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The Financial Consequences of Poor Mental Health

The Financial Consequences Suffered by Seniors with Poor Mental Health

by Don Drake, Connelly Law Offices, Ltd. 5.7.24


Medicaid Planning Rhode Island
Attorney RJ Connelly III

"In honor of May being Mental Health Awareness Month, we plan to dedicate several blog posts to explore the impact that poor mental health can have on the well-being of seniors," said professional fiduciary and certified elder law Attorney RJ Connelly III. "However, before delving into today's topic, we first want to clarify the distinction between mental health and mental illness."


According to the Centers for Disease Control (CDC), mental illness is a comprehensive term used to refer to a diverse range of conditions that affect an individual's cognitive, emotional, and behavioral functions. These conditions include but are not limited to, depression, anxiety, bipolar disorder, and schizophrenia.


Mental health, on the other hand, denotes a state of emotional, psychological, and social well-being that significantly influences how an individual thinks, feels, and behaves. Mental health is the foundation upon which an individual's ability to navigate the world around them is based, including interpersonal interactions, problem-solving skills, and decision-making abilities.


"It's important to understand that a person doesn't necessarily have to have a mental illness to become vulnerable to exploitation," said Attorney Connelly. "Seniors with poor mental health are also more prone to financial scams and exploitation. This can devastate their financial well-being and, eventually, their overall societal functioning. As a result, they may be unable to identify fraudulent schemes or unwilling to report that they have been victimized due to a lack of trust or embarrassment."


Scams, Mental Health, and Seniors

"Financial exploitation and scams have become a growing concern, particularly for the elderly population who are more vulnerable due to various factors such as social isolation, emotional or psychiatric problems, and cognitive decline," stated Attorney Connelly. "Clinicians and family members must consider these factors when evaluating the financial decisions made by older adults that may not seem in their best interest and be willing to intervene."


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May is Mental Health Awareness Month

When it comes to mental health, depression and anxiety are prevalent conditions that can significantly impact the financial decision-making abilities of older individuals. These conditions may hinder their ability to recognize and evaluate the risks and benefits of different financial options, thereby clouding their judgment. Moreover, psychiatric disturbances such as paranoia, agitation, or disinhibition can further impair their reasoning and judgment, rendering them more vulnerable to scams.


Older Adults That Are Most Vulnerable

According to the University of Michigan National Poll on Healthy Aging, older adults living alone or with lower incomes are particularly vulnerable to scams. The poll found that 25% of those targeted by a scam said their bank or credit card accounts, or another type of account, had been compromised. Additionally, 15% reported that they had been hacked, 9% lost money, and 3% had their identity stolen.


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A poll revealed the vulnerability of certain adults

The poll team also discovered stark differences in the scam experiences of older adults based on their health status. When compared to those in better health or with no limitations on their daily activities, older adults who had been targeted by a scam and who rated their physical or mental health as fair or poor or reported having a health problem or disability that limits their daily activities, were 50% more likely to have experienced fraud. Similarly, those with an annual household income of less than $60,000 were 46% more likely to report experiencing fraud from a scam, compared to those with higher incomes.


Concerning the impact of scams, older adults who rated their mental health as fair or poor were more likely to report that experiencing a scam had a significant impact on their financial, mental, or physical well-being. Specifically, 41% of those with fair or poor mental health reported this compared to 10% of those who rated their mental health as good or excellent.


Finally, while the difference in scam impact was smaller, it was still significant between older adults who had fair or poor memory and those who did not, those with a health problem or disability that limits their daily activities, and those without such limitations, those with household incomes under $60,000 compared to those with higher incomes, and those who live alone compared to those who live with others.


Cognitive Deficits

"Many people encounter issues with their cognitive abilities as they age that can significantly affect their ability to process information and make informed decisions, especially regarding financial matters," stated Attorney Connelly. "This is particularly true for older adults who suffer from dementia, as they often have a reduced awareness of their cognitive deficits, making it even more challenging for them to detect fraudulent activities or scams."


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Those with cognitive limitations are especially at risk

Cognitive decline can manifest in numerous ways, such as memory loss, slower information processing speed, difficulty solving problems, impaired mathematical skills, limited language proficiency, and other cognitive areas. Memory deficits, in particular, can cause older individuals to forget past scams or fail to recall the specifics of their current situation. Attention deficits can also pose a challenge, making it difficult for seniors to focus on essential aspects of a problem and rendering them more vulnerable to fraudulent activities.


Language deficits can also severely impact an older person's ability to comprehend potential fraud indicators, communicate with others, and seek assistance when necessary. These cognitive impairments can significantly impact an older person's financial decision-making abilities, leaving them at risk of falling for fraudulent activities and scams.


Who Are the Perpetrators

Financial abuse against all elderly individuals is a pervasive problem, with perpetrators often being family members, spouses, or trusted individuals. While some may assume that strangers are the most common culprits of financial abuse, research indicates otherwise. The National Center on Elder Abuse (NCEA) reports that a significant proportion of such cases, specifically 53%, is committed by family members, including adult children and spouses.


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Family members are involved over half of the time

While elder financial abuse is often carried out by family members, trusted individuals, or caregivers, it is not always the case. In recent years, there has been a concerning rise in phone and email scams targeted explicitly towards seniors, resulting in significant financial losses.


"The National Institute of Justice has noted the percentage of individuals aged 60 years or above has increased by 33% from 2010 to 2020 and is projected to continue rising in the years to come," said Attorney Connelly. "Unfortunately, this demographic is also highly vulnerable to financial fraud. The Better Business Bureau reports that older adults lose over $36 billion to financial exploitation and scams annually."


In 2020 alone, the FBI's Internet Crime Complaint Center received 105,301 fraud reports against individuals aged 60 years or above. Further, the National Incident-Based Reporting System documented 128,216 offenses against individuals aged sixty-five or above in 2021. Despite these alarming statistics, many fraud cases go unreported, particularly among older adults who are often hesitant to speak out.


Legal and Financial Interventions

Elder law attorneys are best equipped to assist older adults who have been victims of financial abuse and exploitation. These professionals possess an in-depth understanding of the laws and regulations that govern elder abuse. They can offer personalized advice based on the victim's particular situation.


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Elder law attorneys and professional fiduciaries can help

In cases where the abuser still has access to the senior or their assets, they can help obtain protection orders or injunctions to prevent further harm. These legal measures can prohibit the abuser from contacting or approaching the older individual and safeguard their financial resources.


Elder law attorneys can also develop comprehensive estate plans that protect seniors' assets during their lifetimes. They can also provide for their future needs through various legal tools, such as trusts and powers of attorney. This way, seniors can safeguard their finances and ensure their loved ones honor their wishes.


In cases where older adults cannot manage their financial affairs independently due to declining mental health or cognitive issues, a financial guardian or conservator may be necessary. An elder law attorney can help establish legal guardianship. In guardianship, a trustworthy individual or institution manages the senior's finances and will make decisions on their behalf.


When guardianship is deemed unnecessary, an attorney or a professional fiduciary may offer daily financial management services to seniors, those with disabilities, and their families. Typically, this service includes the management of bill payments, the reconciliation of checking accounts and investment statements, the monitoring of accounts for fraudulent activity, the preparation and deposit of bank accounts, the organization of tax documents, the negotiation with creditors, the review of medical insurance papers, the verification of the proper processing of claims, the general organization of financial documents and systems, and the referral of clients to legal, tax, and investment professionals, as well as community resources.


A Final Word

"Financial abuse and exploitation can impact individuals from all walks of life, regardless of their age or background," said Attorney Connelly. "However, elderly individuals with poor mental health, mental illness, or cognitive deficits are particularly vulnerable to this type of abuse. The elderly often experience isolation and loneliness due to the breakdown of traditional family structures, loss of a spouse or friends, and declining health. As a result, they may seek companionship, which leaves them vulnerable to individuals who may not have their best interests at heart. Scams among this age group can have enormous financial consequences, and exploitation under these circumstances can leave the elderly traumatized and hesitant to report it, causing further deterioration of their mental and physical health. It is crucial to acknowledge the severity of this issue and address it proactively to safeguard the overall well-being of our senior citizens."


Medicaid Planning Rhode Island

Please note that the information provided in this blog is not intended to and should not be construed as legal, financial, or medical advice. The content, materials, and information presented in this blog are solely for general informational purposes and may not be the most up-to-date information available regarding legal, financial, or medical matters. This blog may also contain links to other third-party websites that are included for the convenience of the reader or user. Please note that Connelly Law Offices, Ltd. does not necessarily recommend or endorse the contents of such third-party sites. If you have any particular legal matters, financial concerns, or medical issues, we strongly advise you to consult your attorney, professional fiduciary advisor, or medical provider.

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