Identity theft is a global, rapidly growing crime, with the United States ranked just behind India in the number of identity theft victims. According to the National Council on Identity Theft Protection, a private company dedicated to the education and prevention of identity theft and fraud, experts believe that every 22 seconds, a new case occurs. In the United States, it’s estimated that 33% of Americans have had some form of identity theft in their life. But what is identity theft?
Identity theft is when someone uses your personal or financial information without your permission. Thieves use this information to open new accounts, use your existing accounts, obtain medical services, file taxes, or otherwise pose as you for the purpose of misleading law enforcement or governmental agencies. It can have serious and long-term consequences. One type of identity theft that individuals with signification wealth can be targeted for is tax-related identity theft.
While identity theft can (and does) happen to anyone regardless of financial status or demographics, there are some factors that make inheritors and those with significant wealth the target tax-related identity theft.
Tax-related identity theft is perpetrated by individuals using your social security number and other personal information to file a tax return claiming a fraudulent refund. There are a number of ways your social security number can be compromised:
- Stolen mail
- Unsecured online activity
- Data breaches
- Phishing and spear phishing scams
While there is no clear evidence that inheritors are specifically targeted for tax-related identity theft based solely on the status as an inheritor, individuals with significant wealth may be at increased risk for tax-related identity theft based on some assumptions and the complexity of their financial picture.
- There is an assumption on the part of thieves of larger refunds.
- Wealthy individuals may have a larger number of financial transactions that put them at risk for their personal information being obtained.
- Many inheritors of significant wealth have multiple professional partners, family office members, advisors, philanthropic organizations, and other services, increasing the number of people with access to their personal information.
- Inheritors often have very complex financial frameworks, making it harder to monitor unauthorized activities.
Prevention of identity theft for individuals with significant wealth is much the same for anyone, though there may be some additional measures you can take given the circumstances.
- Regularly audit financial accounts and legal documents.
- Utilize specialized services for high-net-worth individuals such as a financial monitoring service or digital privacy protection solution.
- Keep informed about the latest security recommendations including the best practices for secure communication, strong and unique passwords, and the ever-changing landscape of scams.
- Physically secure your financial and personal documents.
- In the case of tax-related identity theft, filing your tax return extension as early as possible can reduce the likelihood of someone filing a fraudulent return in your name.
- Work closely with your trusted legal and financial advisors to develop strategies to decrease your risk of identity theft.
Clients of The Wealth Conservancy should feel free to contact their advisor(s) for more information on identity theft prevention or how we safeguard your personal information. We are committed to protecting our clients’ information from unauthorized and unlawful access.