Ethical and practical issues dealing with elderly donors and clients

1. Ethical and practical issues dealing with elderly donors and clients Planned Giving Council of Houston April 24, 2014 Laura Hansen Dean, J.D. Pamela Jones Davidson, J.D. The University of Texas at Austin Davidson Gift Design

2. Definitions and Standards Legal Capacity: The mental ability to understand the nature and effects of one’s acts Testamentary Capacity: The mental condition a person must have when preparing a will in order for the will to be considered valid; this capacity is often described as the ability to recognize the natural objects of one’s bounty and the nature and extent of one’s estate.

3. Lack of Capacity May include: Mental illness Physical illness Disability (although many disabilities do NOT cause lack of capacity Drug and alcohol issues Incapacity may or may not be permanent. Even if a donor does not legally lack capacity, development officers still need to exercise care to avoid exercising undue influence or taking advantage of a vulnerable donor.

4. Definitions and Standards Undue Influence: 1) The unfair or improper persuasion of one person by another who has attained a position of domination or power; consent to a contract, transaction, relationship or conduct is voidable if the consent is obtained through undue influence. 2) In the context of wills, coercion that destroys the testator’s free will and substitutes another’s objectives in its place; when a beneficiary actively procures the execution of a will, a presumption of undue influence is raised, based on the confidential relationship between the influencer and the testator.

5. Undue Influence Generally involves some sort of coercion or control over an individual Removes a person’s free will or causes them to fail to understand the consequences of their actions Legal transactions executed using undue influence are voidable.

6. Signs a Donor May Lack Capacity • Memory lapses • Forgetting past meetings, conversations or correspondence • Confusion about unrelated things, like forgetting other meetings or appointments • Changes in appearance, especially lapses in hygiene • Lack of attention to cleanliness in person or environment • Changes in basic personality • Mood swings or inappropriate behavior

7. Signs of Aging that do NOT Indicate Lack of Capacity • Vision and hearing loss • Physical infirmities such as trouble writing or diminished fine motor skills • Taking more time to process thoughts or ideas • Speaking more slowly • Delayed reflexes • Thoughts may wander more or not be as linear, may spend more time reflecting, repeating thoughts or concepts in conversation

8. The Donor Relationship The charity/development officer’s ongoing relationship with a donor is the single best strategy for assessing a donor’s mental state and avoiding undue influence when a donor is considering making a charitable gift.

9. Strategies for Donor Meetings • Multiple visits provide baseline of “normal behavior” • Active listening • Let the donor do most of the talking • Engage the donor in discussion of specifics of the gift • Careful scheduling of appointments to avoid taxing energy of older donors • How far does donor have to travel? • Public venues can make hearing difficult

10. When You Suspect Issues of Capacity • Immediately suspend all charitable gift discussions! • Involve family or professional advisor where appropriate • Recognize that some issues of capacity may be temporary • Medical conditions such as stroke or illness • Interactions from medication • Even fatigue can impair an elderly person’s judgment temporarily

11. The Role of Donor Stewardship Maintaining reasonable contact with a donor after a gift is made can provide proof of the relationship and evidence that a donor’s gift was reasonable. This does not have to be entirely though personal visits: • Letters • E-mails • Communications and events with planned giving recognition society Too much contact can be as suspicious as too little.

12. The Role of Professional Advisors If a development officer suspects a donor may lack capacity, contacting the donor’s advisor may be the best course of action. • Advisor may be able to confirm or deny that there is a problem. • Confidentiality may prevent advisor from providing information about donor’s condition. • Involving a donor’s advisor in gift planning discussions before a gift is made can provide protection for a charity later.

13. Strategies and Techniques to Avoid Allegations of Undue Influence • Carefully document all contact with donors • Contact reports of visits and phone calls • Copies of e-mails and letters • Disclosure statements for charitable gift annuities are required by law • Affidavits of recognition of disclosures for gifts made during donor’s lifetime • Retained life estates • Remainder interests in homes or farms • Involvement of professional advisor in gift discussions and documentation of gift

14. Case Study #1 – Martha, Age 86 • Loyal annual donor who has already made significant bequest to your charity • Widowed last year, currently in assisted living • Children do not live nearby • Interested in life income vehicles • First visit with Dev. Officer goes well • At follow-up appointment, donor is pleasant and chatty, but with no reference to previous visit, no mention of potential gift or life income plans, conversation wanders

15. Case Study #2 – Alex, Age 43 • Alumni of your university (B.A. and J.D.), divorced with no children • Successful professional, consistent annual giving at leadership level, served on young alumni council • First gift planning visit in restaurant is enjoyable and Alex wants to know more about possible beneficiary designations, but he has several cocktails during lunch • Follow up visit at donor’s home, donor continues to drink throughout visit and shows signs of intoxication • Nothing in records, but colleague tells you that Alex has history of alcoholism and has been sober for many years

16. Case Study #3 – Carl, Age 80 • Carl is an alumnus of your university, married (although you have never met his wife), and a longtime supporter of the music school. A decade ago he gave a very expensive organ to the school and has stayed in close touch with faculty and staff. • Carl has called you several times over a period of months to discuss giving another organ to the music school. • Last week Carl called university administration to complain that you have been harassing him with phone calls and letters. Based on that call, you decide to stop put gift discussions with Carl on hold. • Today Carl calls you again to talk about this potential gift. He makes no reference to his call to the university administration and acts as if everything is fine.

17. Case Study #4 – Edith (Deceased, Age 90) • One of first women graduates of university, husband deceased • 10 years ago they both donated home with retained life estate, worked closely with estate planning atty. • Edith has just passed away, has two grown sons • Son #1 manages successful business, but spotty employment record and significant gambling debts • Son #2 in and out of trouble, alcoholic and drug addict, unemployed and living at home • Edith’s will creates special needs trust for #2, but just enough for basic living expenses • Sons want to sell the house, find out about gift to university, contact a lawyer • Allege they did not know of gift, accuse university of using undue influence and threaten to sue

18. QUESTIONS? For additional questions please contact: Laura Hansen Dean lhdean@austin.utexas.edu Pamela Jones Davidson pjdavidson@giftplanners.com

19. THANK YOU Marcia Inger Navrátil The University of Texas at Austin Planned Giving Council of Houston December 6, 2012