Thursday, November 10, 2011

Protecting Older Investors

AARP’s Public Policy Institute has just issued a report entitled “Protecting Older Investors - The Challenge of Diminished Capacity.”

“As the Baby Boom Generation enters retirement, the incidence of Alzheimer’s disease and other dementias will grow. Individuals in this generation and beyond will be largely responsible for their own retirement security—yet their ability to manage investments may decline due to diminished financial capacity. This report shares original research findings about financial services industry practices and protocols to address diminished capacity and makes recommendations for stakeholders and policy makers.”

Among the recommendations in the report is the following:

Enact or strengthen legislation to promote acceptance of powers of attorney and prevent, detect, and redress power of attorney abuse. When an investor loses capacity to make financial decisions, the best remedy for all concerned is for a trusted individual to step into the shoes of the incapacitated person and handle the account in accordance with the principal’s preferences and interests. States should ensure that their power of attorney laws enhance autonomy by facilitating appointment of an agent and the acceptance of POA documents by third parties such as financial services firms. At the same time, these laws should safeguard the principal against power of attorney abuse. The 2006 Uniform Power of Attorney Act (UPOAA) includes provisions to meet both of these goals. Ten states and the U.S. Virgin Islands had enacted the UPOAA by mid-2011, but most other state laws fall short at least in part. Cognitively impaired investors will be better served if states strengthen provisions for acceptance of POAs and to address POA abuse, either by adopting the UPOAA or drafting their own measures that are at least as protective.”

Here is a link to the Report:

The Pennsylvania Association of Elder Law Attorneys (PAELA) has been working hard to encourage adoption of legislation that would update Pennsylvania’s POA laws in a manner consistent with the above Report’s Recommendation.  PAELA has been seeking legislative adoption of provisions based on the UPOAA in regard to acceptance of documents by third parties, the authority of an agent to make transfers of the principal's assets, and related protections of a principal against abuse. 

Current House Bill 1905 may offer a platform which, when amended appropriately, can facilitate the acceptance of POA documents by banks and other third parties, while preserving the autonomy of the principal and protecting the principal from abuse. But we are not quite there yet.  

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