Posts Tagged ‘Arizona Court of Appeals’

Unreachable Joint Account Makes Applicant Ineligible for Medicaid

NOVEMBER 14, 2016 VOLUME 23 NUMBER 43
Paul (that’s not his real name) needed long-term care. His health and his mental capability had both declined, and he could no longer handle his personal affairs nor take care of himself.

Paul’s assets included a car (titled in his and his daughter’s names) and three Bank of America (its real name) bank accounts. Those assets put him over the $2,000 eligibility limit for Arizona’s version of the federal/state Medicaid program, the Arizona Long Term Care System (ALTCS).

One problem: Paul’s daughter had her name on the bank accounts and on the car. She had the car in her possession, in fact — and she refused to turn it over.

Before he became incapacitated Paul had signed a power of attorney naming his sister as his agent. She went to Bank of America to get control of Paul’s accounts so she could use the money to pay for his care — and ultimately get him eligible for ALTCS coverage. That’s when she learned about a Bank of America rule: both signers on a joint account are permitted access the account, but an agent under a power of attorney may not exercise that authority on behalf of one owner without the other’s consent.

In other words, Paul’s sister could not close the account, remove Paul’s daughter’s name from the account, or even withdraw money to pay for his care — unless his daughter signed a form letting her do that. And Paul’s daughter refused to sign.

Paul’s sister applied for ALTCS coverage on his behalf. Even though he had assets over the $2,000 limit, she argued that those assets were actually unavailable. ALTCS regulations permit applicants to become eligible when assets are unavailable, and Paul’s sister argued that the situation with Paul’s bank accounts was no different from real estate owned jointly with an uncooperative family member, for instance.

ALTCS disagreed. The agency determined that Paul could get access to his own account if his sister just initiated a court proceeding — a conservatorship of his estate. Consequently, ALTCS declined to grant him eligibility.

Paul appealed (through his sister, of course). The court considering the agreed with her, and ordered ALTCS to cover Paul’s care costs. ALTCS appealed from that decision.

The Arizona Court of Appeals last week issued its opinion in the case. It agreed with the ALTCS agency, ruling that Paul could have access to the account by having his sister initiate a conservatorship. As conservator, reasoned the appellate court, she could then withdraw money from the account for Paul’s care — and that made the whole account a countable, available resource. Paul’s ALTCS eligibility was denied.

The Court of Appeals acknowledged that there would be some cost and difficulty getting access to Paul’s money. That, though, was not enough to prevent counting the asset as available. “Any practical inconvenience or accessibility difficulties are not relevant to determining whether assets are to be counted,” ruled the judges. McGovern v. AHCCCS, November 8, 2016.

The decision in Paul’s case simply fails to deal with the practical realities facing Paul and people in his circumstances. The opinion does not make clear how large the joint accounts might have been (except that they obviously exceed $2,000), but the practical reality is that a conservatorship proceeding might well cost thousands of dollars — and could cost even more if Paul’s daughter simply objected. She, after all, would have a higher priority for appointment as conservator than his sister, and her side of the story about the accounts is simply unmentioned in the appellate decision.

Even if Paul’s sister was appointed as conservator, that does not guarantee that she could get access to the accounts. Bank of America might well insist on getting the joint owners’ consent to close an account, or make other changes in the account structure. Paul’s daughter, when faced with the likelihood of losing the accounts, might actually close them out; she would not be hamstrung by the Bank of America rule about powers of attorney, after all.

And Paul’s vehicle? As joint owner, his daughter has absolute right to possess and use the vehicle. Getting it back for Paul, or forcing his daughter to buy out his interest, would almost certainly cost more than the value of the vehicle — and might not be successful even after significant expenditures.

The outcome is especially odd since ALTCS easily recognizes that joint ownership creates problems for other kinds of assets. Joint tenancy real estate, owned with a family member? No problem — eligibility can be granted (though it is described as “conditional” eligibility, requiring the ALTCS recipient to make efforts to sell their fractional interest). But bank accounts — even small accounts worth far less than a piece of real estate — are treated differently. Or at least the bank accounts in Paul’s case were treated differently.

Another irony: Paul had actually died before his case even got to the appellate level. The dispute was about whether ALTCS would have to pay for the care he had already received — and (though the opinion does not clarify this point) it is likely that his care facility is the one left without recourse, not his sister and not his daughter.

Arizona Appellate Decision Addresses Interesting Parentage Question

OCTOBER 17, 2016 VOLUME 23 NUMBER 39
Kelly and Sam are a married couple. They want to have a child, but cannot do so together, so they agree that Kelly will undergo artificial insemination. The process is successful, and Kelly delivers a beautiful baby boy, Edward.

Does Sam have any duty to support Edward? If Kelly and Sam get divorced, will Sam have any chance at custody, or joint custody, of Edward? If not, does Sam have any right to visitation with Edward?

Take this question forward a few years. Imagine that Kelly and Sam do get divorced, and Sam dies shortly after the divorce is final (without having written a will). Does Edward get any share of Sam’s estate — or perhaps Sam’s entire estate?

These questions may seem easy. Yes, of course Sam has a duty of support. Of course Sam has a chance at custody (and in any event, visitation) upon Kelly and Sam’s divorce. Of course Edward is an heir to Sam’s estate.

Oh — we left out an important element. Kelly and Sam are both women. Their marriage is recognized because of the 2015 U.S. Supreme Court decision in Obergefell v. Hodges. That landmark court decision holds that same-sex marriages are entitled to the same legal status, protections and liabilities as heterosexual marriages.

Arizona law says that when a child is born to a married couple, the husband is presumed to be the child’s father. Does that mean that a same-sex partner is presumed to be the father? Or a second mother? And if the law creates just a “presumption” of paternity, can that be overcome by proof of the biological impossibility of one woman impregnating another?

This is an interesting thought experiment — except that it’s a real question in an actual Arizona court case. We’ve changed the names of all the principals, but this very story played out in a courtroom in Tucson last spring. Kelly had filed for a divorce, and argued that Sam had no right to consideration for custody of or visitation with Edward.

The trial court judge determined that it would be impermissible to create a presumption for a married man that would not apply to a similarly-situated spouse just because she was a woman. Besides, Kelly and Sam had entered into an agreement before Edward was born — they had agreed to be treated as co-equal parents and to seek a “second parent” adoption if they ever resided in a state that permitted same-sex couples to formally adopt one another’s children (Arizona does not clearly authorize such proceedings).

Kelly sought review by the Arizona Court of Appeals, which agreed to take the case under “special action” jurisdiction (even though the underlying case has not been concluded). Last week the Court of Appeals agreed with the trial judge — though with a slightly different shading in their interpretation. As the appellate court notes, the “presumption” that a married partner is the father of a child born during the marriage is not based only on biology. It is also partly a response to the social policy that favors giving a child a right to support from and attachment to a person who has assumed the role of parent.

None of that, ruled the appellate court, is different just because Sam is a woman. Accordingly, the custody/visitation/support case should proceed as if the Arizona statute was gender-neutral, and Sam should enjoy the presumption that she is Edward’s parent. McLaughlin v. Jones, October 11, 2016.

Kelly and Sam’s legal case is (we think) a fascinating analysis of the differences we have to confront as same-sex marriage becomes clearly embedded in our legal framework. But, because of what we do here at Fleming & Curti, PLC, we’re mostly interested in the probate and inheritance implications of their legal case.

Clearly, Edward is now an heir of Sam. If Sam were to die without writing a will, a portion of her estate — and perhaps all of her estate — would pass to Edward. If Kelly were to die, Sam would have the right to full custody of Edward — even if Kelly had nominated someone else to serve as Edward’s guardian.

Interestingly, the words “father” and “mother” do not appear anywhere in Arizona’s Probate Code (Title 14 of the Arizona Revised Statutes). References to “parent” or “parents” should be easy to work with, and the gender of a decedent’s spouse is irrelevant under existing probate law.

In another generation, though, there will be some oddities. If, for example, Edward were to grow up, have children of his own and then die without writing a will, his estate might pass half to his “maternal” and half to his “paternal” family lines. We can hope that by that time, Arizona’s statutory language will have caught up with the times.

“Right of Survivorship” Terminated by Co-Owner Unilaterally

MAY 9, 2016 VOLUME 23 NUMBER 18
First, a short primer on “joint tenancy with right of survivorship”:

In Arizona, there are two main ways that two or more people can own property together (assuming they are not married). One choice is for the owners to be “tenants in common.” The other is to be “joint tenants.”

What is the difference? There are several, but two stand out:

  1. Joint tenants must have an equal interest, while tenants in common can have any variation they choose (60%/40%, or any other variation they can come up with), and
  2. Tenants in common can leave their interests to the other tenant in common, or to anyone they choose. Joint tenancy automatically includes a “right of survivorship,” so that the surviving joint tenants automatically receive the share belonging to a deceased joint owner.

It is that second element — the right of survivorship — that most distinguishes joint tenancy. If three people own the property as joint tenants, and one of them dies, the two survivors are now 50/50 joint owners, with the right of survivorship as between themselves. So, for instance, if a married couple decides to transfer their home into joint tenancy with the wife’s daughter (from a first marriage) as joint tenants, and then the married couple both die before the daughter/stepdaughter, she is the sole owner of the property.

But here’s the less-known thing about joint tenancy: any of the joint tenants can, unilaterally and semi-secretly, turn the joint tenancy into tenancy in common. How? Simply by transferring their fractional interest to another person — even if the recipient promptly transfers the interest back to the original joint owner. In some states (including Arizona), the joint tenant can even transfer his interest to himself and get the same result. Of course, the transfer should be filed with the County Recorder (in Arizona, at least) to be effective, but no notice to the other joint tenants is required.

That’s what happened to Janet Smith (not her real name). Her mother and stepfather (we’ll call them Edna and Greg) owned their home, and Janet lived with them. In 2002, the couple transferred their home into three names: Greg, Edna and Janet, as joint tenants (with right of survivorship).

Edna died in 2006, and Janet continued to live in the home with Greg. She helped take care of him, and helped him to stay at home, until his death in 2013. Sometime before his death, however, Greg had transferred his one-half interest in the home into a trust, which named his two children (from his first marriage) as beneficiaries.

Janet filed a claim against the estate. She alleged that the care she had provided to Greg after her mother’s death was worth at least $100,000, and that there had been an understanding that Greg would not change the joint tenancy arrangement after Edna’s death. Part of the reason her name was put on the house in the first place, she said, was that Edna and Greg relied on her to take care of them, and that she was to receive the house in return.

Greg’s son, as personal representative of Greg’s estate, denied Janet’s claim. The probate court agreed with the disallowance of the claim, and granted summary judgment in favor of the estate. Janet appealed.

The Arizona Court of Appeals affirmed the probate court ruling. The appellate court first noted that there would likely be a problem with Janet’s claim in any event, since an agreement involving real estate ownership would ordinarily have to be in writing. But, since the appellate court agreed with the probate court on Greg’s ability to terminate the joint tenancy, the lack of a written agreement did not have to be considered.

The Court of Appeals ruled that Greg and Edna’s belief and expectation at the time they established the joint tenancy was simply unknown. Janet claimed that Greg had repeatedly told her that she would be “taken care of” after his death; that vague assurance was insufficient to support any agreement not to take the property out of joint tenancy. Janet’s claim failed again at the Court of Appeals level. Show v. Otto, May 3, 2016.

It is important to remember that Janet was not completely disinherited by the outcome. Upon her mother’s death she became an owner of a half interest in the property, and Greg’s later termination of the right of survivorship did not divest her of that interest. She just did not receive the entire property, as she had apparently expected. In fact, the Court of Appeals opinion mentions that the property was sold and the proceeds split. Her share of the proceeds will no doubt be reduced by the amount of attorney’s fees awarded against her by the appellate court decision.

Though the joint tenancy/tenancy in common distinction is most often thought of in the context of real estate, the same rules apply to personal property as well. The distinction is often, if somewhat imprecisely, characterized as a difference between “and” and “or” on a title. If, for instance, a vehicle title indicates that an auto is owned by “Greg AND Janet”, that amounts to tenancy in common — it takes both Greg and Janet to transfer the vehicle to a buyer, and if either of them has died then the decedent’s interest must be dealt with (by probate proceedings or otherwise). But if the auto title is “Greg OR Janet”, either can sign the title, and the result is equivalent to a joint tenancy (with right of survivorship).

And, just to confuse things further (sorry about that), there is an entirely different set of considerations when property is held by a married couple. But that’s a story for another day.

Guardianship / Conservatorship Petition Backfires on Son Who Exploited Mother

MAY 2, 2016 VOLUME 23 NUMBER 17

When a litigant asks the court for particular relief, lawyers call the request a “prayer.” It isn’t always as spiritual or respectful as that sounds, but it does give us a chance to offer good generalized legal — and life — advice: be careful what you pray for.

Consider the family of Martha Young (not her real name). She had two children, son Donald and daughter Joanne. When Martha was in her early 90s, her ability to manage her own affairs had slipped somewhat, and Donald decided he needed to get legal authority to handle her affairs. He filed a petition for guardianship (of the person) and conservatorship (of the estate) in the Maricopa County (Phoenix) courts.

Donald immediately thought better of his prayer for relief, and dismissed the case before his mother or his sister had answered it. Still, Martha and her attorney filed a response — but rather than simply objecting to the guardianship and conservatorship, she alleged that Donald had stolen money from her, and had put the money he took into an account in his name alone. She alleged that she was a vulnerable adult under Arizona law, and asked that Donald be ordered to return her money.

The probate court ordered Donald to return the funds in question, and he appealed. The Arizona Court of Appeals reversed, finding that there was no jurisdiction in the probate court once Donald dismissed his initial petition. That looked like it might be the end of things.

Then Charles Schwab, where the account in question was held, filed a separate action with the court. The investment company said it knew about the allegations of theft and exploitation, and it didn’t want to turn the money over to the wrong person. Charles Schwab asked the court to tell it who should receive the balance of the account Donald had set up.

That got the issues back before the court. Donald insisted that his mother had given her half of a large parcel of land she had owned, and that when the land was sold (yielding $818,955.61), his mother had moved half of the net proceeds into an account in his name. With “her” half of the sale proceeds, she bought a home (leaving a small balance which, Donald insisted, she had voluntarily added to “his” half of the sale proceeds). After a number of transactions, the $150,000 of remaining funds found their way into the Charles Schwab account.

Meanwhile, it turned out that the bank where Donald had opened his account had filed a report with Adult Protective Services, expressing concern about the way Martha’s finances were being handled and her ability to protect herself. That report had led to an investigation but (apparently) no action to stop the use of funds or recover any of the money for Martha.

Here’s one of Donald’s problems: when he filed the guardianship and conservatorship petition against his mother, he listed the bank account as one of her assets. But the court ultimately ruled that, since the conservatorship matter had never been litigated, Donald could not be held to the position he took in the initial filing. Similarly, Martha’s claim could not be dismissed on statute of limitations grounds, since she had made a good-faith effort to recover her funds when she filed the petition in the guardianship and conservatorship action — even though it was ultimately dismissed by the Court of Appeals.

After a two-day trial, the judge ruled that Martha was a vulnerable adult (and had been for almost a decade), that Donald had acted as her de facto conservator throughout the banking and real estate transactions, and that the Charles Schwab account really belonged to Martha. The judge ordered Schwab to turn the money over to Martha’s estate (by the time of the court ruling she had died), and also imposed a judgment against Donald for attorney’s fees — another $92,000.

Donald appealed, arguing that Martha’s claims should have been dismissed because they were filed years after she knew or should have known to file her lawsuit. He also argued that he should not have to pay attorney’s fees to his mother’s estate, and that he had not been shown to have exploited his mother financially.

The Court of Appeals noted that the evidence had shown that Donald lived with his mother for years, that he had seriously reduced the value of her home property (five dumpsters of his trash was removed after her death and his eviction from the property), that Martha had weighed just 62 pounds when her daughter had her removed from Donald’s care, and that he had managed her affairs for at least five years before the litigation began. Donald had to admit that his mother had been unable to manage her own affairs for at least five years before his initial court filing — that was what he had alleged in that first petition seeking control of her affairs.

After review of all the evidence considered by the trial court, the Court of Appeals upheld the lower court’s rulings. The judgment against Donald — for return of all the funds in the Charles Schwab account plus over $100,000 in attorney’s fees and interest on those awards. The court also ordered Donald to pay attorney’s fees for the appeal, in an amount to be determined after his mother’s estate’s attorneys file fee affidavits with the court. Yamamoto v. Kercsmar & Feltus, April 19, 2016.

Murder-Suicide Case Leads to Complex Probate Claim Analysis

APRIL 25, 2016 VOLUME 23 NUMBER 16

It was a horrible, tragic story. In June, 2012, Phoenix resident James Butwin killed his wife and three children, drove the family car to a remote area in the desert, set the car on fire and killed himself. News stories soon revealed that the couple were enmeshed in a divorce, that there was a dispute about whether a prenuptial agreement was valid, and that Mr. Butwin was undergoing treatment for a brain tumor.

Mr. Butwin had an estate, but no surviving family. His mother-in-law filed a probate proceeding for Mrs. Butwin, and that estate sued Mr. Butwin’s estate for “wrongful death” — for the murder of his wife. After a trial, she won an award of over $1 million against Mr. Butwin’s estate. Then she sought to impose a “constructive trust” against his estate’s assets to satisfy that judgment.

Meanwhile, Mr. Butwin’s business associates were studying his books. They discovered that, as manager of several properties they owned, Mr. Butwin had embezzled almost $1 million. They filed a claim against his estate, seeking repayment of $965,000.

Mr. Butwin’s estate was insufficient to satisfy the two million-dollar claims. Who should be paid first? Or should the claimants have their claims reduced proportionally?

An Arizona statute (the so-called “Slayer Statute” at A.R.S. sec. 14-2803) says that a person who “feloniously and intentionally” kills another person automatically forfeits any claim they might have against the victim’s estate. Clearly, Mr. Butwin could not inherit any share of his wife’s estate. But that doesn’t change the fact that some — perhaps most — of their assets were his before the killing. In one subsection, the statute goes further: it allows imposition of a “constructive trust” on the killer’s assets:

K. The decedent’s estate may petition the court to establish a constructive trust on the property or the estate of the killer, effective from the time of the killer’s act that caused the death, in order to secure the payment of all damages and judgments from conduct that, pursuant to subsection F of this section, resulted in criminal conviction of either spouse in which the other spouse or a child was the victim.

But what is a “constructive trust”? It is a legal device employed by the courts to sequester assets that should not have belonged to the record owner in the first place. It is often used, for instance, to seize property purchased with ill-gotten proceeds — even though the property might itself not be available to satisfy debts. If, for instance, a public official were to take bribes, and use the bribe money to purchase a farm, the court might impose a “constructive trust” on the farm to allow the government, as the injured party, to seize the property to recover the bribe money. That’s not an imaginary story — that’s precisely the story behind a leading British case allowing use of a constructive trust.

Arizona’s statute on collecting wrongful death proceeds from a killer in circumstances like Mr. Butwin’s would seem to speak precisely to the claim of his wife’s estate. But there was one problem: Mr. Butwin didn’t live long enough to face criminal prosecution, much less conviction.

That was the basis on which the probate court denied the request for a constructive trust by Mrs. Butwin’s estate (and her mother). Before the Court of Appeals, Mrs. Butwin’s estate argued that requiring a criminal conviction was absurd, since the statute would only apply when the killer himself had died. Besides, the wrongful death action can be maintained even when there is no criminal conviction, since the standard of proof for civil actions is different (and easier to meet).

The Arizona Court of Appeals upheld the probate court decision. It is not absurd, ruled the appellate judges, to apply the statute only where the killer has survived long enough to be convicted and then dies. While that may not be a common circumstance, it certainly could happen — and if the legislature wanted to apply the constructive trust statute to murder-suicide cases like the Butwins’, they could certainly have written the statute in that fashion. Estate of Butwin v. Estate of Butwin, April 19, 2016.

The Court of Appeals decision doesn’t actually resolve the sequence of payments from James Butwin’s estate. It might be possible, for instance, for his business associates to argue that all — or substantially all — of his assets are traceable to the embezzled funds. If that argument is not made, or is not successful, the statutes spell out a sequence of payments to be made when an estate is insufficient. Arizona Revised Statutes section 14-3805 spells out that sequence, which starts with administrative costs (filing fees, lawyer’s fees and the like), then moves on to funeral expenses, federal tax claims, expenses of the decedent’s final illness, state taxes, and then “all other claims.”

The statute explicitly rejects payment of any creditor in a given class ahead of other creditors of that class. Since neither the embezzlement claims nor the wrongful death judgment fit into any of the other categories, they will probably both be characterized as “other claims.” That will likely mean that each will receive approximately equal shares of Mr. Butwin’s estate — and that any other claimants will also have their claims reduced to about half of the amount due.

Given the size of the estate, the size and nature of the claims, and the emotional impact of the case, it seems likely that there will be further litigation to resolve the competing claims. We’ll let you know if there is another legal footnote to this tragic, horrible story.

Court Orders Weekly Visitation for Grandmother of Child

NOVEMBER 30, 2015 VOLUME 22 NUMBER 44

When Mary Lansing (not her real name) gave birth to a daughter in August, 2013, her boyfriend (and the father of her daughter) was already in prison. Four months later, she filed a paternity action naming her boyfriend, and sought a court order granting her sole legal decision making authority and child support.

Her boyfriend’s mother Louise filed a motion to intervene in the paternity action. She asked for a court order giving her regular visitation with her granddaughter. Because Mary had expressed concerns about Louise, and the baby’s father had expressed concerns about Mary, the court appointed what is called a “Court Appointed Advisor” to investigate and report.

A Court Appointed Advisor (let’s call them “CAA”) is a professional, usually trained in mental health or appropriate social services. The court actually has the option of appointing an attorney to represent the child’s wishes (though that wouldn’t have made sense in this case, since the child is still just a little older than two), or an attorney to represent the child’s best interests, or a CAA.

The logic of the CAA appointment makes sense. This professional can visit the home where the child lives, the home where visitation or shared custody might be carried out, and interview all the players. The CAA then becomes a witness — an expert witness, in fact, and (in a sense) the court’s own expert witness. This might help the judge get to the bottom of the dispute more readily.

In this case, the CAA prepared a written report and testified at a temporary visitation hearing. After that hearing, the judge ordered that Louise would have one three-and-a-half hour visitation session (unsupervised) with her granddaughter every Sunday.

Mary appealed the order, arguing that the judge had failed to give sufficient consideration to her basic right to control who would have access to her daughter. She also objected to the judge’s reliance on the CAA report, and to the failure to order Louise to pay her attorney’s fees.

The appellate court upheld the trial judge’s rulings on each issue. It was appropriate to rely on the CAA’s recommendations, said the Court of Appeals; there was no evidence that the judge failed to make his own decision about the child’s best interests. Merely because many of the CAA’s recommendations were adopted, it does not follow that the judge improperly “delegated” his decision-making role.

A large part of the trial judge’s ruling relied on the obvious animosity between Mary and her ex-boyfriend’s earlier girlfriend, the mother of his first child. The fact that Louise indicated a desire to let her two granddaughters (and half-sisters) get to know one another should not prevent her involvement in the child’s life.

One other point made by the trial judge (and approved by the Court of Appeals): the amount of intrusion on Mary’s parenting was very limited. A single weekly session for just a few hours should not be seen as much imposition. Mary’s objections, though not irrelevant, should not preclude Louise’s ability to maintain at least some slight contact with her granddaughter.

On the subject of attorney’s fees, the trial judge had noted that Mary’s behavior in the court proceedings was “abusive and unnecessary.” Based on that, and on the fact that Louise was successful in securing a visitation order, the trial judge had refused to order Louise to pay any portion of Mary’s attorney fees.

On the other hand, the trial judge had declined to order Mary to pay any of Louise’s fees — not because she should not have to pay, but because she had no assets from which to pay. The Court of Appeals explicitly approved the trial judge’s handling of the attorney fee issue. Lambertus v. Day-Strange, November 19, 2015.

There are few (perhaps surprisingly few) Arizona appellate cases about grandparents’ visitation rights. Most of the cases that are decided at the appellate level are “memorandum” decisions — meaning that they are not supposed to be cited as precedent in later cases, though they do represent the appellate judges’ thinking on the issue. Mary and Louise’s dispute was resolved in just such a memorandum decision.

Imagine that you are having a dispute with the mother (or father) of your grandchild, and that you want to seek a court mandate that you have visitation rights. Assuming that your dispute is in Arizona, what does this case tell you about your chance of success, or alternative approaches you ought to consider? (If your dispute is not in Arizona, do not take this case or anything we write here as indication of a single thing about your dispute — talk to a lawyer in your state.)

Probably not a lot. Each grandparent visitation case will be dependent on its own facts, and the collection of evidence (and its presentation in court) can make facts difficult to pin down with clarity. The process can be cumbersome and expensive, and bad interpersonal relationships are unlikely to improve in the course of litigation.

Probably the best take-away from Mary and Louise’s legal dispute is that you should start by reading the Arizona statute on grandparent visitation (look particularly at subsection C for visitation). It is important to understand that the statute does not tell you that if you meet the basic standards you will be entitled to a visitation order. Instead, the statute is a threshold issue: if your case does not meet one of the four criteria for a visitation proceeding, there is no recourse under the statute at all.

Exploitation of a Vulnerable Adult, or Not? You Judge

NOVEMBER 16, 2015 VOLUME 22 NUMBER 42

This week we’re going to ask you to be the judge. We’re going to tell you a story, then give you a moment to decide what you think should be the outcome of a lawsuit. Once you’ve decided, we’ll tell you what actually happened in the courts. Ready?

Diego Ramirez (not his real name) was 80 years old when his wife died. Shortly thereafter he moved in with his daughter and son-in-law.

Diego was a Spanish immigrant, and spoke no English. He was having trouble handling his finances, and his daughter and son-in-law helped him. They also provided care for him — first in their home, and later in the nursing home where he moved when he was unable to stay at home any longer.

The care they provided for Diego was complete — they made doctor’s appointments (Diego had a heart condition as well as his increasing confusion), transported him to medical appointments, administered his medications, took him on social and recreational outings, and even took care of his dog. Diego’s daughter actually quit her job to take care of her father (though she was able to return to work part-time and, eventually, full-time).

Shortly after Diego arrived in their home, his daughter and son-in-law arranged to sell his house. His daughter located an attorney, made an appointment and took Diego to visit the attorney. The attorney helped complete the sale of the home, and prepared a power of attorney document for Diego to sign. The power of attorney gave his daughter and son-in-law authority to manage his finances, and to conclude the sale of his home.

The daughter and son-in-law used some of the proceeds from that sale to improve their own home, adding rooms for Diego and doing some other work that needed to be done. They did not add Diego to the title on their home; when they later sold the home, the took the proceeds and bought a new home in their own names.

Diego had a private pension and Social Security. His daughter and son-in-law deposited the monthly checks in their own account and used the proceeds — along with their own income and savings — to take care of the entire household, including themselves and Diego. In other words, they did not keep separate accounts for Diego, and could not show exactly how his income had been spent after the fact. They handled Diego’s savings in the same way, using his funds to keep the entire household operating.

According to the daughter and son-in-law, Diego knew how his funds were being used. They said that he had agreed with them that they could use his funds so long as he lived with them and they were providing the care he needed.

After this relationship continued for ten years, Diego died. One of his sons successfully sought appointment as personal representative of his estate, and sued the daughter and son-in-law for return of the funds they had allegedly exploited from Diego while he was a vulnerable adult. The daughter and son-in-law responded that the reasonable value of their services on his behalf exceeded what they had received, and that if anything his estate owed them money.

The probate court held a one-day hearing on the allegations of exploitation of a vulnerable adult. From the recitation of facts we’ve provided (taken from the later Court of Appeals decision, by the way), can you tell how the court ruled? Did Diego’s daughter and son-in-law take funds from him improperly? Were they entitled to additional fees for the ten years of care they provided?

Think about it a minute before you move on. What would you decide?

The probate judge decided that Diego was a vulnerable adult, that his daughter and son-in-law acted as if they had been his conservator (though they were never appointed by any court), and that they had commingled his assets and income with their own. They enriched themselves with his assets, and they were unable to provide any meaningful accounting of the funds they had used. They were found liable for a breach of their fiduciary duty and a violation of the Arizona statutes on exploitation of a vulnerable adult, and they were ordered to repay his estate $15,527.26 — plus an additional $35,000 in attorney’s fees incurred by the estate.

The Arizona Court of Appeals upheld that ruling, agreeing with the probate judge that Diego was a vulnerable adult, that the daughter and son-in-law improperly commingled assets, and that they had violated the exploitation statutes. Of some interest to the appellate court was the provision of the Arizona law that anyone in the daughter and son-in-law’s position must use the vulnerable adult’s assets solely for the benefit of the vulnerable adult.

The existence of the power of attorney did not improve the daughter and son-in-law’s position. Nor did the agreement that Diego could live with them and that they would provide care. Neither of those authorized the daughter and son-in-law to commingle assets or take Diego’s funds for their own benefit. Rodriguez v. Graca, November 3, 2015.

Let us assume for a moment that Diego in fact wanted to turn over most of his assets and income in return for a home and the care required to allow him to live there as long as possible. What could he (or his daughter and son-in-law) have done in order to make that arrangement possible?

First, a clear (and, preferably, written) understanding should have been reached. It probably would have been helpful to discuss that arrangement with Diego’s other children, so they could talk with Diego about it at the time. It also would have been important for the daughter and son-in-law to maintain clear records, showing how much of Diego’s money was needed to care for him, and how they spent the funds. That could have included time records as well as financial details.

A final word of advice: do not enter into these kinds of arrangements lightly. It is very difficult to establish the reasonableness of the agreement years later, with the vulnerable adult no longer available to explain what they had in mind at the time. Recognize that the senior’s needs — and ability to supervise or negotiate — will probably change over time, and perhaps over a short period of time.

Oh, and how did you do as the judge?

Quit Claim Deed Was a Mistake, Says Mother

OCTOBER 26, 2015 VOLUME 22 NUMBER 39

We’ve made the key points before: don’t sign your home over to your children while you’re still alive, and be very careful about doing your own estate planning without an attorney’s help. This week we’re going to add a couple of other points: do not rely on non-lawyer document preparers for legal help, and don’t try to represent yourself in court.

What kind of case could possibly be so convoluted as to support all of those positions? The Arizona Court of Appeals decision in a simple dispute between Deborah Fitch (not her real name) and her son Warren demonstrates all of those principles.

Let’s start with a bit of background information. Since 2003, Arizona has recognized a category of non-lawyer assistants called “Certified Legal Document Preparers.” The certification is handed out by the Arizona Supreme Court, based on an application and examination process. Document preparers (who often list the initials CLDP after their name) are not supposed to give legal advice, but can prepare divorce petitions, deeds, wills, trusts and other documents without the supervision of an attorney. Opinions about this authority are mixed, but Arizona now has over a decade of experience with its unique program.

How does that relate to Deborah Fitch? In 2009 she visited a CLDP to facilitate the transfer of her home to her son Warren. It is unclear precisely what she told the CLDP, but she signed the document that was presented to her. That document was a quit claim deed, transferring her home from her name alone into joint tenancy between her and her son.

Sometime later she decided that she had made a mistake. She had intended, she said, to sign a “beneficiary deed,” not a quit claim deed. If she had signed a beneficiary deed, Warren would not have gotten any immediate interest in the property, and Deborah would be able to change her mind at any time up until her death.

Deborah asked Warren to sign a deed conveying the property back to her, and negating the quit claim deed. Warren refused. Three years after she initially gave him an interest in her home, Deborah was filing a lawsuit in the local Arizona courts against her son. She sued, incidentally, to get her home back — and also to make him repay the student loans she had paid for him. Deborah had an attorney in that lawsuit, but Warren chose to represent himself.

Deborah’s attorney asked Warren to admit that his mother had intended to sign a beneficiary deed rather than a quit claim deed. Warren did not respond properly to that request, but did file an affidavit from the document preparer that claimed Deborah had understood the difference and had chosen to sign a quit claim deed. The trial judge gave Warren a second chance to respond to the request from his mother’s lawyer; he instead filed something he called a “motion to disqualify counsel in violation of ethical rules, motion to dismiss, response to amended complaint.”

Eventually, the trial judge granted Deborah’s attorney’s request for summary judgment in her favor, ruling that the quit claim deed was invalid and that Warren owed his mother for her loan payments on his behalf. The judge also granted Deborah an award of her attorney’s fees. Warren appealed.

The Arizona Court of Appeals disagreed with the trial judge. Warren might not have properly denied the assertion that Deborah misunderstood the nature of a quit claim deed, ruled the appellate court, but that is ultimately irrelevant. What matters is what Deborah understood, not what Warren thought she understood. And on the subject of Deborah’s understanding, the appellate judges noted that the affidavit from the document preparer created a dispute about her actual understanding. The trial court should not have granted summary judgment on that issue, ruled the Court of Appeals.

Not everything was reversed, however. Although Warren had asked for reversal of the judgment against him for the student loan payments, he didn’t actually introduce any arguments about why that item should be reconsidered. But, since most of Deborah’s claim was being sent back to the lower court for a trial, the appellate court did reverse the award of attorney’s fees. Fees v. Fees, October 20, 2015.

Could a lawyer have changed the course of the dispute between Deborah and Warren? We’d like to think so. A lawyer would have strongly counseled Deborah against signing a quit claim deed, and made sure she clearly understood the effect of the decision before she signed. In fact, a lawyer might well have declined to prepare the deed that eventually caused Deborah so much trouble. What she really needed (a will, powers of attorney, possibly a beneficiary deed) could have been prepared inexpensively by her lawyer — had she consulted one.

Warren, too, skipped legal representation once the dispute landed in court. Had he gotten good legal advice, he could have been guided as to legal procedures, and he might not have lost in the first instance in the trial court. He (and his mother, for that matter) would have saved significant expenses and delays incurred by having to go to the Court of Appeals — and back to the trial court for a repeat round of procedures.

Had this mother and son both had good legal representation, they might well have been able to work something out without the expense of court proceedings and appeals. Would they once again be a loving family, trusting one another implicitly? Perhaps — but it seems pretty unlikely that such an outcome remains possible now.

What Survivor Must Do When Trust Mandates Split on First Death

SEPTEMBER 14, 2015 VOLUME 22 NUMBER 33

Once in a while we read an appellate court decision that nicely addresses a subject which isn’t the issue before the court. A recent Arizona Court of Appeals case illustrates this phenomenon nicely.

The legal issue was technical and would appeal only to lawyers — and probably only to appellate lawyers, at that. After the probate court ruled against them, some of the beneficiaries to a trust filed a motion to have the court reconsider its decision. When that also failed they appealed, but alleged that the probate court should have considered an argument similar to but different from the one they actually made. That approach was, unsurprisingly, unsuccessful.

What’s more interesting about the decision, though, is the background of the dispute. It involved a joint revocable trust that mandated division of a married couple’s assets into two equal shares on the death of the first spouse.

A little background might be appropriate here. Joint revocable trusts are fairly common in Arizona, and provisions like those involved in this case are far from unusual. Until recent years, the mandatory division was often a tax-driven decision, in order to minimize estate taxes on a married couple’s assets. Today that is less likely to be the reason for a mandatory trust split, since only very large estates face any tax liability at all and surviving spouses inherit their deceased spouse’s estate tax exemption amount, to the extent that it is unused.

The combined estate in the recent appellate case was apparently modest, and so estate taxes seem unlikely to have been the reason for the mandatory split. What other reason, then, might a married couple have for ordering a split of assets on the first death? Second marriages.

Dale and Mary were married for some years. They each had children from a prior marriage, and they owned their home in Green Valley, Arizona. In order to make sure that their home’s value was split equally between the two families, they created a trust to hold just their residence. That trust included a mandatory split into two shares on the first death, and directed that each half-interest in the trust would pass to one spouse’s children. That way they could assure the division even if the survivor lived for years after the death of the first spouse.

As it happens, Dale died first — in 2005. Mary died four years later. Though she was trustee of the trust holding the residence, she never actually divided the trust in half. She did, however, use the home as security for a loan she took out after her husband’s death.

Four years after Mary died, one of Dale’s children filed an action to compel Mary’s children to account for the administration of the trust, and to perfect the claim to half the house. The probate judge hearing the matter did not order an accounting, but did order half of the home’s value to be distributed to Dale’s children — along with $33,429.33 from Mary’s half, to make up for the fact that her children had used the residence after Mary died. The judge also ordered an offset for the loan Mary took out against the house after Dale’s death.

Mary’s children asked the probate judge to reconsider his decision, which he declined. That set up the actual legal argument in the appellate case, which (as we’ve already noted) as actually less interesting than the mandatory trust split issue. Suffice it to say that the Court of Appeals chose not to upset the probate court’s judgment directing distribution of the trust according to its terms, plus damages for Mary’s (and her children’s) misuse of the trust’s sole asset. In Re Newman-Pauley Residential Trust, August 31, 2015 (an unpublished decision).

Why is the uncompleted split so much more interesting than the actual legal issue in Dale and Mary’s trust case? Precisely because it is so commonplace.

We regularly meet with surviving spouses who have not gotten around to the division of assets mandated by a joint trust document. Sometimes the trust might include provisions that allow the surviving spouse to skip the requirement, or to undo it. But if the trust unequivocally directs such a division and the surviving spouse does not follow that direction, the courts will ultimately order a split to reconstruct what should have happened months, years or sometimes decades before.

Of course these disputes are most common in second-marriage situations, where each spouse has children — often children who were grown when the marriage took place. They also occur in family situations where each spouse is closer to one child or one group of children. Sometimes we see them when the couple operated a family business, and less than all of the children are involved in managing the business after one spouse’s death.

What is the lesson to be taken away from the dispute between Mary’s and Dale’s children? Get legal advice early, and follow it. If Mary had talked with her lawyer shortly after Dale’s death, she might have gotten direction about how to actually make the trust split. Her expectations — and those of her children — might have been set more reasonably, too. That might have saved the later dispute and attendant legal expenses.

Attorney’s Fees in Probate Proceeding Challenged, Approved

SEPTEMBER 7, 2015 VOLUME 22 NUMBER 32

How much can an attorney charge in a probate proceeding? In Arizona, at least, the principal rule is one that is difficult to determine: attorney’s fees must be “reasonable”. But what does that actually mean?

A recent Arizona Court of Appeals decision approving the fees charged by the attorney for an estate’s personal representative may give the answer for that case, but may leave lawyers (and heirs) scratching their heads. It involved a relatively small estate, and what looks at first glance like an unremarkable set of legal issues.

Angela Teran (not her real name) died in 2010. Her will was easily admitted to the probate process in Maricopa County (Phoenix) courts. A personal representative was appointed, and she hired Phoenix-area attorney Robert Kelly Gorman to represent her.

Angela’s will directed that $2,000 should be given to her church, and the rest of her estate divided among four named individuals. It was not clear from the will whether the division of the remainder should be in equal shares or by some other arrangement. Her estate consisted of a single $35,000 bank account and another $3,000 in trust.

Once the probate was filed, the attorney began communicating with the four beneficiaries to figure out how to make the distribution. He proposed that the remaining estate balance should be divided equally, and he prepared an agreement to that effect for all the beneficiaries to sign.

Two beneficiaries quickly signed, but the other two did not. For two years nothing developed, though there were apparently numerous contacts among the attorney, the personal representative and one of the beneficiaries about how to treat all four beneficiaries fairly. Finally, the beneficiary who disagreed with the proposed distribution filed a request with the court to remove the personal representative.

At a hearing in 2012, the court directed attorney Gorman to prepare a proposed plan for distribution of the estate and a petition for approval of his fees incurred in representing the personal representative. He did just that, proposing to give the church its $2,000 and just $1,000 to each of the four other beneficiaries. He claimed fees and costs totaling $33,620.90, of which $22,650 had already been paid.

At about this time, the personal representative herself died, and the contesting beneficiary was next in line to administer the estate. Upon her appointment she objected to the proposed (and already collected) attorney’s fees, alleging that they were unreasonable. After a hearing, the probate court denied approval for Gorman to collect any additional fees, but did not order him to return any of the $22,650 he had already received. The new personal representative appealed, urging the court to order him to return some or all of his fees.

The Court of Appeals, in a split opinion, approved the probate court’s determination on the reasonableness of Gorman’s fees. While the two judges voting to uphold the fee award found it “concerning that the amount of fees awarded is very large given the size of the Estate,” they did not find any basis on which to reverse the probate judge’s determination. Of particular note to the majority judges was the fact that the contesting heir did not point to particular items on Gorman’s bills that should be disallowed, but instead relied on her assertions that he treated her unfairly and that his fees deprived the beneficiaries of their inheritances. That, said the judges, was not enough of a challenge to force reduction of his fees. Kurowski v. Gorman, August 25, 2015.

The one dissenting judge wrote a strongly-worded opinion. He noted that the approved fees ended up being 59% of the entire estate — an amount he called “strikingly unreasonable.” While the lawyer’s early actions were unobjectionable, wrote the dissenting judge, he should have moved the dispute to the court for resolution much more quickly; had he done so, far less time (and money) would have been spent to “field communications that were completely unproductive.”

Under earlier Arizona appellate decisions, lawyers involved in probate, guardianship, conservatorship and trust disputes are required to make an analysis of the cost and benefit of legal actions, and to balance those considerations when determining fees. The probate court, argued the dissenting judge, should have undertaken that same analysis when reviewing the fees — including those already collected.

What does the Kurowski opinion mean for attorney’s fees in other cases? Not much, actually. The opinion is a “memorandum” decision, which means it is not supposed to be used as precedent in other cases. The fact that it is a divided decision also calls into question its value for other cases. But it does demonstrate that one probate judge, and two appellate judges, were persuaded that, at least in a single case with difficult beneficiaries and its own peculiar facts, a fee of almost two-thirds of the estate could be justified.

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