James Sullivan
Take precautions to avoid family disputes in elder planning

Improper planning can inadvertently land CPAs in the middle of a family feud.

August 19, 2013
By James Sullivan, CPA/PFS

A financial planning engagement for a chronically ill client has an added dimension that can cause significant problems if not managed correctly by the CPA planner: the ongoing involvement in the financial planning process by family members. This is especially true if the client is widowed or single. Adult children, other relatives, or a good friend will often step in to fulfill the role a spouse might otherwise have had in the planning process.

Family involvement is also often necessary in the case of elderly couples who are limited in their ability to take care of each other due to age-related health problems. As a result, adult children may step in to manage the care needs and assist with the financial planning.

The CPA planner may quickly find himself or herself in a situation where several individuals may wish to involve themselves in the planning process. Other complications can arise when the CPA planner's invoices will be paid by someone other than the client—such as an adult child. The paying adult child may feel entitled to being closely involved in the planning. The first question to ask is: Who exactly is the client? The CPA planner has certain responsibilities to the client, including confidentiality.

Who is the client?

Under the AICPA's current Statement on Responsibilities in Personal Financial Planning Practice (SOR), a CPA "…is also obligated to ensure that client confidentiality is maintained in accordance with the applicable rules of professional conduct." The Proposed Statement on Standards in Personal Financial Planning Services released June 11, 2013, also requires that the member comply with the AICPA Code of Professional Conduct. Rule 301 of the AICPA Code of Professional Conduct imposes a duty on members to protect the confidentiality of client information.

To abide by this requirement, the CPA planner must first identify the client. The client must give permission for the sharing of his or her information. The engagement letter also should identify who may receive copies of the information. Where the client lacks capacity, the contact person should hold the appropriate durable power of attorney that permits him or her to take action on behalf of the client.

This restricts the distribution of information to a select few individuals who are properly identified. And that is where the CPA may find himself or herself caught in a family squabble.

You sent the information to my brother—why not to me?

In most cases, family members work together to do what is best for their chronically ill parent. But in some cases, CPA planners may find themselves in the middle of family disputes. These problems may have been dormant for many years—often since childhood—only to surface when a parent becomes ill. Jealousy or suspicions may arise when, for example, a younger brother is given the power of attorney for health or for property instead of an older sibling. Often, resentment is felt when an out-of-town sibling comes home for a visit and immediately begins criticizing the actions taken by a local sibling who has been doing all the caregiving. Disputes can also arise over just how ill a mom or a dad is. Some siblings will deny a problem even exists while others may argue that the mom or the dad needs to move into an assisted-living or a skilled-nursing facility.

For the CPA planner, the most immediate problem may be when a member of the family who's not listed as a contact person or who does not hold a POA calls and requests information regarding the financial plan. In this case, the CPA planner will have to refer the caller to the family member or other individual who does have the authority to receive the information. It cannot come from the CPA planner without appropriate permission. This can make the caller very angry—especially when the caller has a hidden agenda to obtain the requested information without the contact person knowing. (The caller may suspect fraud or that the contact person is gaining undue influence over a chronically ill parent.)

Even a seemingly innocent question can draw the CPA planner into the middle of an argument. An out-of-town sibling may call and say to the CPA planner, "You saw my mom yesterday. How do you think she is doing?" The answer may inadvertently put the planner on one side or the other of a "mom doesn't need to move from her home" argument. The caller may invoke the name of the CPA planner as supporting his or her position on the mom's need for care.

Avoiding problems

Emotions often get out of hand in these types of engagements due to the stress of the situation. Some family members will take actions that they would never consider under normal circumstances. Most have good motives, but others may be more concerned about an expected inheritance than about their parents' health care needs.

Future problems are best avoided at the start of the engagement. This is where the SOR section titled "Planning the Engagement" can be especially helpful. First and foremost, the engagement letter should identify the client. It should also identify the contact person in case the client is cognitively impaired. The letter should be clear that information will not be shared or discussed with anyone else without the express permission (in writing) of the client. In case of incapacity, the CPA planner may have to work with a guardian appointed by a court or the individual(s) holding a POA. It should also contain a provision stating that the only person who may call the CPA planner is the contact person.

Careful engagement planning is important in all personal financial planning arrangements. This is especially true when working with the chronically ill and their families.

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James Sullivan,CPA/PFS, is a financial planner in Naperville, Ill., who specializes in working with individuals suffering from chronic illness and their families.

Personal Financial Planning Section members, including CPA/PFS credential holders, will benefit from additional elder planning resources in Forefield Advisor on the AICPA's PFP website at aicpa.org/pfp. Members will also benefit from the free CPA's Guide to Financing Retirement Healthcare written by this same author.

The AICPA's PFP Section provides information, tools, advocacy, and guidance to CPAs who specialize in providing tax, retirement, estate, risk management, and investment advice to individuals and their closely held entities. All members of the AICPA are eligible to join the PFP section. For CPAs who want to demonstrate their expertise in this subject matter, apply to become a CPA/PFS Credential holder.