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Louis Gottschalk was a well-known psychiatrist who helped create the Gottschalk-Gleser scales, an internationally recognized diagnostic tool that charted impairments in brain function.

He was also, according to his son, the elderly dupe of Nigerian scam artists who conned him out of more than $1 million.

The son, who is also a doctor, filed a lawsuit in 2008 asking a court to remove his 89-year-old father as head of an $8 million family foundation, saying the elder Gottschalk had doled out as much as $3 million in response to Internet pleas offering the elderly man a cut of huge sums of cash that were supposedly trapped in African bank accounts.

The father, who died a few months after the suit was filed, claimed the losses were from "bad investments."

If the senior Gottschalk was the victim of a scam, he certainly wasn't alone. One out of every five people over age 65 has been victimized by a financial con, according to a survey released last year by the Investor Protection Trust.

Financial abuse of the elderly is a huge and growing problem. A recent MetLife study pegged the annual cost at nearly $3 billion, a 12% increase from 2008. Many financial experts predict the toll will continue to rise as baby boomers age and their cognitive abilities decline.

Women were twice as likely to be victimized as men, the MetLife study indicated. The most common victim was a woman, aged 80 to 89, who lived alone but required some kind of outside assistance with health care or home maintenance.

"The victims generally want their independence and value it very highly, but also show some signs of vulnerability," said Sandra Timmermann, the director of the MetLife Mature Market Institute, which co-sponsored the study. "They also are trusting and may in fact be happy to be befriended by someone who could be a scam artist."

In perusing media accounts of fraud, the study found that:

  • 51% of frauds were perpetrated by strangers.
  • 34% by family, friends and neighbors.
  • 12% by the business sector (things like home repair scams or the sale of unsuitable reverse mortgages or annuities).
  • 4% of cases were related to Medicare and Medicaid fraud, such as facilities charging for services they don't supply to vulnerable seniors.

Liz Weston

Liz Weston

Financial elder abuse can take many forms, from organized cons that sell "sucker lists" of prior victims to crimes of opportunity, where a family member or caregiver abuses access to an elderly person's finances. One caregiver in Orange County, Calif., was recently sentenced to 13 years in prison for stealing more than $600,000 in jewelry from her charges. Another, in Long Beach, Calif., is being sought for disappearing with more than $1 million of a stroke victim's funds, including the proceeds from the sale of a strip mall the caretaker illegally sold.

People with closer ties can exploit older people, too. Here are a few of the tales from my mailbag:

  • A reader named Ernie wrote to me about his wife's brother, who moved into their father's house after the elderly man, suffering from Alzheimer's disease, entered a nursing home. The brother-in-law took out a huge loan against the once-paid-for property. "The house is so heavily mortgaged, we've learned it's now close to foreclosure," Ernie wrote.
  • Reader Terry said her mother had been romanced by a man who isolated the older woman from her family and eventually ran through all her money. Terry eventually won back her mother's trust, took over as conservator and evicted the Don Juan from her mother's apartment.
  • Reader Amy discovered that her once-frugal mother had more than $30,000 in credit card debt, much of it incurred to placate the endless financial demands of Amy's grown, chronically unemployed nephew. Amy's efforts to distance her mother from the man have created a family-wide rift.

"I see too many seniors who are terrified," Amoruso said. "They need to know that no matter how helpless they feel, they have the power to change things."

Anyone who wants to report abuse or who suspects a senior is being abused can call the Eldercare Locator at 1-800-677-1116 and ask for help, or contact the adult protective services office in the county where the senior lives.

Sometimes the pressures are more subtle. More than one-third of seniors in last year's Investor Protection Trust study said they were being targeted by "people (who) are calling me or mailing me asking for money, lotteries and other schemes." Only one in five of adult children surveyed realized their parents were being pressured by such pitches.

If they're being conned, parents or grandparents may become secretive or defensive about their finances, which can make it more difficult to figure out what's going on. Once you know, however, stopping it may not be easy. Even if they repeatedly fall for financial scams -- even those as obvious as a Nigerian email scheme -- that may not be enough to wrest control of seniors' finances from them.

Courts don't grant conservatorships or guardianships without "clear and convincing evidence" that the senior "has functional limitations and doesn't understand that they have functional limitations," Amoruso said. Being foolish with money or easily conned may not be enough to strip seniors of their right to manage their own affairs, he said.

So how can you protect parents or grandparents -- and later, yourself -- from financial abuse? The following can help:

  • Talk to them. Discuss common scams, like the "Help me, Grandma!" ruse where people posing as grandchildren call, text or email asking for emergency funds. There is some evidence people become more trusting with age, and they may be less in touch with how scams are evolving.
  • Know who's in their circle. Predators work most effectively when they can isolate their victims. If you can, make it a point to introduce yourself to your parents' or grandparents' new friends and financial advisers. If family members are being turned against you, go to a respected third party (a minister, friend or professional adviser) for help regaining their trust.
  • Thoroughly vet caregivers. Pay for a professional background check that includes criminal records and credit reports. Take note if a caregiver refuses to leave the room when you visit or tries to limit access to a parent or grandparent, since that's often a sign of elder abuse. Consult the Eldercare Locator or an elder law attorney for help.

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  • Look for signs they're on a sucker list. One sign is a large volume of junk mail for sweepstakes, "free" trips and contests or cheap trinkets that indicate the family members are buying products to "win" a contest.
  • Set up the right paperwork. A power of attorney designates a trusted person to handle someone's finances in case of incapacity. Ideally, that person would be required to regularly report to a family member or a professional adviser, such as an attorney or an accountant. Having such reporting requirements can make the task more difficult, Amoruso noted, and can reduce the pool of people willing to take on the job, but it does offer another layer of protection for the senior.
  • Don't hesitate to act if you see signs of abuse. "Get the police involved" is Amoruso's advice when you suspect financial misuse. An adult protective services office can launch investigations of any kind of elder abuse, neglect and exploitation. If you're not sure where to turn, start with the Eldercare Locator.

Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.