Thinking About Fiduciary Duty As A Core Concept for “Elder Law”
I tend to think of “Elder Law” as a subset of “Laws and Policies of Aging.” Given what appears to me to be a steady increase in public concern about ways in which some older persons are exploited financially, it occurs to me that we may be at a point where “fiduciary duty” is becoming a central — perhaps even the central — concept for the future practice of Elder Law, overtaking even Medicaid planning and end-of-life health care planning. Seasoned practitioners already know that the “million dollar question” in Elder Law is “who is my client?” — a question intimately tied to carrying out fiduciary duties as an attorney.
Along that line, I’ve been digging into my stack of “must read” books, a stack that is always a threat to my safety as it gets taller and taller no matter how fast and furiously I read. I’m very much enjoying a book by Boston University Law Professor Tamar Frankel titled, simply enough, Fiduciary Law (Oxford University Press, 2011).
Early in the book, the author, whose teaching and research interests include corporation governance and regulation of financial systems, proposes a definition of “fiduciary relationships,” which I find both intriguing and conducive to discussion. I don’t think it is taking too much away from her full book, to repeat the four features Professor Frankel proposes as triggering fiduciary duties. She writes:
The suggested features that all fiduciaries share are the following:
First, fiduciaries offer mainly services (in contrast to products). The services that fiduciaries offer are usually socially desirable, and often require expertise, such as healing, legal services, teaching, asset management, corporate management, and religious services.
Second, in order to perform these services effectively, fiduciaries must be entrusted with property or power.
Third, entrustment poses to entrustors the risks that the fiduciaries will not be trustworthy. They may misappropriate the entrusted property or misuse the entrusted power or they will not perform the promised services adequately.
Fourth, there is likelihood that (1) the entrustor will fail to protect itself from the risks involved to fiduciary relationships; (2) the markets may fail to protect entrustors from these risks; and that (3) the costs for the fiduciaries of establishing their trustworthiness may be higher than their benefits from the relationships.
Good food for thought as, for example, we watch the Obama Administration’s efforts to adopt a fiduciary duty standard for retirement financial investment advisors. Similarly, I think this issue could exist for continuing care or life communities (CCRCs), where older adults often pay large upfront fees and commit major life savings to operators, with the expectation that the operators will continue to provide the same level of housing and care “even if” the resident runs out of money to pay monthly fees.