January 01, 2019 Feature

What to Do When a Client Loses Capacity

By Valerie Sherman

It rarely happens all at once—there’s a strange phone call here, a forgotten meeting there. But in the end, you know it in your gut: Your client is beginning to suffer from age-related dementia.

Client Capacity

Client Capacity

As the American population ages, attorneys and other fiduciaries must keep some questions top of mind when dealing with elderly clients and donors:

  • How do you distinguish true dementia from the ordinary forgetfulness that comes with age?
  • How can you continue a business relationship with a client or donor who’s losing capacity?
  • What are some signs of elder abuse by relatives or caregivers, and what do you do if you suspect your client is a victim?

My own experience in recognizing dementia issues comes from several years at a Chicago boutique estate law firm and six-plus years of working with donors to nonprofits. Unfortunately, in both my time in traditional legal practice and in gift planning, I also encountered elder abuse by caregivers and neighbors.

Using my legal background, I sought to train my lay colleagues on identifying and addressing issues of dementia in donors to help them to identify some of the telltale signs.

Why get involved? Because failing to identify the signs can result in legal and ethical problems for you as a fiduciary.

Why a friendly conversation is helpful

Several times a year, I volunteer for the Wills for Heroes Foundation in Chicago, which seeks to provide estate plans to police, fire, and other first-responder personnel. The other day, I overheard a colleague asking some clients in a signing ceremony: “Do you have the capacity to make gifts of property?”

While I understand the technical reasons he asked the question so directly, identifying capacity issues with your clients is rarely so simple. (Can you imagine the client who says, “Why no, I don’t have capacity! Thank you for asking.”)

I prefer to put my clients at ease by starting up a friendly conversation, during which I can more subtly root out any nervousness on their part, aspects of the plan they don’t understand, or any confusion that might result from the complicated process. With the Wills for Heroes clients, they’re often nervous about the process and particularly reluctant to discuss death, so some conversation and humor goes a long way.

I ask my clients questions designed to determine if they can intelligently discuss the following:

  • What kinds of property do you own?
  • Why did you choose certain stocks or investment vehicles?
  • Who else is on the title of your real estate?
  • How many children do you have?
  • Do you have any grandchildren under the age of 18?
  • Do you have any caregivers who help you out around the house?
  • Why are you choosing to disinherit someone?

In the areas of estate planning as an attorney, as well as my current work in gift planning for charities, asking these questions is often a natural part of the client relationship. You want to get to know donors before you ask them for a major gift, and you want to put clients at ease about your estate planning services.

In that process of getting to know them, you might accidentally identify a potential issue with capacity. Similarly, the better you get to know your clients or donors, the more quickly you’ll be able to confidently identify changes in their personality that signal that they’re experiencing some dementia symptoms.

Signs your client is losing capacity

Here are some red flags that can signal a potential capacity issue. The client:

  • Has trouble finding your meeting place, especially on more than one occasion
  • Can’t remember recent occurrences, such as special occasions, your last contact with them, or big events like elections
  • Doesn’t seem to know the date or season
  • Has significant trouble remembering names of family members, especially more recent additions like grandchildren
  • Misses meetings, particularly when they never did so before
  • Has mood swings, such as frustrated or angry reactions to questions that seem innocuous to you
  • Has significant difficulty following a conversation
  • Shows difficulty reading or understanding simple forms
  • Makes bad financial decisions, particularly if you’ve known them to be normally sharp
  • Has trouble discussing the future or understanding things that will happen in the future, such as an advanced directive or charitable gift

These signs aren’t exhaustive, but they can provide you with a flavor of changes to a client that can signal diminished capacity. Once you see these signs, you shouldn’t continue helping a client with financial plans or advance directives until you speak with the client’s family or friends.

Continuing the representation despite some of these signs may subject the estate to legal challenges and may jeopardize your professional license. If you represent a charity, the charity could also be vulnerable to lawsuit.

Watch for signs of elder abuse

Elder abuse is one of those things that’s so sad and so vile that it’s difficult to imagine that a human being could do such a thing to a fellow person. And yet I saw examples of such abuse in my time at a law firm, as well as my work with elderly and deceased donors at nonprofits.

At the firm, we’d taken some cases from the Office of the Public Guardian that involved significant financial elder abuse. In those cases, neighbors had taken advantage of isolated elderly women by coercing them into signing a power of attorney that allowed the neighbor to transfer property or take out credit cards in the women’s names.

These men then went on spending sprees, which sometimes continued after the women’s death despite the fact that the credit card was in a deceased person’s name.

At a university, I encountered several heartbreaking cases where something similar had happened. In one case, the abuser was the victim’s caregiver. The caregiver had used a signature stamp to transfer the donor’s real property to her name.

It was caught only when the caregiver attempted to sell it and the buyer’s attorney identified a problem in the chain of title—the man’s trust owned the property, which was a legal technicality the abuser hadn’t understood when she attempted to transfer the property from the man personally.

In another case, an elderly woman’s neighbors identified a case of elder abuse. They fought it through the courts, ensuring that her estate went to the charity as she intended.

When I looked back at our contact reports for the donor with the abusive caregiver, I saw several calls where a fundraiser had attempted to call the donor to thank him for his gift, and she the caregiver refused to allow any staff member to speak with him on the phone or to schedule a visit.

In the cases I’ve seen, I’ve identified signs of elder abuse you can consider as red flags when you deal with clients or donors:

  • A caregiver or family member continually refuses to allow you to speak to the client
  • A caregiver or family member won’t let you see the client alone or seems to have brought the client to your office against the client’s wishes
  • The client has lost a large amount of weight (you suspect through neglect)
  • The client is unusually disheveled or dirty
  • The client or donor has injuries or repeated injuries, and the caregivers won’t take the client to be treated
  • The client acts withdrawn or frightened
  • You identify withdrawals from the client’s account the client can’t explain
  • You encounter unpaid bills or missing financial information
  • The signature on a power of attorney document you’re reviewing doesn’t look right

Your vigilance can not only help protect the client’s assets and the client personally, but it can also preserve the donor’s intent to give gifts to family or a favorite charity. If you suspect your client or donor—or any elderly person you know—is the victim of elder abuse, you should contact your local adult protective services agency immediately.

What to do with clients losing capacity

If you’ve determined that a client or donor has lost the capacity to make gifts, that’s not necessarily the end of the story. Over the years, you may have developed a close personal connection to this person, and it may cause both you and the client distress to cut off all contact. You can continue this personal connection in a way that doesn’t jeopardize your professional ethics.

In my gift-planning roles, if I determine that donors had lost the mental capacity to understand their finances and gift-giving, I’d enter data into our database to record this information for others. First, I entered a contact report explaining my interaction with the donor and my reasons for suspecting the donor’s lack of capacity. This would either be a vague suspicion, which could be confirmed later by another staff member, or a definitive statement in some cases.

For example, one donor had made a gift of $200,000 in annuities with the university about five years prior to my calls with him. He found the receipt for these annuities and, in the present day, didn’t remember making the gifts. He called me frustrated and upset about what these annuities were.

At first, I didn’t recognize the situation and attempted to explain the gifts to him. When I could tell that this information wasn’t sinking in, I simply thanked him for the gift and praised him for his generosity. This seemed to satisfy him, and we had several such calls like this over the six months prior to his death. I was able to confirm with his niece his diminished mental state, and I assured her that the university would mail information only—there would be no new gift solicitations.

When I confirmed that a donor had definitely lost capacity to make gifts, we coded the donor “do not solicit” so that we’d ensure that the university didn’t accidentally take advantage of the donor’s decreased mental state and continue asking for annual gifts.

However, we didn’t code the donor “do not mail,” which would have stopped all newsletters to the donor. Even in a diminished mental state, donors often enjoy seeing pictures of their favorite charities that may bring them back to a younger age. I’ve even heard of major gift officers continuing to meet with donors who have advanced dementia, paying their respects to people who’ve had a significant impact on the charity.

If you work in a law firm, meeting the client for an occasional coffee can be an enjoyable way to stay in touch and visit even after the attorney-client relationship is over. You can also continue to do right by the client by staying on the lookout for signs of elder abuse mentioned above. Our nation’s seniors will need this assistance in the coming years.

Aging is a natural part of life, and the dementia that comes with age for some of your clients doesn’t have to end your relationship with them. However, it’s important to identify signs of dementia or elder abuse so that you can protect your professional responsibility while also being a good steward of your clients’ estate plan and finances.

Valerie Sherman

Valerie Sherman is the director of gift planning at Saint Mary’s College in Notre Dame, Ind., where she specializes in making major gifts accessible to donors through blended gifts and estate plans. She worked for six years in the same area at Northwestern University and previously worked at Peck Ritchey LLC. She has also volunteered for six years for the Wills for Heroes Foundation through the Chicago Bar Association and encourages colleagues to participate in pro bono work in this rewarding area.