Advising elderly clients requires extra diligence, lawyer says

(November 8, 2004) Looking over his client files, the veteran advisor saw potential traps that might have gone unnoticed by an unwary practitioner. A wealthy widowed client with no children had just turned 90. “The lady is very sharp for her age but I’ve noticed a definite decline in her edge in the last couple of years. I feel I have to be careful here,” he said.

Another client, also a senior citizen, usually appears capable, the advisor added. But this client takes several strong medications that sometimes affect his mental faculties. “When he’s good, he’s great, but when he’s not good, I don’t always know if I’m getting the right decision.”

Issues surrounding the mental capacity of clients have always been important in professional relationships. But they’re becoming increasingly evident as the population ages, according to Dana Goodfellow of Borden Ladner Gervais LLP, who is an expert in estate litigation.

“The relationship is fiduciary, so be very careful when dealing with elderly clients,” Goodfellow told an audience of brokers during a presentation focusing on practical advice for dealing with elderly clients at last week’s IFB fall summit in Toronto.

Those fiduciary responsibilities include an obligation to make inquiries if the client is, or may be, incapacitated and vulnerable. “Does the elderly client have mental capacity?” should be the advisor’s first question, Goodfellow said, meaning the ability to understand information relevant to making a decision and to appreciate the consequences of making a decision.

“Does the client have a Power of Attorney (POA) and if not, do they have a guardian?” should be the advisor’s next question. Power of Attorney grants authority, and limits on that authority, from the elderly person, while a guardian is appointed by the court to submit recommendations for permission to proceed, she explained to Advisor.ca during an interview following her presentation.

There are other questions designed to highlight the client’s capacity in a discussion on the granting of a POA. “Does the person know that the attorney will be able to do (in some cases) anything on that person’s behalf? Does the person know that the attorney must account for decisions? Does the person know that if he or she is capable he or she can revoke the POA?”

Even with a valid POA in place, there are some complexities that an advisor must take into account. “Do not assume that the POA in Ontario will be recognized in other provinces,” she warned. For example, in British Columbia POAs are effective when they are executed and witnessed, while in Ontario they may be only effective when the person is incapacitated. In Ontario, there may also be a “triggering event,” such as when the person becomes incapacitated.

An advisor with a client who owns assets in Ontario and British Columbia should seek legal advice in both provinces. As another example, Goodfellow suggested, where an advisor gets conflicting instructors from the client and from the person holding the POA, “consider whether a capacity assessment should be done.”

Art Melo is a Toronto-based financial writer

(11/08/04)