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The Financial Advisor and Client Incapacity:Legal, Medical and Ethical Responsibilities to Clients With Potential Mental Capacity Issues

Panelists and Speakers

▪ Dr. Steven P. Wengel, M.D.-- Assistant Vice

Chancellor for Campus Wellness for UNO and UNMC.

▪ Monte L. Schatz-- Attorney, Vandenack Weaver LLC

▪ Keith Deras—Financial Advisor, Sr. Vice President

Harry A. Koch and Co.

▪ Thomas Van Robays—Trust Officer, Sr. Vice

President, First Trust Company, LLC.

Financial Planners Association

Quarry Oaks Country Club

May 16, 2019

▪ Dr. Wengel will discuss medical capacity.

▪ Monte will focus on legal capacity and the

similarities with and distinctions from medical

incapacity.

▪ Keith will share his client experience with a

client with mental capacity issues. He will

also share corporate and industry ethics

issues and capacity

▪ Tom will share post incapacity diagnosis

financial options and how those remedies are

administered to the incapacitated client.

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Panelist Biographies

Dr. Steven Wengel

Dr. Wengel is from Omaha, and has been a practicing

psychiatrist since 1991, specializing in geriatric psychiatry.

He treats patients with a broad range of psychiatric

conditions, including dementia, depression, and anxiety

disorders. He is currently the director of the UNMC Division

of Geriatric Psychiatry.

Dr. Wengel previously served as the Chair of the UNMC

Department of Psychiatry from 2004 to 2018, when he

became UNO and UNMC’s first Assistant Vice Chancellor for

Campus Wellness. He has a longstanding interest in the role

of nonpharmacologic interventions for reducing stress and

anxiety. Dr .Wengel has employed meditation techniques in

his personal, clinical, and academic practices for many

years, and has worked with the University of Nebraska to

create innovative academic and clinical programs in stress

reduction. In his current role as the wellness champion for

UNMC, he oversees academic programs reaching out to

faculty and trainees in all disciplines. His goal is to reduce

stress and burnout in healthcare students and staff, as well

as to reach out to other populations in the region and the

state.

Monte Schatz

Monte is a member in the law firm of Vandenack Weaver

LLC. His expertise includes trust administration, probate,

estate planning, tax, and business law. Schatz’s client

service is strengthened by a 30-year work history that

includes key executive positions with national and regional

bank corporations. Monte assists individuals and

businesses with wealth strategies, trusts and estates, asset

protection, tax planning, tax preparation and tax

controversies.

Monte earned his law degree from the University of South

Dakota. In addition, he received a Masters of Taxation from

the University of Tulsa and he earned a Bachelor’s Degree

with high honors in Economics and Political Science from

South Dakota State University. Monte is a member of the

Nebraska, Iowa, South Dakota and Omaha Bar

Associations. He is past President of the Omaha Estate

Planning Council and Metropolitan Community College

Foundation.

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Keith Deras

Keith is a Senior Vice President at The Harry

A. Koch Company.

Keith has over 30 years of experience in the

financial services industry. His credentials

include ChFC® CLTC® and CLU®.

Keith is a life long resident of Omaha and is

very active member in the Omaha community

serving on many community, philanthropic

and professional boards.

Thomas Van Robays

Tom is a career trust officer with over 25 years

experience in estate planning, financial services

and trust services. Prior to joining First Trust

Company, Tom served as president of Dakota

Guardian Trust Company. Earlier, he managed

the trust department of Great Western Bank in

Omaha.

Tom holds a B.S. degree from South Dakota

State University and a J.D. degree from

Creighton University School of Law. He serves

on the executive board of the Omaha Estate

Planning Council and is also involved in several

charitable organizations and foundations.

Panelist Biographies

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Keith Deras: Two Great Clients!

Husband & Wife / In There Mid-Eighties / Have

Worked with them over 30 years

Very Loyal / GREAT Savers / Accumulated over

$1,000,000

He worked outside the Home until about 4 years ago

with a very modest Income

Required Minimum Distributions from IRA were NOT

needed until he retired / always saved in a Savings

Account

Savings Account / Emergency Fund had accumulated

over $ 100,000

They Simply Didn’t spend any money / Hated Paying

Taxes!

Until 2 Years Ago / They had a daughter listed as a

Beneficiary on their Savings Account

Phone Call / Text from the Daughter / HIPPA

Red Flags!! Worried about his bills and not having

enough money / Savings Gone!

Met with the Clients several times over a few months

always needing a few more dollars

Inconsistent Transactions / Never needed money for

existing bills, Life Insurance, Long Term Care, Home

Owners Insurance, Med Supp Policies. Cash

Advances & Loans

Finally admitted he had potentially won a

Sweepstakes! Both Anxiety and Excitement.

Son / Daughter asking for Help! Deceit & Cover UP /

Connected them with Susan Spahn and I reached out

to my Broker Dealer / Insurance Company

Emergency Conservatorship Husband Only / First

Nebraska Trust / Jeff Arnold as Conservator /

Temporary Restrictions on Accounts / renew after 3

months

Over a 1 Year process for approval of a Permanent

Conservator Arrangement / Restrictions

Current Situation both have Permanent

Conservatorships

Couple Live Alone. AdultChildren looking into possible

alternatives NOW !

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Psychiatric aspects of

decision-making

Steve Wengel, MD

UNMC Geriatric Psychiatry

UNO/UNMC Assistant Vice Chancellor for Campus Wellness

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Overview

1. Case presentation

2. Elements of decision-making

1. Medical

2. Financial

3. Clinical nuances

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Frank Jones

▪ 75-year-old retired corporate HR director

▪ Widower; lives alone

▪ Multiple chronic health problems

▪ Type 2 diabetes

▪ Hypertension

▪ Parkinson’s disease

▪ Macular degeneration

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Frank Jones

▪ Estranged from his daughter

▪ Niece from San Diego providing care

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What goes into medical decision-making?

▪ Are you aware there is a decision to be made?

▪ Do you know what your condition (including diagnosis and

severity) is?

▪ What is the recommended course of treatment?

▪ What other options do you have? What are the risks and

benefits of these various options?

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Principles of medical ethics

▪ Autonomy

▪ Beneficence

▪ Non-maleficence

▪ Justice

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Testamentary capacity from Banks v. Goodfellow

▪ Understanding of the nature of a will

▪ Knowledge of the nature, extent of one’s assets

▪ Knowledge of whom would reasonably claim to be beneficiaries

▪ Awareness of impact of the distribution of one’s assets

▪ Freedom from delusions which influence disposition of assets

▪ Ability to clearly and consistently express wishes

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Undue influence

▪ Suspicious circumstances:

▪ Radical change from prior expressed wishes

▪ Multiple changes in a will

▪ Evidence of concurrent mental or neurological disorder that may

affect cognition, judgment, impulsivity, or reality testing

▪ Dependence on others for daily needs (vulnerability)

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Possible indications ofundue influence

▪ Confidential relationship between testator and influencer,

creating opportunity to control testamentary act

▪ Unnatural provisions in the will

▪ With benefit to the influencer/beneficiary

▪ Influencer actively participated in the will creation/change

▪ Testator isolated from friends, family

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Nuances

▪ Capacity is a “sliding scale” based on complexity of the decision

to be made

▪ Much lower standard to consent to drawing blood versus a cardiac

bypass

▪ Capacity is context-dependent

▪ Decision-making for one aspect may be better than for other

aspects

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Nuances

▪ Capacity may change dramatically from hour to hour, especially

in delirious individuals

▪ Check, recheck over time

▪ Capacity may change depending on the context

▪ Who else is in the room?

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Nuances

▪ Some forms of dementia are subtle at first

▪ Frontotemporal dementia affects personality and judgment but not

memory in early stages

▪ May produce impulsive decision-making

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Nuances

▪ Merely having a diagnosis of dementia does not automatically

mean you lack capacity to make decisions

▪ Example: driving safety

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Nuances

▪ Impairment ≠ incapacity/incompetence

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Executive functioning

▪ Predominately frontal lobe functions

▪ Organizing

▪ Sequencing

▪ Planning

▪ Abstracting

▪ Cognitive flexibility

▪ Problem-solving

▪ Self monitoring

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American Family“Teen Safe” Program

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Executive Dysfunction: a history lesson

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▪ History of an elusive disorder

▪ “New disease entity”: 1967

▪ “A new clinical syndrome”: 1993

▪ “Executive Dysfunction Syndrome” : Lyketsos

▪ Russian expression:

▪ “A head without the czar inside.”

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Frontotemporal Dementia

A neurodegenerative disorder affecting the frontal and/or

temporal lobes of the brain that presents with predominantly

behavioral or language disturbance, with relative preservation of

memory and spatial skills early in the illness

The behavioral disturbance is due to executive dysfunction

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https://www.nextavenue.org/ftd-dementia-

misdiagnosed/

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Unique things about FTD

▪ Leads to long period of diagnostic uncertainty

▪ May be misdiagnosed as depression or other

psychiatric problem

▪ Or attributed to willful, deliberate misbehavior

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Specific personality changes seen in FTD

• Stereotyped obsessional behavior: hoarding,

exaggerated interest in gambling, puzzles, etc.

• Appetite changes: preference for same meal

repeatedly, “sweet tooth”

• Sexual behavior: libido increase or decrease,

unusual sexual interests 27

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Specific personality changes seen in FTD

1. Disinhibition: uncharacteristic, often crude,

comments, jokes, gestures

2. Lack of insight: inability to recognize their own

behavioral changes

3. Lack of empathy: inability to “read” or care about the

emotions of others

1. Similar to autism, Asberger’s syndrome28

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Executive function testing

• The Awareness of Social Interference Test (TASIT)

• Video vignettes

• Patients with executive dysfunction had marked

impairment in recognizing sarcasm and negative

emotion

• Differentiates them from normal controls and AD

patients

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Clock Drawing Test—2:45

Normal

Moderate

Cognitive

Impairment

Mild

Cognitive

Impairment

Severe

Cognitive

Impairment

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Legal Overview of Capacity: Interrelationship Between Medical and Legal Capacity

Legal Incapacity

▪ In broad and colloquial terms, legal incapacity is

determined and is a function of the results from

medical capacity testing.

▪ The broad legal definition of mental incapacity is: A

person unable to make rational decisions or engage in

responsible actions. Mental and/or physical

deficiency, disability, illness, or drug use causing

temporary or permanent impairment.

▪ The legal definition of mental incapacity will vary

significantly from this broad definition depending upon

the jurisdiction and the type of situation or transaction

where legal capacity must be defined.

▪ Neb. Rev. Stat. §30-2601 (1) Incapacitated person

means any person who is impaired by reason of

mental illness, mental deficiency, physical illness or

disability, chronic use of drugs, chronic intoxication, or

other cause (except minority) to the extent that the

person lacks sufficient understanding or capacity to

make or communicate responsible decisions

concerning himself or herself;

Medical Incapacity

▪ An absence of mental capacity.

▪ An inability through mental illness or

significant cognitive impairment to carry on

the everyday affairs of life or to care for

one's person or property with reasonable

discretion*

*Merriam Webster Medical Dictionary

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Legal Overview of Capacity:Four Components to Derived From Medical

Testing to Assess Legal Incapacity

1. Medical Causal Component.

2. Medical Cognitive Component.

3. Medical Behavioral Functioning.

4. Medical Necessity or Interactive Component.

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Legal Capacity Relationship to Medical Testing:Medical Causal Component

Medical Causal Component

▪ What is the diagnosis that is causing the

incapacity?

▪ The causal component is the diagnosis that is

the cause of the incapacity—for example,

Alzheimer’s disease or schizophrenia.

Legal Relationship

▪ The relationship of this component corresponds

to the disabling condition in reviewing a

guardianship or conservatorship.

▪ “Will the alleged incapacitated person get better

or get worse?” The clinical diagnosis may answer

why a specific client is frequently changing his or

her mind.

▪ The attorney and mental health professional

should work toward answering these questions

as to whether the incapacity is in a state of flux or

is likely to be a permanent condition

necessitating a surrogate decision maker.

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Legal Capacity Relationship to Medical Testing:Medical Cognitive Component

Medical Cognitive Component

▪ What are the patient’s cognitive strengths and

weaknesses?

▪ Are the cognitive weaknesses caused by a

cognitive disorder, such as dementia, or a

psychiatric disorder such as schizophrenia?

Legal Relationship

▪ Cognitive Functioning components: Attention,

memory, understanding or expressing information,

reasoning, organizing, planning or other areas.

Executive Functions

▪ Does the individual have the ability to “receive and

evaluate information or make or communicate

decisions” or “sufficient understanding or capacity

to make/communicate decisions”?

▪ The mental health professional and the lawyer

should work together to determine if the

patient/client cognitive functioning has diminished

to the point the individual is no longer capable of

processing information to make cognitive

decisions.

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Legal Capacity Relationship to Medical Testing:Medical Behavioral Functioning

Medical Behavioral Functioning

▪ Many traditional clinical assessments end once

the person’s diagnosis and cognition are

assessed but it is important to have specific,

direct information about the individual’s mental

strengths and weaknesses for the capacity in

question.

▪ Specific examples of the types of transactions

appropriate clinical assessments can help

address include, but are not limited to, making a

will, making a medical decision, making

decisions about living at home, driving, or

various other activities of daily living, both

financial and nonfinancial

Legal Relationship

▪ This functional element of capacity is found in

guardianship and conservatorship law in clauses

that describe the need to adequately manage

one’s person or property. The element is also

found in all types of transaction-specific legal

standards that characterize the specific skills or

abilities necessary for the transaction at hand.

▪ The assessment of behavior by the lawyer

includes review of the functional assessments

prepared by the mental health professional in

conjunction with the medical and legal

professionals’ observations of the client as well as

reports from family members.

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Legal Capacity Relationship to Medical Testing:Medical Necessity or Interactive Component

Medical Necessity or Interactive

Component

▪ The mental health professional assesses the resources

available to the individual, risks of the specific situation,

and the person’s values and preferences.

▪ The outcome of a clinical evaluation of capacity is not

merely a diagnostic statement or report of test results,

but an integration of the client’s life and situation.

Legal Relationship

▪ The interactive component is clearly recognized

in legal concepts of capacity, particularly in

statutory pre-conditions for guardianship or

conservatorship that requires a finding that a

surrogate decision making decision is the least

restrictive alternative.

▪ The interactive component is assessed through

direct questioning about the situation, the

person’s resources, history, values, preferences,

and knowledge of the services and prior clinical

interventions.

▪ Examples of prior interventions encompass

medical and non medical history such as bill

paying services or treatment for or psychiatric

symptoms.

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Legal Overview of Capacity: Standards of Capacityfor Common Legal Transactions

Legal Capacity Type Requisite Capacity

Testamentary Capacity The testator at the time of executing a will must have

capacity to know the natural objects of his or her bounty.

Donative or Gift Capacity Capacity to make a gift has been defined by courts to

require an understanding of the nature and purpose of

the gift.

Contractual Capacity Courts generally assess the party’s ability to understand

the nature and effect of the act and the business being

transacted.

Capacity to Convey Real Estate A grantor typically must be able to understand the nature

and effect of the act at the time the conveyance is made.

Capacity to Execute a Durable Power

of Attorney

The standard of capacity for creating a power of attorney

has traditionally been based on the capacity to contract.

However, some courts have also held that the standard is

similar to that for making a will.

Decisional Capacity in Health Care

Directive

The individual’s ability to understand the significant

benefits, risks, and alternatives to proposed health care

and to make and communicate a health-care decision.

Capacity to Mediate The mediator should ascertain that a party understands

the nature of the mediation process, who the parties are,

the role of the mediator, the parties’ relationship to the

mediator, and the issues at hand.

Legal capacity determinations encompasses a fact driven analysis.

Particularly in legally contested cases.

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Two Good Resources Explaining Interaction and Relationship Between Medical and Legal Capacity

• Assessment of Older Adults with

Diminished Capacity: A Handbook for

Psychologists ©American Bar Association Commission

on Law and Aging – American Psychological Association

• ABA Comm. on L. & Aging & Am. Psychological Assn.,

Assessment of Older Adults with Diminished Capacity: A

Handbook for Lawyers (2005)

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Proposed Legislation from Nebraska Unicameral: LB 247:The Advance Mental Health Care Directives Act

▪ Intent is to provide mechanism for informed consent by surrogate decision maker during episodic mental health

situations when individual loses capacity to make decisions for mental health treatment for themselves. Bill

compares this to end of life decision making for people no longer able to make decisions for themselves.

▪ Capacity under L.B. 247 means having both (a) the ability to understand and appreciate the nature and

consequences of mental health care decisions, including the benefits and risks of each, and alternatives to any

proposed mental health treatment, and to reach an informed decision, and (b) the ability to communicate in

any manner such mental health care decision.

▪ (1) An advance mental health care directive shall: (c) State whether the principal wishes to be able to revoke

the directive at any time or whether the directive remains irrevocable during periods of incapacity. Failure to

clarify whether the directive is revocable does not render it unenforceable. If the directive fails to state whether

it is revocable, the principal may revoke it at any time;

▪ (2) To be irrevocable, the directive shall state that the directive remains irrevocable during periods of incapacity.

▪ (7) When an incapacitated principal refuses inpatient mental health treatment or psychotropic medication, the

principal's agent only has the authority to consent to such treatments for the principal if the principal's

irrevocable directive expressly authorizes the agent to consent to the applicable treatment.

▪ Sec. 12. (1) An advance mental health care directive, including an irrevocable advance mental health care

directive, shall remain in effect until it expires according to its terms, until it is revoked by the principal, or until

two years after the date it is signed by the principal, whichever is the earlier.

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Proposed Legislation from Nebraska Unicameral: LB 247:The Advance Mental Health Care Directives Act

▪ (2) A principal may revoke a directive even if the principal is incapacitated unless the principal has made the

directive irrevocable during periods of incapacity.

▪ Two of the following professionals shall, within twenty-four hours after the principal's arrival at the facility,

evaluate the principal to determine whether the principal has capacity and shall document in the principal's

medical record a summary of findings, evaluations, and recommendations: A licensed psychologist or a

physician, physician assistant, advanced practice registered nurse, or other mental health care professional

licensed to diagnose illnesses and prescribe drugs; and If the evaluating mental health professionals determine

the principal lacks capacity, the principal shall be admitted into the inpatient treatment facility pursuant to the

principal's directive.

▪ After thirty-five days following the date of admission, if the principal has not regained capacity or has regained

capacity but refuses to consent to remain for additional treatment, the facility shall release the principal during

daylight hours unless the principal is detained pursuant to involuntary commitment standards. A principal may

specify a shorter amount of time than thirty-five days in the advance mental health care directive if the principal

consents to being hospitalized in the directive.

▪ (2) No health care professional acting or declining to act in reliance upon the decision made by a person whom

the health care professional in good faith believes is the agent pursuant to an advance mental health care

directive shall be subject to criminal prosecution, civil liability, or professional disciplinary action.

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Pre and Post Incapacity Remedies, Administration and Care of Incapacitated Individuals

▪ Guardianships

▪ Conservatorships

▪ Durable Financial Power of Attorneys

▪ Health Care Power of Attorneys

▪ Living Wills

▪ Living Trusts

▪ Other Resources