This column first appeared in the San Antonio Express News on June 5, 2017.
Dear Mr. Premack: My mother is in rehab after a fall. I need to be able to pay her bills and handle some of her financial transactions for a few weeks. I’ve been told that I should get a Durable Power of Attorney, but mom never signed one before. She is clear-headed most of the time, but when she gets tired she gets confused. Is it too late for me to take get her to sign legal documents? – C. R.
It may not be too late. However, it is certainly very bad timing for her to be signing a Durable Power of Attorney because she must have legal capacity. She must have the same capacity a person needs when entering into contracts. For that reason, legal documents like this should be in place before a crisis strikes, but preparation means thinking beyond tomorrow, a task which many people place at a low priority. Readers: don’t let this happen to you! Make binding legal plans while you are healthy and fully capable.
Just being older does not inherently cause mental incapacity. Just being ill or injured does not inherently cause mental incapacity. Still, both age and infirmity are conditions that raise legal uncertainties. Actually, Texas law does not allow us to presume incapacity only because of age. Still, anyone under stress or with an infirmity should be very careful to show that they understand the transaction into which they are entering.
In the Fletcher case (heard before the Supreme Court of Texas) a stockbroker assisted an elderly lady (Cairns) in transferring several hundred thousand dollars of stock to her nephew. The broker had never met Cairns before, and went to her house so Cairns could sign the transfers. A year later, Cairn’s niece initiated a Guardianship, and was successful in showing Cairns was incapacitated during the hearing. Now her aunt’s Guardian, the niece sued the stockbroker.
The jury thought that the broker’s actions were negligent and/or a breach of fiduciary duty, and that the broker had used “fraudulent, manipulative and/or deceptive” actions. However, the jury did not find that Cairns was incapacitated at the time she worked with the broker.
On appeal, the broker claimed his only duty to Cairns was to faithfully carry out her instructions. The Guardian claimed the stockbroker should know, because of Cairns’ age alone, that she would not understand the transaction.
The Appeals Court acknowledged that there is a real risk an elderly person may not understand a complex financial transaction. It chose, however, to balance that risk against the need to provide services to everyone in the same manner, regardless of age. As such, the Appeals Court decided there is no responsibility on the part of service providers to determine the competence of their clients. The Court stated that, “service providers cannot be expected to have any expertise in assessing mental capacity… A service provider should not be put to choosing between refusing to assist an elderly person with legitimate transactions and incurring liability for providing such assistance when the provider lacks any qualification for determining competence”.
So, is a lawyer a “provider (who) lacks any qualification for determining competence”? That has never been decided by a court, but lawyers who prepare estate plans and Durable Powers of Attorney could be held to a higher standard: that of a trained professional who has the qualifications to make judgements about a client’s capacity. As such, a prudent attorney will be very cautious in preparing legal documents without a personal assessment of the client’s capacity, which is influenced by age and infirmity.
Paul Premack is a Certified Elder Law Attorney with offices in San Antonio and Seattle, handling Wills and Trusts, Probate, and Business Entity issues. View past legal columns or submit free questions on legal issues via www.TexasEstateandProbate.com or www.Premack.com.