Beverly Flaxington is a practice management consultant. She answers questions from advisors facing human resource issues. To submit yours, email us here.
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Note from Bev: I have been partnering with experts in the elder care arena. I receive so many questions related to legal documentation that this week I’ve asked our partner, Howard Krooks, to provide some insight.
Howard says they frequently receive questions about clients’ advance directives, such as durable powers of attorney and health care advance directives. Here is the information he provided:
These documents are designed to allow another individual, the agent, to make decisions for your client when s/he is unable to do so due to incapacity, whether physical or cognitive. Learning how to deal with clients who have advance directives in place is important for advisors since many people plan for incapacity by executing durable powers of attorney and health care advance directives.
Here, we are concerned primarily about the durable power of attorney, which is a legal document wherein a client may appoint another individual, an agent, to make financial decisions for him/her. While prevalent, the documents themselves don’t tell the advisor how to deal with an agent, or what to do if an out of state advance directive has been presented to the advisor. Should that advance directive be honored? If it was executed out of state, and in accordance with the laws of another jurisdiction, can it be honored in the advisor’s home state?
Let’s say a client moves from New York to Florida with a New York power of attorney appointing her son as agent. You have been dealing with this client in Florida for about five years without issue, running investment decisions by her, discussing advantages and disadvantages of each proposed transaction in advance, and obtaining approval for each trade before it is consummated. Lately, however, you are noticing that your client is not as responsive when you present options to her, oftentimes not responding at all. Even when she makes herself available to you, you find her asking many of the same questions over and over, and you are no longer certain that she understands the implications of the proposed investment, even after multiple discussions.
At one point, she mentions that it might be helpful to have her son become involved in these discussions, and this proves quite helpful. Her son is able to explain things to her in terms that she seems to understand, and things return to “normal,” for a while. But then, even with her son involved, it is apparent to you that she can no longer follow the discussion or understand the implications of her decisions.
Her son calls you and says that it is becoming overwhelming for his mother to continue on the phone calls and she can no longer participate in investment decisions. Her son suggests that from this point forward, you should deal only with him. You review your file and note that you have the New York power of attorney your client provided to you years ago.
You recognize that the power of attorney is a legal document, and not being a practicing lawyer yourself, you have many questions:
- Is this power of attorney valid? How can you find out? What constitutes a valid New York power of attorney?
- Even if the power of attorney was valid when executed, is it still valid, this many years later? You heard that New York recently changed its power of attorney law. What effect with the new law have on a power of attorney executed prior to the new law?
- Even if the law governing powers of attorney had not changed, you wonder if the power of attorney executed this many years ago remains valid today? Does it ever go stale? What protocol do you need to follow in order to honor a power of attorney executed many years ago in order to satisfy yourself that it remains valid and should be honored today?
- Have you ever spoken with your client about getting a Florida power of attorney in place? Have you ever spoken with your client about whether and when to honor the power of attorney, even if it would mean excluding her from all future discussions?
These are some of the questions you need to be asking. Your client is unlikely to institute these discussions with you. Yet you, as the advisor, will need to make some important decisions regarding the management of your client’s financial resources down the road should incapacity present.
You will need to develop a protocol for answering those questions. The answers vary by individual circumstances and that is what an attorney with the appropriate expertise can offer.
Howard S. Krooks is an elder law and special needs planning attorney practicing in New York and Florida.
Read more articles by Howard S. Krooks, JD, CELA, CAP
