Cognitive Impairments: Ready or Not, Here They Come! Clinical Professor Kate Mewhinney, J.D. The Elder Law Clinic, WFU School of Law
Our Plan • Scary stories of problems • Simple solutions you can consider • Several changes in the law to know about • Some resources
Fiduciaries Without Boundaries
Huguette Clark • Wealthy and generous heir who died at age 105. • Following a stay at Beth Israel Hospital, she decided to live there …for her last 13 years!
Generous or impaired…..or both? • Gifts to daytime nurse : $450K house, $40K at Christmas for nurse and husband; schools, medical care and music lessons for 3 kids… for 20 years, tax bill of $300K; apartment for son and brother, of almost $1m; $885k apartment for other kids; $1.5m apt. for nurse; $599k beach house; Over $600k per child to the 3 kids; $1.5m to husband; 3 checks of $5m apiece; etc. etc…. • Gifts to attorney Bock’s daughter’s town: $1.85m • Gifts to hospital: $940K over costs to stay, in 10 yrs.
Another Case from NY Brooke Astor’s grandson/agent and her attorney filed a false will.
Brooke Astor case, continued • Grandson got 3 years in prison; settlement of $3m instead of the $70m he tried to get. • Attorney was disbarred and sentenced to 1-3 years in prison. * * *
Two of the Top 2015 Verdicts in NC • Martha Capps had dementia. Her stockbroker and attorney took millions of dollars. Fraud verdict: $10.3 million plus $2.9 million in attorneys fees. Financial advisor spent 3 years in fed prison. • Breach of duty verdict by a cognitively impaired father against daughter, for $1.5 million, for POA abuse.
What Should the Boundaries Be? • Office procedures and legal basics • New legal developments in NC and elsewhere • Resources and “The Ten Commandments”
Some Solutions to Consider
Office Practices • Handling the involved (meddlesome?) relative • “Why am I left in the waiting room?” brochure from ABA
• Bedside manner: • Less speed and complexity • Brief • Repeated • At home • Limited options • Educate and supervise the fiduciary
• Recommend POA and HCPOA, and possibly a HIPAA release • Second person to monitor POA and accounts, and a third person to monitor second person • National Do Not Call Registry – www.donotcall.gov • NC Security Freeze – www.ncdoj.gov
• Pay with automatic bank drafts • Possible use of revocable trust • Recommend use of POA instead of joint accounts, or JTWROS, with client’s children
No asset transfers — for any reason — without first consulting with a Medicaid-savvy attorney. They are often unnecessary or counter-productive.
• Build a team to help the client • Do more “due diligence” – ask more questions • Anticipating future capacity issues (see RPC 157 and Rule 1.14) – who you going to call? • Any interested person may initiate a guardianship action, but don’t jump the gun.
Clinic Procedure on Incapacity W HAT I F Y OU B ECOME M ENTALLY U NABLE TO M ANAGE Y OUR A FFAIRS ? This page explains our policy if we have serious concerns about your mental capacity. If we are still representing you, we will continue to do so. We will take steps to protect your interests. We will follow legal standards of practice and ethics rules. N.C. ethics rules provide that, when a client cannot act in his own interest, the lawyer may take appropriate action in assessing the client ’ s capacity and considering protective action. This could include seeking appointment of a guardian. I would only take actions that I reasonably believe to be in your best interests and consistent with your previously expressed wishes. Unless you direct me otherwise in writing, you authorize me: (1) to communicate with your family, your physicians and your other advisors and to give them confidential (private) information that I think is appropriate under the circumstances, and (2) to represent one or more members of your family or other advisors acting in a fiduciary relationship (which means a “ trusted ” relationship) for you or your property. However, I would not represent them in any proceeding involving determination of your capacity. Please tell me if you have questions or concerns about this. Thank you.
Professional Ethical Standards • Lawyers’ duty to impaired clients – Rule 1.14 • Payment by 3 rd parties – Rule 1.8(f) • Confidentiality issues – Rule 1.6 • Conflict of interest problems - Rule 1.7 • Can you represent an impaired person? • Yes; see 98 FEO 16 (NC State Bar)
Legal Standards & Impaired Capacity • Different standards for contracts versus wills • Concerns about “undue influence” • Who arranged for and paid for your services, brought the client in, and was present during the meetings? • Representative payees for Soc. Sec. and VA
Mandatory Reporting of Elder Abuse N.C. Gen. Statute § 108A-102. Duty to report; content of report; immunity. (a) Any person having reasonable cause to believe that a disabled adult is in need of protective services shall report such information to the director.
…But Isn’t This Confidential? • No. A lawyer may reveal confidential client information to comply with the law or a court order. Rule 1.6(b)(1) • Disclosure of Confidential Information (NC State Bar, 2005, EA 2394) • Ethics materials are on Elder Law Clinic site • elder-clinic.law.wfu.edu
New Developments
N.C. Financial Exploitation Law: 2014 • Applies to 65 and older and to disabled adults. • NC now allows financial institutions to collect a list of “trusted persons” from customers. • Allows DA to ask that assets be frozen or seized.
N.C. Financial Exploitation Law: 2014 • Law enforcement (LE) and Dept. of Social Services (DSS) can request a subpoena for financial records. • LE and DSS can request a delay in notice to the customer in some circumstances. • See § 14-112.2 and AOC-SP- 630, “Petition and Order for Issuance of Subpoena Directing Release of Financial Records.”
Living Probate • You can now get a court ruling on the validity of a will before you die, in NC. Gen. Stat. Sec. 28A-2B • An objection may concern a lack of testamentary capacity, undue influence, duress, fraud, or forgery. • If an interested party files a written objection before the hearing or makes an objection to the validity of the will during the hearing, then the clerk must transfer the matter to superior court.
Other States • Missouri’s Senior Savings Protection Act • Allows certain brokerage employees to delay investment trades requested by people ages 60 and up, and adults ages 18 to 59 with certain disabilities, if they think completing the trades would result in financial exploitation.
Other States • Must notify certain agencies and individuals connected to the account. • Delay up to 10 days. • Delaware and Washington only 2 other states with similar laws. • Wells Fargo pushed for this new Missouri law.
Training Doctors About Exploitation • Collaborative effort to help health care providers talk about financial exploitation. • “Elder Investment Fraud and Financial Exploitation” or EIFFE. • Includes the North American Securities Administrators Asso., Investor Protection Trust, United Way, National APS Association.
Resources • “Money Smart for Older Adults,” Consumer Financial Protection Bureau (CFPB) and FDIC . http://tinyurl.com/kjq92ka • “Planning for Diminished Capacity and Illness,” CFPB and the SEC . http://tinyurl.com/oue6o9j • “Why Am I in the Lobby ?” ABA Commission on Law and Aging, http://tinyurl.com/zuf9yso
Resources • “A Guide for Seniors: Protect Yourself Against Investment Fraud,” SEC Office of Investor Education and Advocacy. http://tinyurl.com/h39yxt2 • True Link Card – www.truelinkfinancial.com • It is a debit card that the owner can control online, while giving the user some independence and autonomy. Can authorize some stores and not others, or block ATM withdrawals or cash at purchase.
Resources • “Assessment of Older Adults with Diminished Capacity: A Handbook for Lawyers” (ABA Commission on Law and Aging, and Am. Psychological Asso.). • www.apa.org/pi/aging/resources/guides/diminis hed-capacity.pdf • Board certified elder law attorneys: N.C. State Bar Board of Legal Specialization and/or the National Elder Law Foundation (NELF)
Resources • “Access to Records in Financial Exploitation Investigations, ” Aimee Wall, UNC School of Gov’t. , http://canons.sog.unc.edu/?p=8001 (2/16/15) • Webinar on the 2014 NC exploitation law • http://www.nccourts.org/Training/WebFinExp.asp • “Financial Exploitation of Older Adults and Disabled Adults: An Overview of North Carolina Law, ” Aimee Wall, Bulletin No. 43. • http://sogpubs.unc.edu/electronicversions/pdfs/sslb43.pdf (10/14)
Resources • “How to Protect Clients with Diminished Capacity, ” S. Adams and P. Lichtenberg, Jl. of Financial Planning, http://tinyurl.com/no6hzzj • “Living Probate before the Clerk of Superior Court,” Estate Admin. Bulletin 3/1/16 www.sog.unc.edu/publications/bulletins/living-probate- clerk-superior-court
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