Even Senior Clients Deserve Attention
by Ellen Bessner
Originally published in the National Post on July 30, 2007.
This second article on ageing clients was to be about my mother, but she refused her
permission after hearing the topic -- a power of attorney and an ageing parents assets.
So instead, it is about, Alex's mother. Alex is an economist who sat next to me on a
recent flight. We got to talking and he told me when he called his mother, who is in her
mid-sixties, on Mother's Day he was surprised to learn her line had been disconnected.
He immediately called her cellphone and was relieved to hear her voice.
Melmira, it seems, had made a sudden decision to move because of the deteriorating
health, including signs of dementia, of her 87-year-old mother, Teresa. She didn't trust
her stepfather to give Teresa the care she needed. Furthermore, Teresa had a
substantial estate of which Melmira was the sole beneficiary and power of attorney.
Melmira didn't want her stepfather to get his hands on her mother's assets. Having
learned Teresa's assets had been moved into joint accounts with her husband to avoid
probate, Melmira went to Teresa's investment advisor.
The advisor said that the document Melmira had appointing her Teresa's power of
attorney with sole responsibility for her financial matters in the event she became ill or
incapacitated, had been replaced by one in which the stepfather had power of attorney.
However, the advisor claimed it would be a breach of privacy to show her the new
document signed by Teresa.
Alex immediately sent his mother to a lawyer. Five days later, Teresa passed away.
Alex joined his mother for the reading of her Last Will and Testament, which had not
been changed. Unfortunately, the liquid assets in the joint account belonged to the
stepfather.
Melmira sued the dealer, the advisor, the lawyer and her stepfather. Through litigation,
she learned the advisor had a copy of the original power of attorney and her mother's
will. However, when the stepfather appeared at the advisor's office with a new and
updated version signed by Teresa, the advisor had no choice but to follow the
instructions, even though recent meetings with Teresa had revealed signs of dementia.
The advisor moved the assets into joint accounts, changed Teresa's risk tolerance to
high, and transferred the assets into futures and options from balanced funds and blue
chip stocks. Approximately 50% of the capital was lost. Alex is concerned that three
years later the litigation against all three continues with no end in sight.
-2With a large segment of the population ageing, such problems are common. Recent
Supreme Court of Canada decisions deal directly with the issue of whether money in a
joint account with a deceased person is owned by the joint account holder or whether it
should be divided among the deceased's beneficiaries. The courts have the difficult task
of examining evidence relating to the intention of the deceased when the assets were
moved into the joint account and, where the evidence is insufficient, apply complex trust
laws to arrive at a conclusion.
Already complex relationships among blood relatives can be even worse in a blended
family, but there are steps advisors can take to ensure clients' wishes are met:
Know your client at every stage of the relationship Fulfilling this regulatory duty will
avoid problems, such as those experienced by Melmira and Teresa. If Teresa's advisor
had spent the necessary time with her, and asked the right questions, he would have
known who her lawyer was and who she had appointed power of attorney. And with
written permission from Teresa, he could have contacted her lawyer when the new
power of attorney was presented, before the account was moved into risky investments.
Be alert for signs of dementia In all decisions affecting the client's account, the client's
interests must be protected. The advisor should advise compliance or legal to ensure
steps taken accord with the advisor and dealer's obligations to the client. The
compliance department should have been alerted when a second power of attorney was
presented to Teresa's advisor and before any investments were changed. While the
effect of a new power of attorney is to revoke all previous ones, in circumstances where
the client may not have had capacity, this may not be the case. But, it is not for the
dealer or advisor to decide which power of attorney rules. If the client has dementia,
such matters must be resolved in court, preferably with the advisor playing a passive
role.