Posts Tagged ‘Arizona Revised Statutes’

Durable Powers of Attorney: “Springing” or “Surviving”?

NOVEMBER 7, 2016 VOLUME 23 NUMBER 42
For over four decades, Arizona law has permitted residents to create powers of attorney that continue to be valid even after the signer becomes incapacitated. That simple concept, once thought to be radical, has become widespread: all U.S. states now permit powers of attorney to be “durable.”

To make a power of attorney “durable” under Arizona law, it should include language that indicates the signer intends it to either:

  • Continue in effect even if the signer becomes incapacitated, OR
  • Become effective only if/when the signer becomes incapacitated.

You can read the law in question, Arizona Revised Statutes sections 14-5501 and those following, to see how durable powers of attorney work in Arizona. There is even a basic form for what the signature block might look like.

But what is the difference between the two kinds of durable powers of attorney? Lawyers often refer to them as “surviving” or “springing” powers — the former exist and are operative as soon as signed (they “survive” the later incapacity), while the latter become effective (they “spring” into existence) upon the later incapacity of the signer.

Which is better? Of course that depends on what the signer prefers, but there are some practical considerations that you might not have thought about.

Many of our clients feel uncomfortable about giving their agent(s) the power to handle financial matters immediately. While they completely trust the person they name as agent, those clients think it might be tempting fate to give authority to someone else. They don’t really expect their agent to act unless and until they are unable to take care of things themselves, and prefer to make their powers of attorney the “springing” type.

There are problems with this approach, however. Those problems can include:

  1. How to prove incapacity? How, exactly, will your agent prove that you have become incapacitated? Will it require a letter from your attending physician? Or two letters from two different physicians? Or your consent? How protective do you think you should be? Of course, one of the reasons you are signing a power of attorney is so that we won’t have to initiate legal proceedings to permit your agent to take over your finances. By making the proof of incapacity difficult, you might be reducing the value of the very document itself.
  2. Is there a doctor in the house? Perhaps you have considered the problem described above, and you’re willing to let any doctor (not necessarily your attending physician) certify your incapacity — and you are not planning on requiring a second opinion. Still, it can be quite a challenge to get any medical person to sign a letter saying you’re incapacitated. It might be that your medical care isn’t even being provided by a physician — maybe you’ll be evaluated by a nurse practitioner, or a psychologist. Can we write the document so that your chiropractor could make the decision? And have you tried to get a letter signed by any medical provider in the modern era of HIPAA?
  3. “I’ll be the first to know when I need it.” No, tragically, you won’t. In fact, you’ll probably benefit from assistance for a period of time when you are still capable of doing things yourself. The law has a quaint notion — people are fully competent until some future instant when they suddenly, and demonstrably, become incapacitated. That isn’t actually how it happens. You are much more likely to slowly decline, needing help with some large decisions (perhaps investment management, or organizing assets) long before you absolutely need help with smaller decisions (like signing checks). Consider the importance of letting your agent take over gradually, leaving you in control of as much as you can (and wish to) manage for as long as possible.
  4. Planning on leaving Arizona (even for visits)? Some states (notably Florida) don’t even permit “springing” powers of attorney. Maybe you think it unlikely that you will relocate to Florida, but we are a pretty mobile society. You might well end up in a state where the “springing” power of attorney is problematic — and possibly at a time when you are unable to sign new documents.
  5. Really? You don’t trust your agent? Giving someone a power of attorney is, literally, giving them the tools to misuse your assets. Of course they are not supposed to commingle assets, take your funds or make decisions in their own interest. Some do. You need to make your selection very, very carefully — your agent needs to be completely trustworthy. And if you trust them when you’re incapacitated (when you don’t have the mental acuity to protect yourself), why wouldn’t you trust them right now, when you are able to monitor their actions closely?

As you can probably tell, we are inclined to recommend that people sign “surviving” durable powers of attorney, rather than “springing” powers. That said, clients frequently are just uncomfortable giving immediate authority, and we will respect your decision. Don’t be surprised if we try to convince you to reconsider, though.

Incidentally, the same considerations apply when we consider health care powers of attorney — but there is a different practical reality. Since you will necessarily be present when health care procedures are undertaken, and since medical personnel are almost certainly involved, it is much easier to assess whether you are able to make your own decisions. A good agent will involve you in the decision-making process to the extent that you are able to participate. A good medical provider will do the same.

Arizona Guardianship and Mental Health Treatment

SEPTEMBER 15, 2014 VOLUME 21 NUMBER 33

A guardian (of the person) is often said to have all the powers over her ward that a parent would have regarding a minor child. In other words, if the court appoints you as guardian over your mother or father, you have (at least in a legal sense) switched roles. But there are some things a guardian can not do — chief among them, at least in Arizona, is a limitation on a guardian’s ability to secure inpatient mental health treatment.

A word of warning is appropriate here: all of our newsletters focus on Arizona law — though the principles are often similar in other states. This installment will not be one of those. It relies completely on an Arizona statute and practice that are not widespread — so far as we know, no other state has quite the same approach to getting inpatient mental health care for someone under guardianship.

Generally speaking, an Arizona guardian has the authority to approve or arrange for mental health treatment for her ward. The guardian can authorize the administration of psychotropic medications. Similarly, the guardian can approve psychiatric treatment in an outpatient setting, or the delivery of psychiatric services to a ward who is in the hospital, a nursing home or a secure residential facility.

But an Arizona guardian does not have the power to place her ward in a locked psychiatric facility without further court involvement. That is expressed in Arizona law by limiting the guardian’s authority to admit her ward to a “level one behavioral health treatment facility.” That describes a locked-ward inpatient psychiatric program, so a guardian is usually unable to admit her ward to involuntary mental health treatment in a locked psychiatric ward.

How does a mentally ill patient get inpatient mental health treatment when it is required? There are two ways: either the mental health system must initiate an involuntary treatment petition (what is sometimes called a “civil commitment” proceeding), or the guardian must have gotten special authority to admit her ward to inpatient treatment in advance.

Why does it take an additional proceeding to get needed mental health care for an ill ward? Because the mental health system if very protective of the civil rights of individual patients, and involuntary placement in a locked ward looks very much like incarceration to the unhappy patient.

Would it make sense, then, for every Arizona guardian to get the mental health authority in advance, just in case it turns out to be needed? No — that is not even possible unless the ward is actively mentally ill at the time of the guardianship petition.

The Arizona statute on mental health guardianships (Arizona Revised Statutes section 14-5312.01) spells out what is required. In addition to the evidence required to get a guardianship at all, the guardian must file a report from a psychiatrist or psychologist, show that the ward is currently mentally ill, and establish that there is likely to be an actual need for institutionalization within the upcoming year. The authority to make the placement decision expires in one year, whether or not it is used; the guardian must take steps to extend the authority by collecting additional affidavits from a psychiatrist or psychologist, setting a court review time and giving notice to her ward. The process is somewhat automatic once those documents are filed, but there is usually no reminder or assistance from the court or the mental health treatment system, and so a guardian must be diligent to get the authority extended.

Every Arizona guardianship requires that the ward have counsel; if the court appoints an attorney to represent the ward, that appointment may end once the guardianship is established (at least in some Arizona counties — practices differ). But if the guardian has mental health powers, the attorney’s involvement continues indefinitely. That means that the guardian must continue to give notice to (and involve) the attorney for at least as long as the mental health authority continues.

Does that mean that the mental health authority is usually worthless? Not at all. It is not often even available, but in cases where it is a legal possibility, it can shorten the process of getting mental health treatment for a loved one who is decompensating. It also can provide significant comfort to family members who are anxious to have all the tools that might be helpful — even if it does not often get used.

Arizona guardians should know about the mental health treatment limitations and special authority available in some cases. Not very many guardian will need to pursue getting the mental health power added to their guardianships, but for those whose wards are actively mentally ill (and in and out of treatment facilities), the authority can be helpful and comforting.

Reporting Abuse, Neglect or Exploitation of Vulnerable Adults

DECEMBER 23, 2013 VOLUME 20 NUMBER 48

As people live longer and the elderly population increases, so does the likelihood of abuse, neglect and exploitation of vulnerable adults. Lawyers, accountants, doctors, nurses, caretakers, bankers — indeed, any professional — faces a growing probability that at some point they will be confronted with the issue of whether to report suspected abuse, neglect or exploitation. For lawyers, especially, the ethical requirement that client confidences be maintained can complicate the problem.

There were over 1,600 allegations of abuse, neglect or exploitation of vulnerable adults reported in Pima County, Arizona (the Tucson area) last year. Surprisingly, fewer than 1% of these were reported by legal professionals. Arizona law imposes an affirmative duty on attorneys to report suspected exploitation of a vulnerable adult to the authorities. Arizona Revised Statutes § 46-454(b) requires any attorney who is responsible for preparing the tax records of a vulnerable adult, or responsible for any “action concerning the use or preservation of the vulnerable adult’s property and who, in the course of fulfilling that responsibility, discovers a reasonable basis to believe that exploitation of the adult’s property has occurred or that abuse or neglect of the adult has occurred shall immediately report or cause reports to be made …”

Keep in mind that an individual does not have to be “elderly” to be a vulnerable adult. Any adult who is unable to protect himself or herself from abuse, neglect or exploitation by others because of a physical or mental impairment is a vulnerable adult. The definition of vulnerable adult is broad and so are the types of abuse and exploitation that the statute is intended to cover. Financial exploitation of vulnerable adults occurs with alarming frequency and in many cases goes unreported because the victim may not be aware of the ways in which he or she is being exploited.

Reports of suspected abuse can be made to the City Police, County Sheriff or (statewide) Adult Protective Services. The Pima County Public Fiduciary also handles cases of suspected financial exploitation. Even if suspected abuse is later found to be unsubstantiated, there are no penalties for good faith reporting. Any attorney who makes a report in good faith is likely to have some civil and/or criminal immunity from liability. You can make a report anonymously, however, the law requires that the report be made immediately, otherwise you may be found guilty of a class 1 misdemeanor.

So, you may be reading this and thinking: “how can I uphold my duty of confidentiality to my client if I suspect that he or she may be a victim of abuse, neglect or exploitation?” How is it possible to balance this ethical duty when reporting of suspected abuse is mandatory? In Arizona, you will not breach your duty of confidentiality if you reveal only information to the extent you believe is necessary to comply with a law that requires the disclosure of such information.

Arizona’s version of the ethical rules governing lawyers provides specific guidance to attorneys in cases where an attorney believes that his or her client of diminished capacity is at “risk of substantial physical, financial or other harm unless action is taken and cannot adequately act in the client’s own interest.” In these specific cases, an attorney may take “reasonably necessary protective action,” including consulting with individuals or entities who may be able to protect a client with diminished capacity.  In taking any protective action, among other considerations, an attorney may be guided by the client’s best interests or the wishes and values of the client.

Pima County (and Arizona) is home to a growing number of seniors and vulnerable adults. As we consider the ways our practices can build a healthy community, we must remember the duty of advocacy we owe our clients. If you suspect a case of abuse is occurring and feel unsure about your duty to report, then reach out to one of our colleagues who specialize in professional responsibility or call the Arizona State Bar Ethics Hotline.

What about lawyers practicing in other jurisdictions? State laws vary — many states have mandatory reporting requirements but quite a few of them either do not extend to, or specifically exempt, lawyers from coverage. The ethical rules permitting disclosure when the client is at risk, however, have been adopted in substantially similar form in almost every state.

What about other professionals? Arizona’s mandatory reporting law is very clear: doctors and other medical providers are covered as to reporting abuse, neglect and exploitation, and accountants and tax preparers are covered as to reporting exploitation. Other states vary, with some focusing on medical providers and others on social workers and government officials. If you work with seniors and/or adults with diminished capacity, you should check into your state laws regarding mandatory reporting of abuse, neglect and/or exploitation.

Arizona Probate Court Changes Coming in 2012

DECEMBER 19, 2011 VOLUME 18 NUMBER 43
It is not exactly a secret that the Arizona probate court system has been widely criticized over the past two years or so. The Phoenix-area newspapers have been filled with stories about alleged abuses of the probate process. Many of those stories have focused on practices in the guardianship and conservatorship systems, which in Arizona are controlled by the probate courts. During last year’s Arizona legislative session a number of changes were adopted; most of those take effect on January 1, 2012.

At the same time the legislature was acting, a committee of the Arizona Supreme Court was considering many of the same (or similar) changes. The courts have now released their final changes; some of them will take effect on February 1, 2012, and some on September 1, 2012. We will describe some of those changes, and what effect they are likely to have on existing and future clients, in a later newsletter. For now, we focus on the changes adopted by the legislature. They include:

  1. Fiduciaries are now expressly required to consider costs when making decisions about how to act, and to make reasonable decisions to limit those costs. The notion of a cost/benefit analysis, which we all apply to business and personal decisions in our own lives, has been adopted for guardianship, conservatorship, probate and trust administration proceedings. See Arizona Revised Statutes section 14-1104.
  2. Unreasonable litigants — including those who repeatedly file the same kinds of pleadings despite successive decisions against them — can now be prevented from running up probate costs, and can even be charged with some or all of the costs they do incur. The probate court has the express power to prohibit further court filings by an unreasonable party, and to summarily deny repetitive motions without requiring others to answer or argue. See Arizona Revised Statutes sections 14-1105 and 14-1109. The court rules which become effective a month later, incidentally, include a concept of “vexatious conduct” that is similar but somewhat more expansive.
  3. Arbitration of probate disputes is encouraged — but not (yet) required. Mediation and other forms of alternative dispute resolution are also permitted. See Arizona Revised Statutes section 14-1108.
  4. Guardians, conservators and attorneys must now provide written information about their fees — how they are going to be calculated and at what rate or rates — at the beginning of their involvement. Failure to do so will mean that they are not permitted to collect fees from the ward in a guardianship or conservatorship proceeding. The probate court has been given wider latitude to determine when a professional fee is reasonable and necessary. See Arizona Revised Statutes section 14-5109. Another fee-related change: attorneys are not permitted to wait until the conclusion of a case (or some later event) to submit their bills. Any bills not submitted within four months of the services are waived. See Arizona Revised Statutes section 14-5110.
  5. It should be easier for the subject of a guardianship or conservatorship — or his or her family — to seek appointment of a new guardian and/or conservator. This change reflects the legislature’s concern that even when family members are unable (or unsuitable) to serve, they should have some say in selecting the fiduciary. There are limits on how often the ward and family members may ask for changes, and the court retains the final say on any substitution, but the statutory changes will probably lead to more changes of fiduciary, at least in contentious cases. See Arizona Revised Statutes sections 14-5307 and 14-5415. The notion that family members — even family members who can not themselves serve — should have a greater say in selecting and monitoring guardians and conservators is sprinkled through other sections of the new law.
  6. Although most of the new law deals with guardianship and conservatorship changes, there are a few changes in probate proceedings and at least one in trust administration matters. The principal change for trusts: the beneficiary of a trust has the ability to direct appointment of a new trustee — at least if the trust was originally established by the beneficiary. See Arizona Revised Statutes section 14-10706. This section will not apply — at least not directly — to trusts established by someone else for the benefit of the beneficiary. It will apply to self-settled special needs trusts and other irrevocable trusts established by the beneficiary.

What effect will the statutory changes have on guardianship and conservatorship practice? It is hard to be certain until there is more experience. A few likely effects, including some that might be categorized as unintended consequences:

  • The cost of probate court proceedings is likely to go up in most cases. This is a paradox, since one of the original motivations behind the changes was to control costs, and especially legal fees. In some very expensive cases in recent years, that might well be the effect. In the vast majority of cases, however, increased requirements and a higher burden on fiduciaries and their attorneys will likely result in at least a small increase in costs.
  • There are likely to be fewer private fiduciaries willing to get involved in difficult or contentious cases. That, in turn, is likely to mean an increase in caseloads for the Public Fiduciary in each county. Not only will the Public Fiduciary see an increase in cases, but it is likely that the complexity of the average Public Fiduciary case will increase.
  • Some private professional fiduciaries may leave the field, or change their practices significantly. We predict (on the basis of no empirical data whatsoever) that another paradox is likely to be an increase in the number of licensed fiduciaries — and that both the average case load and the professional training and experience of private fiduciaries may well be lower in future years.

On January 18, 2012, Fleming & Curti, PLC, will host a training session for our clients who act as guardian, conservator or personal representative. We will invite fiduciaries who are not our clients, as well. Those in attendance will likely include both family members handling a single case and professional fiduciaries with large and complicated case loads; both kinds of fiduciary will need to know what the changes mean for them. We will cover both these legislative changes and the Supreme Court’s changes in rules and accounting requirements (and forms). If you are interested, you can pre-register by calling Yvette in our office (520-622-0400) and leaving your name and e-mail address. We will be sending out formal invitations in the upcoming week.

Simplified Probate Proceeding Valid Even Though Fraudulent

JANUARY 25, 2010  VOLUME 17, NUMBER 3

The difficulty and cost of a probate proceeding can make it hard for heirs to collect small estates. Even the court filing fee can be prohibitively expensive if the decedent’s assets are very small. As a consequence most states have some sort of alternative to a full probate proceeding for smaller estates. Most often those mechanisms are not available for real property owned by the decedent. In Arizona, however, even real estate can be transferred to heirs by a simplified proceeding with limited notice and few formalities.

Arizona’s so-called Affidavit of Succession (see Arizona Revised Statutes section 14-3971) proceeding resembles a stripped-down, highly shortened probate proceeding. It does require a court filing, but no formal notice is given to heirs, anyone named in a will or even the decedent’s creditors. It is available only if the decedent’s interest in the real estate was worth less than $75,000.

But what happens when the informality and lack of notice are used improperly? If someone uses the simplified process fraudulently, can they get away with wrongly taking the decedent’s property? A recent Arizona Court of Appeals decision addresses exactly that question.

When Rodney Olson died in 2003, he left three children and a home in Glendale, Arizona. There was a mortgage on the home, and his children got together and decided they would let the property go into foreclosure rather than try to take over the debts. A year later daughter Sherry Vandervort changed her mind; she moved in to the house, paid $11,000 in back mortgage payments and discussed with her brother and sister what it would take for her to acquire the house.

Ms. Vandervort’s brother waived any claims to the house, but her sister wanted her interest bought out. The two women agreed that Ms. Vandervort would pay her sister $25,000 over time, and she would keep the house. Then she turned to refinancing the loan.

Ms. Vandervort’s lawyer had the other two siblings sign quit-claim deeds to her, then he prepared and filed an Affidavit of Succession under Arizona’s simplified proceeding. In the Affidavit she alleged that she was the sole heir of her father’s estate; because of the nature of the simplified proceeding, no additional notice was given to the other two heirs. Based on the inaccurate filing, title was transferred to Ms. Vandevort’s name and she refinanced the property.

When Ms. Vandervort’s sister became upset about not getting payments on her agreed-upon $25,000, she initiated a full probate proceeding and sought to set aside the Affidavit insisting that it was inaccurate and in fact fraudulent. The holder of the note signed by Ms. Vandervort objected, arguing that the proceeding had appeared valid, and that any misrepresentation or fraud had been committed by others; the lender claimed not to have been aware of any flaws in the simplified proceeding.

The trial court invalidated the Affidavit but agreed that the lender’s claim should be enforceable at least to the extent of the original loan amount. That left the lender out of luck as to the rest of the refinancing.

The Court of Appeals reversed, ruling that the full loan was valid and affirming the Affidavit of Succession as against innocent third parties. The proceeding was fraudulent (because Ms. Vandervort swore to an inaccurate statement about the estate’s heirs), according to the appellate court. The property should be drawn back into the estate and handled appropriately. But because the lender was not involved in the misrepresentations, the full amount of the loan should be a valid encumbrance against the property now to be held as part of the estate. Beck v. Deem, January 14, 2010.

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