Protecting the Elderly from Financial Exploitation: The Dilemma and Solution
Protecting the Elderly from Financial Exploitation: The Dilemma and Solution
According to the Alzheimer’s Association, there are approximately five (5) million Americans who have some type of dementia. Close to 50% of all people over the age of 85 have Alzheimer’s disease or another kind of dementia. Diminished capacity is more prevalent as one ages. According to the 2010 U.S. Census, there are 40.3 Million people that are age 65 or older. It is projected that by 2050, this age group will comprise 20% of the total U.S. population. In 2011, there was some type of disability reported by 65% of men and 38% of women in this age group. There are (and will be) a large number of individuals with varying degrees of diminished capacity susceptible to exploitation who do not qualify for protection under the Florida Guardianship Law.
A. The Risk of and Common Perpetrators of Exploitation.
The Met Life Study of Elder Financial Abuse: “Crimes of Occasion, Desperation and Predation Against America’s Elders” published in 2011 followed up previous studies released by Met Life in 2008 and 2009. The Met Life study found that elderly individuals have become largely socially isolated. Extended, multi-generational families are no longer common in our society. Adult children no longer feel responsible for caring for elderly parents. Because more than 25% of non-institutionalized elders live alone, there are fewer persons in the elder’s life who can detect suspected financial abuse and perpetrators can more readily prey on the elderly individual. These elderly individuals are ripe for perpetrators of elder financial abuse.
According to the Met Life Study, the annual financial loss by victims of elder financial abuse is approximately $2.9 Billion. Women were nearly twice as likely as men to be victims of elder financial abuse. Most victims lived alone and were between the ages of 80 and 89. These individuals required help with health care or other activities of daily living.
The 2011 Met Life Study classified the perpetrators as follows:
a. 51% of the cases involved elder financial abuse by strangers such as home repair scams, telemarketing, robbery and burglary.
b. 34% of the elder financial abuse involved family, friends, neighbors and in-home caregivers including agents acting under powers of attorney. Nationally, 30% of adults with disabilities utilize such personal assistance with their daily lives.
c. 12% of the financial abuse involved insurance advisors, bankers, attorneys, nursing home administrators and the like.
It is indicated that only 1 out of 14 cases are actually reported and other studies indicate that only 1 in 24 cases are actually reported.
B. The Courts do not Protect Persons with Diminished Capacity from Exploitation by Undue Influence
Florida does not protect persons with diminished capacity from exploitation by the undue influence of others. Those individuals have been left on their own to create an estate plan that protects their interests during the twilight of their lives.
In Florida National Bank of Palm Beach County v. Genova, 460 So.2d 895 (Fla. 1984), the Florida Supreme Court refused to permit a third party (a corporate co-trustee) to challenge the revocation of a trust by the settlor with diminished capacity even though the revocation resulted from undue influence. The Court held that so long as the individual has capacity, the courts will not protect the vulnerable adult:
The courts have no place in trying to save persons
such as Mrs. Genova, the otherwise competent settlor
of a revocable trust, from what may or may not be her
own imprudence with her own assets. When she created
this trust, she provided a means to save herself from her
own incompetence, and the courts can and should zealously
protect her from her own mental incapacity. However, when
she created this trust, she also reserved the absolute right to
revoke if she were not incompetent. In order for this to remain
a desirable feature of a trust instrument, the right to revoke
should also be absolute.
In Genova, the settlor, Ann Clearly, married Mark Genova. Ann was 76 years old. Mark was only 32. They were divorced a year later. In the divorce proceedings the trial court voided a transfer of assets to Mark because of undue influence he exerted over her. During the divorce proceeding, Ann created a trust which named Florida National Bank as a co-trustee with Ann.
Less than three (3) months after the divorce became final, they married again. Five days after the marriage Ann wrote to Florida National Bank requesting that the trust be revoked. The request was made on the letterhead of Mark’s business -- the Alibi Bar. One day later, Ann executed a power of attorney, prepared by Mark’s attorney that directed Florida National Bank to transfer the trust assets to her individual account. The power of attorney was delivered to the bank the next day by Mark’s attorney. Florida National Bank filed an action for instructions from the court with respect to these requests because of the concern that the same was a result of the undue influence of Mark.
The trial court found the attempts to revoke the trust invalid because of the undue influence of Mark. The Genova dissenting opinion regarded the revocation as an act of Mark, not Ann:
The trial judge found that the settlor had been unduly
influenced causing her to revoke her trust. Her act,
therefore, was not the exercise of her right to revoke,
but rather was the will of another foisted on her.
Under these circumstances the revocation should be voided.
Yet, the Genova majority rejected undue influence as a basis to void the revocation:
The issue presented here is whether the principle of
undue influence is applicable when revoking a revocable
trust. We hold that it is not; therefore, we approve the
decision of the Fourth District Court of Appeal.
The approved Fourth DCA opinion is instructive as to the public policy of the Florida Courts to defer to the actions of vulnerable, but otherwise competent, adults while they are alive:
Our focus is upon the present appellant/settlor in her
lifetime; and not upon the prospective beneficiaries
who may benefit in the event of her death. There being
no substantial, competent evidence to establish her incapacity
at the time of her revocation, she was free to terminate what
she alone had undertaken, the subject matter of which belonged exclusively to her.
In conclusion, we believe this court would be overstepping
its bounds by becoming, in essence, the settlor's guardian-
notwithstanding the absence of her incapacity-in its application
of the principle of undue influence to the revocation of a trust
of which she alone is the sole settlor and beneficiary. The undue
influence is allegedly being asserted by her lawful husband
towards whom no petition for dissolution has been directed.
Let us assume there was never a trust and the husband unduly
influenced his present wife to give him $100,000. Could the
court in that instance undertake to void the gift if one of the
wife's relatives sued to do so, notwithstanding the absence
of any dissolution proceedings or action by the wife to rescind
the gift? When does the court stop being a judicial forum and
turn into an Orwellian Big Brother? Our judgment tells us
that there is a limit to the issuance of judicial fiat based on
the belief that the court is saving the wife from what she
may do in the future with her own money vis-a-vis her
lawful husband. 
Genova was applied to prevent a challenge to the revocation of a trust based on undue influence even after the death of the settlor.
This laissez- faire policy has been carried over into the guardianship context.
In Re Maynes-Turner, 746 So.2d 564 (Fla. 3rd DCA 1999) involved a guardianship proceeding in which Ms. Maynes-Turner was declared incompetent and her children appointed as her guardian. Ms. Maynes-Turner filed a Suggestion of Capacity and the trial court partially restored her rights. The examining physician testified that while Ms. Maynes-Turner may hold the necessary ability for the restoration of her rights, her judgment may be suspect. He opined:
Cognitively she does reasonably well. She would seem
to possess the necessary knowledge that would be
required for restoration, however, I do not know that
she could make effective decisions and might pose
significant risks for herself on the basis of those decisions
that she would make. 
The Third DCA restored the full capacity of Ms. Maynes-Turner holding that the deprivation of her “precious individual rights” outweighed any protection from unwise future decisions:
The examining doctor reported objective findings
consistent with full competency. He indicated that Ms. Turner
was aware and knowledgeable during his examination.
Additionally, the record reflects that Ms. Turner was aware
of the proceedings and knew the state of her affairs. However,
the doctor and the trial court both expressed paternalistic
feelings about the possibility that she might make future harmful decisions1 “In our present day paternalistic society we must take
care that in our zeal for protecting those who cannot protect
themselves we do not unnecessarily deprive them of some
rather precious individual rights.” 
In McJunkin v McJunkin, 896 So.2d 962 (Fla. 2nd DCA 2005), the Second District Court joined In Re Maynes-Turner to hold that paternalistic concerns are insufficient to deprive a person of his or her civil and legal rights.
A person with diminished capacity can enter into any transaction, create or revoke trusts or make gifts to anyone. As long as a person has capacity, the court will not interfere with his or her decisions, even if imprudently made or unduly influenced by others.
C. Capacity v. Diminished Capacity
The line between diminished capacity and incapacity is rarely factually clear and involves numerous shades of gray. The capacity to transact business is different than the capacity to create a Trust or Will or to make an intervivos gift. A person may have the capacity to enter into one transaction, but lack the capacity to enter into another. There is no bright line and every situation will have its own set of unique facts.
1. Legal Capacity
Every person is presumed to have capacity to act. A person has the capacity to enter into a transaction so long as that person has sufficient intelligence to understand the nature and effect of the transaction. Mere mental weakness does not amount to the inability of the person to comprehend the transaction. The mind must be so affected as to render the person incapable of understanding the nature and effect of the transaction.
The capacity to execute a Will, Trust or to make a gift is the ability to mentally understand in a general way, the 1) nature and extent of property to dispose of; 2) the person’s relationship to those who naturally claim substantial benefits of the Will, Trust or gift; and 3) a general understanding of practical effect of the Will, Trust or gift.
The capacity to execute a preneed guardian designation is the ability to understand the nature of the decision being made and its implications.
2. Guardianship Capacity
The determination of legal capacity is transaction specific. The test is whether the person has the capacity to enter into the specific transaction. The Florida Guardianship Law employs a functional test as to the general capabilities of the person. The court must determine the nature and scope of a person’s “incapacities” and the specific rights that the person is incapable of exercising. Section 744.3215, Florida Statutes describes the rights of a person which cannot be removed, rights that can be removed but not delegated and rights that can be removed and delegated to a guardian. A guardian cannot be appointed to exercise delegable rights, if there are reasonable alternatives to a guardianship. This guardianship scheme is designed to provide assistance to a person that “least interferes with the legal capacity of [the] person to act in her or his own behalf.”
Is guardianship capacity (or incapacity) any different than legal capacity? The Florida Guardianship Law does not define the term capacity. The statute defines “incapacitated person” as a person who has been judicially determined to lack the capacity to manage property or meet his or her essential health and safety requirements. The term “manage property” is further defined as those actions necessary to obtain, administer and dispose of real, personal, intangible and business property as well as benefits and income. The capacity (or lack thereof) to obtain, administer and dispose of property is legal capacity. The capacity of a person to exercise the other listed rights under Section 744.3215 to contract or make gifts is no less than legal capacity. Although the Florida Guardianship Law examines a person’s functionality as to his or her ability to exercise a number of rights, the standard to find a person “incapacitated” is no different than the standard of legal capacity and not a lesser standard such as impaired judgment:
Section 744.102(10), Florida Statutes (2003), defines
an “incapacitated person” as “a person who has been
judicially determined to lack the capacity to manage at
least some of the property ... of such person.” Florida
Statutes do not define “capacity.” They do however
provide a clue as to what it is not. Before being amended
in 1989, chapter 744, Florida Statutes, contained language
to describe an “incompetent” person as one “likely to
dissipate or lose his property.” §744.331(1), Fla. Stat. (1987).
After the statute was amended, “incompetent” became
“incapacitated” and the reference to losing or dissipating
property disappeared. See Ch. 89-96, §§ 1-112, at 173-224,
Laws of Fla. It is evident that under the current version
of the statute, before depriving an individual of “all their
civil and legal rights,” the individual must be incapable
of exercising his rights at all, whether wisely or otherwise.
See § 744.1012.
The provisions of the Florida Guardianship Law reinforce this legal standard. A court must find that the person “is totally without capacity to care for herself or himself or his or her property” before any individual rights are taken away pursuant to an order determining incapacity. Although the examining committee must make a functional assessment of the alleged incapacitated person, each report must describe the matters to which the person “lacks the capacity to exercise rights … and the factual basis for the determination that the person lacks that capacity.” Finally, as set forth above, Section 744.102(12) defines an “incapacitated person” as “a person who has been judicially determined to lack the capacity …”. The incapacity must be established by clear and convincing evidence. If a majority of the examining committee members determine that the person does not “lack the capacity” to exercise his or her legal rights, then the incapacity issue never reaches the court. The court must dismiss the incapacity petition.
3. Diminished Capacity
Black’s Law Dictionary defines diminished capacity as “an impaired mental condition short of insanity”. The definition is very broad.
The Model Rules of Professional Conduct provides limited guidance to attorneys representing clients with diminished capacity. MRPC Rule 1.14 titled “Client With Diminished Capacity” does not define the term but requires the attorney to maintain a normal attorney-client relationship as far as reasonably possible with a client with diminished capacity. The model rule authorizes the attorney to take reasonable measures to protect the client with diminished capacity, who “cannot adequately act in the client’s own interest”. The rule and comments to the rule illustrate the varying degrees of capacity, short of incapacity. The comments to Model Rule 1.14 acknowledge that a client with diminished capacity “often has the ability to understand, deliberate upon, and reach conclusions about matters affecting the client’s own well-being” and “can be quite capable of handling routine financial matters while needing special legal protection concerning major transactions.” Comment 6 suggests that in determining the extent of the client’s diminished capacity, the lawyer should consider and balance such factors as the client’s: (1) ability to articulate reasoning leading to a decision, (2) variability of state of mind, (3) ability to appreciate consequences of a decision, together with the (4) substantial fairness of a decision and (5) consistency of the decision with the known long-term commitment and values of the client.
In 2005, the American Bar Association published a handbook for lawyers titled: Assessment of Older Adults with Diminished Capacity. The handbook discusses the history and focus of Model Rule 1.14 as well as provides an in-depth discussion of legal and clinical capacity.
The first three factors listed in Comment 6 to Model Rule 1.14 assess the cognitive functioning of the person. The last two factors are substantive and analyze the content and nature of the transaction. The ABA suggests that the more “risky” the substantive decision, the greater level of cognitive functioning that should be required for the specific transaction. In the undue influence context, if an estate plan is “blatantly unfair” to the person’s family, then the greater level of capacity should be required for the transaction. Likewise, if the risk of the decision is low, “then capacity concerns wane proportionately.” 
Although the ABA handbook and Model Rule 1.14 address and offer guidance in the representation of adults with diminished capacity, they provide little input for the protection of the client from undue influence. The ABA handbook briefly discusses undue influence, but only in assessing a specific transaction and the client’s capacity to enter into the transaction. The Florida ethical rules offer even less guidance. It is the adults with diminished capacity who are most susceptible to undue influence, but most difficult to represent because of their diminished capacity. There is a real gap in protecting these persons from themselves and others.
D. Remedies for Financial Exploitation of Persons with Diminished Capacity.
There are remedies available to the person with diminished capacity who has been financially exploited. The problem is to convince the person to bring or consent to an action against the perpetrator and to prove that a transfer of an asset to a perpetrator was not a gift to or compensation for services rendered by the perpetrator or that an estate planning document is invalid. The ability of third parties to assert claims for pre-death/incapacity exploitation without the cooperation and consent of the person are limited or nonexistent.
1. The Department of Children and Family Services must Investigate, Report and Assist, but cannot force Intervention.
The Florida Legislature adopted the Florida Adult Protective Services Act to provide for the detection and correction of abuse, neglect and exploitation of a “vulnerable adult” through both social services and criminal investigations. The Act established a program of protective services for all vulnerable adults in need of them. The Act imposes mandatory reporting and requires immediate protective service investigations. The Act authorizes the Department of Children and Family Services to contact law enforcement for assistance if an investigation is being prevented by a caregiver. The Act requires the Department to notify law enforcement if there is a reason to believe that abuse, neglect or exploitation has occurred.
The Act provides the Department with complete access to all medical, social and financial records of the “vulnerable adult” authorizes and requires the Department to provide protective services or protective supervision to the “vulnerable adult” and provides for emergency and nonemergency intervention.
The term “vulnerable adult” is defined broadly to mean:
a person 18 years of age or older whose ability to
perform the normal activities of daily living or to provide
for his or her own care or protection is impaired
due to a mental, emotional, sensory, long-term physical,
or developmental disability or dysfunction, or brain
damage, or the infirmities of aging. Section 415.102(27),
Nevertheless, the Department cannot provide protective services or supervision (even emergency protective services) to a “vulnerable adult” who does not consent to such services or supervision. The Department cannot even access the medical, social and financial records of the “vulnerable adult”, if he or she specifically prohibits such access. Only if the “vulnerable adult” has consented to protective services can the protective services be continued without consent, but only when there was an emergency removal. Such emergency services cannot continue more than a 60 day period. The emergency protective services authorized in Section 415.1051(2), Florida Statutes is further limited to abuse or neglect (not exploitation) of the “vulnerable adult” relating to death or serious injury.
Capacity as defined by the Act is no different than legal capacity:
“Capacity to consent” means a vulnerable adult
has sufficient understanding to make and communicate
responsible decisions regarding the vulnerable adult's
person or property, including whether or not to accept
protective services offered by the department.
Conversely, the Act defines the “lack of capacity to consent” as:
a mental impairment that causes a vulnerable adult
to lack sufficient understanding or capacity to make
or communicate responsible decisions concerning person
or property, including whether or not to accept protective
Although the Act defines the “vulnerable adult” broadly to include persons with diminished capacity who are subject to undue influence, the Department is powerless to protect such a person from exploitation through the use of undue influence without that person’s consent. The Department’s role becomes one of investigation, reporting, consultation and the preservation of evidence for future court proceedings.
2. Criminal Prosecutions for Financial Exploitation are Limited when the elderly person suffers from diminished capacity.
The Florida Adult Service Act requires the Department to orally notify law enforcement of alleged abuse, neglect or exploitation of the vulnerable adult. Within five (5) working days, after the oral notification, the Department must submit a written preliminary report to law enforcement. If it conducts its own investigation, law enforcement must submit its findings to the state attorney and the Department within five (5) working days after concluding the investigation. The state attorney must determine whether a prosecution is justified under the circumstances and report its findings to the Department.
Criminal prosecutions for financial exploitation are governed by Section 825.103(1), Florida Statutes. Chapter 825 uses the term “elderly person”, not “vulnerable adult”, but the definitions are basically the same. “Elderly person” is defined as:
“Elderly person” means a person 60 years of age
or older who is suffering from the infirmities of aging
as manifested by advanced age or organic brain damage,
or other physical, mental, or emotional dysfunctioning, to
the extent that the ability of the person to provide adequately
for the person's own care or protection is impaired.
The definition of “elderly person” like that of the “vulnerable adult” would include a person with diminished capacity who is subject to undue influence. Nevertheless, proving the criminal exploitation of an elderly person is difficult and many times the evidence is confusing at best.
Section 825.103(1). Florida Statutes establishes two separate crimes for financial exploitation.
Section 825.103(b), Florida Statutes requires the State to prove that the asset of the elderly person was obtained when the perpetrator knew or should have known that the elderly person lacked the capacity to consent to the transaction. The statute defines the “lack of capacity” no differently than the legal standard of capacity:
“Lacks capacity to consent” means an impairment by
reason of mental illness, developmental disability, organic
brain disorder, physical illness or disability, chronic use of
drugs, chronic intoxication, short-term memory loss, or
other cause, that causes an elderly person or disabled
adult to lack sufficient understanding or capacity to make
or communicate reasonable decisions concerning the elderly
person's or disabled adult's person or property.
This definition is consistent with case law involving theft from a victim with diminished capacity. Theft is not shown when an owner gives property to another unless there was “evidence that the defendant knew the victim lacked the mental capacity to consent to the taking of his or her property.” If the elderly person has legal capacity, no crime can be committed under Section 825.103(1)(b).
Section 825.103(1)(a), Florida Statutes does not require the finding of incapacity. However, the State has a high burden to prove financial exploitation pursuant to this provision. The State must prove that the perpetrator “knowingly, by deception or intimidation” obtained the assets of the elderly person. Intimidation is defined as the threat of physical injury or the deprivation of food, clothing, money and other necessities. Deception is defined as the misrepresentation or concealing of a material fact relating to services, disposition or use of property intended for the benefit of the elderly person.
In Bernau v. State, 891 So.2d 1129 (Fla. 2d DCA 2005), parents with diminished capacity endorsed a check in the amount of $847,000 (representing the proceeds from the sale of their home) to their son, David. This transaction occurred in September of 2000. In March of 2001, both parents were declared totally incapacitated. The parent’s guardian recovered about $380,000 from David on behalf of the guardianship estate. David was charged and convicted of exploitation under Section 825.103(a), Florida Statutes.
The Second DCA noted that the State failed to offer any evidence that the parents were incompetent at the time of the transaction. There was no evidence that David “lied to his parents or intimidated them in order to obtain the funds.” Although the parents exercised “extremely poor judgment” in making the gift, this did not constitute “circumstantial evidence proving the elements of the crime”. Although David was convicted of stealing money from his parents a few years earlier and the gift of the funds to him was “highly suspicious”, the court “reluctantly reversed” the conviction. There was simply insufficient evidence to prove that David received the funds from “deception or intimidation”. The Court held:
We are not called upon to judge the morality
of David Bernau's conduct. The elements of this
crime were established by the legislature, and the
State was unable to prove them.
In Guarscio v. State, 64 So.3d 146 (Fla. 2d DCA 2011), the Court was faced with a similar scenario. There, the grandmother, Helen Woichowski, raised her granddaughter, Dana Guarsio. Dana and her son moved to Florida. Helen soon followed. Helen purchased a home in Sarasota. The home was refinanced several times between 2003 to 2005 to pay for Dana’s wedding, business, divorce, car, trips and gifts. Helen suffered a stroke in November of 2005. Dana was convicted of financial exploitation based on the multiple refinancings and use of the money obtained therefrom.
The Second DCA reversed the exploitation conviction. The Court examined the statutory definitions of deception and intimidation and found no evidence that Dana obtained her grandmother’s money from intimidation or deceit. The refinancings were “not a good idea”, but the Court held that any inference therefrom was “a far cry from proof that they were accomplished by [Dana’s] deception or intimidation.”
If the elderly person has the capacity to understand a transaction or to make a gift, a successful prosecution for financial exploitation may prove difficult. Intimidation and deception may be factors in proving undue influence in a civil case, but these factors are necessary elements to prove criminal exploitation and pose a significant proof problem versus the Carpenter active procurement criteria to establish undue influence in a civil action.
3. Civil Remedies for Financial Exploitation are Limited when the Elderly Person suffers from Diminished Capacity
Section 415.1111, Florida Statutes creates a civil action in favor of the vulnerable adult against a perpetrator for actual and punitive damages caused by the abuse, neglect or exploitation of the vulnerable adult. The action can be brought by the vulnerable adult, his guardian or personal representative. A person or organization acting on behalf of the vulnerable adult can also bring the action but only with the consent of the vulnerable adult.
Therefore, if the vulnerable adult has capacity, the only way an action can be brought against the perpetrator is if the vulnerable adult brings the action or consents to such action. If the vulnerable adult is under the undue influence of another, it is questionable as to whether the vulnerable adult would bring an action or consent to an action against the undue influencer (perpetrator).
The Florida Power of Attorney Act may create standing in third parties to challenge actions of an agent under a power of attorney. Section 709.2116(1), Florida Statutes provides:
A court may construe or enforce a power of attorney,
review the agents conduct, terminate the agent’s authority,
remove the agent and grant other appropriate relief.
Section 709.2116(2), Florida Statutes lists the persons and entities who may petition the court pursuant to this provision. Those listed include the principal, agent, successor agent, guardian, conservator, trustee or other fiduciary of the principal and the person authorized to make health care decisions for the principal (but only if the health care of the principal is affected by the actions of the agent). Also included are:
- “a governmental agency having the regulatory authority to protect the wealth of the principal; and
- any other interested person if the person demonstrates to the court’s satisfaction that the person is interested in the welfare of the principal and has a good faith belief that the court’s intervention is necessary”.
The statutory list of persons and entities that may bring an action with respect to the use of a power of attorney are very broad, but can an action be brought when the principal has capacity? The focus of Chapter 709 and the recent amendments thereto relate mostly to the durable power of attorney. There is no case law interpreting the standing of these “interested persons” to file an action, if the principal has capacity. The white paper prepared in support of the adoption of the revised Florida Power of Attorney Act does not address this standing issue.
The Florida Rules of Civil Procedure does not necessarily require the consent of the vulnerable adult to file a proceeding. Florida Rules of Civil Procedure, Rule 1.210(a) states:
Every action may be prosecuted in the name of a real party
in interest but a . . .party expressly authorized by statute may
sue in that person’s own name without joining the party for
whose benefit the action is brought.
Section 709.2116, Florida Statutes and Rule 1.210 seem to permit an interested person or the Department of Children and Families to bring an action against the agent acting under the power of attorney. However, if the real party of interest (the vulnerable adult) objects to such a proceeding and the vulnerable adult’s right to sue and defend law suits [see Section 744.31215(3)(b), Florida Statutes] has not been removed, can the statutorily authorized person proceed with the action? Even if the third party could proceed with the action, the vulnerable adult, by undue influence or otherwise, could undermine any proceeding as he or she has the authority to authorize or consent to any action of the agent or execute a release of the agent from liability. The agent would be subject to criminal prosecution under Section 825.103(1)(c), Florida Statutes.
E. The role of the Attorney - How to protect the person with diminished capacity from undue influence.
Genova held that it is not the public policy of the State of Florida to protect an adult with diminished capacity from the undue influence of others. Nevertheless, Genova held that under the terms of the trust, Mrs. Genova established the means to protect herself from her own incompetence, which “the courts can and should zealously protect her from her own mental incapacity.” If a settlor can protect himself or herself from incompetence, then a settlor can protect himself or herself from undue influence in the same way.
An irrevocable trust is one option, but most individuals want to control their assets and funds until they are not able to do so. An irrevocable trust also has gift tax implications. A revocable trust may permit an amendment or revocation only with the permission of a third party or co-trustee; however, this may prove too restrictive for most settlors. A settlor may achieve similar protections utilizing a revocable trust which suspends the rights of the settlor under certain conditions. Here again, there is a conflict between the settlor wishing to maintain control of his or her assets until the last possible moment versus the protection of the settlor as his or her mental capacity diminishes. The following is a discussion of pertaining to the revocable trust.
A revocable trust consists of a settlor, trustee and a beneficiary. In many trusts, the settlor also acts as the trustee. The settlor often times retains the power to amend or revoke the trust, remove and appoint a trustee, withdraw assets from the trust (income or principal) or direct the distribution of such assets, direct the investments of the trust and direct the trustee to act whether or not the direction is contrary to the terms of the trust.
Most, if not all trusts, provide some mechanism for the appointment of a successor trustee in the event the settlor, as trustee, cannot manage the affairs of the trust or is otherwise incapacitated. Many times this determination is made by the successor trustee and/or a family member in conjunction with a written medical opinion. Such trusts many times provide guidance to the successor trustee for the distribution of the trust income and principal when the settlor is incapacitated.
However, the trust terms oftentimes stop short of removing the powers retained by the settlor to revoke, amend or make directions as to the trust or trust assets. The inability of a settlor trustee to manage the affairs of the trust does not mean that the settlor lacks the capacity to create, amend or revoke the trust or direct the successor trustee to act. Although the successor trustee, family member and/or doctor believe that the settlor lacks the capacity to exercise a reserved power, unless the trust term provides otherwise, the settlor can at least attempt to exercise the power. If the settlor with diminished capacity exercises a power through the undue influence of others, the exercise of such power will be enforced by the Florida Courts. The result of the exercise of such a power, under these circumstances, certainly will lead to expensive litigation, whether in an eventual guardianship proceeding or trust contest.
This result can be avoided by addressing the issues of diminished capacity and undue influence under the terms of the trust. The provisions of a trust can suspend any or all of the reserved powers of the settlor under certain circumstances. For instance if the successor trustee and/or family member reasonably believe that the judgment of the settlor is impaired due to his or her mental capacity which is confirmed by a written medical opinion, written notice may be provided to the settlor that suspends all reserved trust powers. The right to suspend a reserved power may be as minimal as having the successor trustee make this determination or as stringent as to require an actual adjudication of incapacity. The suspension may pertain only to the settlor’s powers exercisable for lifetime purposes and not powers that impact the trust after the death of the settlor (i.e. trust distributions, trusteeships or other post death provisions).
The Florida Trust Code does not prohibit trust suspension provisions. Section 736.0602(1), Florida Statutes does provide that unless a trust states that it is irrevocable, a settlor may revoke or amend a trust. However, Section 736.0105(1), Florida Statutes makes it clear that the terms of a trust prevail over any provision of the Florida Trust Code, except as to the twenty-three (23) specifically listed mandatory provisions. Section 736.0602, Florida Statutes is not listed as a mandatory provision. Therefore, a trust may provide for the suspension of the reserved powers of the settlor.
There may be situations where the successor trustee and/or family member suspends the reserved powers of the settlor when the settlor can make independent and prudent judgments or can subsequently make such independent and prudent judgments. Under these circumstances and to prevent unintended abuses, the trust can provide that the reserved powers of the settlor can be restored by court order or determination by a family member, physician or a third party. The trust may provide for the reinstatement of the reserved powers only if the court or physician determine that the settlor can exercise a power independently without the undue influence of others or any other criteria established by the trust.
There may be situations where the successor trustee and/or family member either do not know of the authority to suspend the reserved powers of the settlor or cannot act fast enough to suspend the reserved power and prevent the amendment or revocation of the trust by a settlor with diminished capacity through undue influence or otherwise. The Florida Trust Code and Genova may prevent the successor trustee or family member from challenging such a trust amendment or revocation during the lifetime of the settlor. Nevertheless, Section 736.0207, Florida Statutes is not a mandatory trust provision. The settlor can create standing in anyone to challenge any power exercised by the settlor, particularly when the successor trustee or family member believes that the exercise of the power was void because of the undue influence of others. The trust terms can authorize the successor trustee, an acting co-trustee, family member or third party file an action to challenge the exercise of the reserved power and require the trust to pay for the prosecution of such an action.
There are numerous persons in Florida that are living with diminished capacity. Most of these elderly adults do not want to be classified as “incapacitated”. They want to maintain all of their rights. Because of distance and the change of our society, many of the elderly are socially isolated from their families. These elderly persons may become dependent on neighbors, friends and others and are subject to the influences of these individuals. The numbers of those with diminished capacity are growing each year.
The courts cannot not protect these individuals from the undue influence of others or their poor judgment. The legislature is reluctant to interfere with the rights of those individuals who have legal capacity. The legal representation of these individuals can prove difficult.
Estate plans can be created to protect these individuals from themselves and others, but even these plans can be difficult to prepare and implement.
R. CRAIG HARRISON is a shareholder in the firm of Lyons, Beaudry & Harrison, P.A. located in Sarasota. He is Board Certified in Wills, Trusts and Estates and is a graduate of the University of Michigan (B.A. 1980) and the University of Detroit (J.D. 1983). He is a member of the Probate and Trust Litigation Committee of the Florida Bar and the author of “Homestead”- The Post-Death Spousal Disclaimer: A Cure for a Constitutionally Prohibitive Devise?” and Trusts: TBE or Not TBE” published in the Florida Bar Journal.
This column is submitted on behalf of the Elder Law Section, John Lardy, chair, and Stephanie M. Villavicencio, editors.
This article appeared in the Florida Bar Journal: 88-June Fla. B.J. 77 Florida Bar Journal June, 2014 Column:
Elder Law PROTECTING THE ELDERLY FROM FINANCIAL EXPLOITATION: THE DILEMMA
AND SOLUTION, PART I Craig Harrison Copyright © 2014 by
 Kristen M. Lewis & Kelli Wolk, Financial Abuse of Elders and Other At-Risk Adults (Forty-Eighth Annual Southern Federal Tax Institute, October, 2013).
 Id at pages CC: 1-5.
 Id at 898.
 Id at 898.
 Id at 895.
 Genova v. Florida Nat. Bank of Palm Beach County, 433 So.2d 1211, 1215 (Fla. 4th DCA 1983)
 MacIntyre v. Wedell, 12 So.3d 273 (Fla. 4th DCA 2009). FLA. STAT. §732.207 now permits the filing of such a post-death challenge.
 Id at 565.
 In re McDonnell, 266 So.2d 87, 88 (Fla.4th DCA 1972).
 See also Losh v. McKinley, 86 So.3d 1150 (Fla.3rd DCA 2012).
 Holmes v. Burchett, 766 So.2d 387 (Fla. 2nd DCA 2000); Hassey v. Williams, 174 So.9 (Fla. 1937); Gardiner v. Goertner, 149 So.186, 189 (Fla. 1932).
 Donnelly v. Mann, 68 So.2d 587 (Fla. 1953); Long v. Moore, 626 So.2d 1387 (Fla. 1st DCA 1993).
 Hassey v. Williams, 174 So.9 (Fla. 1937).
 In re Wilmont’s Estate, 66 So.2d 465 (Fla. 1953); Hodges v. Atl. Nat. Bank of Jacksonville, 184 So.875 (Fla. 1938); Saliba v James, 143 Fla. 404 (Fla. 1940); FLA. STAT. §736.0601.
 Koshenina v. Buvens, 2014 WL 304889 (1st DCA 2014). This legal standard should apply to the execution of a healthcare surrogate designation. The attending and another physician makes the determination as to whether the principal has the capacity to make healthcare decisions or provide informed consent. FLA. STAT. §765.201. For this purpose, “incapacity” (capacity is not defined in Chapter 765) is the inability to communicate willful and knowing healthcare decision FLA. STAT. §765.101(8). “Informed consent” is defined not only as the ability of a person to generally understand a procedure and/or treatment after sufficient explanation and disclosure, but also to make a health care decision “without coercion or undue influence” FLA. STAT. §765.101(9).
 FLA. STAT. §744.331(6); FLA. STAT. §744.3215.
 FLA. STAT. §744.3215 (1), (2), (3).
 FLA. STAT. §744.331(6)(b).
 FLA. STAT. §744.1012.
 FLA. STAT. §744.102(12).
 FLA. STAT. §744.102(12)(a).
 McJunkin v. McJunkin, 896 So.2d 962m, 963 (Fla. 2nd DCA 2005) [emphasis added].
 FLA. STAT. §744.331(6)(c).
 FLA. STAT. §744.331(3)(f).
 FLA. STAT. §744.331(5)(c); In re Bryan, 550 So.2d 447, 448 (Fla. 1989).
 FLA. STAT. §744.331(3)(g); FLA. STAT. §744.331(4).
 ABA Commn. On L. & Aging & Am. Psychological Assn., Assessment of Older Adults with Diminished Capacity: A Handbook for Lawyers (2005).
 Id at 18-19.
 Id at 16 and 18.
 R. Regulating Fla. Bar 4-1.14
 FLA. STAT. §415.101.
 FLA. STAT. §415.1034; FLA. STAT. §415.104.
 FLA. STAT. §415.104(1).
 FLA. STAT. §415.1045; FLA. STAT. §415.105; FLA. STAT. §415.1051.
 FLA. STAT. §415.102(27).
 FLA. STAT. §415.105(1); FLA. STAT. §415.1051(2).
 FLA. STAT. §415.1045(4).
 FLA. STAT. §415.105(2); FLA. STAT. §415.1051(2)(f)(b).
 FLA. STAT. §415.1051(2)(g).
 FLA. STAT. §415.102(4).
 FLA. STAT. §415.102(15).
 FLA. STAT. §415.104(1).
 FLA. STAT. §415.104(5).
 FLA. STAT. §415.104(8).
 FLA. STAT. §825.101(5)
 FLA. STAT. §825.101(9).
Deranger v. State, 652 So.2d 400, 401 (Fla. 2nd DCA 1995).
 FLA. STAT. §825.101(8).
 FLA. STAT. §825.101(3).
 Id at 1232.
 See In re Carpenter’s Estate, 253 So.2d 697, 702 (Fla. 1971).
 Pasquale v. Loving, 82 So.3d 1205, 1208 (Fla. 4th DCA 2012)[only the person and entities named in the statute have standing to bring the action.]
 The agent could be subject to criminal prosecution under FLA. STAT. §825.103(1)(c).
 FLA. STAT. §736.0601.
 FLA. STAT. §736.0207. Section 736.0207, Florida Statutes does not prohibit a guardian of an “incapacitated settlor” from challenging the trust amendment or revocation upon any grounds. See also FLA. STAT. §744.441(11), Florida Statutes. However, a guardian cannot act until the settlor is adjudicated incapacitated and is authorized by the court to file the trust challenge. Such a potential trust challenge also does not solve the problem of a settlor with diminished capacity and who is susceptible to undue influence. A co-trustee or successor trustee is in a better position to take prompt action to challenge a revocation of a funded trust or a trust amendment which may affect the administration of the trust during the settlor’s lifetime. A protective trust provision further provides the settlor with more flexibility to describe the circumstances for which a trust action may be brought. To the contrary, if the trust with suspension or standing provisions is created by undue influence, such a trust may be subject to attack in a subsequent guardianship proceeding and may not be considered as an alternative to the appointment of a guardian. Searle v. Bent, 2013 WL 5225218 (Fla. 2d DCA 2013); FLA. STAT. §744.331(6)(f). Therefore, it is best to create such a trust when the settlor has full capacity as opposed to waiting until diminished capacity is an issue.