Posts Tagged ‘California’

Doctor’s Report to California DMV Does Not Violate Privacy Rights

DECEMBER 5, 2016 VOLUME 23 NUMBER 45
You might have wondered about this from time to time — we have, too. If a patient really shouldn’t be driving, is his or her doctor really able to write to the Motor Vehicle Division to report the patient’s condition? Wouldn’t that be a violation of the patient’s privacy rights?

A recent California case says no — the doctor is not liable for any breach of privacy, at least not under California law. The facts of that case are interesting, and instructive.

Mitch McIntyre (not his real name) was trying to establish that he was disabled, so that he could qualify for Social Security Disability payments. He visited several physicians over an almost ten-year period, but his primary care physician was Dr. Ann Kim. His diagnoses included diabetes and unspecified cognitive deficits.

During one office appointment, Mitch told Dr. Kim that he needed to renew his commercial driver’s license. He told her that he had applied to drive a school bus, and asked if she would “sign off” on his medical certification.

Over previous years, while he was working as a bus driver, Mitch had complained to Dr. Kim and other physicians that he didn’t want to “babysit” his passengers. He had confessed to his physicians that he didn’t always follow the routes specified by his employer — he preferred his own routes. On one occasion, he acknowledged, he had taken a group of children from San Diego, California, to Tijuana, Mexico — though that was not their actual destination.

But when Mitch told Dr. Kim that he was about to start driving school buses, that was too much for her. She called Mitch, told him that she wouldn’t be signing his medical certification form, and added that, in fact, she was considering sending a letter to alert the California DMV to her concerns about his impulsivity and poor judgment. Mitch told her that he did not want her communicating with the DMV at all, and that he did not agree with her reporting her concerns.

Dr. Kim thought about her dilemma for several weeks, and then wrote a letter to DMV. Her letter reported that Mitch “is functionally illiterate, lacks the capacity to set limits on himself and fails to understand the consequences of his behavior.” She added that Mitch’s problems appear to be “the result of mild congenital or developmental brain damage that has not only affected his cognitive skills but more importantly has impaired his judgment, impulse control, insight, forethought and ability to introspect.”

Mitch’s commercial and regular driver’s licenses were suspended almost immediately after the DMV received Dr. Kim’s letter. His employment was suspended, and he was ordered to get his licenses reinstated if he wanted to continue to drive buses. He managed to get his regular license restored quickly, but it took him three months to get his commercial license reinstated — though he did manage to do so. Because he failed to meet his employer’s deadline, however, he lost his bus-driving job.

Mitch then sued Dr. Kim and her employer, alleging that she had violated state privacy laws and the federal HIPAA (Health Insurance Portability and Accountability Act) law by disclosing his medical information to DMV. The defendants moved to dismiss Mitch’s complaint, arguing that they were permitted to give such information to the Department of Motor Vehicles. While the trial court did not immediately dismiss, it ultimately threw out Mitch’s case after he had put on evidence at his trial; the defendants were not even required to put on any case.

Mitch appealed to the California Court of Appeals, which affirmed the trial judge’s dismissal. Applying California’s version of the privacy laws, the appellate judges ruled that Dr. Kim’s disclosure was specifically authorized to report her concerns about Mitch’s ability to drive. According to the appellate court, California has a policy of encouraging people (including but not limited to physicians) to report the possibility of unsafe driving — and that supported Dr. Kim’s authority to disclose medical information for the limited purpose of calling Mitch’s ability to drive into question. McNair v. City and County of San Francisco, November 22, 2016.

Mitch and Dr. Kim, of course, were operating under California’s state law — and the national HIPAA rules. As the court acknowledged in its opinion, HIPAA does not give Mitch (or any other individual) any right to bring a breach-of-confidentiality suit against a medical provider. That means that state law will be the most important consideration in addressing similar claims.

Arizona has law that seems like it would resolve a dispute similar to Mitch’s (if it had been subject to Arizona law, that is). Arizona Revised Statutes section 28-3005 spells out that:

Notwithstanding the physician-patient, nurse-patient or psychologist-client confidentiality relationship, a physician, registered nurse practitioner or psychologist may voluntarily report a patient to the department who has a medical or psychological condition that in the opinion of the physician, registered nurse practitioner or psychologist could significantly impair the person’s ability to safely operate a motor vehicle.

In fact, the Arizona Motor Vehicle Division has a web page devoted to the forms and procedures for physicians — and any regular citizens — to report unsafe drivers or concerns about anyone’s ability to drive. Physicians are encouraged to use the form on the MVD website; other concerned citizens can download a form to make their own reports, as well.

Undue Influence and Limited Capacity Do Not Necessarily Justify Conservatorship

OCTOBER 31, 2016 VOLUME 23 NUMBER 41
In our legal practice, we frequently deal with individuals with limited capacity. Sometimes we speak of them being “incapacitated” or “incompetent.” Sometimes they are “disabled,” or qualify as “vulnerable adults,” or are subject to “undue influence.” But each of those terms means something specific, and some variations even do double duty (with two related but distinct meanings). A recent California case pointed out the confusion engendered when litigants rely on similar but different terms.

Aaron, a widower in his late 90s, lived alone after the death of his wife Barbara. He had no children of his own, though he and his wife had raised Barbara’s daughter Connie together after their marriage — when Connie was four. Aaron’s other nearest relatives were two nieces, Cynthia and Diane. He didn’t have much contact with Cynthia and Diane, though that might have been because his late wife had discouraged contact over the years they were together.

Connie was actively involved in overseeing Aaron’s care. She arranged for his doctor’s visits, went to his home at least twice a week to check on him, helped pay his bills and generally watched out for him. She was concerned about his ability to stay at home, and on several occasions she found herself summoning the local police to make welfare checks on her stepfather.

After Aaron fell in his home, refused treatment, and suffered a frightening seizure, he was diagnosed as having a subdural hematoma (from his fall). He spent some time in a hospital, but was anxious to return home. His physician noted that he had a poor score on the mental status exam administered in the hospital, and diagnosed him as having dementia. He was discharged to a nursing facility, with Connie’s help.

Aaron hated the nursing home, and the assisted living facility Connie helped move him to after that. He insisted that he could return to his own home. About this time, his nieces began to visit him, and they tried to assist. They disagreed with his placement, and niece Cynthia prepared a power of attorney for Aaron to sign, giving her authority over his personal and financial decisions. After he signed the document, he asked his attorney to write to Connie, asking her to return his keys and personal possessions so that he could return home.

Connie filed a petition for her own appointment as conservator of Aaron’s person and estate (California, confusingly, refers to guardianship of the person as conservatorship). While that proceeding was pending, Aaron went to his attorney’s office and changed his estate plan — instead of leaving everything to Connie, he would split his estate into three equal shares, with one each for Cynthia, Diane and Connie’s daughter.

The probate judge heard evidence in connection with Connie’s conservatorship petition, but denied her request. The judge found that Aaron was clearly subject to undue influence, and might lack testamentary capacity — but he didn’t need a conservator (of his person or his estate).

How could that be? Connie appealed, but the California Court of Appeals ruled that the probate judge was correct. At the time of the hearing on the conservatorship petition, according to the appellate court, Aaron was alert, oriented and able to describe his wishes. The fact that he might have been incapacitated when he signed the powers of attorney, or that he might have been subject to undue influence when he changed his estate plan, was not dispositive of the question of his capacity at the time of the conservatorship hearing. Furthermore, the mere fact of incapacity would not be enough; by the time of the trial Aaron had a live-in caregiver who could help him manage his daily needs, and that could support the probate judge’s determination that no conservator (especially of the person) would be necessary.

Aaron and his attorney also argued that Connie didn’t actually have any standing to file a court action in the first place. After all, she was his stepdaughter, and not even a blood relative. The Court of Appeals rejected that notion; any person with a legitimate interest in the welfare of a person of diminished capacity has the authority to initiate a conservatorship proceeding. Conservatorship of Mills, October 20, 2016.

So what do the various terms mean, and how are they different? “Capacity” (and “competence”) usually refers to the ability to make and communicate informed decisions. “Testamentary” capacity is a subcategory, and requires that the signer of a will must have an understanding of his or her relatives and assets, and the ability to form an intention to leave property in a specified manner. “Vulnerable adult” is a related term, but is used in most state laws to refer to a person whose capacity is diminished, and whose susceptibility to manipulation or abuse is therefore heightened. “Undue influence” can arise because of limited capacity, but refers to the actions of third persons which overpower the individual’s own decision-making ability. “Disability” is, perhaps, the least useful of the terms — attaching the term does not say much about an individual’s ability to make their own decisions, since disabilities can be slight or profound, physical or mental (or, of course, both), and subject to adaptive improvement in any case.

In Aaron’s case, it might well be that his amended estate plan will be found to have been invalid as a result of undue influence, and his new powers of attorney might be set aside on the same basis. He might even be found to have been a vulnerable adult and any transactions benefiting his nieces might be subject to challenge. But he apparently had the level of capacity necessary to make his own personal and financial decisions at the time of the hearing on the conservatorship petition.

As an aside, there’s another issue in Aaron’s court decision: the inappropriate reliance on scores obtained on short mental status examinations. Typically, medical practitioners ask a short series of questions (“What is the year?”, “Please repeat this phrase: ‘no ifs, ands or buts'” and the like) as a way of determining whether further inquiry should be made into dementia and capacity questions. Aaron variously scored 14, 18, 24 and 20 on 30-point tests administered by several interviewers, and both the probate court and the Court of Appeals seem to have thought that the results demonstrated his fluctuating capacity (and general improvement). Those scores are only suggestive of incapacity, and should be an indicator that further testing might be appropriate. There is no bright-line score for determining incapacity on the basis of those short examinations.

Special Needs Trust Pays Substantial Legal Fees in Dispute

SEPTEMBER 26, 2016 VOLUME 23 NUMBER 36
Questions often arise about what kinds of payments may, or should, be made from a trust. When the trust is a “special needs” trust, the questions sometimes can be even more pointed — the purpose of a special needs trust, after all, is usually to provide for supplemental needs not available from other sources. As in almost every trust case, there are questions about whether trust expenditures improperly favor one beneficiary over the interests of others; in many special needs trusts, the question is compounded by trying to assess the protection due to the state Medicaid agency, since it is often entitled to repayment from the trust on the death of the primary beneficiary.

All of that, though, is hard to analyze — until a specific trust distribution is at issue. To help review the considerations we might look at a recent case out of South Carolina, in which a special needs trustee’s payment of legal fees has come into question.

Alexis Davis (not her real name) presents a tragic story. In 2006 she delivered triplets (after she and her husband had tried to have children for several years). During the delivery, however, she was catastrophically injured; she remains unable to move or speak, and communicates primarily by blinking.

Alexis’ husband and parents cooperated in filing a lawsuit against the hospital where she was treated, and a settlement was negotiated. A special needs trust was established to handle the settlement proceeds, and it was funded with an initial amount of almost $1 million, plus monthly income payments of over $30,000. Alexis’ mother and father were named as trustees of her special needs trust, and as guardians of her person and conservators of her estate.

After the settlement, Alexis’ husband announced that he wanted to pursue a divorce. In response, her parents filed a divorce proceeding on her behalf, and sought visitation between her and her triplets.

All of the legal proceedings took place in California, where the couple had lived together and the triplets were born. For a time, Alexis’ parents moved to California to help take care of her, and to have her remain close to her family. As the divorce proceeded, however, they moved her back to South Carolina to take care of her at home.

Over almost a decade, legal battles proceeded over the visitation issue. Alexis’ legal position was directed by her parents, acting as co-trustees and as co-guardians. The legal costs were paid from her trust.

Meanwhile, legal fees mounted. Alexis’ ex-husband eventually filed an action in South Carolina to try to prevent Alexis’ parents from paying those costs from her trust. He brought his action against them as trustees but did not name Alexis herself as a party. His request was made on behalf of the triplets, arguing that their interests in the trust were being compromised by the legal expenses.

In response Alexis’ parents asked the South Carolina court to expressly approve legal fees they had paid totaling $495,326.75. They also asked that the trust be modified to make it clear that they could pay legal fees without prior court approval. The court appointed a guardian ad litem (a local lawyer) to represent the triplets’ interests in the trust. The court also appointed another local attorney to act as Alexis’ guardian ad litem, and a third as attorney for Alexis.

Midway through the court proceedings (after several days of trial and after Alexis’ ex-husband finished his presentation) the judge formally amended the petitions to make clear that Alexis herself was a party. Because the allotted time was up, the court continued the whole proceeding for a new date; it was set to start up again several months later. Meanwhile, the judge who had heard the first part of the proceedings lost her reelection bid, and Alexis’ ex-husband appealed the order adding her as a party.

Meanwhile, the first appeal resulted in an order denying Alexis’ ex-husband’s objections, and he appealed to the next level of court — South Carolina’s Court of Appeals. That appellate court agreed with both of the lower courts which had considered the questions, approving the addition of Alexis as a party, the appointment of a guardian ad litem and an attorney to represent her, and the course of the litigation up to that point. Dorn v. Cohen, August 3, 2016.

Are you confused yet? We know we are — and we speak the arcane language of appeals and legalisms regarding trusts and guardianship. But that’s not really our point. Instead, we think that Alexis’ case illustrates an important issue.

The key dispute involved here centers around legal fees of almost $500,000. Since that bill was incurred, the dispute moved to another state, three different attorneys have been appointed to be involved in the case, and a multi-day trial has been conducted — and yet the issues are far from resolved. With the change of judge, it seems safe to suggest that there will eventually be several more days of court proceedings, and more legal wrangling just to get to that point. Meanwhile, the underlying fight — over visitation between Alexis and the triplets — was actually resolved (according to news reports) five years ago. The resolution sounds imminently sensible, and it may even be going well.

Our point is that legal proceedings can sometimes lose their connection to reasonable grounding. From Alexis’ parents’ perspective, they have by this time incurred legal fees that are probably two or three times the original reported bill — and they could conceivably be instructed to pay those fees from their own pockets. On the other side, unknown fees and costs have been incurred by Alexis’ ex-husband. Presumably, all the legal costs will eventually be borne by the triplets, since their inheritances (from their father, their mother’s trust and even their grandparents) will have been significantly reduced.

Does this mean that it is dangerous to even act as trustee of a special needs trust (or, for that matter, of any trust)? No. This level of dispute is extremely unusual. But the story is still a cautionary one.

 

Trustee Has Duty to Monitor His Lawyer’s Behavior

AUGUST 29, 2016 VOLUME 23 NUMBER 32
Are you a trustee, or named as successor trustee for a family member or friend? We regularly advise people in your circumstance that they should get good legal advice. Once you’ve done that, however, you are not absolved from any liability if things go wrong.

A trustee is generally permitted to delegate some duties to others — especially to professionals. So it makes sense, and might even be required, for a trustee to hire a stockbroker, or an accountant, or a lawyer. But the ability to delegate is coupled with a duty to monitor the professional.

At least that’s the law in Arizona, and probably also the law in any state that has adopted the Uniform Trust Code. It’s also the law in California, as it turns out — even though California has not adopted the Uniform Trust Code. How do we know? Because of Terry Delgado (though we’ve changed his name for this narrative).

Terry was named as successor trustee on his mother’s trust. After her death late in 2011, he took over, and began managing her trust property. That included two pieces of real estate in the San Francisco area, several bank accounts and some personal property items. Her trust directed that it should be distributed equally between Terry and his two sisters.

When they hadn’t gotten any information about the trust after two years, Terry’s sisters wrote to the lawyer who had been handling the trust administration. They asked for an accounting, distribution of some of the trust’s holdings, and information about what would happen to the real estate. They got nothing back in response. They did, though, get a notice from Terry’s lawyer that one of the properties was being listed for sale. They wrote back saying that they thought the property needed work done before it was sold, and demanding that they get information about what had happened and what might be proposed.

A court hearing was set for six weeks later. Three days prior to that hearing, Terry’s lawyer filed a motion to continue the hearing, claiming that he (the lawyer) had been ill and needed to be involved in the preparation of any accounting. The probate judge conducted a hearing anyway, and decided Terry’s power as trustee needed to be suspended. The judge appointed a professional trustee to take charge temporarily, and ordered Terry to file a complete accounting with the court within six weeks from that hearing date.

Instead, Terry’s lawyer filed a motion to reconsider the order suspending Terry’s powers as trustee. The lawyer claimed that, because of his illness, he had been sleep-deprived and unable to complete the accounting. He had also been working on an accounting in connection with the related estate of Terry’s mother’s late husband. Furthermore, Terry himself had been unable to complete the accounting because of his work schedule and his lawyer’s illness.

At the same time, Terry’s lawyer filed an entirely separate pleading on behalf of the real estate agent who had been hired to list the property. That pleading objected to any change in trustee, and noted that the real estate agent’s company might file a claim against the estate if the listing were to be canceled.

On the last day set by the probate judge, Terry’s lawyer filed an accounting on his behalf — on the wrong forms. The accounting revealed that up to that point, Terry’s lawyer had charged the trust something more than $320,000 in fees — $350 per hour for 916.15 hours.

The probate court received the accounting and set a hearing to review it for two months later. During the delay, Terry’s lawyer filed his own declaration. It apologized to the probate judge for the delays, acknowledged that he had filed the wrong kind of accounting, described his health problems and promised to get the proper accounting filed before the new hearing date already set.

At that hearing, the probate court permanently removed Terry as trustee. It appointed the neutral fiduciary who had been acting temporarily, and noted that no acceptable accounting had yet been filed. At a later hearing on Terry’s lawyer’s request for a reconsideration, the probate judge reaffirmed the same orders.

Terry appealed to the California Court of Appeal. That court upheld the removal and the appointment of a new fiduciary. The appellate judges noted that Terry had every right to hire an attorney to represent him as trustee, but that he had an obligation to monitor his attorney and to see to it that his duties were properly discharged.

Terry’s attorney had created a serious conflict of interest by appearing in the same proceeding on behalf of someone who asserted a claim against the trust, ruled the appellate court. The attorney’s assertion that there was no “actual” conflict of interest in the dual representation did not relieve Terry of his duty.

It is perfectly permissible, ruled the appellate court, for a trustee to hire a professional — like an attorney — to handle trust business and to delegate authority to that professional. The trustee, though, is still required to monitor the professional, and to hire a more suitable alternate if the attorney is unable to handle the assignment — whether that is because of illness, unfamiliarity with trust administration procedures, or otherwise. Desbiens v. Delgman, August 10, 2016.

Joint Tenancy with Right of Survivorship, or Community Property?

MARCH 24, 2014 VOLUME 21 NUMBER 12

Which is better? How should we take title to our house? How about our brokerage account?

These questions are really common in our practice. The answer is actually pretty straightforward, but we do need to lay a little groundwork.

Arizona is a community property state. That means that property held by a husband and/or wife is presumed to belong to them as a community. That presumption does not apply if the property existed before the marriage, or was received by a gift or inheritance. There are special rules for property you owned in a non-community property state before you moved here. It’s also possible for a married couple to enter into an agreement that changes the nature of community property, but those agreements are relatively rare.

Historically, there was one great disadvantage to community property ownership, and one great advantage. That is, there was one advantage and one disadvantage if you assume that the couple would never get divorced. If you have substantial separate property and are considering turning it into jointly-held property, is that advisable? That question is beyond our short essay today, and the answer depends on your comfort level with your spouse and marriage. We’re not particularly accomplished marital counselors, and we don’t have any facts for your personal situation.

But assuming you and your spouse live together more-or-less-happily until  one of you dies, here are the competing considerations to holding property as community property:

Advantage: Income taxes. Upon the death of one spouse, property held as community property takes on a new “basis” for calculating future capital gains. If you have stock that you bought at $1,000 and that you now sell for $10,000 (congratulations!), you have “recognized” $9,000 of gain and will pay income taxes based on that amount. But if you held that property in joint tenancy with your late spouse, it got a step-up in basis to his or her date-of-death value; assuming the stock was worth $10,000 on that day, your income tax is only on $4,500 of the total gain. But if you had held that stock as community property with your late spouse, there would be no capital gains tax on the sale at all.

Disadvantage: Probate. Until 1995, community property could not pass automatically to the surviving spouse. That meant that a probate was often required to transfer the deceased spouse’s community property interest to the surviving spouse. Since no probate was required for property held in joint tenancy (the “right of survivorship” part of joint tenancy means the surviving joint tenant receives the property without having to go through the probate process), most married couples opted for joint tenancy rather than community property.

In 1995, the Arizona legislature made the disadvantage to community property disappear — they created a concept of “community property with right of survivorship.” That means a married couple can have it all: they can get the full stepped-up basis for income tax purposes, but avoid probate, on the first spouse’s death.

Does that mean that all property should be titled as community property with right of survivorship? Almost, but not quite. There are a handful of problems that occasionally crop up and have to be considered:

  • Not every married couple intends to leave everything to one another. You can still get the full stepped-up income tax basis and leave your share of community property to someone else — your children from a prior marriage, perhaps, or another family member. In such a case it might make sense to hold the property as “community property” (with no right of survivorship) but have a will or trust to make provisions for each spouse’s share.
  • The income tax benefit does not always appear. Note that the benefit is not a direct tax savings, but only a potential savings. If you get a full stepped-up basis on property that you then hold until your own death, you haven’t really saved any tax money. But the community property benefit just might give you flexibility — you can decide to sell property after your spouse’s death on the basis of good investment advice, rather than the tax effect.
  • The option only applies (this is obvious, but we need to say it) to married couples. “Community property” is not available to anyone else. Is it available to same-sex married couples? We think so (see our articles on the subject over the last few months here, here and here), but we might turn out to be wrong about this.
  • The benefit may not even be necessary for some assets. No growth in your brokerage account? No benefit. You invest only in municipal bonds and certificates of deposit? Minimal to no benefit. But here’s the big one: most people’s biggest growth asset is their home — and there’s already a substantial ($250,000) exemption from capital gains taxes for a single (widowed) person selling their home.
  • Have you already established a trust as part of your estate plan? You may not need to go through the analysis, since the practical effect of your plan may be the same as the benefit of community property with right of survivorship — or better. Ask your estate planning attorney to review this with you.
  • There are sometimes costs to making the change. For real estate, you will need someone to prepare a deed (you can probably get it right on your own, but it makes sense to hire a professional). In addition, there are modest costs to record the new deed.
  • This only applies to Arizona property. No problem with your brokerage or bank account — they are Arizona property if you live here. Your vacation cottage in Montana, or your Mexican condo held in a land trust, are a different matter. But if your vacation cottage is in Alaska, or California, Idaho, Nevada or Wisconsin, you might be able to do something similar. Ask a local lawyer about the possibility.
  • We need to reiterate: if you have separate property and transfer it to community property with right of survivorship to take advantage of income tax benefits, you may have made a gift of half of your separate property to your spouse. Be careful, and make sure you know what you’re doing.

What’s your bottom line? Should you change everything you own from joint tenancy with right of survivorship to community property with right of survivorship? Maybe, but your home is the least urgent thing to tackle. Your brokerage account? Absolutely. Your summer cottage in another state? Check with your lawyer and ask her (or him) to find out whether the other state has community property with right of survivorship.

Note that none of this really helps you deal with retirement accounts, IRAs, 401(k) accounts, separate property you brought from another state or your complex estate planning intentions. For those, you really need to talk with your lawyer. Also, please be clear: we do not know the correct answer if you live in a state other than Arizona — talk to your local lawyer about that.

 

Estate Plan For Benefit Of “Confidential” Wife Upheld

OCTOBER 5 , 2009  VOLUME 16, NUMBER 56

Legal issues confronted by celebrities are, of course, often fodder for tabloids, late-night television and casual gossip. They also often reveal unusual legal problems, since celebrities tend to lead lives that are more complex than those of their fans. Comedian Richard Pryor’s death in 2005 is a case in point. His estate involved at least three interesting legal issues, as described in a recent California Court of Appeals decision.

Mr. Pryor was married to Jennifer Lee Pryor in 1981; they divorced in 1982. Shortly after that, Mr. Pryor was diagnosed as suffering from multiple sclerosis. Almost twenty years (and, for Mr. Pryor, two intervening marriages, both to the same woman) later, the couple remarried—after Jennifer Pryor had been providing care to Mr. Pryor for a seven-year period.

The second marriage between Richard and Jennifer Pryor raises the first interesting legal issue. The marriage was by a “confidential marriage license,” an unusual alternative available in California. This type of marriage somewhat resembles the old common-law marriage concept, except that it involves a formal marriage certificate. The couple must swear that they live together as a married couple, but the certificate, once issued, can not be retrieved from public records except by the husband, wife or court order. Mr. Pryor apparently did not tell his family that he and Mrs. Pryor had remarried.

When Mr. Pryor died in 2005, his daughter Elizabeth Pryor still did not know that he had been legally married. Mr. Pryor’s estate plan left a significant share of his assets to Mrs. Pryor, and daughter Elizabeth filed an action to set aside those gifts.

Elizabeth Pryor’s lawsuit relied on another unusual California statute, which automatically invalidates gifts given to care custodians unless certain additional steps are taken. In other states there may sometimes be a presumption of invalidity when gifts are made to caretakers, but California’s statute is much more stringent. There is, however, an exception for gifts made to a spouse, and Mrs. Pryor produced the marriage certificate to show that the exception applied in her case.

Elizabeth Pryor then sought to annul the confidential marriage. She argued that Mrs. Pryor had acted fraudulently in securing the marriage, and that she should be able to seek the annulment as her father’s “successor in interest.”

The trial judge dismissed her annulment petition and ruled against her on the merits in the action to set aside the transfers. The California Court of Appeals upheld both judgments, ruling in two companion appeals that (1) an annulment proceeding can only be brought by a spouse, and can not be pursued after one spouse’s death, and (2) consequently, Elizabeth Pryor’s claims against Jennifer Pryor involving transfers to a caregiver must fail. Pryor v. Pryor and Estate of Pryor v. Pryor, September 29, 2009.

For those of us who grew up laughing at Mr. Pryor’s regular television comedy appearances, and who enjoyed Silver Streak and Stir Crazy, his decline and death were especially tragic. Irony, one of the core components of good comedy, abounded in his life and death. Two good Richard Pyror lines seem particularly apt:

“I believe in the institution of marriage, and I intend to keep trying until I get it right.” (Mr. Pryor was married seven times, though only to five different women.)

“Marriage is really tough because you have to deal with feelings … and lawyers.”

Court Cases Demonstrate Two Remedies For Elder Abuse

MAY 17, 2004 VOLUME 11, NUMBER 46

Two recent appellate court cases illustrate different aspects of the law’s response to abuse and exploitation of seniors. Taken together the two cases underscore that protection of vulnerable seniors can be a priority of the legal system.

The first case tested California’s law on elder abuse, which permits the courts to (among other things) disinherit a family member or devisee who exploits a senior. Laura Marie Lowrie had accumulated an estate of approximately $1 million during her 89 years. During the last ten years of her life her son Sheldon Lowrie took over more and more of the management of her finances. By the time of her death in 1999 he had gotten her to transfer two houses to him. He had also persuaded her to modify her revocable living trust so that the bulk of her estate would pass to him.

Ms. Lowrie’s granddaughter Lynelle Goodreau believe that her uncle had taken financial advantage of his mother. She brought an action to set aside changes in the living trust, and to secure return of property that should have belonged to the trust.

Ms. Goodreau alleged that her uncle had abused his mother physically and financially. According to her, he isolated his mother from contact with other family members. He taped her telephone handset so that she could not make or receive calls, he locked her security door from the outside so she could not leave her home, and he put a warning sign on the front door instructing social workers and peddlers not to bother her.

Among the choices available to the judge under California’s elder abuse statute was the possibility of ordering that Sheldon Lowrie should be treated as having died before his mother. He was the remainder beneficiary of her trust, and would receive the bulk of her assets under its terms. If he had died before his mother, however, most of the trust assets would pass to Ms. Goodreau.

After hearing testimony from most of the family members, plus neighbors, friends and acquaintances of Ms. Lowrie, the trial judge decided that Mr. Lowrie had taken advantage of his mother. The judge noted that he had stolen hundreds of thousands of dollars from her and from the family business, and that he had bought seven or eight antique automobiles, had paid off his own personal credit card bills, and had accepted “gifts” of most of her physical property.

Based on that testimony the trial judge decided that Mr. Lowrie should be treated as having predeceased his mother. It ordered that he pay Ms. Goodreau $665,623.60 to replace the money he had taken from his mother, plus $250,000 for his mother’s pain and suffering, plus another $50,000 in punitive damages. The California Court of Appeal upheld the judgment and the finding of disinheritance. Estate of Lowrie, April 30, 2004.

Arizona law is similar to the California provision on elder abuse. One alternative available to the courts in extreme cases of abuse, neglect or exploitation is to work a disinheritance of the offender. Just as in the Lowrie case, that would result in the abuser/exploiter being treated as already deceased, and the elder’s property passing to heirs or devisees other than the offender.

In the second elder abuse case reported in recent weeks, a care home operator in Hawai’i was convicted of manslaughter in the death of a resident of her home. The Hawai’i Court of Appeals upheld the conviction, despite her argument that it had not been shown that she intended any harm.

Chiyeko Tanouye was eighty years old at the time of her death. She had lived in an adult care home operated by Raquel Bermisa for only a few months, but her condition had worsened dramatically and quickly.

Ms. Bermisa took Ms. Tanouye to her doctor’s office on June 30, 1999, for treatment for a urinary tract infection. During that visit the doctor noted that Ms. Tanouye had a decubitus ulcer (a bedsore) which, at about five centimeters in size, required attention. He instructed Ms. Bermisa to wash the ulcer with Betadine cleaning solution and to apply Intrasite gel daily, and to bring her back a week later for a follow-up visit.

When Ms. Bermisa returned with Ms. Tanouye on July 7, the decubitus ulcer had not cleared up. The doctor referred her to a specialist for further treatment.

Ms. Tanouye was seen by the specialist just two days later, but her condition had worsened markedly. He saw two decubitus ulcers rather than one, and both had areas of dead tissue. He cleaned the ulcers, applied sterile gauze moistened with saline solution, and instructed Ms. Bermisa to change the dressing two or three times each day. He scheduled another follow-up visit for a week later, but Ms. Bermisa and Ms. Tanouye did not return.

Instead, Ms. Bermisa arrived at the Pali Momi emergency room a month later with Ms. Tanouye in the front seat of her car. She told nurses at the emergency room that she had been out shopping with Ms. Tanouye and the other residents of her care home, and that something was wrong with Ms. Tanouye.

Something was indeed wrong. Ms. Tanouye’s decubitus ulcers had grown much larger, and they showed no signs of treatment. The smell from the ulcers was overpowering to the nurses, and they noted that one of Ms. Tanouye’s heels was also ulcerated. They tried their best to treat Ms. Tanouye but she died the next day.

Ms. Bermisa was charged with manslaughter for her apparent failure to provide adequate care. At her trial testimony was offered from an adult protective services worker, the nurses who provided care to Ms. Tanouye during her final hospitalization, the doctors who had treated her and directed Ms. Bermisa how to care for her, and the trainer who had given Ms. Bermisa instruction leading to her certification as a Certified Nurse’s Aide (CNA). The jury convicted her, and she appealed.

The Hawai’i Court of Appeals affirmed Ms. Bermisa’s conviction. Although she argued that the prosecutor had not shown that she had any intention to harm Ms. Tanouye, the court found that she had acted recklessly, and that she had a duty to provide adequate care. The court also noted that Ms. Bermisa was properly trained to recognize the problems Ms. Tanouye was suffering, and she should have recognized the importance of maintaining the treatment regimen directed by Ms. Tanouye’s physicians. When she failed to follow through with proper treatment, and apparently failed to appreciate the significance of her resident’s condition, she violated her duties as a caretaker. State v. Bermisa, May 7, 2004.

Arizona Community Property Is Not Always Subject To Probate

OCTOBER 9, 2000 VOLUME 8, NUMBER 15

Arizona is one of nine “community property” states in the country, and that can be the source of some confusion about estate planning, taxes and property ownership rights for married couples. Recent changes in Arizona’s law make the “community property” designation a little more friendly and understandable, and the benefits to this unique property ownership choice are now clearer.

“Community property” concepts were not part of the English common law. Under the system imported to most of the American states, property was owned by one spouse or the other, though the non-owner might acquire some rights in his or her spouse’s property. The French and Spanish, however, understood the marital community to be a separate entity from either spouse individually, and permitted the “community” to own property. Each spouse then holds an equal interest in the community’s property.

Those American states with rich Spanish or French histories tended to adopt some version of the community property concept. Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin are community property states, although the method of implementing the concept varies somewhat. Alaska also permits some trust assets to be held as community property.

In community property states a married couple is presumed to hold assets as community property regardless of the actual title on the asset. Couples may, however, choose to hold their property in joint tenancy or as tenants in common if they wish.

One important advantage to having assets titled as community property comes, oddly enough, from federal tax law. Although capital gains taxes are ordinarily due any time an appreciated asset is sold, the increased value of property held by a decedent at the time of death is not taxed. The property’s income tax “basis” is said to “step up” to its value on the date of the owner’s death, often resulting in substantial income tax savings for heirs.

Jointly owned property only receives a partial “step up” in basis. Property held in joint tenancy will usually only get half the income tax benefit on the death of one joint owner. Community property, however, is treated differently: the entire value of a community property asset gets “stepped up” to the value on the first spouse’s death, resulting in twice the income tax savings.

The main drawback to holding community property in Arizona has long been the requirement of a probate proceeding to pass the property to the surviving spouse. Although the long-term tax savings can be substantial, the probate costs are immediate and, in most people’s minds, too high. Since 1995 Arizona has permitted married couples the best of both worlds: property can be held as “community property with right of survivorship” and secure the favorable income tax treatment while still avoiding the probate process. The value of this type of property ownership is, of course, restricted to married couples.

One caveat: some commentators, relying on fairly arcane interpretations of the federal tax law, argue that the “community property with right of survivorship” designation could conceivably be found to result in no step up in tax basis at all. So far the federal government has not taken such a position, but there remains some slight possibility of a problem. In addition, the effect of titling separate property as community property (with or without the “right of survivorship” language) has more than just tax effects. In other words, you should consult an Arizona attorney before changing title on your existing assets or deciding how to title a new acquisition.

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