Don’t Let Yourself Get Scammed Out of Your Nest Egg
By: Barry E. Haimo, Esq.
December 11, 2014
We’ve all heard stories about how our friend’s elderly aunt donated thousands to a fake charity or great grandpa Terry who lost the house in a reverse mortgage scam. It used to be that these were sad, isolated anecdotes people would share as warnings that made them seem more common because of the retelling.
Unfortunately, today senior financial abuse is becoming more and more prevalent as the Baby Boomer generation enters their twilight years. There are so many elder scams, and they occur so frequently, that some have even called them the “crime of the 21st century,” and the National Council on Aging has a list of the most common scams that target seniors.
Each scam on this list has the potential to be financially devastating, but one struck me particularly hard because it’s a version of a story I know: the Grandparent Scam. Instead of simply explaining it, I’m going to tell you the sad story of Mrs. McCabe and her love for her grandson, Tim.
It Started with an Urgent Phone Call
Mrs. McCabe had been living alone in her Broward County, Florida, home ever since her husband passed away a decade ago. For an 85-year-old woman, her health was relatively good, but she didn’t get out a lot and only spoke to her daughter once a month. Though she kept in contact with her extended family, she only saw them once a year – during the holidays.
So it was quite surprising when she got a call out of the blue. “Hi Grandma,” said the male voice on the other end. “Do you know who this is?”
Immediately a smile lit up her face. “Timmy? What are you doing calling me? Are you in town?” He was the youngest of her three grandchildren and the only boy, a year away from graduating college.
“No, Grandma. I wish I was visiting, but I’m nowhere near you. Actually, I feel kind of embarrassed, but I’m calling you because I kind of have a problem.”
“Oh, no. You’re not sick, are you? Those dorms are like incubators for disease. I told your mother you needed an apartment—”
“I’m not sick. It’s my car. Yesterday this guy came out of nowhere and hit me. Then he just sped off before I could get his license. I had to tow the car to a shop.”
“Tell me about it. And my insurance won’t cover it. They’re saying my policy lapsed, but I never got a notice. And I can’t tell mom and dad. All they’ll do is tell me how irresponsible I am. The tow truck driver is even threatening legal action if I don’t pay.”
“Can I help?”
“Would you? I just need a few hundred dollars to cover the tow and some body work. You don’t mind?”
“Of course, dear. I’m just glad you called me. Will $500 cover it?”
“That would be great. Do you have a pen and paper? I’ll tell you where you can send it.”
Over the next six months, Mrs. McCabe got more than a dozen calls from her grandson, sometimes asking for a few hundred dollars, and sometimes requesting thousands. His needs ranged from the desperate – “My landlord is threatening to kick me out!” – to the excited – “I’m going to propose to my girlfriend, but I can’t afford the ring.” He was always incredibly thankful, always promised to pay her back as soon as he could, and always asked her to wire the money through Western Union.
Mrs. McCabe wasn’t made of money, but she didn’t mind. She was thrilled to be such a big part of Timmy’s life and learn things even his parents didn’t know. Even if it cost her a bit of money to do it, she was more than willing to pay the price.
But as his requests increased and the holidays crept closer, Mrs. McCabe started to tally up what she’d given to him. All told, it was close to $25,000 in less than half a year. She was shocked and promised herself to bring it up with him when she saw him.
You can probably guess what happened. In a word: confusion. During their annual holiday gathering, Timmy seemed surprised when Grandma asked to talk to him in private, but he readily agreed. She tried to keep things pleasant by asking about his car and his fiancée, but the more she spoke to him, the more confused he seemed. And when she finally got around to suggesting they come up with a payment plan to return her money, he looked at her like she was crazy. “Grandma, I don’t know what you’re talking about.”
After a lot of angry words, followed by extreme mortification, Mrs. McCabe realized that it wasn’t her grandson she had been speaking with and sending money to over the past year. She’d been thoroughly and completely scammed, and because of her trusting nature, she would never see that $25,000 again.
Estate Planning Can Make It Difficult for Scammers
As soon as she realized what happened, Mrs. McCabe made changes in her life so any future scammers would have to work a lot harder to get her money. She put herself on the Do Not Call list. She signed up for Direct Deposit. She set up a Power of Attorney so her daughter could help her with financial decisions if she ever became incapacitated.
And she set up a meeting with an estate planning attorney who had been recommended to her. Because she had a substantial estate and was worried about getting fooled again, he recommended putting much of her nest egg into a trust to protect it from taxes and probate when she passed away. Doing this would have the added benefit of keeping it out of the hands of con artists because of the various checks and balances of planning ahead.
For the money that she needed to live on, he had some simpler suggestions – don’t be so quick to open her pocketbook, always require that a person’s identity be verified, keep a weekly and monthly budget that she stays on top of, and talk over any unusual financial decisions with someone she trusts.
Barry E. Haimo, Esq.
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