A familiar scenario: Old Aunt Rose is a widow, and her two children live in L.A. and don’t seem to care about her. Aunt Rose is having more and more trouble with the business of daily life—writing checks to pay her bills, driving to the doctor’s office, driving to the grocery store, cleaning the house, doing her laundry.
As Aunt Rose is in decline she turns to the nephew who lives locally for help more and more often, and Nephew feels obliged to help his deceased mother’s sister. Aunt Rose contacts her lawyer to draft a general durable power of attorney, and a health care power of attorney, naming Nephew as her agent so she and Nephew can be sure that Nephew has all the legal paperwork to help Aunt. Aunt Rose realizes this is an imposition, and so she pays Nephew for the time Nephew spends helping her.
As Aunt Rose continues to decline, she can no longer write checks and so she tells Nephew to use his power of attorney to write checks to himself to pay for his time. Perhaps Aunt Rose makes gifts of personal and household items to Nephew in appreciation for the help he gives her.
Aunt Rose gives oral instructions to Nephew to hire people to repair and update things around the house and gives Nephew her credit card to buy gas for the car and to shop for her. Aunt Rose has her Nephew make all her medical appointments, and Nephew takes Aunt Rose to her appointments and takes charge of Aunt Rose’s medical care. All of this, of course, is oral, and Nephew does not make any contemporaneous note about any of Aunt Rose’s instructions.
One fine day the cousins arrive from L.A. and are shocked to see mom’s (Aunt Rose’s) terribly declined state. They are further shocked to learn that mom is worth considerably more than they ever imagined, and that Nephew, interloper that he is, has taken charge of so much of mom’s life.
They take mom to a different lawyer and have the powers of attorney revoked and new ones drawn naming themselves as agents. They inform Nephew that he is not welcome anymore to see Aunt Rose, and they threaten legal action for elder abuse, theft, deception, etc. Nephew is shell-shocked—all he was doing was helping his deceased mother’s sister!
Is Nephew in trouble? The answer is that he may be. The reason involves an area of law that receives very little attention but can have huge consequences for everyday people who are simply trying to help the Aunt Rose in their lives. This is called “fiduciary law.” Here are some tips for folks who find themselves being sucked into the position of Nephew:
- DON’T DO IT! I give this advice, with great emphasis, to my clients who appear with an Aunt Rose-Nephew story. In my experience, the Nephews of the world universally ignore this advice.
- If “Nephew” will not listen to my advice, then here are a few things Nephew should do:
- Inform “cousins” early and often what is going on. A weekly written report is a good idea. The report cannot be too detailed, and should list every single event, transaction, check written, deposit made, errand run, etc. in which Nephew is involved;
- Nephew should get the written consent of cousins to be appointed Aunt Rose’s agent under powers of attorney;
- Nephew should keep a set of records of Nephew’s activities on behalf of Aunt Rose (including a narrative account, a check register, other appropriate financial records) at Aunt Rose’s house and also at Nephew’s house;
- Nephew should have Aunt Rose approve (in writing, e.g., by signing) Nephew’s weekly reports and records kept by Nephew on at least a monthly basis;
- Nephew should have Aunt Rose acknowledge (in writing) each time Aunt Rose has Nephew use a credit or debit card;
- Nephew should NEVER write a check to himself from Aunt Rose’s account, should NEVER write a check to “Cash”, should never use Aunt Rose’s ATM card to withdraw cash, and should never use petty cash (all of these can be construed as a breach of Nephew’s fiduciary duties to Aunt Rose, and will be used by cousins to argue that Nephew has stolen from Aunt Rose);
- Should obtain, and keep, receipts for any money whatsoever spent at Rose’s instruction or for her benefit;
- Should never accept any gift from Aunt Rose unless a written document is signed by Aunt Rose and a disinterested witness noting the gift.
This list is not exhaustive. There are a few cardinal rules of fiduciary law: do not self-deal. Do not deal in cash. Document everything. Have the “principal” (Aunt Rose in our example) sign documents ratifying everything the “agent” (Nephew in our example) does. Keep those who are the “natural objects of the Principal’s bounty” (“cousins” in our example) informed of everything that happens.
Account for all the money. Record all activities. Have the Principal give written approval to all activities. Provide detailed, regular, and timely information to all interested parties about finances and activities.
Before taking on the tasks of caring for your “Aunt Rose” you should seek the advice of a lawyer versed in fiduciary law. Our Cortland lawyer has 34 years of experience in fiduciary law and is available for consultation by calling and making an appointment.