The Financial Exploitation and Abuse of the Elderly
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Western Kentucky University TopSCHOLAR® Honors College Capstone Experience/Thesis Honors College at WKU Projects 6-26-2017 The inF ancial Exploitation and Abuse of the Elderly Christopher Hodges Western Kentucky University, [email protected] Follow this and additional works at: https://digitalcommons.wku.edu/stu_hon_theses Part of the Economics Commons, Elder Law Commons, and the Gerontology Commons Recommended Citation Hodges, Christopher, "The inF ancial Exploitation and Abuse of the Elderly" (2017). Honors College Capstone Experience/Thesis Projects. Paper 684. https://digitalcommons.wku.edu/stu_hon_theses/684 This Thesis is brought to you for free and open access by TopSCHOLAR®. It has been accepted for inclusion in Honors College Capstone Experience/ Thesis Projects by an authorized administrator of TopSCHOLAR®. For more information, please contact [email protected]. THE FINANCIAL EXPLOITATION AND ABUSE OF THE ELDERLY A Capstone Project Presented in Partial Fulfillment of the Requirements for the Degree Bachelor of Economics with Honors College Graduate Distinction, at Western Kentucky University By C. Jacob Hodges May 2017 ***** CE/T Committee: Dr. Cathy Carey, Chair Dr. Stephen Locke Mr. Cory L. Dodds J.D. i Copyright by C. Jacob Hodges 2017 II I dedicate this thesis to my parents, Chris and Beth Hodges, to my siblings, Dalton and Alayna Hodges, and also to my committee without whom I would not be where I am today. Thank you for the inspiration as well as the motivation to press on. III ABSTRACT The criminal industry of elder financial fraud and exploitation (EFFE) is a growing concern among policy makers as well as researchers. This is due to the growing financial impact exploiters are having on their victims. EFFE is defined by the National Center on Elder Abuse as “the illegal or improper use of an elder’s funds, property, or assets (NCEA, 2017).” Following this definition, the quantity of wealth determined to have been lost due to EFFE is staggering. As the tangible capital loss has grown so has the need for more research into this topic. The research in this paper seeks to accurately define the problem of EFFE through a legislative review and then utilize regression analysis to discover potential variables that could affect its prevalence in specific states. By correlating data gathered from the Consumer Sentinel Network, released under a Freedom of Information Act request, and the United States Census Bureau, I hope to generate policy recommendations that will combat EFFE in an efficient and effective manner. IV VITA EDUCATION Western Kentucky University , Bowling Green, KY May 2017 B.A. in Economics – Mahurin Honors College Graduate Honors Capstone: The Financial Exploitation and Abuse of the Elderly Monroe County High School, Tompkinsville, KY May 2013 AWARDS & HONORS Summa Cum Laude, WKU, May 2017 Cherry Presidential Scholarship Awardee WKU May 2013- 2017 PROFESSIONAL MEMBERSHIPS International Economics Society Omicron Delta Espilon (ODE) INTERNATIONAL EXPERIENCE Toppers at Sea Climate Change Research Study June 2014 Harlaxton College Fall 2014 Semester at Sea Spring 2016 V CONTENTS ABSTRACT .................................................................................................................................... iv VITA ................................................................................................................................................ v INTRODUCTION .......................................................................................................................... 1 BACKGROUND ............................................................................................................................ 4 RESEARCH .................................................................................................................................. 11 REGRESSION ANALYSIS ......................................................................................................... 27 CONCLUSION ............................................................................................................................. 31 FUTURE RESEARCH ................................................................................................................. 32 RECOMMENDATIONS .............................................................................................................. 33 WORKS CITED ........................................................................................................................... 35 VI LIST OF FIGURES Figure 1: Population Aged 65 and Over as a proportion of Total Population. Source: National Center on Elder abuse ............................................................................................... 2 Figure 2: Population pyramid for the united states. Source: NCEA, 2017 ..................................... 3 Figure 3: Method of Contact Source: FTC Consumer Sentinel Network Database ..................... 24 Figure 4. Total complaints by age group Source: FTC Consumer Sentinel Network Database ................................................................................................................................. 25 Figure 5. Frequency of contact by age group. Source: FTC Consumer Sentinel Network Database ................................................................................................................................. 25 VII LIST OF TABLES TABLE 1: States with the Best Elder-Abuse Protections .............................................................. 7 TABLE 2: Definition of an Elder by State .................................................................................. 12 TABLE 3: EFFE Claims data from the FTC Consumer Sentinel Database as a Percentage of the Population by State ................................................................................... 20 TABLE 4: Summary Statistics..................................................................................................... 27 TABLE 5: Regression Results ..................................................................................................... 28 VIII INTRODUCTION Elder financial fraud and exploitation, hereafter referred to as EFFE, is defined by the National Center on Elder Abuse as “the illegal or improper use of an elder’s funds, property, or assets (NCEA, 2017).” With the growing population of elderly Americans due the baby boom bubble and to increased life expectancy, the financial exploitation of the elderly has grown into a prominent topic concerning new legislation. This paper seeks to further explore this unique type of fraud and postulate potential policies that might assist in reducing the total amount of funds defrauded from the elderly. As elders’ physical and mental health deteriorate, it falls to their children, or a trusted advisor, attorney or paid caregiver, to responsibly manage their finances. The challenge of settling an estate can be handled with care and approached with the best interest of the elder at heart, or it can present a lucrative opportunity to those that would seek to profit from individuals who are either incapable of knowing when they are being wronged or unwilling to report those they love to the proper authorities. As much as 55 percent of all EFFE cases occur within families (MetLife Mature Market Institute et al., 2009). According to Acierno’s report, The National Elder Mistreatment Study, this is a 5.2 percent one-year incidence rate among older adults (Acierno, 2013).” With improvement in healthcare increasing the life expectancy of an average adult, this task of estate management will be extended out over a longer time period exacerbating this specific brand of fraud. According to the 2010 census, there are over 50 million Americans 62 and older. According to the World Atlas, by the time Americans reach the age of 65, “they can, on average, be expected to live for 17 years more.” (Dillinger, 2017) These numbers are expected to grow, as shown in Figure 1 and, due in 1 part to the demographic bubble, illustrated in Figure 2 below, generated from the baby boom following World War II. FIGURE 1: POPULATION AGED 65 AND OVER AS A PROPORTION OF TOTAL POPULATION. SOURCE: NATIONAL CENTER ON ELDER ABUSE Figure 1 was retrieved from the National Center on Elder Abuse and illustrates the drastic change in the proportion of society that will be constituted by the elderly in the coming decades. As the proportion of society represented by the elderly grows, so will the amount of wealth concentrated within that age bracket. This will make the elderly a continuing source of profits for criminals who would seek to steal their hard earned money. This is further evidence that not only more legislation but also legislation written with this population trend in mind is necessary to maintain societal balance for the elderly. 2 With over 75 million members in the baby boomer generation, the sheer size combined with the rise in prevalence of 401(k) plans during their productive years has amassed an incredible amount of wealth in the elderly (WallStreet.org, 2012). Between 2008 and 2011, the aggregate dollar amount defrauded from the elderly increased by 12% to $2.9 billion. As individuals are managing their own retirements at an increasing rate, the elderly will continue to grow more vulnerable to exploitation (WallStreet.org, 2012). FIGURE 2: POPULATION PYRAMID FOR THE UNITED STATES. SOURCE: NCEA, 2017 3 BACKGROUND The recent trend of increased research into EFFE has been motivated by the