How to advise elderly trustees

This article discusses the issues elderly trustees face when undertaking substantial trust responsibilities.

• How should lawyers advise such clients?
• How should lawyers advise the beneficiaries where there is an elderly trustee who appears not to discharge the duties of office?

These are two sides to the same coin. The situation arises when elderly trustees appear to be acting outside their comfort zone. When lawyers practice in the field of elder law, they often encounter such cases. Some of the actors – trustees and beneficiaries – may be incapable. They are at risk of causing or suffering abuse, whether intentional or not.

The standard of care for a trustee’s capacity

Provincial trust legislation does not directly address the category of “elderly people.” Each province does define capacity, although not in terms of trust activities. Capacity to manage financial affairs is a higher standard than capacity to make will or power of attorney.^Footnote1 There is a general obligation of trustees to discharge their duties competently and honestly as part of their fiduciary duty.

In management of property, case law provides for an “ordinary person” standard, rather than an elevated, professional standard.^Footnote2 I noted in an earlier article that there is a general exemption from liability for losses incurred where the trustee acted reasonably. Even so, case law imposes liability in cases of wilful blindness, conflict of interest and failure to act.

Lawyers should be alert to the difference between the property of the person with diminished capacity and the property of others. Trustees must manage the property of others prudently, which is a higher standard than managing their own affairs.

How can the lawyer advise the elderly trustee?

Age is not a standard, except in the case of minors. Lawyers should never judge a book by its cover, whether that ‘cover” is the fact of a client’s age or appearance of frailty. People can be effective trustees at almost any age. Are you going to be the lawyer who tells Warren Buffett (born in 1930) that he is too old to manage his billions? Or his business partner, Charlie Munger (born in 1924)? Or those of their many loyal shareholders?

The first agenda item should be to discuss capacity. Lawyers make excellent capacity assessors, and are obliged to undertake this task with respect to every client. Consider the commentary of the Law Society of Upper Canada:

A lawyer and client relationship presupposes that the client has the requisite mental ability to make decisions about their legal affairs and to give the lawyer instructions. A client’s ability to make decisions, however, depends on such factors as their age, intelligence, experiences, and mental and physical health, and on the advice, guidance, and support of others. Further, a client’s ability to make decisions may change, for better or worse, over time.^Footnote3

The standard for capacity to make decisions for others is necessarily higher than the capacity to manage for themselves. The prudence standard is only one of the concepts in play. Trustees act in a fiduciary capacity, which prohibits conflicts and may require proactive decision-making. Elderly people with diminished capacity may act whimsically. They may simply refuse to act in face of pressure from events or other people. This is not the case for trustees, and their greater standard for capacity reflects tis difference.

Lawyers often pass this responsibility on to medical doctors and psychologists. As yourself these questions:

• Who is better able to apply the legal tests of capacity when dealing with legal, trust and business matters?
• Who is best suited to ask a client to describe the scope of estate property and to explain certain business or property decisions?
• Who is best suited to consider the interests of the beneficiaries relative to the trust and to the trustees?

The reason why a client cannot pass a legal capacity test may be medical in nature. Whether the client is deemed capable for a specific task is a judgment call that the lawyer can be well situated to make.

Lawyers, especially general practitioners, often encounter capacity issues. These are not restricted to elderly clients, but age and apparent frailty can be red flags. Lawyers should always be alert for signs of diminished capacity. Where the client is acting on behalf of others, the threshold for concern becomes lower. Trustee clients with diminished capacity may act in a manner that causes harm to property and to relationships.

To act or not to act

 Part of the lawyer’s advice should deal with whether the client-trustee assumes (or continues) the responsibilities of the will, trust or power of attorney. Remember that an individual does not have to accept the trust obligations. Consider these questions:

• What duties will the client take on? Some or all may be too difficult, take too much effort, last too long, or trigger disputes that the client should not face.
• How can the trustee delegate some of the more onerous tasks? Trustees may delegate many of their management duties to professionals, albeit at risk of reduction in their compensation.
• Can the trustee manage others effectively? Perhaps the person does not communicate well or is confined to quarters or spends winters abroad. Florida, Arizona and California have excellent phone and email systems. Some remote destinations do not. Consider that some elderly people have physical restrictions (such as hearing, eyesight and mobility) that obstruct the use of such media.
• What is best for the beneficiaries? A chorus of support or opposition from the beneficiaries could suggest the answer to this. If the beneficiaries are minors or far away or themselves have diminished capacity, the lawyer may have to make the judgment call. In cases of doubt, there is always access to the motion for directions to the local superior court.
• What is in the trustee’s best interest? Consider that the risk of harm, possible liability, and emotional stress may outweigh an elderly trustee’s pride, sense of responsibility and possible compensation.

What about beneficiaries of elderly trustees?

Lawyers may be called on to advise people who deal with elderly trustees. There may be complains that the trustee is taking too long, shows indecision, takes unreasonable decisions or “just doesn’t get it.” What should the lawyer do about this?

On application, courts can replace trustees. This can be a drastic measure that is not suitable for the circumstances. It should be the last resort. The lawyer should use sound judgment to approach the elderly trustee. Does the trustee have legal counsel? If so, the trustee’s lawyer can deal with the sensitive issues.

It is the self-represented elderly trustee that presents the greatest problems. Here are some possible solutions:

• Meetings in the lawyer’s office should be witnessed by other professionals. Accessiblity issues (such as ramps and washrooms) may be present.
• Recording such sessions is an option (with consent and full disclosure).
• Document all discussions, especially commitments made by the trustee.
• The medium of communication depends on the person. Some elderly people are uncomfortable with (or have no access to) email. Some prefer one method of communication over another, such as ordinary mail, meetings or phone calls.
• Some may want a relative to receive copies of communications, or be present for meetings or calls.
• Consider whether a mediator should sit in to serve both as a witness and as guide or counsellor. There are several excellent mediators who are experienced in both elder law and estates law.
• Language is usually the lawyer’s best weapon. Lawyers have to tailor their spoken and written language to the elderly trustee. Lawyers should be careful with the use of technical words, confusing sentence structure, loud or soft voices (in spoken language). Generally, short sentences and simple language works for all clients. Lawyers should make sure their language and tone are appropriate for their audience.

John Hollander is a litigator who currently practises with the estates law and financial loss groups of McBride Bond Christian LLP in Ottawa.