By Jennifer L. VanderVeen, CELA, CAP, Fellow
Educating your client’s agents helps your client, his or her agent, and builds your practice. Here are some tips.
Why should we, as attorneys, care about whether the agents our clients name are educated about their duties and responsibilities? Why should we take the time and make the effort to work with those named individuals to ensure that we have made the effort to explain to them the limits of their positions and the ongoing requirements of their service?
Added Service to Our Clients
Elder and special needs law attorneys do more than draft documents. We are putting together a plan for a person’s well-being and security. When clients know that the agents they put in place will have some guidance and assistance, they are often more comfortable executing the documents and, because they want their children to know which attorney to go see, they share information more readily — including sharing your contact information!
Advising clients’ fiduciaries can lead to client relationships with other family members and build word-of-mouth referrals. Just be certain that you have a good intergenerational conflict letter in hand. An excellent example can be found in Stuart Zimring’s article, “Ethical Issues in Representing Multiple Family Members,” found in the December 2011/January 2012 NAELA News (www.NAELA.org/ZimringEthicalIssues).
Distinguishing Yourself From Other Estate Planners
Online “do-it-yourself” estate planning companies and trust mills will not be available to answer questions when an attorney-in-fact has difficulty using a power of attorney document or helping a trustee. We can give our clients’ fiduciaries the assistance and guidance they need in a crisis situation.
Preventing Conflicts and Misunderstandings
Educating fiduciaries about the need to maintain open communication and providing information to beneficiaries is key to preventing conflicts and misunderstandings.
In the world of elder and special needs law and fiduciary representation, defining who is your client is perhaps the most critical, and often vexing, question attorneys face. It is also the most important. Unfortunately, the ABA Model Rules of Professional Conduct (MRPC) are fairly thin on this point. Turning to NAELA’s Aspirational Standards (www.NAELA.org/AspirationalStandards), Standard B deals entirely with client identification. Standard B2 states that an elder law attorney, “Recognizes the unique challenges of identifying the client when a fiduciary is acting on behalf of a protected individual.” In a typical case, you could be representing the principal; the agent, on behalf of the principal; or the agent, individually.
Each representation carries its own risks and requirements.
The Standards specify that, once an attorney identifies who will be the client, it should be memorialized in writing in the engagement agreement. If the attorney represents the principal, you can receive authority to later represent the agent in his or her capacity as a fiduciary via an authorization to disclose or a waiver of conflict. A sample is available with the Aspirational Standards on the NAELA website.
Educating the Principal
In some cases, the principal is the first line of defense and the first person to notice something is wrong. Prior to drafting documents, review the powers, duties, and responsibilities of each potential agent with the client, both to ensure the correct agents are named and so that the principal understands the scope and purpose of each document. Consider whether the principal wants to authorize a third person to review the actions of the principal (for example, receive accountings) if the principal is incapacitated. Share your educational materials with the principal so he or she can review and reinforce your instructions. Get advance authorization to disclose information to agents and discuss the scope and limits on that authorization, if any.
Educating the Fiduciary
Self-dealing: The first rule of acting as an agent is the rule against self-dealing. While self-dealing may be permissible in certain circumstances, it is likely better for you and the agent to set clear boundaries early, requiring disclosure and discussion of any possible self-dealing in advance. As I often tell agents, many times we can figure out a way to make something work within the boundaries of their authority, but I cannot put a genie back in a bottle once it’s out.
Showing authority: Fiduciaries should clearly understand what documents provide them with their authority, who should be provided with copies, and what the limitations of the document itself may be. For example, many financial institutions and brokerage services will not accept court letters authorizing an executor or personal representative that are more than 60 days old. To avoid possible fees and charges associated with getting new copies from the court, the fiduciary should get the documents on file with financial institutions as soon as is practicable after issuance.
How to sign/act: One of the mistakes made most often by fiduciaries is failing to sign documents correctly. Providing the fiduciary with examples and frequent reminders can prevent this from happening. You also may need to provide answers to such seemingly basic questions as, “How do I access trust/estate funds?” or “How will I know which bills to pay?” Keep in mind that, although we deal with these situations on a daily basis, many of our fiduciaries have never been in this position before and may never have known someone else who was. You also may need to correct misinformation that comes from the fiduciary having either acted before in a similar situation or knowing someone who did. If you know your fiduciary has some experience and you were not the attorney in that case, ask how they handled the responsibility and how they managed things. This can allow you to correct bad habits before they affect your case.
Money management: If you are in a situation where a financial planner is not already involved in the case and the fiduciary has little experience with managing finances, refer them to trusted financial planners who can help. All fiduciaries should be briefed on the prudent investor rule, even if it needs to be in the simplest terms possible. You never want to put yourself in a situation where the fiduciary turns to you and says, “You never told me I couldn’t invest in Bitcoin.”
Recordkeeping: While the timeframes for required recordkeeping and the form may be different for each type of fiduciary, the basics are the same. There are tips and tricks you can arm fiduciaries with to make recordkeeping easier and minimize questions on any future accounting. The memo line on a check is an agent’s best friend. It can also be used to specify the purpose of any check written. Agents should always have check copies included with bank statements, even if the bank charges an extra fee. Many courts require them with accountings and it can save on hassle and expense later. Check registers have two available lines for each check, one usually shaded in grey. That second line is the perfect place to note what a transaction or check was for to help jog an agent’s memory in the future.
Who the fiduciary is responsible to: You should clearly set out for the fiduciary his or her responsibilities to the various individuals involved in the case, whether that is beneficiaries of an estate or trust or the principal and his or her heirs in the case of a power of attorney.
Contact information should be provided, if available, and the fiduciary should be encouraged to maintain direct contact with these individuals, if feasible.
In certain situations, direct contact between the fiduciary and beneficiaries is not in anyone’s best interest, in which case, the fiduciary should be in frequent contact with the attorney who can provide updates to the beneficiaries.
What reports are required/suggested: Each type of fiduciary role has its own accounting requirements. From the laughably simple required by the Social Security Administration to the complicated, detailed accountings required by some jurisdictions in guardianships, an agent should be prepared to give detailed reports on income to and withdrawals from all accounts with explanations of each transaction at any time.
If the principal is competent, quarterly reports are not so frequent to be burdensome, but often enough to keep the principal informed. In addition, quarterly reports allow any questions to be asked while the transaction is still fresh enough in the agent’s mind to respond. At a minimum, reports should be compiled annually, even if the reporting requirements are less frequent. n
About the Author
Jennifer VanderVeen, CELA, CAP, Fellow, is NAELA President. She practices in Indiana and Michigan.