Identity thieves respect no one -- not even the recently deceased. In fact, a person's identity may be more susceptible to ID theft in the months following death than when they were living.
The problem is increasing. In one example, federal authorities say, a group of sophisticated identity thieves managed to steal nearly $4 million by filing bogus tax returns using the names and Social Security numbers of 1,900 other people, most of them deceased. In other cases, thieves have been known to start stealing identities the moment people die in a hospital.
The Internal Revenue Service, at the request of Scripps Howard News Service, in 2011 revealed that tax filers improperly submitted 350,000 returns on dead Americans in the prior tax season. The improperly claimed returns totaled $1.25 billion.
"Stealing the identity of the dead is so wrong, and so easy," says Robert Siciliano, McAfee consultant and identity theft expert. "It is made even easier by public records. A provision in federal law that reformed welfare in the 1990s also created a loophole that could allow swindlers to obtain the Social Security numbers of the recently deceased."
How they get away with it
When a person dies, several factors come together to create the perfect scenario for identity theft. Death and other records are widely available. "There are Excel files of the deceased online," says Siciliano. In an effort to reduce welfare and Social Security benefit fraud that occurs when people collect benefits on behalf of the deceased, the government started publishing names and Social Security numbers in the Social Security Administration's Death Master File, which is widely available on the Internet. One problem may have been partially solved, but another was created. Crooks can find all the Social Security numbers of deceased persons they want without getting up from their computers. Even some genealogy programs list Social Security numbers with names, dates of birth and death, and mother's maiden names.
It takes time to settle a person's affairs after death, and during that time thieves can get to work. Waiting for bills to come in, notifying creditors and filing taxes can easily take a year or longer. In the general confusion, as family members try to sort out their loved one's financial affairs, a few mystery debts may get thrown in with the rest and no one is the wiser. Deceased people can't defend themselves, and personal representatives or executors have no easy way to know which debts are legitimate.
Sadly, some ID theft is from family and close friends, who don't see any harm in helping themselves to their deceased dad's credit cards and possibly opening some new ones. "A lot of times the perpetrator is a family member," says Bill Hazelton, personal finance and credit expert. "It's just bait for any family members who are in financial troubles or late on a mortgage, etc." According to Javelin Strategy and Research, one out of seven cases of identity theft was committed by a relative, friend or acquaintance.
The problem has become so severe that the government is beginning to change how they display Social Security numbers of the deceased. Government records are only part of the problem, however. Crooks also scan newspaper obituaries to see who has died.
ID theft prevention steps
Siciliano's advice for preventing unauthorized opening of credit in anyone's name while you are alive is simple: Get a credit freeze. "It is the cure for new account fraud. No creditor is going to grant credit to someone when you have a credit freeze." Without a credit freeze, a person's credit is wide open. Anyone can take a Social Security number and check that person's credit, and with very little trouble, start opening accounts left and right in his name.
To find out how to go about requesting a credit freeze, read "Put your credit on ice with a credit freeze."
Once a person dies, you need to make sure a person's death is recorded immediately in the national death index, according to Siciliano. "You want to contact your local government, city hall or your version of state vital statistics," he says. "It's different in every state."
Call the Social Security administration at 800-772-1213 to report the death (TTY 800-325-0778).
Next, notify the credit bureaus. Ask them to flag the account as "deceased" -- which is a permanent credit freeze -- so no one can issue credit. Their phone numbers are:
You also need to contact all the financial institutions the deceased had accounts with -- banks and credit card companies, insurance and stock brokers, anything financially related -- and alert them ASAP so no one can make unauthorized transfers or withdrawals. "Expediency is really the key," says Hazelton. "That's what ID thieves really rely on is that complacency window. Jumping on it right away is really important."
To speed things up as you close accounts, make sure you get enough original copies of the death certificate the first time around. Hazelton recommends about a dozen original copies. "Pay the nominal charge and get the death certificates. You're not going to be able to close the account unless you have the certificate. They're not going to accept a copy."
Also, be careful about what you put in the obituary. Many obituaries are an identity thief's dream. Dates of birth and death, mother's maiden name and even relative's names and home address are commonly included. "People give away so much info in their obituaries that it's just nuts," says Hazelton. "You need to limit the information to honor the deceased, but not to serve up a credit profile for an ID thief. That's the first place they go is the obituaries."
Be very judicious about who you share information with in the family, too. Don't leave credit cards, check books or brokerage statements lying about, and don't volunteer how much money or valuables Grandpa had or where it's held. "That info needs to be kept in a really small circle," says Hazelton.
If you take a few precautionary steps before identity thieves have a chance to act, they'll soon move on to easier victims. That's the best way to make sure your loved one's estate is left to relatives and any good causes as intended, instead of being squandered on new cars and island retreats for the bad guys.