DECEMBER 19, 2011 VOLUME 18 NUMBER 43
It is not exactly a secret that the Arizona probate court system has been widely criticized over the past two years or so. The Phoenix-area newspapers have been filled with stories about alleged abuses of the probate process. Many of those stories have focused on practices in the guardianship and conservatorship systems, which in Arizona are controlled by the probate courts. During last year’s Arizona legislative session a number of changes were adopted; most of those take effect on January 1, 2012.
At the same time the legislature was acting, a committee of the Arizona Supreme Court was considering many of the same (or similar) changes. The courts have now released their final changes; some of them will take effect on February 1, 2012, and some on September 1, 2012. We will describe some of those changes, and what effect they are likely to have on existing and future clients, in a later newsletter. For now, we focus on the changes adopted by the legislature. They include:
- Fiduciaries are now expressly required to consider costs when making decisions about how to act, and to make reasonable decisions to limit those costs. The notion of a cost/benefit analysis, which we all apply to business and personal decisions in our own lives, has been adopted for guardianship, conservatorship, probate and trust administration proceedings. See Arizona Revised Statutes section 14-1104.
- Unreasonable litigants — including those who repeatedly file the same kinds of pleadings despite successive decisions against them — can now be prevented from running up probate costs, and can even be charged with some or all of the costs they do incur. The probate court has the express power to prohibit further court filings by an unreasonable party, and to summarily deny repetitive motions without requiring others to answer or argue. See Arizona Revised Statutes sections 14-1105 and 14-1109. The court rules which become effective a month later, incidentally, include a concept of “vexatious conduct” that is similar but somewhat more expansive.
- Arbitration of probate disputes is encouraged — but not (yet) required. Mediation and other forms of alternative dispute resolution are also permitted. See Arizona Revised Statutes section 14-1108.
- Guardians, conservators and attorneys must now provide written information about their fees — how they are going to be calculated and at what rate or rates — at the beginning of their involvement. Failure to do so will mean that they are not permitted to collect fees from the ward in a guardianship or conservatorship proceeding. The probate court has been given wider latitude to determine when a professional fee is reasonable and necessary. See Arizona Revised Statutes section 14-5109. Another fee-related change: attorneys are not permitted to wait until the conclusion of a case (or some later event) to submit their bills. Any bills not submitted within four months of the services are waived. See Arizona Revised Statutes section 14-5110.
- It should be easier for the subject of a guardianship or conservatorship — or his or her family — to seek appointment of a new guardian and/or conservator. This change reflects the legislature’s concern that even when family members are unable (or unsuitable) to serve, they should have some say in selecting the fiduciary. There are limits on how often the ward and family members may ask for changes, and the court retains the final say on any substitution, but the statutory changes will probably lead to more changes of fiduciary, at least in contentious cases. See Arizona Revised Statutes sections 14-5307 and 14-5415. The notion that family members — even family members who can not themselves serve — should have a greater say in selecting and monitoring guardians and conservators is sprinkled through other sections of the new law.
- Although most of the new law deals with guardianship and conservatorship changes, there are a few changes in probate proceedings and at least one in trust administration matters. The principal change for trusts: the beneficiary of a trust has the ability to direct appointment of a new trustee — at least if the trust was originally established by the beneficiary. See Arizona Revised Statutes section 14-10706. This section will not apply — at least not directly — to trusts established by someone else for the benefit of the beneficiary. It will apply to self-settled special needs trusts and other irrevocable trusts established by the beneficiary.
What effect will the statutory changes have on guardianship and conservatorship practice? It is hard to be certain until there is more experience. A few likely effects, including some that might be categorized as unintended consequences:
- The cost of probate court proceedings is likely to go up in most cases. This is a paradox, since one of the original motivations behind the changes was to control costs, and especially legal fees. In some very expensive cases in recent years, that might well be the effect. In the vast majority of cases, however, increased requirements and a higher burden on fiduciaries and their attorneys will likely result in at least a small increase in costs.
- There are likely to be fewer private fiduciaries willing to get involved in difficult or contentious cases. That, in turn, is likely to mean an increase in caseloads for the Public Fiduciary in each county. Not only will the Public Fiduciary see an increase in cases, but it is likely that the complexity of the average Public Fiduciary case will increase.
- Some private professional fiduciaries may leave the field, or change their practices significantly. We predict (on the basis of no empirical data whatsoever) that another paradox is likely to be an increase in the number of licensed fiduciaries — and that both the average case load and the professional training and experience of private fiduciaries may well be lower in future years.
On January 18, 2012, Fleming & Curti, PLC, will host a training session for our clients who act as guardian, conservator or personal representative. We will invite fiduciaries who are not our clients, as well. Those in attendance will likely include both family members handling a single case and professional fiduciaries with large and complicated case loads; both kinds of fiduciary will need to know what the changes mean for them. We will cover both these legislative changes and the Supreme Court’s changes in rules and accounting requirements (and forms). If you are interested, you can pre-register by calling Yvette in our office (520-622-0400) and leaving your name and e-mail address. We will be sending out formal invitations in the upcoming week.