MAY 14, 2012 VOLUME 19 NUMBER 19
In Arizona (as in most other states) there is an important rule about wills: if the original document was in the possession of it’s signer, and it can not be found after the signer’s death, then there is a presumption that it was destroyed. Not only that, but the presumption is that the signer destroyed it, and that he intended to revoke his will by doing so. Arizona’s statute on missing wills is pretty clear. What is less clear is how to apply the statute in real cases with individualized facts.
The logic of the presumption is pretty clear. One can revoke one’s will by committing a “revocatory act” upon it, according to a different section of Arizona’s probate code. So if tearing up, or burning, your will is sufficient to revoke it, well, if it has gone missing the system is simply going to presume that that’s what you did.
Of course people lose their original wills all the time. Sometimes surviving relatives or friends know what became of the original. Sometimes it doesn’t make very much difference (if, for instance, the will simply leaves everything to family members in the same proportions they would receive if there had not been a will at all — or if there are no assets in the decedent’s name, everything having been transferred into a living trust, or placed in joint tenancy, or spent). Sometimes everyone can agree that the loss was accidental, and that a copy should be admitted to probate. Sometimes none of those things are true.
Take the case of Warren Alexander (not his real name). When he died, at age 94, his original will could not be found. What could be found was a copy of the will, a copy of three codicils he had signed over the years, and the original of his fourth codicil. The fourth codicil contained some changed language and, as is usually the case when lawyers draft codicils, added a line at the end that said he was otherwise republishing (readopting might be a more familiar term) his original will.
What does that mean? Does it depend on the sequence of events? Assuming that Warren actually destroyed his original will and intended to revoke it, would it make any difference whether that was before or after he signed the fourth codicil?
The Arizona probate court hearing the case decided that the codicil was valid (the original had been found, after all, and it was properly executed). Because it contained language incorporating at least some of the provisions of the original will, those provisions were still valid as well. The fourth codicil was admitted to probate.
Family members would inherit Warren’s estate if there had not been a valid will at all. One of them appealed the probate court’s ruling, but the Arizona Court of Appeals agreed with the probate judge’s decision. According to the appellate judges, the probate judge had not admitted a missing will to probate — he had admitted a codicil that incorporated some or most of the terms of that missing will. In fact, observed the Court of Appeals, the codicil really was a will; although we think of codicils as amending wills, they are themselves testamentary instruments with all the power and effect of a will. Estate of Andreson, May 4, 2012.
What does Warren’s probate tell the rest of us about what we should do? A few suggestions come to mind:
Keep track of original documents. Some of them are not themselves important (though the rules may vary from state to state). The deed to your house, for instance — in Arizona, it is not important to keep that original, provided that it has been recorded. Your living trust is generally still valid even if the original can’t be found. But it would be good to keep all the original documents in one place.
If you really do want to revoke your will, do it by signing a new will rather than tearing up your old one. And for goodness’ sake, talk to a professional. The small cost of involving a lawyer will be saved many times over by your heirs and devisees.
Periodically review your documents, and go looking for originals. If you can’t find them, ask your lawyer to redo them and sign new originals.
Rather than amending a will four times you probably want to consider just redoing the whole thing. That reduces the number of documents you have to keep track of, it reduces the likelihood of inadvertent errors, and it simplifies your estate planning. It also probably costs no more than successive codicils (lawyers don’t usually charge by the word, despite the jokes we have all heard).
MAY 7, 2012 VOLUME 19 NUMBER 18
We have written about contracts to make (or not to revoke) a will before. The question comes up infrequently, and usually only in a handful of ways: can you and your spouse make an enforceable agreement that you will leave your respective estates to, say, your children no matter what? Yes, you can — at least in Arizona.
For John and Martha Lindford (not their real names), the question came up during their divorce proceedings. Martha wanted to make sure that the couple’s two children, John, Jr. and Paula, would receive at least a share of John’s estate when he died. When the couple negotiated a property division as part of the divorce, it included a provision that required each of them to “execute a Will leaving fifty percent (50%) of their respective estates in equal shares to the children and twenty-five percent (25%) to each other.”
Eleven years after the divorce was final they both agreed that it was time to modify their first arrangement. John and Martha both signed an amendment that eliminated the requirement that any share of each estate be left to the other, and instead provided that 75% of each ex-spouse’s estate would go to the two children. Six months after that modification, John remarried.
Five years after the second marriage John was diagnosed with cancer, and he began to seriously plan his estate. He amended signed a new will and modified his existing living trust; the new documents specifically left several business entities to his new wife, and provided that she would also receive an additional amount to bring her share of his estate up to 25% if it did not already amount to that much.
In the months after his cancer diagnosis, John also transferred several assets — the family home, several bank accounts and one of the businesses — to his second wife outright. When he died eighteen months after diagnosis, the effect had been to leave his second wife substantially more than one-quarter of his entire estate — although she had gotten a large part of that share by lifetime gifts, not in his will or the trust.
John, Jr., and Paula and first wife Martha filed a claim against John’s estate. They argued that the effect of his gifts and the terms of his will and trust violated the marital property agreement as it had been amended. His second wife acknowledged that she had gotten more than one-quarter of John’s assets, but argued that the agreement only required him to have a will leaving 75% to his children — and that lifetime transfers were not prohibited by the agreement.
After a two-day trial, an Arizona probate judge ruled that John’s actions violated the property settlement agreement with his first wife. The second wife was ordered to return all the assets she had received from John, so that a new division could be made and her share could be capped at 25%. She appealed the ruling.
The Arizona Court of Appeals agreed with the probate judge, and upheld his ruling. The appellate judges calculated that John had given about $2.5 million — amounting to more than one-third of his entire estate — to his second wife, and that he had done so in an attempt to defeat the agreement he had signed with his first wife. Estate of Lockett, April 26, 2012.
Should John’s and Martha’s original agreement, signed in the course of a divorce nearly two decades before John’s eventual death, effectively tie John’s hands indefinitely, and despite his later marriage, growth of his estate and changes in his family relationships? That question is larger than the legal question posed by his probate case. For good or ill, John and Martha had signed an agreement that compelled them each to leave three-quarters of their respective estates to their two children. That agreement might have turned out to have been unwise or constraining, but it was their agreement.
What formalities are required for such an agreement to be effective, and to bind the parties? Arizona law (and other states may have different provisions, so be careful about generalizing from Arizona’s example) requires a contract to make a will — or not to modify or revoke a will — to meet only very basic formal requirements. Paradoxically, it would seem that a contract which does not satisfy basic will formalities (e.g.: unwitnessed and not in the decedent’s handwriting) might qualify as an enforceable contract, thereby effectively creating a will.
What landmines and roadblocks might people considering such a contract (e.g.: the lawyers representing a couple in a divorce proceeding) reflect upon before signing? Well, the opinion in John’s probate case turned, among other things, on a letter he wrote before the agreement was signed. In that letter John reported that he intended to leave 75% of his “entire estate” to his first wife and children. When the second wife later argued that the agreement necessarily only covered his will and his probate estate (and therefore should exclude property he gave away before his death), both the probate judge and the appellate court pointed to his letter as proof that he meant the contract to include his entire estate. If that is true, it certainly would have been a good idea for the agreement to spell that out in more detail, and to cover the possibility of living trusts, lifetime transfers, creation of limited liability companies or family limited partnerships, and other arrangements.
This is a question we have addressed before, in discussing a 1996 Mississippi case. It comes up from time to time and in different circumstances. The Mississippi case described earlier, for instance, involved a conservatorship rather than a guardianship proceeding, though the principles are the same in either circumstance. The bottom line, as described in our earlier article, is that a person may be able to sign a new will in Arizona — even if they have been determined to be incapacitated, or in need of (financial) protection.
A recent Arizona Court of Appeals decision revisited the question, with a slight twist. John Bartlett (not his real name) had been the subject of both a guardianship and a conservatorship order since 2004. On May 28, 2008, the probate court held a hearing on his request to terminate his guardianship. He maintained that he no longer needed a guardian, but the probate judge decided that he continued to be incapacitated — that is, that he was still unable to make responsible decisions regarding his own care.
That very same day John signed a new will. In it, he disinherited his daughter (his only child) and left his entire estate to his grandson. The document also revoked an earlier will, signed before the guardianship proceedings were begun, which had named his daughter as his personal representative and left his entire estate to her.
When John died a few months after signing his new will, a probate court dispute ensued regarding which document was valid. Did John have the capacity to revoke his old will, and to disinherit his daughter? Both wills were submitted for consideration, and the probate court found the new will to be valid and admitted it to probate.
When the personal representative of the estate filed a final report with the court, John’s daughter objected that her challenge to the new will (and to a trust signed the same day) had not been resolved. The estate’s personal representative disagreed, and filed motions to strike the daughter’s pleadings, enter summary judgment in favor of the later will, and close the estate. In a series of hearings, the probate court granted all of those requests.
The Arizona Court of Appeals disagreed. Although John’s daughter had not put on any evidence — indeed, she had not even filed any pleadings expressly objecting to the summary judgment request — the probate court should have been on notice that there was substantial evidence of John’s incapacity. The fact of a guardianship proceeding was enough to raise doubts about his ability to sign a new will, and summary judgment — entered without taking any evidence — was improper, according to the appellate judges.
The Court of Appeals takes pains to make clear that it is not holding that John’s will is invalid, or that people under guardianship can not sign new wills. In fact, the mere existence of a guardianship does not (in Arizona, at least) even create a presumption of incapacity to sign a will. But the existence of the guardianship proceeding, and especially the guardianship finding on the very day John signed his new will, should have alerted the probate court that there was some evidence in support of a challenge to that will. Estate of Blackford, March 13, 2012.
MARCH 12, 2012 VOLUME 19 NUMBER 10
Georgia Griffin (not her real name) moved from Kansas to Arizona in 1997. She lived in her own townhome in Sun City West, a retirement community northwest of Phoenix, until 2001, when she moved in next door to her daughter Barbara, who lived in Scottsdale.
Georgia’s story was fairly typical: she had lived at home independently until, at age 90, her physical ailments made it difficult for her to get along without help. The move to be next to her daughter was occasioned by her daughter’s concern that she was at risk living alone. One particular concern: after Georgia fell in her home, she worried that if she were to fall again she might not be able to get up, even to summon help.
After Georgia’s initial move to Arizona, daughter Barbara helped her with her banking, filling out checks and making transfers and withdrawals. She was a joint tenant with her mother on some accounts; several were changed from joint tenancy to “payable on death” (POD) to Barbara at some point. Meanwhile, Georgia’s other daughter Elizabeth was less involved — though she also lived nearby.
Shortly before Georgia’s move to be next door to Barbara, Barbara had purchased six condominium units in the complex where she lived. In fact, Georgia’s move was into one of those units. Elizabeth would later argue that the money for those purchases came from their mother’s accounts.
After Georgia’s death in 2003, Elizabeth initiated a probate proceeding and was appointed as personal representative of Georgia’s estate. She then filed an action against Barbara, alleging that Barbara had taken advantage of Georgia while she was a “vulnerable adult” — an important term under Arizona’s law protecting seniors and those with disabilities.
After a five-day trial, she convinced the judge that Georgia was vulnerable, that Barbara had held a position of trust with their mother, and that she violated that trust by using Georgia’s money to purchase her condominium units. The judge entered a judgment for $179,518.51 against Barbara, and imposed a constructive trust on five of the condominium units (ordering that they could be sold to satisfy the judgment). The judge also ruled that Barbara had forfeited any right to inherit from her mother’s estate; the judge did not impose treble damages against Barbara, which was an option available at the time (the Arizona legislature has since reduced the maximum penalty to double the amount of the basic judgment, though that would not have made any difference in this case).
The Arizona Court of Appeals upheld the judgment. The key question raised by Barbara on appeal: how could the trial court have found Georgia was “vulnerable” when the evidence indicated she was fully competent? Can vulnerability be based solely on evidence of physical limitations?
The short answer: yes. The appellate judges ruled that vulnerability for purposes of Arizona’s exploitation statute can be predicated solely on physical impairments if, as a result of the impairments, the victim is unable to protect herself from the exploiter. Mental impairment is not necessarily required. In this case, according to the court, Georgia’s “diminished vision and hearing could also have made her more susceptible to exploitation, as they could make her less aware of her surroundings and the circumstances of any transactions in which she became involved, thereby making her less able to protect herself if targeted for exploitation.”
That is not to say that every transaction Georgia might enter into would be suspect. “A vulnerable adult may still have the capacity to transfer property,” according to the judges. In fact, Georgia had transferred her original townhome to Elizabeth and the family home in Kansas to Barbara; those transfers did not necessarily amount to exploitation.
There is a second interesting holding in the appellate decision, though it is perhaps less far-reaching in its scope. After the trial was over, and while one of Barbara’s sons was packing up his belongings to move out of the condominium he lived in (and which would now be sold), he said he discovered old letters written by Georgia. Those letters related how Georgia was helping Barbara and her husband purchase several condominiums so that they would have income when they retired. Barbara moved to reopen the trial to introduce those letters, but the trial judge refused.
That refusal was not error, according to the Court of Appeals. There was insufficient evidence that the letters could have been found by diligent search before the trial. More importantly, the letters would not likely have changed the outcome. Why not? Because Barbara’s (and her husband’s) defense throughout the trial had been not that Georgia permitted the use of her money but that none of her money was involved in purchasing the condominiums. The letters would therefore have run counter to their core argument. In re Estate of Gorsik, April 12, 2012.
There are several footnotes worth mentioning in discussion of the appeal in Georgia’s case. First, the decision is a “Memorandum Decision.” That means that, though the appellate court laid out its reasoning and legal arguments, the decision is not “published” and therefore can not (at least not usually) be cited as precedent in other, similar cases. It is in the nature of lawyers and judges to make and keep records, so one irony about unpublished (memorandum) decisions is that they are published, can be read by anyone who wants to take the time to look for them, and are often cited as at least some evidence of the inclinations of appellate courts.
Another small irony: even as Georgia’s case was working its way through the courts, the Arizona legislature has been busy weakening the protections afforded to victims of abuse, neglect and exploitation. First, as noted above, was the reduction of “treble damages” awards to “double damages.” That, as it turned out, had no direct effect on Georgia’s case, since the trial judge decided that extra damages should not be awarded — but it does make such cases less attractive to lawyers with experience in exploitation cases, and it reduces the likelihood that any given case will be initiated in the future. Since then, the legislature has continued to push at the margins of abuse, neglect and exploitation cases; there is a bill pending even now that would eliminate the availability of an award of attorneys fees to the successful party in cases involving vulnerable adults.
Why would the legislature want to eliminate protections for vulnerable adult victims? Probably because some abuse, neglect and exploitation cases are filed against nursing homes, long-term care homes and medical providers, and they tend to have legislators’ attention. Vulnerable adults, by contrast, have a very poor lobbying record.
MARCH 5, 2012 VOLUME 19 NUMBER 9
We have written before about changes to Arizona guardianship, conservatorship and probate proceedings adopted in the past year. Changes involved both probate laws and court rules. One thread running through both sets of changes: the notion that proceedings in probate court could be unnecessarily complicated by “vexatious litigants.”
The problem of a vexatious litigant should be obvious. In a court environment focused on thorough investigation — especially when there are allegations of wrong-doing — the costs can easily spiral out of control. There needs to be some mechanism to stop repetitive filings that impede, rather than advance, the cause of justice.
As it happens, the Arizona Court of Appeals has been dealing with just such a vexatious litigant for a year now. Five separate cases test the probate court’s ability to control multiple and frivolous filings by someone who has been tagged as vexatious. The vexatious litigant in those cases? The subject of the guardianship/conservatorship.
Mark Peterson (not his real name) first came to the attention of the Arizona court system after a party where, he alleged, he assaulted by several other individuals. He filed lawsuits against several people who were at the party. He sued the attorney who represented some of the partygoers. He harassed family members of others in attendance.
The Arizona courts ordered Peterson not to harass any of the people involved. It dismissed his lawsuits. It even entered a $30,000 sanction against him. The court’s presiding judge declared him a vexatious litigant, and ordered that he could not file any more lawsuits without the judge’s permission. He kept harassing his victims.
In an attempt to deal with Peterson, the judge appointed an attorney as his “guardian ad litem,” and authorized her to file a guardianship, conservatorship and/or mental health petition on him. She did, and the court appointed the Maricopa County Public Fiduciary (a public guardianship agency in Arizona). Peterson filed a petition to terminate the guardianship and conservatorship. The court did end the conservatorship, but maintained the guardianship; it also approved an order his guardian ad litem had obtained, ordering him not to harass her or go to her office at all. The Public Fiduciary filed a final conservatorship accounting, and the court approved their account.
Peterson appealed, and in January of last year the Court of Appeals upheld everything the probate court had ordered — partly on the basis that Peterson’s appeal was improperly filed. The appellate judges approved the court’s process for limiting Peterson’s ability to file motions and court actions.
Meanwhile, Peterson had already filed a request with the probate court that he be permitted to file a lawsuit against AHCCCS, Arizona’s Medicaid agency, and a malpractice action against his treating medical team. The probate court had conducted two hearings on his request, and had denied him the authority to file additional lawsuits unless he first met with his guardian ad litem, convinced his court-appointed attorney or guardian to file the lawsuits. Peterson appealed this denial, even as the appellate court was still considering his first (actually his third — but his first guardianship-related) appeal.
The Court of Appeals dismissed this appeal, too. It found that Peterson had failed to provide an adequate record (he had not ordered and paid for transcripts of the probate court hearing), and that the order finding him to be a vexatious litigant was proper.
That was not the last appeal, however. While the other two appeals were pending, Peterson filed a petition asking the probate court to terminate his guardianship and lift the pre-filing limitations on his access to the courts. The probate judge denied his petition, and — you probably guessed this — he appealed.
The Arizona Court of Appeals denied Peterson’s most recent request, just as it had denied the earlier appeals. It is well-settled by now, ruled the appellate judges, that Peterson is a vexatious litigant, and the restrictions on his ability to file multiple petitions, motions and lawsuits are appropriate in the circumstances.
One interesting item to note about the three probate-related appeals orders covering Mr. Peterson: the first was a 12-page opinion, the second 11 pages and the most recent down to 10 pages. Apparently the Court of Appeals is having less trouble upholding Peterson’s status as a vexatious litigant with each visit he makes to their court. In Re Petramala, January 14, 2011, May 5, 2011 and February 23, 2012 (unpublished memorandum decisions).
FEBRUARY 27, 2012 VOLUME 19 NUMBER 8
Phoenix-area resident Larry Robertson (not his real name) was undoubtedly fading mentally, but he had made plans for handling his affairs. He had created a revocable living trust, signed a power of attorney and created a beneficiary deed. All those documents named a husband-and-wife team who were also his caretakers. They would receive his entire estate upon his death, and were put in charge of handling both his finances and his health care decisions while he was still alive.
Larry’s sister Betty lived in Ohio. She became concerned that the caretakers might be taking advantage of Larry, so she consulted with her local Ohio attorney, David Lynch. Mr. Lynch prepared a petition seeking Betty’s appointment as guardian of Larry’s person, conservator of his estate, and trustee of his trust. The petition claimed that there was an emergency requiring immediate action. It was signed by Betty and by Mr. Lynch — who was not admitted to practice law in Arizona. The petition was actually filed by an Arizona attorney, who did not sign it.
Once the petition was filed, an attorney was appointed to represent Larry. Another Phoenix-area attorney entered an appearance on behalf of Larry, claiming that he had prepared all of the questioned documents, that Larry had been perfectly capable of signing them, and that in fact Larry still had capacity and could make his own decisions about placement, caretakers and disposition of his property at his death.
The probate court held a hearing on the emergency petition. At the beginning of that hearing, Mr. Lynch asked to be admitted to practice law in Arizona just for the purpose of this one case — a process that is called “pro hac vice” admission. The probate judge heard some preliminary testimony, and discovered that Mr. Lynch had himself made an appointment with Larry’s attending physician under the pretense that he needed medical treatment, and that he had interviewed Larry’s physician about Larry’s condition. The judge refused to allow Mr. Lynch to be a lawyer in the case, ruling that it appeared that he might have turned himself into a witness instead.
Larry’s sister Betty then testified that she believed the caretakers might be taking advantage of her brother. In her petition she had alleged that Larry’s attending physician had told her that the caretakers seemed to be taking advantage of Larry; on the stand she acknowledged that the physician had not actually told her that he was concerned. The physician himself testified that Betty had asked him to say that Larry was incompetent, but he said that he had declined to render such an opinion.
At the conclusion of the hearing, the probate judge ruled that Betty had not shown any basis for a guardianship and conservatorship. The judge dismissed the petition, and ordered that Betty and her Ohio lawyer, Mr. Lynch, should both be liable to pay Larry’s original lawyer $6,470 in fees incurred in preparing for and conducting the hearing. The sanctions were imposed pursuant to Rule 11, a court rule governing civil proceedings which prohibits filing baseless proceedings.
Later, at a follow-up hearing set to consider whether Betty should be appointed as Larry’s trustee, the probate judge found that there was no basis for that allegation, either. By that point Betty’s entire petition had been denied; as a final blow the probate judge imposed an additional $9,651.04 in fees against Betty and Mr. Lynch — this time to pay the court-appointed attorney’s fees.
Mr. Lynch appealed the second award of fees against him. He argued that he had not been given a chance to show his own good faith in preparing the original petition for Betty. He had relied on Betty’s assertions, he argued, and that should have been all that was required.
Not so, ruled the Arizona Court of Appeals. When an attorney signs a pleading (as Mr. Lynch had done, even though he was not admitted to practice in Arizona), he or she effectively swears that he or she has made a reasonable inquiry into the facts alleged. Simply relying on the statements of the client was not enough — at least not when the witnesses to the documents were readily available, and Mr. Lynch could have simply interviewed them to see what they thought about Larry’s competence. “It appears,” wrote the appellate court, “the only effort Lynch made to verify Betty’s allegations was his inappropriate meeting” with Larry’s physician. The sanctions against Betty and Mr. Lynch, totaling over $16,000 in payments to Larry’s two lawyers, were upheld. Guardianship and Conservatorship of LaLonde, February 16, 2012.
In separate proceedings, incidentally, the Arizona Supreme Court admonished Mr. Lynch for practicing law in Arizona without being licensed in this state. The Ohio Supreme Court followed suit on October 14, 2011, publicly reprimanding Mr. Lynch in the same case.
There are at least two messages to be taken from the court-imposed sanctions against Betty and Mr. Lynch. First, it is important to make sure that you have some actual evidence of incapacity and an emergency situation before filing a petition to secure an emergency appointment as guardian for a family member or loved one. Pretty much the same can be said for a petition for appointment of a conservator, or for appointment of a successor trustee.
The second message is really addressed to lawyers more than to family members. It is not necessarily enough to rely on the assertions of your client. It is also dangerous to get so personally involved that you lose objectivity.Particularly in a time of heightened scrutiny being applied to guardianship, conservatorship and trust administration matters, it is important to have a good foundation before filing a petition that so deeply affects the personal life, independence and autonomy of a client’s family member.
FEBRUARY 20, 2012 VOLUME 19 NUMBER 7
OK — you’ve signed your will and paid the big lawyer’s fee. Now you want to make a change. Do you know how to modify your will? Can you do it without incurring another fee? Shouldn’t it be easy to make the change?
All that might have been going through Donald Wolf’s mind when he made changes back in 2005. You see, he had written a clearly valid will in 1995. In it, he left half of his estate to a married couple who had been long-time friends. A quarter of his estate was to go to another friend, and the final quarter to a fund to assist AIDS patients. He named the wife of the married couple as his personal representative. Then he gave an unsigned copy of the will to the woman named as personal representative.
In 2005, when he was thinking about making a change, Mr. Wolf talked with the couple to whom he was leaving half of his estate. Then he took THEIR copy of his will, crossed out the bequest for AIDS patients and wrote that instead that quarter of his estate would be divided between two other friends. He dated and initialed the changes, but no one signed as witnesses. At some point — perhaps during that same meeting, but his friends could not clearly recall — he did the same thing on the signed original will, as well.
Was Mr. Wolf’s will amendment effective? We’ll give you a minute to think about it, and try to decide what you think. Wait — we’ll give you one more clue: the probate court decided that the attempt to amend his will was ineffective, and ordered that the AIDS fund was still a one-quarter beneficiary.
One of the two friends named in the hand-written amendment appealed the probate court’s decision, and the Arizona Court of Appeals reversed the finding. Arizona permits “holographic” wills and amendments; if the material provisions of a will are in the decedent’s handwriting, they do not need to be witnessed. The appellate court decided that Mr. Wolf’s amendment was a holograph, and that it should be given effect. Estate of Wolf, February 7, 2012.
Back to our original questions: assuming you want to change your will, does the Wolf case stand for the proposition that it is as easy as taking your original will out, scribbling the changes, initialing and dating (which Mr. Wolf did) and putting it back away? Emphatically, NO. Here are some reasons why you should NOT use Mr. Wolf’s method for changing your will:
You might live in, or move to, a state where holographic wills are not permitted. Not every state in the U.S. allows holographic wills and codicils, and they are disfavored in other jurisdictions — even in English-speaking countries, where the idea was once embedded in English law. Even where they are permitted the rules vary. It is never a good idea to rely on a holographic will, codicil or amendment.
Even if the handwritten notes are admitted as part of the will, the intent and meaning is usually subject to interpretation and confusion. Is it possible that Mr. Wolf was making notes about possible changes that he meant to discuss with his lawyer — but never got around to completing? Apparently not, but very slight differences in testimony can lead to significant differences in result.
Holographic documents are much more likely to result in litigation — and in delay and additional cost.
The cost of making changes in your will is usually surprising slight. Go ahead — ask the lawyer who prepared your will how much he or she will charge for making changes. You are likely to be surprised at the answer. Why would it be inexpensive? Because a significant part of the cost of preparing your estate plan comes from the time it takes to understand your assets, family situation, goals and intentions. Much of that has already been done, and so amending your will is likely to cost quite a bit less than the original cost of preparing the will. That is true even though most lawyers would rather simply write a new will than prepare an amendment or codicil.
There is a side benefit to meeting with your lawyer to amend your will. Laws change, your situation changes, the world changes — and your lawyer can point out things you ought to be thinking about in addition to the changes you want to make. In fact, you should be visiting with your lawyer once every five years or so — more if your situation is more fluid, or your assets are significant — just to see if you need to update documents.
SEPTEMBER 19, 2011 VOLUME 18 NUMBER 33
It’s frankly a little hard to explain why trust lawyers get excited about the subject of this week’s article. After all, it seems to be about who will pay for the new doors in a home renovation in a pricey suburb of Phoenix. The bill was large — $8,276.10 — but hardly astonishing. Let’s see if we can convey some of the excitement.
Richard and Kristen Williamson owned their home in Scottsdale, Arizona, just west of McDowell Mountain Regional Park. They had also created a revocable living trust. Just as they should, they had transferred the title to their home into the trust’s name.
But what does that mean? In Arizona, at least, that usually means that the trust “settlors” (the people who create the trust, sometimes also called “trustors” or “trust creators”) sign a deed from themselves as owners to themselves as trustees. So Mr. and Mrs. Williamson had transferred their home by just such a deed — and the Maricopa County Recorder’s office indicated that ownership of the home now belonged to “Richard M. Williamson and Kristen A. Williamson as Trustees of the Williamson Family Trust.”
Then the Williamsons — again quite properly — went about living their lives. In June, 2005, they decided to construct an addition on their home. They hired a contractor, Freedom Architectural Builders, to do the work. Their contract was unremarkable; it spelled out what the contractor would do and how funds would be released, in stages, as work progressed.
Almost two years later the work had progressed to the point that it was time to put doors on the addition. Freedom Architectural Builders sub-contracted with another company, PVOrbit, Inc. (it was doing business as Fountain Hills Door & Supply), to actually provide the doors and hinges. PVOrbit did what it was supposed to do, delivering doors and hinges to the home and sending its invoice to Freedom Architectural Builders.
Before the bill for doors got paid, however, Freedom Architectural Builders got into serious financial trouble. It notified Mr. and Mrs. Williamson that it could not complete the work on their home, and it walked away from the project. The Williamsons ended up hiring a new contractor to finish the work.
The Williamsons had no separate contract with PVOrbit or Fountain Hills Door & Supply, so they ignored demands for payment for the doors. Besides, they argued that they had already paid Freedom Architectural Builders for the doors, that they had to pay over $30,000 more than the total contract price to get the work done, and that PVOrbit’s complaint was with the contractor.
PVOrbit responded by filing a lien against the Williamsons’ home. The lien — often called a “materialman’s” lien or “mechanic’s” lien — can be unilaterally filed by someone who has provided materials used on real or personal property without having been paid. There are some specific rules about how such liens may be filed, and they vary from state to state. In Arizona, there is one important (for our purposes) limitation: such a lien can not be pursued against a home actually lived in by its owner.
Mr. and Mrs. Williamson sued, asking that PVOrbit be ordered to remove the lien and pay their attorneys fees and costs. At about the same time, PVOrbit sued the Williamsons and Freedom Architectural Builders for the doors they had installed. The two lawsuits were consolidated. Freedom Architectural Builders filed bankruptcy and was dismissed as a party in the consolidated lawsuits.
PVOrbit argued that the Williamsons were not owner/occupants of their home. The home, according to the door supplier, actually belonged to the Williamson Family Trust, not Mr. and Mrs. Williamson. Besides, said PVOrbit, the Williamsons shouldn’t be allowed to get away with not paying for the $8,276.10 worth of doors and hinges — to allow that would be to unjustly enrich them. The trial judge was not impressed with either argument; he dismissed the PVOrbit lawsuit and granted the Williamons $6,000 in fees and costs against the door company.
Admittedly, trust lawyers tend to be easily excited, at least when it comes to arcane issues like this question: who actually owns property titled to a trust? The Arizona Court of Appeals has probably raised the level of excitement (and agitation) among trust lawyers by upholding the trial judge in the Williamson/PVOrbit litigation, but with a slight twist. The appellate court has decided that because the deed says “Richard M. Williamson and Kristen A. Williamson,” the Williamsons are in fact owners of their home — even though the rest of the title qualifies their ownership interest: “…as trustees of the Williamson Family Trust.” It is a technical reading of the relationship of the Williamsons as individuals to the Williamsons as trustees. Williamson v. PVOrbit, Inc., September 1, 2011.
There is actually a perfectly good basis on which the Court of Appeals could have relied. Trust law has for centuries allowed for a distinction between the “legal” ownership of property (what the Williamsons as trustees held) and the “equitable” ownership of the same property (what the Williamsons held as trust beneficiaries). The appellate court could have decided that the statute protecting owner/occupants of homes was satisfied if the ownership interest is a beneficial one. That would have solved the problem.
What difference does it make? Well, what if Mr. and Mrs. Williamson — for whatever reason — decided to let their successor trustees take over. Now ownership might be held as “Skip and Marcy Jackson as Trustees of the Williamson Family Trust.” (Note: we don’t actually know who is successor trustee of the Willaimsons’ trust, and we don’t know anyone named Skip and Marcy — we just like the sound of it.) Would that mean that Skip and Marcy would have to move in with the Williamsons to protect against materialman’s liens? That would be silly — so long as Mr. and Mrs. Williamson are beneficiaries of the trust they created, they have the equitable ownership interest and the right to be, well, owner/occupants.
One other thing about the Williamson case strikes us. It may work to the advantage of people who worry about buyers’ title insurance policies. Some have suggested that transferring your home into a living trust could arguably be a transfer that voided your title insurance coverage. If the Williamson decision is valid, that argument would be a lot easier to strike down.
SEPTEMBER 12, 2011 VOLUME 18 NUMBER 32
Imagine with us for a moment: you are the trustee of an irrevocable trust created by a now-deceased woman for the benefit of her daughter. The trust says that her daughter is to receive all the income generated by the trust. You are also given the discretion to give the daughter some of the trust’s principal if she needs it. When the daughter dies, whatever is left in the trust will go to her nieces and nephews, the grandchildren of the original trust settlor.
You have just gotten a letter from the daughter, asking you for an additional $3,000 per month to pay for her care. You know that the remainder beneficiaries — the nieces and nephews — might object to that extra distribution. What should you do?
That is essentially the problem faced by Citigroup Trust, which is trustee of just such a trust. It was established by Esther Caplan for the benefit of her daughter, and it is administered in Arizona. After Citigroup began making regular distributions to the daughter, one of her nephews questioned whether the trustee should be giving her additional funds. Eric Bistrow told Citigroup that he wanted more information about his aunt’s finances, and that he wondered whether the trust was funding a too-lavish standard of living.
To make sure that they understood the daughter’s needs, Citigroup requested (and got) tax returns and a budget. They decided to keep making the distributions, but also to ask the Arizona courts for direction.
Citigroup filed what in Arizona trust law is called a “Petition for Instructions.” They essentially asked the probate judge to tell them whether they were right to make the discretionary distributions of principal.
In the course of the proceedings, Mr. Bistrow and his attorney asked to look at his aunt’s budget, tax returns and financial information. Citigroup declined, saying that the information was private and should not be shared. How, then, would Mr. Bistrow know that they had properly considered her financial needs? The trustee suggested that it would give the records to the probate judge, and let him review them privately; if there were concerns or questions, the judge could make the decision to share them, or some portion of them.
The probate judge agreed, looked at the records, and approved the past and proposed future distributions to Ms. Caplan’s daughter. It also confirmed that Mr. Bistrow and the other nephews and nieces were entitled to statements showing how much was actually distributed, as well as how much was earned by the trust and what other expenses it incurred.
The nieces and nephews appealed, arguing that they were not being given enough input into the decision to distribute trust principal to their aunt. Their position was that they should be notified before any distributions could be made, that they should be given full financial information, and that they should be given an opportunity to weigh in on their aunt’s need for funds.
Not so, ruled the Arizona Court of Appeals. Mr. Bistrow and the other remainder beneficiaries are entitled to be treated fairly. They are entitled to know what the trustee is doing. They are entitled to ask the courts to intervene if they think the trustee has exceeded its authority. They are not, however, entitled to see their aunt’s financial records, or to vote on whether the trustee should exercise its discretion to make distributions to her. In Re the Matter of Esther Caplan Trust, September 1, 2011.
The Caplan case is focused on a narrow question, but it has broader application. It also raises (but does not answer) a number of interesting questions. It gives important guidance to trustees on how to safely exercise the discretion given by a trust document.
What are some of the lessons of Caplan? A few come to mind:
Asking for court review of decisions which might be challenged should always be considered. It may be that the amount in controversy is too small to justify court involvement, or that the trustee’s decision is simply unassailable, or that the remainder beneficiaries are agreeable. But in any case in which there might be disagreement, the Petition for Instructions is a good safeguard for the trustee.
Remainder beneficiaries are important, and their interests need to be considered in administering a trust. But the income beneficiary’s interest is usually paramount. Remainder beneficiaries are not in charge of trust administration.
Notwithstanding that remainder beneficiaries are not in charge, they are still entitled to sufficient information so that they can determine if their interests are being adequately protected. But “sufficient information” is not the same thing as “complete information.” It may sometimes (rarely, but occasionally) be appropriate for a trustee to withhold sensitive or personal information. Usually, it would be wise to identify the information which is not being shared, so that the remainder beneficiaries can make a reasoned decision about whether to challenge that determination, too.
Creative thinking can come up with solutions that protect everyone’s interests and violate none. Giving the judge a chance to review the financial records in camera (privately) was just such a creative solution.
FEBRUARY 28, 2011 VOLUME 18 NUMBER 7
The issue arises with some regularity. A married couple, perhaps in their second marriage. Adult children. One spouse becomes ill — often, but not always, demented. The other spouse, unable to cope, turns the care of the ill spouse over to one of the children. That child figures out that, financially, at least, the ill spouse would be better off divorced. That way, control of the ill spouse’s share of the couple’s property could be managed for the sole benefit of the ill spouse, and care could be assured. But can the guardian file a divorce petition?
In most states, the answer is not clear. A handful of states have explicitly addressed the question, with mixed results. The latest state court to face the issue is the Supreme Court of Vermont.
Catherine and Philip Samis had been married for almost a quarter century when Mrs. Samis began to show signs of dementia. Mr. Samis, a Canadian citizen, withdrew across the border to one of the couple’s homes, taking most of their personal effects with him. Mrs. Samis’ son from a former marriage stepped in, secured a guardianship of his mother’s person and estate (in Arizona we would call it a guardianship and conservatorship), and began overseeing her care.
Mrs. Samis is a U.S. citizen, and would be entitled to Social Security benefits under her first (now deceased) husband’s account if she were not married. Since Mr. Samis is a Canadian citizen, there are no Social Security benefits payable to her while she remains married. Her son decided it would be in her best interest — financially, at least — to get divorced, and to divide the couple’s property so that he could control how her share was spent.
Once a divorce proceeding was filed, however, Mr. Samis objected. He argued that Vermont law did not permit a guardian to petition for divorce on behalf of a ward. As with most states, the Vermont statutes were silent on the subject; there was a single reference in Vermont court rules to guardians signing divorce petitions, but no indication how the Vermont legislature felt about the possibility.
After the divorce court denied Mr. Samis’ objection, granted the divorce, divided the couple’s property and ordered Mr. Samis to make a lump-sum support payment of about $300,000, he appealed. The Vermont Supreme Court was thus faced with determining whether Mrs. Samis’ guardian had the authority to initiate the proceeding in the first place.
Ruling that a guardian’s powers are limited to those spelled out in the guardianship statutes, the state’s high court reversed the divorce court’s orders. The justices considered the holdings in a handful of states, including Arizona, and concluded that most do not permit guardians to file divorces.
The ability to file for divorce is intensely personal, said the justices. The only Vermont precedent that addressed the issue at all, an 1877 Supreme Court case, agreed; in that case, a person who had been placed under a guardianship of the estate (what would be a conservatorship in Arizona) was permitted to file his own divorce proceeding despite the guardianship. Now it is clear that in Vermont, at least, the guardian can not file the divorce petition for a ward who has become incompetent.
What about the other states? The Vermont decision cites several that agree with its holding, including appellate courts in Kentucky, New York and South Carolina. Courts in Massachusetts and New Hampshire have allowed guardians to petition for divorce, but have done so based on specific state statutes. According to the Vermont justices, only two states, Arizona and Washington, have permitted guardians to file for divorce even without the support of statutes clearly authorizing the action. Samis v. Samis, February 18, 2011.
As the Vermont Supreme Court notes, Arizona is one of the minority of states clearly permitting the guardian to file a divorce proceeding, even without express statutory authority. That is the holding of the Arizona Court of Appeals in the 1993 case of Ruvalcaba by Stubblefield v. Ruvalcaba, which we reported on at the time (yes, Virginia, there was an Elder Law Issues in 1993/1994), and which we have since described in more detail for our readers.
