WA: Financial Institutions and Vulnerable Adults

The State of Washington recently provided more protection through ESSB 6202 to vulnerable adults – and more incentive for financial institutions to be proactive – wherein financial institutions are allowed to refuse transactions when there is a reasonable belief that financial exploitation of a vulnerable adult may have occurred or was or is being attempted.  The financial institution, without liability, may notify in writing all depositors, beneficiaries, or other persons claiming an interest and withhold payment until written consent from all interested parties is obtained or the court directs payment.   

Financial institutions must provide employee training on financial exploitation of vulnerable adults and the institutions and employees are immune from civil liability for certain good faith acts in response to suspected abuse. 

"Financial institutions" includes broker-dealers and investment advisers.

Financial Abuser = Slayer: Good Law or Litigation Minefield?

Washington State Substitute House Bill 1103 – 2009-10, effective July 26, 2009, prevents an abuser from inheriting property or receiving any benefit from the estate of a vulnerable adult who was the victim of financial exploitation by the abuser.

This may be a trend other states are keen to follow.

Generally speaking, “no slayer or abuser shall in any way acquire any property or receive any benefit as the result of the death of the decedent.” That is, an abuser is treated the same as a slayer with respect to the distribution of the decedent’s estate, although the court has equitable discretion and may consider, among other things:

  • Elements of decedent’s dispositive scheme;
  • Decedent’s likely intent given the “totality of the circumstances”; and
  • The degree of harm.

A criminal conviction conclusively determines an abuser, but civil conviction must be by clear, cogent, and convincing evidence.

In many sad cases, financial exploitation is obvious, and the punitive impact of this new law certainly should apply. However, how will this impact other cases where the facts are not so easy to resolve? If there is insufficient evidence for a criminal conviction, but the fact finder proceeds to a determination in civil court, could this new law unnecessarily punish those that failed to have the foresight to properly document every gift from the dearly departed? How many keep written documentation of a gift, particularly from a family member? And when that elderly person becomes more mentally and physically frail, at what point does the average person have the medical or other specialized training to determine whether there is exploitation? The often dysfunctional response to grief and inheritance can lead to unwarranted allegations of who loved the decedent more and who sucked the funds (and life) right out of dear ol’ mom or dad. It can turn ugly, quickly. Is it “financial exploitation” or is it “but Mom always paid for everything, because I’ve never stood on my own two feet in my life?”

The new Washington law provides an escape in that a defendant may avoid liability if the court finds by clear, cogent, and convincing evidence that the decedent knew of the financial exploitation and subsequently ratified it. Maybe that’s enough room for those unjustly charged to avoid liability. Maybe not.