed or regulated daily money manager, so you need to be careful about that. If you live outside the Bay Area for instance, or even inside the Bay Area as well, there's a number called 211 like calling 911 on the telephone. You just call 211, you'll talk to an advisor who can plug you in to some various assistance and resources to assist an elder whether or not that elder is in the bay or whether or not that elder is across the country. So that could be very helpful where if as a central guardian you have absolutely no idea where to start. That's a good start.
Frank: I notice that you have a lot of resources on your site, on your websites. People want to go not only to learn about what you do, but you have a lot of those resources with links. Where would they go to get that information?
Eric: Our website is www.ahoandassociates.com. In fact the website is about to be re-tooled and overhauled within the next two weeks. So, it will change considerably, but we do have a resources page there. It has various links to Bay Area agencies and resources that a person might go to if they need help managing your parents' money. I forgot, I should add this right now, the Sonoma Area Counsel on Aging offers certain fiduciary services and daily money management services. It is for a fee, I think it is quite reasonable but right off the bat that is one place to start. I think we may have that on our website.
Frank: There's similar associations in other areas in other parts of the country as well.
Eric: Yes, yes.
Frank: I know we don't have a whole lot of time, but you brought it up before. So, we've got just a couple of minutes. But maybe just touch on it when you were talking about maybe an adult child getting money from their parent because of a gambling problem. That's a huge issue and I know we can only touch upon it now but that could certainly be a subject matter we could talk about on a future show in more detail, but just touch on it if you can that this is a growing problem with seniors.
Eric: It does merit probably a separate show because the subject is so vast and the subject havn't been given much attention. I can lay out an interesting statistic right off the bat, approximately 7% of the adult gambling population are separate from what is called disordered gambling which is a term of ours in the psychiatric professional. The elderly population in the demographic group depending upon you suffers a higher rate of disordered gambling probably around 10%. Gambling has not been really discussed because it's a difficult disorder problem to determine. The red flags are very subtle. So if you're mother or father may be suffering from disorder gambling, then it's very important to look for some subtle red flags on what may be going on. One red flag would be trying to match up expenditures to their income. Why would their expenditures be so high as opposed to their income. Also, looking at debt load, look and see whether or not there are a lot of ATM transactions at casino restaurants. Talk to your mother or father about what it is to gamble, what are their feelings about gambling. If they're purposely vague about that, then that might be a redflag something might be going on because those who suffer from a gambling problem are very good at hiding it. So you want to try and get a feel for how your mother or father may be discussing gambling to see whether or not they may be hiding something. The reason why this is so important is that gambling is more prevalent than ever in this country, more opportunities, elders if they suffer from a gambling problem, they're much less likely to ever recover from it because the money can be gone. It even has medical consequences which are somewhat perverse and very sad but it's one of these things where the consequences are irreversible. It's like elder financial abuse in terms of the elder not being able to recover from significant gambling losses.
Frank: Eric, we can talk forever. Actually, I know you're coming out with a book and when you have that on the bookshelves let me know. We got to have to talk about gambling and there's so many this to talk about. Your wealth of information if you want to learn about Eric and Lorraine's firm, just go to ahoandassociates.com. Eric, thanks so much for joining us. We'll have you back. Thank you all for listening, again you can listen to all the podcasts by going to itunes. You could also go to www.agingboomers. com. You can connect to my website at seniorcareauthority.com, download on your iphone or android phone on the aging boomers, all the different ways to listen to these shows. Send them down to friends and family as well. Have a great week, be safe out there, and we'll talk to you all soon.
Eric: Thank you Frank. I appreciate being on your show.
Frank: Thanks Eric. Please continue to support our podcast. Go to www.theagingboomers.com, you could go to iTunes, download the app on your iPhone or android phone as well, and send it to all your friends and family.