A few years back, a common view in the financial industry held that “where insurance agents rattle the coffin lid, bank client advisors talk up the sunny side of life.” This, however, has changed since the Child and Adult Protection Act came into force in 2013. While not all banks routinely inform their clients, today all institutions are very interested in having their clients take the necessary steps to prepare for the eventuality of not being able to deal with their finances themselves one day.
“When the KESB comes into play, things always get complicated,” says a banker, adding that the Child and Adult Protection Authority (Kinder- und Erwachsenenschutzbehörde [KESB]) serves a different purpose than a privately chosen representative: it must protect the assets ex officio, while a private representative has more freedom in pressing ahead with the existing investment strategy. From the KESB’s perspective, banks often don’t make things easier because they focus too much on protecting themselves legally. For clients, this means it's best to make legally binding preparations when you're young and review them again regularly.
Your own interests set the benchmark
The loss of the power of judgment can be a real burden in financial matters. When young people lose sound judgement, this often happens quickly (e.g. because of an accident). But the elderly most often lose their power of judgment gradually. When dementia sets in, the people affected will have good days and bad days. The phases of confusion become more frequent and last longer over time. The legal concept of the power of judgment is always coupled with a point in time and the facts of the case. That’s why banking lawyers and the KESB agree that a person’s capacity to act on financial issues can only be doubted when they begin making financial decisions that openly go against their own interests.
Nowadays, most banks train their client advisors and clerks on these subjects. Criminal schemes like confidence tricking are part of the picture. At UBS, the IT department checks all payment transactions for the “odd ones out” which are immediately discussed with the client before they are implemented. Smaller banks like the Zurich-based private bank Rahn + Bodmer draw on their experience and on raising awareness among employees. “But we will not hesitate to block an account on suspicion until we’ve made sure things are in order. Most clients appreciate this,” says Thomas Steinebrunner from the legal department.
If a confidence trick is suspected – one in which criminals convince elderly people that they are related and in dire need of money – measures are brought into play that many banks have developed in their in-house legal and security departments. “We’ve even helped catch con artists,” said an employee of Credit Suisse. But what about when, based on routine dealings, a bank client advisor begins to doubt a client’s judgment? It’s easier for a private bank than for a universal bank like the Zuricher Kantonalbank, where some clients do their banking almost exclusively online.
If a client advisor gets a bad feeling about a client’s transactions, the legal department is notified. Everyone then hopes there is a power of attorney on the account, as the authorized person is the first point of contact with whom the bank can informally discuss the issue. In the worst case, if there are no such authorizations, a risk report has to be issued to the KESB. This, however, happens rarely even with large banks – usually less than three times a year. The KESB then contacts all those involved and typically also calls on medical advice.
“Too many custodians”
If it is determined that the ability to make judgments in financial matters has been lost, the person is given a legal custodian – tailored to handle their specific problems. A “light” custodianship can also be offered to people who are still able to make decisions but are unable to cope. The people affected can generally influence the choice of the legal custodian. Yvo Biderbost from the KESB in Zurich laments that banks often no longer accept existing powers of attorney over accounts when power of judgment is lost, even though they had been set up explicitly for that purpose. This is often also the case for representation by one's spouse. From a legal point of view, you don’t necessarily have to insist on setting up a custodianship.
Nowadays, the ideal situation for all people involved would be if bank clients designated not only one or two powers of attorney for their bank accounts, but also drew up an advance directive in which one person, at best including some substitutes, is mentioned to represent them in case power of judgment is lost. A professional representative can also be chosen should family members not be deemed suitable. With the legal position clarified, the “only” question remaining is when the advance directive should come into force. This would be the task of KESB on request of relatives, for example, and after consulting with the affected person and a doctor.
Comprehensive retirement provision and succession planning at a bank today include more than just setting up a will for the event of death. The eventuality of a loss of power of judgment and measures such as powers of attorney and an advance directive should likewise be discussed.
A power of attorney alone is often not enough
The new Child and Adult Protection Act (in force since 2013) gives everyone the chance to decide what should happen to their finances in case decision-making capacity is lost. The following elements should be considered:
- Powers of attorney for at least one representative on all bank accounts. These can be designated quite freely and linked to conditions or staggered (“if representative X can’t take on the task, representative Y will,” or the like). Before 2013, powers of attorney issued specifically in the event of loss of power of judgment were the only way to plan ahead. Beware: powers of attorney alone are not accepted by some banks. Some also don’t automatically recognize the statutory powers of representation in the case of married couples, when one partner loses their power of judgment.
- Advance care directives, in which at least one person is mentioned as a representative for financial issues in the event a partner loses the power of judgment. It makes sense to name substitutes here as well. The KESB provides templates for the advance directive, but you can also get them from banks, notaries, Pro Senectute etc. For logical reasons, the representatives should receive a copy of the advance directive. It can be deposited at the responsible KESB office in most cantons, and you can notify the civil registry office where it is stored. Should a person lose their power of judgment, you can apply at the KESB for the advance directive to come into force. The KESB checks both the affected person's power of judgment and the suitability of the care representative. The representative is only turned down for very good reasons (e.g. records of embezzlement).
By courtesy of Neue Zürcher Zeitung. Translated by UBS Switzerland Marketing Translation Services.