THE ETHICAL, LEGAL, AND PRACTICAL CONSIDERATIONS INVOLVING THE - PDF document

THE ETHICAL, LEGAL, AND PRACTICAL CONSIDERATIONS INVOLVING THE FINANCIAL EXPLOITATION OF SENIORS Francis J. Rondoni Chestnut Cambronne PA Minneapolis, Minnesota Stuart C. Bear Chestnut Cambronne PA Minneapolis, Minnesota Elizabeth C. Henry Chestnut Cambronne PA Minneapolis, Minnesota

TABLE OF CONTENTS Page I. DEATH BED CHANGES TO ESTATE PLAN .......................................................................... 1 A. The Need for Testamentary Capacity ..................................................................................... 2 B. Undue Influence .................................................................................................................... 2 C. When Undue Influence Becomes Criminal ............................................................................ 3 D. Relationship Between Capacity and Undue Influence ............................................................ 4 II. DISPUTED TRANSFER OF AN INCAPACITATED OR ELDERLY RELATIVE.................... 4 A. The Hardship of Clandestine Transfers .................................................................................. 5 B. Uniform Adult Guardianship and Protective Proceedings Jurisdiction Act ............................. 5 C. Possible Loopholes and Outcomes ......................................................................................... 8 III. REPRESENTING A CLIENT WHOSE CAPACITY APPEARS TO BE DIMINISHED ........... 8 A. Option1: Draft the Will ......................................................................................................... 9 B. Option 2: Decline to Draft the Will ........................................................................................ 9 C. Option 3: Insist on Meeting Alone ....................................................................................... 11 D. Options 4 and 5: Contact Family Members or Adult Protection ........................................... 11 IV. KNOW WHO YOUR CLIENT IS ............................................................................................ 12 A. Elderly Prescription Drug and Alcohol Use ........................................................................... 1 B. Statutes................................................................................................................................ 13 C. Case Law ............................................................................................................................ 14 D. Plan “B,” Take the Keys ...................................................................................................... 15 V. WHAT TO DO WHEN THERE IS NO HEALTH CARE DIRECTIVE .................................... 16 A. Health Care Directives Generally ........................................................................................ 16 B. Family Decision-Making Statutes ........................................................................................ 17 C. No Directive and No Surrogate Statute ................................................................................ 17 VI. UNAUTHORIZED PRACTICE OF LAW ................................................................................ 19 A. Unauthorized Practice of Law ............................................................................................. 19 B. SEC Regulatory Notice 17-11 ............................................................................................. 20 VII. CLIENT JUST DIED OR IS INCAPACITATED; FAMILY MEMBERS OR CAREGIVERS ARE EMPTYING THE HOUSE ............................................................................................... 23 A. Legitimate Emptying ........................................................................................................... 24 B. Illegitimate Emptying .......................................................................................................... 24 i

C. Statute of Frauds ................................................................................................................. 25 VIII. TRUSTEE SUED BY TRUST BENEFICIARIES ..................................................................... 26 A. Lawyers Representing Trustees and Other Fiduciaries ......................................................... 26 B. UTC §802: Duty of Loyalty................................................................................................. 31 C. UTC §803: Impartiality ....................................................................................................... 32 D. UTC §804: Prudent Administration ..................................................................................... 32 E. UTC §813: Duty to Inform and Report ................................................................................ 32 F. UTC §1001: Remedies for Breach of Trust .......................................................................... 33 G. UTC §1002: Damages for Breach of Trust........................................................................... 34 H. UTC §1006: Reliance on Trust Instrument .......................................................................... 34 IX. EXECUTING DOCUMENTS DURING COVID-19 ................................................................ 34 A. Best Practices vs. Statutory Requirements ........................................................................... 35 B. Remote Ink-signed Notarization (RIN) and Remote Online Notarization (RON) ................. 35 X. ATTORNEY AIDER AND ABETTOR LIABILITY ................................................................ 36 A. Restatements of the Law...................................................................................................... 37 B. Elements ............................................................................................................................. 39 C. Case Law ........................................................................................................................... 42 ii

THE ETHICAL, LEGAL, AND PRACTICAL CONSIDERATIONS INVOLVING THE FINANCIAL EXPLOITATION OF SENIORS Francis J. Rondoni Chestnut Cambronne PA Minneapolis, Minnesota Stuart C. Bear Chestnut Cambronne PA Minneapolis, Minnesota Elizabeth C. Henry Chestnut Cambronne PA Minneapolis, Minnesota 123 I. DEATH BED CHANGES TO AN ESTATE PLAN CASE STUDY: The helpful sibling. The recession in the late 2000s was hard on Tom. Tom, an adult in his 40s, always had difficulty holding a job. He was fiercely independent and often times had difficulty getting along with others. During the recession, he found himself out of work and had difficulty securing employment. During this time period, his mother, Mabel, was becoming increasingly frail, but wanted to maintain living in her home. Tom, his two sisters, Lisa and Michelle, and mom thought it best for Tom to move in with mom, to take care of her. This would keep mom out of a care facility, allow mom to maintain living in her home, and provide Tom the ability to have a place to live. While there was no formal compensation arrangement mentioned, mom’s money continued to be used to pay for the food and the expenses associated with the homestead property. Mom recently died. The sisters have a number of questions about mom’s remaining assets. While they do not want to be greedy (because as they keep saying in unison, it’s not about the money), Tom said that mom had no money left other than the homestead property which Tom said mom promised to him. Tom produces a will which was done about a week before mom died, which Tom acknowledged he “assisted” mom in preparing, by obtaining the form from the internet. Tom also said that mom’s remaining assets were all held jointly between Tom and mom or otherwise payable by beneficiary form to Tom, as “that is what mom wanted.” Tom refuses to disclose the amount of the financial assets, but the daughters know from anecdotal evidence that mom and dad lived a comfortable, middle-class life, were very much savers, and did not have any extravagant expenditures. In fact, they point out that the reason Tom was to take care of mom in the home was to allow mom to remain living in the home, and also avoid the high cost of skilled care. 1 The authors wish to thank Ryan Prochaska for his invaluable assistance in writing these materials. 2 The authors wish to thank Mary Radford for her contributions in preparing these materials. 3 Portions of this material were prepared for the 51 st Annual Heckerling Institute on Estate Planning, scheduled for January 9- 13, 2017 in Orlando, Florida. They are reprinted here with the permission of the Heckerling Institute and the University of Miami School of Law. 1