Calculating Risk and Investing Wisely

How to Spot Financial Abuse and What to Do About It

Financial abuse, an often-overlooked aspect of domestic violence, is a subtle yet pernicious form of exploitation. It involves controlling a person's ability to acquire, use, and maintain financial resources, leaving them feeling trapped and dependent.

Here’s what you need to know about it.

What is financial abuse?

Financial abuse involves controlling, exploiting, or misusing someone's financial resources to gain power and control over them. It can occur in relationships between intimate partners, family members, or caregivers and their vulnerable dependents.

What are typical examples of financial abuse?

Here are some common examples of financial abuse.

1. Controlling Access to Money: One partner controls all the financial resources, limiting the other's access to bank accounts, credit cards, or cash, making the victim financially dependent and vulnerable.

2. Coerced Financial Transactions: Forcing or pressuring the victim to take out loans, open credit cards, or sign financial documents against their will or under pretenses.

3. Stealing Money or Property: Taking money, valuable assets, or possessions from the victim without their knowledge or consent.

4. Exploiting Income or Benefits: Forcing victims to hand over their earnings or government benefits, like Social Security or disability payments.

5. Identity Theft: Using the victim's personal information to open fraudulent accounts, apply for loans, or make unauthorized purchases, burdening the victim with debt.

6. Sabotaging Employment or Education: Preventing the victim from maintaining a job or pursuing education to keep them financially dependent.

7. Withholding Basic Necessities: Refusing to provide essential needs like food, shelter, or medical care as a means of control.

8. Gaslighting or Deception: Manipulating the victim into believing they cannot manage finances or make financial decisions to maintain control over them and their resources.

9. Misusing Joint Accounts: Using shared bank accounts to spend money recklessly, leaving the victim without adequate funds.

10. Depleting Savings or Retirement Funds: Draining the victim's savings, investments, or retirement accounts without their knowledge or consent.

11. Forced Financial Dependence: Isolating the victim from their support network and resources, leaving them without any means to support themselves.

What are the signs of financial abuse?

Here are some signs indicating financial abuse:

1. Control over finances: The abuser controls the victim's finances, including bank accounts, credit cards, investment accounts, retirement accounts, and other assets, and doesn't allow the victim to make financial decisions independently.

2. Isolation: The victim is isolated from friends, family, or financial advisors who might notice and intervene in the abuse. The abuser might remove the victim from their support network to maintain control.

3. Forced financial dependence: The victim is forced to depend financially on the abuser, creating a sense of reliance and making it difficult for the victim to escape the situation.

4. Limited access to money: The victim is denied access to their own money or given a strict allowance, making it hard for them to meet their basic needs.

5. Unusual or unexplained financial transactions: The victim notices unusual withdrawals, transfers, or purchases in their accounts that they didn't authorize or understand.

6. Pressure to change wills or legal documents: The abuser may pressure the victim to change their will, trust, or other legal documents to ensure they inherit the victim's assets.

7. Forced to sign financial documents: The victim is coerced into signing contracts, loans, or other documents without understanding the implications.

8. Financial exploitation: The abuser borrows money from the victim and never repays it or takes advantage of the victim's resources for their benefit.

9. Threats or intimidation: The abuser may use threats, intimidation, or emotional manipulation to control the victim's financial decisions.

10. Unexplained disappearance of valuables: Valuable possessions or assets may disappear, and the victim doesn't know where they went.

11. Living conditions do not match the available resources: The victim has sufficient income or assets, but their living conditions are poor or inadequate due to the abuser's control.

12. Unpaid bills or utility shut-offs: The victim may have unpaid bills or experience utility shut-offs because the abuser neglects their financial responsibilities

The impact of financial abuse

The impact of financial abuse can be emotional and physical.  Victims of financial abuse may undergo neurological changes due to prolonged stress and trauma. Chronic stress can alter brain structures, impair cognitive function, and increase susceptibility to mental health disorders. These changes can make it even more challenging for victims to break free from the cycle of abuse.

Where should you report financial abuse?

Each state has Adult Protective Services (APS), which are social services.

You can find contact information for the APS office near you here.

If there is an imminent risk of harm to you or a loved one, call 911.  If the threat is omnipresent but not imminent, call the non-emergency number for your local police.

Report financial abuse to your local District Attorney’s Office and ask them to initiate an investigation that could lead to the prosecution of the abuser.

Contact your bank, credit union, or credit card company and report the abuse.

If you or your loved one lives in a nursing home or similar facility, contact the Office of the State Long-Term Care Ombudsman.  You can find the ombudsman in your state here.

How your financial advisor can help

A financial advisor like Daner Wealth can play a crucial role in preventing or stopping financial abuse.  Here are some ways a financial advisor can help:

1. Education and Awareness: A financial advisor can educate their clients about the warning signs of financial abuse, like sudden changes in economic behavior, unexplained withdrawals or transfers, and isolation from family and friends.

2. Identifying Trusted Contacts: When a client opens a new account or investment, financial institutions often allow the client to designate trusted contacts. The advisor can help the client choose these individuals wisely to provide additional protection against financial abuse.

3. Creating a Financial Plan: A comprehensive financial plan considers the client's goals, risk tolerance, and financial situation. Having a solid financial plan makes the client less likely to fall victim to financial abuse or scams promising quick profits.

4. Implementing Safeguards: The advisor can assist in setting up safeguards, like fraud alerts and multi-factor authentication, to protect the client's financial accounts from unauthorized access.

5. Encouraging Legal Protection: If the client is at risk of financial abuse, the advisor may suggest setting up a power of attorney or a trust to ensure their assets are appropriately managed.

6. Staying Informed about Local Laws and Resources: Financial advisors should be familiar with local laws related to financial abuse and the resources available to victims. They can provide appropriate guidance if they suspect financial abuse and refer the client to relevant authorities or support services.

7. Reporting Suspected Abuse: If the financial advisor suspects their client is a victim of financial abuse, they have a moral and sometimes legal obligation to report it to the appropriate authorities or adult protective services.

In testimony before Congress on his experience with financial abuse, the late actor Mickey Rooney said:  "I felt trapped, scared, used and frustrated. But above all, when a man feels helpless, it's terrible."

According to the California Department of Financial Protection & Innovation, financial abuse is the “most pervasive form of domestic abuse, affecting nearly 99% of domestic violence cases”.

If you or a loved one is a victim of financial abuse, take action to stop it.

"As the late actor Mickey Rooney once testified before Congress about his experience with financial abuse: 'I felt trapped, scared, used and frustrated. But above all, when a man feels helpless, it's terrible.' If you or a loved one is a victim of financial abuse, take action to stop it and seek the support you deserve."

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