(Article originally published in the Seacoast Herald, June 2010)
It is estimated that more than 5 million people are currently suffering from Alzheimer’s, the most common age-related memory loss disease. Within another five years, analysts put the number at nearly 8 million. It will only get worse from there.
Despite the recession, our baby boomers still have more money than any generation before it. And, because people are living longer than ever before, there is an increased likelihood that individuals will eventually suffer from Alzheimer’s. These two factors are likely to create serious complications for wealth management advisors in the future.
Financial planners are often faced with increasingly forgetful or confused clients who may lack an ability to fully understand actions being taken on their behalf. Additionally, clients who are suffering from memory loss are far more likely to be taken advantage of by family members, friends, or in certain instances, caregivers. Financial planners are inevitably in a predicament when these scenarios arise because of an obligation to maintain confidentiality. Above and beyond issues of confidentiality, taking steps to address these types of concerns can jeopardize the financial planner’s relationship with his or her client.
While there is no question that these circumstances are challenging for all involved, there are steps financial planners can take in order to be prepared to handle these situations.
First, be aware of the signs of incapacity. Signs can range from a decline in your client’s physical appearance, increased emotional instability, increased confusion or forgetfulness, sudden changes in your client’s relationships or rapid depletion of assets.
Second, make sure the client has estate planning in place, including a durable power of attorney (DPOA). In a DPOA the client designates an individual to handle his financial affairs if and when the time comes when your client can no longer do so.
Lastly, consider discussing potential incapacity issues with your client at the initial stages of your relationship. Most clients would likely appreciate the importance of addressing this issue up front so that you can provide protection if and when the time comes. You may be able to obtain written authorization to release confidential information to a designated family member or close friend should it become necessary later on. If and when the need arises, you can consider cautiously approaching that designated individual to express concerns and encourage further action.
Even if you take these measures, you may nevertheless be in the unenviable position of knowing further steps need to be taken. It is important to be aware of the possible options.
First, you may have an obligation to make a report to the Bureau of Elderly and Adult Services. You will be required to take this step if you have reason to believe that an incapacitated adult (not limited to elderly individuals) is being exploited, abused, neglected, or is living in hazardous conditions. Failure to report is a misdemeanor. While not an ideal circumstance, a call to BEAS may trigger an investigation and could change the situation.
Second, a conservatorship may be a way to protect your client’s assets if your client is vulnerable but still has the ability to understand his circumstances. State law allows for an individual to appoint someone to handle his financial affairs for him. This is an option to consider when it is questionable whether the client could execute a DPOA but understands his circumstances and needs protection. The probate court requires that the individual voluntarily choose his conservator. A petition must be filed, and a hearing will be held in order to make the appointment valid.
Finally, there are instances in which a guardianship should be considered. When a client has deteriorated but does not have a DPOA, or when you have concerns about giving the person named in the DPOA authority to handle the finances, a guardianship may be necessary. Any interested person can petition the probate court to appoint a guardian. The court will do so if there is evidence that the proposed ward lacks the capacity to handle his own affairs. The court determined whether an individual lacks capacity by examining an individual’s functional, not medical, limitations, such as his ability to prepare meals, take medication, and handle his finances.
A financial planner’s ability to become involved in this process can be complicated by many factors. While never ideal, the financial planners who are aware that these issues will arise and are prepared to address them are far more likely to protect their clients while also preserving those important relationships.
Andrea L. Daly is a member of the litigation department at the law firm of McLane, Graf, Raulerson & Middleton, Professional Association. She can be reached at 334-6927 or [email protected]. The McLane Law Firm has offices in Concord, Manchester and Portsmouth.