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Planning ahead for a client’s mental or physical incapacity isn’t always possible.

Here’s how to protect yourself.

Don’t break the rules

When a client’s judgment appears to be failing, you still have to obtain her signature before making portfolio changes. And though that client might need extra support, you can’t disclose her financial details to family members if she hasn’t:

  • added family members to her account;
  • signed a release to give information to a family member in case of incapacity; or
  • appointed someone as financial PoA.

Advisors have to honour client confidentiality and privacy rules. And this doesn’t change when someone’s completely incapacitated, says Tania Brennae, a branch manager at IPC Investment Corporation in Ottawa. If that client doesn’t plan ahead, all accounts will be inaccessible.

Read: Name trustees for disabled clients

When clients can still communicate

If a client hasn’t been declared legally incapacitated, Brennae meets him individually to ask who he’d appoint joint tenant with rights to survivorship on current accounts, as executor and as PoA for financial and personal care.

She has the client write down contact details, birthdays and occupations of people who will help manage his money, and has the client sign that document. Ideally, there would be a witness.

Brennae follows up with a meeting to inform contacts and her client of the responsibilities of PoAs, for example, and tells the family to visit a lawyer. Then, once PoAs have been notarized and delivered to her, she asks PoAs and joint tenants to complete new account and KYC forms. She also asks for two pieces of ID and, at times, a void cheque. The process takes two to six weeks.

Read: Most don’t do enough estate planning

Warning

The PoA document may list main and
contingent attorneys. speak with the primary contact so that people cannot contest your financial plans.

When clients can’t communicate

In this case, skip the one-on-one meeting. With no consent form or PoA, you can’t share any information—even if family members know the client’s account information. Instead, refer the family to a lawyer who can draw up the PoA and offer estate-planning resources. Arthur Fish, a partner at BLG in Toronto, notes, “advisors can’t insert themselves into the legal process or look like they’re taking sides against their clients.”

Once a PoA’s appointed, or the province has appointed a guardian, the accounts would be accessible and you can make changes.

In an emergency, such as a client running out of money to pay medical or other recurring costs, Brennae has helped deposit clients’ investment proceeds (e.g., dividend and GIC maturity cheques) into their bank accounts by sending letters of direction to their institutions. This prevents a client from bouncing a cheque.

Read: 6 tips for estate planning success

When clients refuse to plan for incapacity

Brennae suggests reducing portfolio risk as someone’s medical condition worsens. She may ask clients to place some investments in cash so they have access to funds during emergencies. But she still needs to get their signatures.

You can also send the client letters detailing the advice you’ve tried to give. Regardless, it’s not appropriate to fire the client, since they won’t understand why you no longer wish to work with them. Ask your branch manager and compliance officer about next steps.

PoA tips

  1. General property PoAs can only manage someone’s funds until that person is incapacitated. To have power afterward, they need to be a continuing PoA.
  2. When PoAs sign documents for clients, they must sign as “[their name], property PoA for [client’s name].”
  3. Springing PoAs only come into effect after someone is deemed fully incapacitated. Arthur Fish of BLG says these appointments are rare because they involve government assessments.
  4. A PoA costs between $50 and $100 to draw up if done as part of a will. But if the family has to go to court, it can cost more than $10,000.

Katie Keir is assistant editor of Advisor Group.

Originally published in Advisor's Edge

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