As forecast in the early 1980s, America is aging. The new century counted almost 77 million Americans over the age of 50, with more than half between 50 and 64 — with a surprising 4.2 million over the age of 85.1 As a result, professionals throughout the wealth management industry2 are seeing an increasing number of older, prospective clients with diminished capacity — and watching the capacity of their existing clients diminish. In both instances, the ethical implications are enormous.3 The question is: How will they handle the dilemmas created by elderly clients?

Consider the possibilities. Let's say Betty, a 75-year-old, has a first appointment with a financial services professional named Tom to talk about her financial portfolio and discuss what financial and insurance products Tom would suggest she purchase. Betty, a widow, is accompanied by one of her three children, Debbie. Betty says she's most concerned about asset preservation and estate planning; she wants to know whether the new financial products will fit her status and age.

After reviewing basic facts, Tom describes a variety of approaches and products. Betty says he's talking above her head. He assures her that everything he proposes will be put in writing and that there would be a period in which she could think about purchasing any products he's suggested. But when Tom questions Betty further, she starts contradicting herself and appears confused. Debbie intervenes several times, answering for her mother. When Betty responds, she's incoherent. Tom realizes that Betty is struggling simply to understand generally what is going on.

Codes of ethics for many professional organizations don't address the issue of client competence to make decisions based on informed consent. Even the ethics codes for the Society of Financial Services Professionals (SFSP) and the American Institute of Certified Public Accountants (AICPA) don't directly tackle this issue.4 While the AICPA has a section in its code of conduct addressing responsibilities to clients, it provides no guidance to its members relating to the competence of customers.5 This is true for SFSP too, but it does indirectly provide guidance on how to conduct a responsible inquiry and ensure that there is an informed understanding of the services or products being purchased.6

In our hypothetical, Tom has gathered enough information, and has sufficient, specific dialogue with Betty to see that Betty may have diminished capacity such that she might not be able to exercise informed consent. The questions then become: What should the professional do in this situation? Does the answer differ among professions? As the lack of capacity becomes starkly apparent, does the professional's ethical duty also become apparent?7

Here's what I would suggest Tom do: If Betty seems clear-headed enough, suggest that she make an appointment with her lawyer to be sure her powers of attorney covering her finances and health care are up-to-date. If Betty seems too fuzzy to follow through on such a suggestion, Tom himself can bring a medical or healthcare professional into the picture. Yes, doing so could very well make Tom lose the sale or commitment to purchase services. But Tom should do this not only because it's the right thing, but also because it's better for him. If Tom has Betty execute documents when he believes she doesn't have informed consent, he may be committing fraud or unfair trade practice and could well be held to account some day.

The real problem is that the ethical boundary is never so obvious. That is why there are professionals crossing that ethical divide all the time as they struggle under the pressure and stress to meet quotas.

Let's complicate our hypothetical to show how difficult things can get. Say that Tom suggests Betty make an appointment with her lawyer to be sure her financial and health care powers of attorney are up-to-date. But Debbie says, and Betty agrees, that she is her mother's attorney in fact and agent. Debbie claims that her brother and sister live out of state, but that they are in agreement with what Betty wants to do. Betty says all of her children love her and everything is just fine. Tom has Betty and Debbie sign all documents for the purchase of the financial products.

Two days later, Betty calls to declare that she is canceling the purchase. In the background, Tom could hear a man's voice yelling instructions to Betty. Tom insists that he visit Betty at home to discuss her decision. At the house, Betty and her son Jack greet Tom; Debbie is not present. Jack takes over the conversation and claims that he is his mother's attorney in fact as of that morning.

Now let's redirect our hypothetical. As Tom suggested, Betty consulted with an attorney, David, regarding her current situation. Debbie had accompanied her. David began by asking Betty who his client was going to be. She agreed that she was his only client for the consult.

David explained advance directives as a necessary diversion against guardianship while clarifying what risks were involved and that there were many reasonable available alternatives. Betty said that David was talking way above her head, to which he replied that everything would be presented in writing for her. When David asked about sharing confidences with, and sending copies of all correspondence to her other children, Betty directed him to share information only with Debbie.

At the inception of the client-lawyer relationship, elder law attorneys and trust and estate lawyers must deal with issues of competence, communication, confidences and loyalty.8 Initially, the ethical analysis of the client-lawyer relationship is not difficult — as long as the lawyer knows to ask, “Who is the client?” to those making the initial appointment9 and the answer comes from the client.

When other family members are present, the initial consultation becomes more complicated when the older person who is seeking legal services has diminished capacity.10 Clearly, there is a tremendous amount of stress that presses against ethical boundaries as a lawyer begins the client-lawyer relationship. Before representation is established, there should be confirmation that the prospective client has sufficient competence or capacity to enter into the client-lawyer engagement.11 Once client identification is confirmed, the broader spectrum of an elder law engagement usually addresses quality of life and quality of services to the elder.12 Concomitant with medical and health care needs, the engagement also may delve into consideration of long-term care insurance, estate and divestment planning for tax or governmental benefits consideration, asset exemptions and transfers and in-home options often leading to transition into assisted living or nursing home environments, or even transition of residency, domicile and state citizenship.13

Elder law attorneys often assess a client's competence to engage counsel and whether he has sufficient cognitive function to exercise informed consent to enter into a contractual relationship that delivers future legal services.14 Some even include, as an element within the scope of prospective representation, a reasonable screening, assessment or calculation of client capacity.15 Acting with sensitivity, reasonable legal competence and diligence, elder law attorneys assess client capacity, while honoring client confidences and protecting property.16

The recently revised Rules of Professional Conduct of the American Bar Association set out new definitions and edited current rules addressing client capacity.17 Following the new ABA Model Rule 1.0(e), defining informed consent, David should make clear his obligations to Betty about her consent related to conflicts of interest and the scope of representation.18

The new user-friendly rule replaces the concept of “consent after consultation” with the more familiar concept of “informed consent.” As defined, “informed consent” denotes agreement “after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.”19

In the initial part of the conference, David followed the rule, going beyond what's required by offering a written contract that confirms Betty's consent. Ordinarily, a client-lawyer situation like this does not require the client to sign a written agreement. This remains the rule despite the ABA Ethics 2000 Commission's recommendation otherwise. 20

Let's go back to the hypothetical. As the consultation proceeds, everything changes. As David starts raising questions, Betty contradicts herself and seems confused. After Debbie answers several questions for Betty, David redirects his questions to Betty and rephrases them so that the answers must be a simple yes or no.

David asks Betty to whom she wants to hand over her financial and health care powers of attorney. Debbie answers for Betty that she would be attorney in fact and agent, and Betty agrees. Debbie says her brother and sister live out of state, but are in agreement with what their mother wants to do. Betty joins in saying how all of her children love her and everything is just fine. David asks Debbie to return to the reception area while he speaks with Betty privately. Debbie insists that that's unnecessary, elevating her voice and Betty's agitation. David again asks Betty if she would talk to him separately, to which Debbie voices strong objection.

David decides that Betty has sufficient capacity to engage him for the initial conference, because he continued the conference believing that she was his client. After Betty showed greater confusion, he could have conducted an informal screening to assess, from a legal position, whether Betty's basic understanding was sufficient to make choices.

In a recent issue of the journal put out by the National Association of Elder Law Attorneys, writer Jennifer Moye notes that the American Bar Association and the American Psychological Association are currently developing rules regarding capacity and the graying of America.21 Moye notes an increasing prevalence with age of diseases affecting cognition, creating a need for attorneys to do some sort of preliminary and informal assessments of capacity when faced with these dilemmas. Some dilemmas are discussed in the revised ABA Model Rule 1.14 (Client with Diminished Capacity), while others will be examined in a soon-to-be published (Fall 2005) handbook for all professionals addressing client capacity.22

In our hypothetical, the conventional legal practice would be for David to advise Betty to first see her doctor, or seek psychological, psychiatric or geriatric evaluation. This is also where more experienced elder law attorneys would insist that Betty be interviewed in private, outside of Debbie's influence.23

Even without the screening, David concludes that Betty has diminished capacity and that Debbie is exerting undue influence over Betty. Given this assessment, the ABA model rules allow David certain discretion, especially in the context of disclosing confidential client information to prevent harm to Betty.24

TO DO AND NOT TO DO

Return first to how the initial story had Tom, the financial services professional, confronted by Betty's son regarding the purchase of the products. Tom's best course of action should be to first assure Jack that cancellation would be accomplished as per Betty's telephone instructions. But Tom should qualify the cancellation by explaining that even though the financial products were Debbie's choice for Betty, they truly were most appropriate and considered good stewardship of Betty's portfolio. Tom should then ask Jack if he would take a few minutes to listen to Tom's analysis. If Jack is insistent on cancellation, then Tom should not continue to press for the sale, but instead take an optimistic approach to cancellation, offering to come back another time to assist Betty and Jack to look at other options.

Now return again to the involvement of David the attorney. Let's look at one possible response for David. He could explain that he cannot adequately represent Betty and advise her to seek other counsel.

No fee is paid. But, say that, as Debbie and Betty leave, David sees what he thinks are bruises on the older woman's arms. From his office window, he sees Debbie in the parking lot arguing with Betty, shoving her into the car and driving recklessly down the street.

Two days later, David receives a call from Betty's son, Jack, who wants to know what happened at the meeting. David tells him everything, especially about what he suspected was Debbie's abuse of Betty in the parking lot. Jack says he would hire David to prepare powers of attorney and that he will fly into the city to arrange for Betty to sign them. David agrees, assuming that Betty had never been his client.

Wrong assumption, wrong move. If David takes this route, he has gotten himself into a terrible mess. New ABA Model Rule 1.18 — Prospective Client,25 provides guidance relating to those who have not actually become clients, but with whom the lawyer has sufficient contact with and received enough information that confidentiality and conflicts are triggered. Betty provided David with important information that must be maintained as confidential client information and communication. She also has committed to a client-lawyer relationship, at least through the initial consult. If David assumes that Jack is his client, under ABA Model Rule 1.18, David should have determined if there were material conflicts in his representation of Jack in relation to Betty. If there were, David should have informed Betty of them, asking her to sign written authorization for him to represent Jack.26 If Jack is not the client, but is paying the legal fee for Betty, David must comply with ABA Model Rule 1.8(f) that deals with such fee payments.27 By telling the son everything before receiving Betty's informed consent, he has violated Betty's right to confidentiality.28 David and Betty were in agreement that he was not representing Debbie or the other children. No matter how much the information would help the two children, he should have maintained Betty's confidentiality.

In situations like this one, when a third party contacts the attorney on behalf of a prospective or current client, the attorney should inform such person of the obligation to hold inviolate the client's confidences and secrets. He also needs to explain that he owes his client his undivided loyalty, assuring against conflicts of interest.29

The ABA Model Rules provide lawyers with discretion to reveal or disclose information in those situations specifically expressed in its rules.30 In our hypothetical, ABA Model Rule 1.6(b)(1) may be applicable insofar as David may conclude that he must divulge confidential client information to Jack “to prevent reasonably certain death or substantial bodily harm.”31 Comments 14 and 15 to Model Rule 1.6, strongly suggest that, before you violate confidentiality, consider other options.32

Additional support for David's discretionary exercise of disclosure is found in revised ABA Model Rule 1.14-Client with Diminished Capacity.33 Because he concluded that Betty's capacity was diminished, he could have disclosed after careful consideration of Sections (b) and (c) of ABA Model Rule 1.14. Even under this part of the ABA Model Rules, David must confine his disclosure to Jack that which would be reasonably necessary to protect Betty's interests.

There is no question as the Baby Boomers hit old age, advisors of every stripe will increasingly be faced with older clients who have diminished capacities — and with children whose interests may conflict with these parents. All organizations of professionals who will be serving these elderly people need to address the ethical strains that will confront their members. One group of lawyers that has been focusing on the elderly for about 20 years — the National Association of Elder Law Attorneys (NAELA)34 — has been reaching out to other disciplines, offering to co-sponsor training sessions and symposiums in which members of other professional organizations learn how best to serve elderly clients. Contact NAELA at www.naela.org. It's a start.

Endnotes

  1. See “Beyond 50.02: A Report to the Nation on Trends in Health Security, Section II Overview of Trends Affecting Population Age Groupings From 50 to 85” (AARP 2002).
  2. Recent articles have pointed out the change in customer characteristics, advising readers on how to market to them. See for example ERGO/GERO Designing Marketing and Displays for the Older Consumer www.ergogero.com/pages/agingmarket.html (2004).
  3. See ABA 2004 MRPC 1.18, Duties to Prospective Client, infra note 14 at pp. 69-71.
  4. See, for example, Society of Financial Service Professionals, Code of Professional Responsibility of the Society of Financial Service Professionals, www.financialpro.org/About/CodeOfProfResp.cfm (SFSP 2004); American Institute of Certified Public Accountants, AICPA Code of Professional Conduct, www.aicpa.org/about/code/sec300.htm (AICPA 2004).
  5. Ibid AICPA CC, ET Section 300-Responsibilities to Clients.
  6. Ibid SFSP CPR at pp. 2-3, Canon 1 Fairness, R 1.5.
  7. See Katherine K. Wallman, “Older Americans 2000: Key Indicators of Well-Being, Indicator 15-Memory Impairment,” (Federal Interagency Forum on Aging — Office of Management and Budget 2000) at p. 25; “Beyond 50.02: A Report to the Nation on Trends in Health Security, Section II Overview of Trends Affecting Population Age Groupings From 50 to 85” (AARP 2002).
  8. See Geoffrey C. Hazard, Jr. and William Hodes, The Law of Lawyering (2d ed. Aspen Law & Business 1996) (Supp. 2004), Pt. 1 at p. 1, explaining that the four duties (competence, communication, confidentiality and loyalty) of the core principles of the law of lawyering run to the client, and noting that The Kutak Commission symbolized the primacy of client interests by reversing the common “lawyer-client” reference; see also ACTEC Commentaries on the Model Rules of Professional Conduct (3d ed. ACTEC Foundation 1999). The ACTEC Commentaries have as their themes (1) the relative freedom that lawyers and clients have to write their own charter with respect to a representation in the trusts and estates field; (2) the generally nonadversarial nature of the trusts and estates practice; (3) the utility and propriety, in this area of law, of representing multiple clients, whose interests may differ but are not necessarily adversarial; and (4) the opportunity, with full disclosure, to moderate or eliminate many problems that might otherwise arise under the Model Rules. Ibid John R. Price, Reporter's Note, ACTEC Commentaries at p. 1.
  9. See generally Bruce A. Green and Nancy Coleman, eds., “Ethical Issues in Representing Older Clients,” 62 Fordham L. Rev. 961 (1994) (hereafter “Green — Ethical Issues”); see also Restatement of the Law Third, The Law Governing Lawyers. Vol. 1, Ch. 2, The Client-Lawyer Relationship (Cumm. Supp. 2003) at p. 125.
  10. See Peter Margulies, “Access, Connection, and Voice: A Contextual Approach to Representing Senior Citizens of Questionable Capacity,” in “Green?Ethical Issues,” supra note 10 at pp. 1073, 1080; Jan Ellen Rein, “Clients with Destructive and Socially Harmful Choices — What's an Attorney to Do? Within and Beyond the Competency Construct,” in “Green — Ethical Issues,” supra note 10 at pp. 1101, 1154; Robert B. Fleming and Rebecca C. Morgan, “Lawyers' Ethical Dilemmas: A ‘Normal’ Relationship When Representing Demented Clients and Their Families, in Joint Conference on Legal/Ethical Issues in the Progression of Dementia,” 35 Georgia L. Rev. 735 (2001) (hereafter “Fleming and Morgan — Lawyers' Ethical Dilemmas”).
  11. See “Fleming and Morgan — Lawyers' Ethical Dilemmas,” supra note 12, at pp. 750-751; see also Michael A. Stratton, “Hit Hard, Not Low,” TRIAL (September 2003) at p. 60 .
  12. See William E. Adams and Rebecca C. Morgan, “Representing the Client Who Is Older in the Law Office and in the Courtroom,” 2 Elder L. J. (Spring 1994) at pp. 1-2.
  13. Ibid.
  14. See “Green — Ethical Issues,” supra note 10 at pp. 18-21.
  15. See “Fleming and Morgan — Lawyers' Ethical Dilemmas,” supra note 12 at pp. 750-p. 751.
  16. See Jeffery N. Pennell, Ethics, Professionalism and Malpractice Issues in Estate Planning and Administration, 2 (ALI-ABA 2002).
  17. See ABA Center for Professional Responsibility, 2004 Model Rules of Professional Conduct, (hereafter ABA 2004 MRPC) www.abanet.org/cpr/mrpc/mrpc_home.html (ABA 2004). Adoption of the Model Rules in virtually every state, whether in whole or in part, is the broadest disciplinary mandate that is uniform across the country); see also Pennell, Ethics, Professionalism and Malpractice Issues in Estate Panning and Administration, Ibid at p. 19.
  18. See ABA 2004 MRPC 1.0(e) Terminology — Informed Consent, Ibid. at p. 7.
  19. Ibid and Comments (6) and (7) at pp. 9-10.
  20. This is one of the few issues on which the ABA House of Delegates parted ways with the ABA Ethics 2000 Commission. The commission believed the time had come to upgrade the preference of a writing of the scope of the representation and the basis or rate of the fee and expenses to an across-the-board directive. The commission sought to maximize understanding by requiring a written agreement. A divided house of delegates found the time had not come to require across-the-board writings. See www.abanet.org/cpr/e2k-summary_2002.html
  21. See Jennifer Moye, “Evaluating the Capacity of Older Adults: Psychological Models and Tools,” 17 NAELA Quarterly (Summer 2004) at p. 3.
  22. Ibid.
  23. Goals recommended by the NAELA Professionalism & Ethics Committee to be published by the NAELA Board will strongly advise NAELA members that this is a best practice to which all members should aspire.
  24. See ABA 2004 MRPC 1.6(b)(1) and 1.14(b), supra note 20 at p. 22.
  25. See ABA 2004 MRPC 1.18, Duties to a Prospective Client, supra note 20 at pp. 69-71.
  26. Ibid.
  27. See ABA 2004 MRPC 1.8 Conflict of Interest: Current Clients: Specific Rules, supra note 20 at p. 36.
  28. See ABA 2004 MRPC 1.6 Confidentiality of Information, supra note 20 at p. 22.
  29. See ABA 2004 MRPC 1.7 Conflict of Interest: Current Clients: General Rules, supra note 20 at p. 26.
  30. See ABA 2004 MRPC 1.6, supra note 20 at p. 37.
  31. Ibid.
  32. Ibid.
  33. See ABA 2004 MRPC 1.14, Client with Diminished Capacity, supra note 20 at pp. 58-61.
  34. Both authors of this article are past presidents of NAELA.