NOVEMBER 14, 2011 VOLUME 18 NUMBER 39
Let’s talk about guardianship and conservatorship proceedings. Before we do, though, let’s remember a couple of important principles:
We only know about Arizona guardianship or conservatorship. Well, OK — we might know a thing or two about other states’ rules and procedures — but we only practice in Arizona. Our observations are not universally applicable. They may not even be universally applicable inside Arizona’s borders.
As always, we simply can’t give specific case-based legal advice here, and you should not rely on this newsletter (or anything you read online or in books) to resolve your case. This is big-picture stuff. We can and do write about how the system works, what the rules look like, and what you might expect if you are involved in a guardianship and/or conservatorship matter in Arizona. Don’t expect to print out our articles, take them to court and argue with the judge, though. She won’t appreciate it, and neither will we. Plus it won’t work. Get good legal advice.
One thing we’ve learned from years of law practice: people think they understand their own cases, but they get blinded to the nuances (or maybe they aren’t told everything about the contrary evidence or opinions) and tend to overgeneralize. We don’t think that means they are stupid, or liars — they are just trying to put the best face on their case, and that’s human nature. But it also means that if you say “aha — he hit the nail on the head and that’s exactly what my worthless brother is trying to do” we’d be likely to tell you (if we were your lawyer): “slow down. It’s not that clear.”
We have written a lot about guardianship and conservatorship. Here’s one of our better (and most comprehensive) articles, a White Paper on guardianship and conservatorship. But it’s a difficult and confusing topic, with lots of information — and misinformation — out there.
Disclaimers aside, let’s talk about guardianship and conservatorship. Let’s start with some definitions of terms.
In Arizona, the word “guardianship” is applied to the court proceedings instituted to acquire legal control over another human beings’ person. In general terms, a guardian is authorized by the court to make placement and health care decisions for that other human being. Not every state uses the same word. Not every state has the same process to get a guardian (or whatever they call the office) appointed. But every state does have some kind of court proceeding in which a person can be appointed to manage the health care and living arrangements of another person.
In Arizona, the word “conservatorship” is applied to the court proceedings instituted to acquire legal control over another human beings’ finances. A conservator usually is authorized by the court to handle checking accounts, real estate, brokerage accounts, businesses, vehicles, horses, airplanes, family photographs, oil and gas leases — you name it. Just to keep the confusion level high, not every state calls this type of court-appointed person a conservator — some, in fact, call them guardians. But in Arizona, the person managing property and finances is a conservator.
Neither guardians nor conservators are “powers of attorney.” In point of fact, powers of attorney are pieces of paper, not people at all. But now we quibble. The person named to manage your property and/or your person in a power of attorney is properly called your “agent” or your “attorney-in-fact.” A guardian or conservator is neither an agent nor an attorney-in-fact. They usually have authority over agents and attorneys-in-fact, though it may require separate court action to make that clear, and it may be possible for the court to determine that the agent (or attorney-in-fact, if you prefer hyphenated names) still has authority even after appointment of a guardian and/or conservator.
Who can have a guardian appointed? Someone who is incapacitated. Their incapacity can be based on their age (minors — those under age 18 — are automatically incapacitated under Arizona law unless they are “emancipated”) or their circumstances. Generally speaking, parents are the natural guardians of their minor children, so they do not need to go to court to secure guardianship. The same is not true for any class of adults. So if your 18-year-old child has a lifelong disability that makes him unable to make responsible decisions, you do not automatically shift from being his natural guardian at 17 to being his legal guardian at 18. A court proceeding is necessary. Same thing if your husband or wife becomes incapacitated — you may need court proceedings to become guardian (if there is no power of attorney and there are things that need to be taken care of). “Incapacity” for adults requires a court showing of (a) a mental, medical or other condition that (b) affects the ability of the person to make and communicate responsible personal decisions and (c) makes it difficult or impossible for them to provide their own food and shelter without assistance. It is also necessary to show that (d) the appointment of a guardian will actually help accomplish that goal.
Appointment of a conservator is based on similar, but slightly different, grounds. First, minority is always considered a legally disabling condition, but parents are not the natural conservators of their children in the way that they are natural guardians. That means if a minor child comes into money, even if they live with both parents and all are harmonious and responsible, there is no way to manage that money without going through the conservatorship process. If an adult becomes unable to manage their money in order to prevent its waste or dissipation, they may have a conservator appointed, as well. Frankly, the definition of when a conservator can be appointed is a great deal less precise than that for guardianships, which can sometimes lead to problems.
An important reality for family members and friends to understand: if a guardianship and/or conservatorship proceeding is initiated, the court has been invoked and will not later simply step aside to let concerned — even appropriately concerned — family members take over. Once the courts are involved, they tend to stay involved.
That means that the cost of securing guardianship and conservatorship can be high. In Arizona, a lawyer is automatically appointed to represent the person who is alleged to be in need of a guardian or conservator. A medical report is required. A court-appointed investigator must go to the residence, conduct an investigation and file a report. There are significant court costs involved. Plus the process is complicated enough that the petitioner is almost always going to hire an attorney. That attorney’s bill is likely to approach half the total cost of getting the guardianship or conservatorship set up.
Much has been written, spoken and broadcast in recent years about the high cost of guardianship and conservatorship. The natural tendency of the system has been to make it more difficult to get guardians and conservators appointed, and to require them to provide more information, more frequently. Though that may be a positive development, it has the (presumably unintended) effect of making the process not only more difficult, but also more expensive.
So — guardianship and conservatorship can be difficult, expensive, even ineffective. Not always, of course, but there is a possibility and it proves to be the case too often. What can beleaguered family members do?
Most lawyers practicing in the field spend the first portion of any contact with a new client talking about how to avoid guardianship and conservatorship proceedings. Did your family member sign a health care power of attorney, a financial power of attorney, a living will, a living trust? Are there other ways to get done what needs to be done? What bad things will happen if we (that is, the family and the lawyers acting together) simply do not file a guardianship or conservatorship proceeding, even if one is warranted? Are there ways to get agreement from all the family members in advance, in order to hold down legal costs?
One important concern, at least in the case of adult guardianship and conservatorship: we will ultimately need to be able to prove that your family member has a medical, mental, emotional or other problem that prevents them from making their own personal or financial decisions. We will need medical evidence. Have you spoken with your family member’s physician, or psychologist, or other member of their treatment team? Can you get a letter from that person describing diagnosis, prognosis and any functional limitations? Without that, we may not be able to proceed. With that in hand, though, the process may be significantly streamlined.
Getting guardianship or conservatorship can be expensive, emotionally wrenching, and sometimes even ultimately unsatisfying. Sometimes, however, it is absolutely necessary. We just need to be sure you are prepared for the cost, the procedures, the limitations, and the possibilities in this type of legal proceeding. That’s why you hire a lawyer, after all.
JULY 11, 2011 VOLUME 18 NUMBER 25
When appointment of a guardian and/or conservator is necessary, the cost of securing the appointment is usually a legitimate charge to be paid by the ward’s estate. There are exceptions, but the general rule is that the guardian’s and conservator’s fees, together with the fees charged by the attorney for the guardian and conservator, can be paid from the ward’s estate.
What happens, though, when a guardianship or conservatorship petition is unsuccessful, or when the person filing the petition is not ultimately appointed as guardian or conservator? Often (but not always) the parties and the court ultimately agree that the petitioner’s efforts — even though not completely successful — benefited the ward, and that their reasonable attorney’s fees should be paid. There is no completely clear authority for that proposition in Arizona, however, and the result could be different in each case.
Last week precisely that question was addressed in a case decided by an appeals court. It was not an Arizona court, but from our neighbor Utah — where the laws are very similar. That does not mean that the Utah decision would be followed in Arizona, but it is certainly an indicator of what an Arizona court might decide in a contested proceeding.
Margaret Guynn lived on her own in Texas until 2009, when her son Donald Bruce Guynn moved her to an assisted living facility in Salt Lake City so that she would be closer to him. A few months later Ms. Guynn’s other child, Catherine Ortega, decided that mother needed the protection of the courts and she filed a petition seeking her own appointment as Ms. Guynn’s guardian and conservator.
Both mother and son vigorously objected that she was not incapacitated and that appointment of a guardian and conservator was unnecessary. In order to avoid expensive and protracted litigation, however, Ms. Guynn agreed that her son (not her daughter) could be appointed as limited conservator of her estate. That would have the effect of requiring him to file an annual accounting with the court for his administration of her funds, but it left him in charge of her finances.
Once the limited conservatorship was in place, Ms. Ortega asked the court to approve payment of her attorney’s fees from her mother’s funds. Mr. Guynn objected, and the probate judge decided that she was not entitled to the payment.
The Utah Court of Appeals agreed. It noted the general rule that, absent specific statutory authority, one party is not entitled to be paid by another for attorneys fees incurred in litigation. In this case, Ms. Ortega’s petition was not successful, and the appellate court saw not reason to order her mother to pay her fees and costs. Matter of Guardianship of Guynn, June 30, 2011.
Arizona’s statute is similar, although it has undergone a number of changes in the past few years. None of those changes, however, would clarify whether an unsuccessful petitioner might be entitled to be paid from the ward’s funds. Recent Arizona cases and intense court and media attention have thrown some light on how the courts might calculate the reasonableness of fees, but not on whether the payment might be made at all. The current statute with regard to conservatorships, Arizona Revised Statutes section 14-5414, addresses an interesting variation on the question: would Ms. Guynn’s attorney, or her proposed conservator’s attorney, have a right to recover fees from her daughter if she had simply dropped the petition? Probably yes, but there is less clarity about how the Guynn question might be addressed by Arizona courts.
APRIL 11, 2011 VOLUME 18 NUMBER 13
The Montana Supreme Court identifies him as “J.R.” to protect him from public identification, but it is possible to get quite a feeling for him, his family and the two different conservators appointed to handle his finances. In 2006, when the legal proceedings started, J.R. was 78 years old. His wife had died three years earlier, and J.R. had become confused and vulnerable. He had five children (and three step-children); one of them, his daughter Marsha, had filed a petition asking the court to appoint a conservator to handle her father’s assets.
Just before the hearing on the petition another daughter, Robin, arrived from her home in Massachusetts and took J.R. back to live with her. She did not tell either the lawyer representing Marsha or the lawyer appointed to represent J.R. himself. It would not be her final failure to cooperate with the Montana courts.
A probate judge in Helena appointed a local private case manager as J.R.’s conservator. Seven months later she asked the judge to relieve her from the role. She could not discharge her obligations, she told the judge, because persistent family interference and undermining of her actions made it impossible to protect J.R. or his estate.
The new conservator was a Helena CPA, Joseph Shevlin. The judge chose Shevlin partly because he had a long career and excellent reputation in the accounting practice, and he was known for his estate planning expertise.
J.R.’s assets included a Helena condominium filled with his personal property, plus a brokerage and a bank account. Mr. Shevlin was instructed to sell the condo and to use J.R.’s money to help pay for his care. The judge specifically instructed Mr. Shevlin not to provide any of J.R.’s money to his family members unless it was for his direct care.
Two years later several of J.R.’s family members (and J.R. himself) filed petitions seeking to transfer the conservatorship to Massachusetts, to direct Mr. Shevlin to create a trust and transfer J.R.’s assets to the trust, to remove Mr. Shevlin as conservator, and to order him to return fees he had collected during his tenure. The probate judge held three days of hearings on those requests (and Mr. Shevlin’s objections), and ultimately entered orders removing Mr. Shevlin as conservator, appointing J.R.’s brother as successor, approving Mr. Shevlin’s accountings and dismissing claims of breach of fiduciary duty.
J.R. appealed to the state Supreme Court, which affirmed the probate judge’s orders. The appeal raised several legal issues:
J.R.’s attorneys’ failure to call an expert witness to testify about Mr. Shevlin’s standard of care. Although every fiduciary is held to a high standard, professionals serving as fiduciaries are required to use any specialized skills. Mr. Shevlin argued that this meant a challenge to a conservator who is also a CPA meant that an expert witness was required to provide testimony as to the standard of care and any breach. The trial judge agreed, but the Supreme Court did not. No expert testimony was required when the complaints, as here, did not touch on specialized skills. Still, the high court noted that J.R. had not met the standard of proof required anyway — and so the probate judge’s misreading of the law was of no moment in his case.
The probate judge had removed Mr. Shevlin as conservator, and J.R. argued that by itself demonstrated that he had acted inappropriately. Not so, ruled the appellate court — in this case, the removal was clearly because it was in the best interests of all parties and not because of any wrongdoing by Mr. Shevlin.
J.R. complained that Mr. Shevlin had not provided funds for his care; that the condo had been held for too long before sale and ultimately sold at too low a price; that Mr. Shevlin should have agreed to transfer J.R.’s assets to a trust in Massachusetts (to be managed by his daughter Robin and a Massachusetts lawyer retained to help get J.R. qualified for public benefits). The trial judge considered each of those allegations and determined that there were good explanations for Mr. Shevlin’s actions, and that his work was made incalculably more difficult by J.R.’s family’s refusal to recognize the conservatorship or cooperate with him. None of them merited requiring Mr. Shevlin to return his fees, and they were not the basis for his removal. The Supreme Court agreed.
More significantly, Mr. Shevlin (a) did not file an inventory, as every conservator is supposed to do within 90 days, and (b) did not file his first annual accounting until 19 months after his appointment, and (c) sold some of J.R.’s personal property (apparently furniture from his condo) to himself. The trial court had disapproved of each of these actions, but ultimately decided that they did not harm J.R. The first conservator had filed an inventory (though it did not include personal property in the condominium) and J.R.’s daughter Robin had demonstrated that she was very familiar with the condo’s contents. The accounting was late, but it included voluminous explanations and backup. The sale of personal property to himself clearly violated a conservator’s duty not to permit conflicts of interest, but the items had been identified as things that might be abandoned or sold rather than shipped to Massachusetts, and Mr. Shevlin did pay full value. All in all, agreed the Supreme Court, these lapses did not rise to the level that would authorize ordering Mr. Shevlin to return his fees or to remove him for cause.
J.R. objected both to Mr. Shevlin’s fees and those of the attorney he hired to represent him in the dispute. As to the former fees, the probate judge ruled that his rates were reasonable, the amount of work and time necessary, and his actions appropriate. As to the latter, the probate judge found that it was necessary to retain counsel to deal with a contentious proceeding and that those fees should be paid from J.R.’s estate. The Supreme Court agreed on both counts, noting that “a large number of Shevlin’s fees and those of his counsel were attributable to the failure of some of J.R.’s children to cooperate with or even recognize the existence of the conservatorship.”
In the Matter of the Conservatorship of J.R., 2011 MT 62 (April 5, 2011).
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.
AUGUST 23, 2010 VOLUME 17 NUMBER 27
It really is unfortunate that we didn’t see this problem coming. Those of us who pioneered special needs trust planning back in the 1980s should have realized that we were setting up everyone (including ourselves) for confusion. We should have just given the two main kinds of special needs trusts different names. But we didn’t, and now we have to keep explaining.
There are two different kinds of special needs trusts, and the treatment and effect of any given trust will be very different depending on which kind of trust is involved in each case. Even that statement is misleading: there are actually about six or seven (depending on your definitions) kinds of special needs trusts — but they generally fall into one of two categories. Most (but not all) practitioners use the same language to describe the distinction: a given special needs trust is either a “self-settled” or a “third-party” trust.
Why is the distinction important? Because the rules surrounding the two kinds of trusts are very different. For example, a “self-settled” special needs trust:
Must include a provision repaying the state Medicaid agency for the cost of Title XIX (Medicaid) benefits received by the beneficiary upon the death of the beneficiary.
May have significant limitations on the kinds of payments the trustee can make; these limitations will vary significantly from state to state.
Will likely require some kind of annual accounting to the state Medicaid agency of trust expenditures.
May, if the rules are not followed precisely, result in the beneficiary being deemed to have access to trust assets and/or income, and thereby cost the beneficiary his or her Supplemental Security Income and Medicaid eligibility.
Will be taxed as if its contents still belonged to the beneficiary — in other words, as what the tax law calls a “grantor” trust.
By contrast, a “third-party” special needs trust usually:
May pay for food and shelter for the beneficiary — though such expenditures may result in a reduction in the beneficiary’s Supplemental Security Income payments for one or more months.
Can be distributed to other family members, or even charities, upon the death of the primary beneficiary.
May be terminated if the beneficiary improves and no longer requires Supplemental Security Income payments or Medicaid eligibility — with the remaining balance being distributed to the beneficiary.
Will not have to account (or at least not have to account so closely) to the state Medicaid agency in order to keep the beneficiary eligible.
Will be taxed on its own, and at a higher rate than a self-settled trust — though sometimes it will be taxed to the original grantor, and sometimes it will be entitled to slightly favorable treatment as a “Qualified Disability” trust (what is sometimes called a QDisT).
So what is the difference? It is actually easy to distinguish the two kinds of trusts, though even the names can make it seem more complicated. A self-settled trust is established with money or property that once belonged to the beneficiary. That might include a personal injury settlement, an inheritance, or just accumulated wealth. If the beneficiary had the legal right to the unrestrained use of the money — directly or though a conservator (or guardian of the estate) — then the trust is probably a self-settled trust.
It may be clearer to describe a third-party trust. If the money belonged to someone else, and that person established the trust for the benefit of the person with a disability, then the trust will be a third-party trust. Of course, it also has to qualify as a special needs trust; not all third-party trusts include language that is sufficient to gain such treatment (and there is a little variation by state in this regard, too).
So an inheritance might be a third-party special needs trust — if the person leaving the inheritance set it up in an appropriate manner. If not, and the inheritance was left outright to the beneficiary, then the trust set up by a court, conservator (or guardian of the estate) or family member will probably be a self-settled trust.
That leads to an important point: if the trust is established by a court, by a conservator or guardian, or even by the defendant in a personal injury action, it is still a self-settled trust for Social Security and Medicaid purposes. Each of those entities is acting on behalf of the beneficiary, and so their actions are interpreted as if the beneficiary himself (or herself) established the trust.
Since the rules governing these two kinds of trusts are so different, why didn’t we just use different names for them to start with? Good question. Some did: in some states and laws offices, self-settled special needs trusts are called “supplemental benefits” trusts. Unfortunately, the idea didn’t catch on, and sometimes the same term is used to describe third-party trusts instead. Oops.
We collectively apologize for the confusion. In the meantime, note that the literature about special needs trusts sometimes assumes that you know which kind is being described and discussed, and sometimes even mixes up the two types without clearly distinguishing. Pay close attention to anything you read about special needs trusts to make sure you’re getting the right information.
Want to know more? You might want to sign up for our upcoming “Special Needs Trust School” program. We are offering our next session (to live attendees only) on September 15, 2010. You can call Yvette at our offices (520-622-0400) to reserve a seat.
AUGUST 16, 2010 VOLUME 17 NUMBER 26
Let’s say you have created a revocable living trust, and you have named yourself as trustee. You also name your two children as successor trustees, to act together upon your death or incapacity. Two years later you become incapacitated; because of a dispute between your two children about who should handle assets outside the trust, the probate court names a local bank as your conservator. Now who handles your trust — the bank, or your children?
Before we answer that question, let us complicate it. You are also the beneficiary of a trust set up by your late husband — and you are trustee of that trust, as well. About half of the assets the two of you owned are included in each of the two trusts. Your husband’s trust names you as trustee (now that he is deceased) and names the two children as successor trustees if anything should happen to you. Does your conservator have any authority over that trust?
Those were precisely the questions faced by a probate judge in South Dakota when Evelyn Didier became incapacitated. The bank appointed as her conservator asked the court to clarify that it had control over both trusts as well as Ms. Didier’s non-trust assets. The judge agreed, and Ms. Didier’s daughter Barbara Didier-Stager appealed.
Court appointment of a conservator does not amount to appointment of a successor trustee, argued Ms. Didier’s daughter. In fact, appointment of a conservator proves the incapacity that triggers a change in trustees — resulting in the son and daughter taking over as successor trustee of their mother’s trust. As to their father’s trust, the successor trustee provisions are triggered by the conservatorship in the same way — though our simplified version of the facts described above fails to clarify that the successor trustees of that trust were actually Ms. Didier-Stager and another local bank — different from the bank acting as Ms. Didier’s conservator.
South Dakota, like Arizona, has adopted the Uniform Probate Code — though South Dakota’s version has been updated more recently and is more current. The Code includes provisions about guardianship and conservatorship (though now those sections have been set aside as a separate uniform law, the Uniform Guardianship and Protective Proceedings Act). Those uniform laws permit the judge in a conservatorship proceeding to enter orders related to the protected person’s estate plan.
So, reasoned the South Dakota court, the probate court could permit Ms. Didier’s conservator to do anything that Ms. Didier herself could have done before becoming incapacitated. Her own trust was revocable and amendable — if she had wanted to do so, she could have changed the successor trustee at any time. She could have named the bank that was ultimately appointed as her conservator. Consequently, the court could allow her conservator to assume the powers of successor trustee over that trust.
The late Mr. Didiers trust was a different matter, however. Ms. Didier herself did not have the power to change the trustee, and so her conservator could not exercise that power on her behalf. That trust would have to be dealt with separately, and the Supreme Court ordered the case remanded to the probate judge to determine what to do about Mr. Didier’s trust. Conservatorship of Didier, June 30, 2010.
Does this mean that Mr. Didier’s successor trustees automatically take over, instead of Mrs. Didier’s conservator? Probably not. Other provisions of the Probate Code give the probate judge authority over trust administration, and if it appears that there is some reason not to allow the named successors to become trustee there will presumably be an order to that effect. But it does change the discussion from a choice between blindly following the document or giving Mrs. Didier’s conservator power to do anything she could do. Instead, the probate court will have to determine which approach is most consistent with the trust, with proper administration, and with the best interests of the trust’s beneficiaries.
The Uniform law actually goes quite a bit further today than the 1974 version originally adopted in Arizona (though Arizona has updated portions of the law several times). Reviewing the statute in the context of the Didier case highlights some of the changes. Among the powers given to conservators by the “new” Code (as adopted in South Dakota, for instance) is the power to “make, amend, or revoke the protected person’s will.” (See Section 411(a)(7) of the Uniform Guardianship and Protective Proceedings Act.) Court approval is required, but the very notion of a conservator changing the protected person’s estate plan might strike some as dangerous.
Michigan Attorney William R. Ford represented Preshus Graves, who had been appointed as conservator of her son Calvin Graves. Calvin Graves, then not quite three years old, had been injured in an automobile accident, and his mother had pursued a personal injury action against the driver of the other vehicle. When the case settled (for a total of $9,300, or $6,122.70 after payment of costs and attorneys fees) the probate judge appointed Ms. Graves as conservator for her son, approved the settlement and ordered her to deposit the proceeds into a court-controlled account. Instead she took the money.
The order appointing Ms. Graves as her son’s conservator was clear. To further reduce the possibility of error, the court also issued a “Notice to Attorney of Duties Under Conservatorship of a Minor.” That document, addressed to lawyer Ford, directed him to accompany his client to the bank, to make sure the account was titled as a conservatorship account, and to see to it that the account was clearly marked as unavailable to the Ms. Graves or anyone else unless they could present a court order allowing distribution of some or all of the funds.
Instead of following the instructions given to him by the probate court, Mr. Ford simply wrote two checks to Ms. Graves for the net settlement proceeds. Nothing on the checks indicated that they really belonged to her son, and nothing alerted the bank to the need to block any account set up with the money. Mr. Ford handed the checks to his client in his office, and did not accompany her to the bank.
A few months later, when the appropriate bank restrictions had not been filed with the court, Ms. Graves was removed and a new conservator was appointed. The new conservator filed a petition to surcharge both Ms. Graves and her lawyer. Mr. Ford responded by blaming the entire matter on his client; he had instructed her on what to do, he said, and her failure to follow the court’s order was her own fault.
After some legal maneuvering (and Ms. Graves’ failure to sign a promissory note for the missing money, as she had promised she would do), the court ordered Mr. Ford to return the missing money. He appealed the surcharge order.
The Michigan Court of Appeals agreed that, on these facts, at least, the attorney is liable for the loss of conservatorship money. Although they upheld the finding, the appellate judges disagreed with the trial court’s reasoning. The “Notice to Attorney” was not a court order, and so Mr. Ford could not be held liable for violation of any court order for not taking Ms. Graves to the bank himself. But by issuing the checks to her in her individual capacity, he effectively gave away the assets of Calvin Graves to an unauthorized person. Matter of Estate of Graves, October 27, 2009.
The difference between a court “notice” and an “order” may be the sort of hair-splitting that appeals primarily to lawyers, but the problem is a real one. Out of ignorance, need or avarice, family members may sometimes be unable to resist the temptation to use a minor’s (or incapacitated adult family member’s) assets improperly. If the probate court wants to make sure that the money is properly placed, how better than to instruct the family member’s lawyer to follow specific rules?
Arizona probate courts (and those in most other jurisdictions) recognize a similar “blocked account” arrangement for protecting funds belonging to minors. As in Michigan, Arizona courts rely on the attorneys involved to see to it that the accounts are properly set up in the first instance.
Who has the obligation to get a proper Medicaid application filed for someone in a nursing home? Can the nursing home resident’s children, spouse, guardian or conservator be forced to pay for care after the patient’s money has run out but before the state Medicaid agency receives the application paperwork in proper order?
The usual answer to that question is a simple “no.” There are exceptions — a spouse may have an obligation of support, for instance, or a child may have separately promised the nursing home that the bills will be covered. The way this question most frequently comes up, though, is when a guardian or a child (and they may sometimes be the same person, though in today’s illustration the guardian was a public agency) has signed the facility’s admission documents but has not followed through with getting Medicaid eligibility established promptly.
That was essentially what happened with Eloise Selby, who resided at Arbor View Healthcare and Rehabilitation Center in St. Joseph, Missouri. Bonnie Sue Lawson, who was the Buchanan County Public Administrator, was appointed as Ms. Selby’s guardian in 2004. A Medicaid application was already pending, but the agency did not have the paperwork necessary to determine the value of two small life insurance policies owned by Ms. Selby. Her new guardian promised to get the missing forms filed.
A month later, with no paperwork in sight, the Medicaid agency denied coverage. A second application filed a month after that included the missing forms, but Ms. Selby was again denied benefits — this time because the value of the two policies exceeded the maximum permissible amount. Yet another month later, another application was filed — and denied for the same reason.
The essential problem with the application became clear at that point: someone would need to cash in the policies, and Ms. Lawson was guardian of the person but not conservator of Ms. Selby’s estate. A conservatorship proceeding was filed, the funds collected, and the final, successful Medicaid application filed a year after the initial involvement of the Public Administrator’s office.
The nursing home then sued the guardian for the fees (and legal costs) it had not collected from Ms. Selby while the failed Medicaid applications were pending. The home’s argument: while Ms. Lawson would not be personally liable for her ward’s nursing home costs in most cases, in this case she had failed to use “due care” in fulfilling her duties.
The trial court agreed, and entered a judgment in favor of the nursing home (and against the Public Administrator) for $16,779.65 — the difference between what the nursing home had collected from Ms. Selby’s income and what it would have collected. The judge also assessed attorney’s fees and costs of $6,597.00 against the Public Administrator.
The Missouri Court of Appeals disagreed, and reversed the finding in favor of the nursing home. In the appellate court’s analysis, Ms. Lawson’s liability for Ms. Selby’s debts was limited to the money in Ms. Selby’s name. Although the admission contract included specific language requiring the Public Administrator to use “due care,” it also included a provision that dealt directly with the possibility of Medicaid eligibility denial. That more specific section limited the facility’s rights to receiving payment from Ms. Selby’s funds; the court agreed with Ms. Lawson that the specific section controlled over the more general provision. Five Star Quality Care v. Lawson, April 7, 2009.
The Medicaid worker was helpful, seemed to understand the question and knew the answer. The applicant’s guardian/conservator asked the right question. Unfortunately, the worker’s answer was just plain wrong. When the guardian/conservator relied on that wrong information, he lost out—and lost the Medicaid recipient’s home after her death.
Richard Knori was his grandmother’s guardian (of the person) and conservator (of the estate) because she could not handle her own affairs. He knew that he would have to place her in a nursing facility of some kind, and so he contacted the local Medicaid office about assistance with the cost of her care. Eligibility worker Hazel Staley assured Mr. Knori that his grandmother could qualify for Medicaid while retaining her home, and that the state would not take the home after her death.
Mr. Knori did apply for Medicaid for his grandmother, and she was picked up by the program in April, 1995. By the time of her death in 2001 she had received $259,446.38 in Medicaid assistance. After her death, Mr. Knori moved to probate her estate and dispose of her home, the only significant asset she had been allowed to retain.
The Medicaid agency promptly made a claim against the estate for the value of its services—effectively demanding her home or the entire proceeds from any sale. Mr. Knori objected, pointing out that he had relied on the misinformation he had gotten from Ms. Staley. He maintained that the state should be bound by what he had been told (what in the law is called “equitable estoppel”).
The Wyoming Supreme Court disagreed. Although the state high court did not condone the Medicaid worker’s mistake, it held that Mr. Knori had not shown “affirmative misconduct” on the part of the eligibility worker. In the absence of such a showing, Mr. Knori could not rely on what he had been told by a state employee. Knori v. State Department of Health, Office of Medicaid, April 14, 2005.
What might Mr. Knori have done differently if he had gotten accurate information? He might have been able to sell the home, apply a portion of the proceeds to his grandmother’s nursing home care and use the rest for care needs that would not be provided by Medicaid. He might even (with court approval) have been able to make a gift to family members—especially if any one of them suffered from a disability. He could have purchased an interest in the home himself (again with court approval) in a manner that preserved it after his grandmother’s death.
The moral: you rely on government workers for an explanation of Medicaid and other complicated programs at your own peril. No matter how helpful, friendly and well-informed they are, it makes sense to seek complete information.
OCTOBER 14, 2002 VOLUME 10, NUMBER 15 Walter and Geraldine Brown had filed for divorce before first Mr. Brown and then Mrs. Brown became incapacitated. When guardianship proceedings were initiated for both of them, the divorce proceeding was simply dismissed.
Mr. and Mrs. Brown lived in Indiana, where the language of guardianship is a little different from Arizona. What Arizonans would call a conservator is referred to as a “guardian of the estate” in Indiana. Two separate banks were appointed as guardians of Mr. and Mrs. Brown’s respective estates.
During the first months of the divorce action Mr. Brown had been ordered to pay spousal maintenance (better known as alimony) to his wife. After the dismissal of the divorce the bank handling Mrs. Brown’s estate asked the probate court to order the bank responsible for Mr. Brown’s estate to continue to make monthly payments. Mr. Brown was ordered to pay $1,600 per month to Mrs. Brown’s guardian.
Mr. Brown had been married before, and he had two sons from that marriage. Mrs. Brown had no children. Mr. Brown’s will left one-third of his personal property and a life estate in one-third of his real estate to his wife, and the balance of his estate to his two sons.
Mr. Brown died shortly after the spousal maintenance award was entered. His sons filed a probate proceeding, divided the estate in accordance with his will and began the process of closing the estate.
At that point Mrs. Brown’s guardian filed a claim against the estate for spousal maintenance that might be due for the rest of her life. After a hearing the probate court agreed and, considering Mrs. Brown’s life expectancy of 13.9 years, set the amount due from Mr. Brown’s estate at just over $160,000.
Mr. Brown’s sons appealed the judgment. Mrs. Brown’s guardian pointed out the Indiana statute (Arizona has a similar law) that allows child support payments to be reduced to a lump-sum claim against a deceased parent’s estate. In these circumstances, argued Mrs. Brown’s guardian, the court should make a similar calculation for spousal maintenance.
The Indiana Court of Appeals disagreed. In reversing the award the Court noted that there is no statute authorizing such a calculation for surviving spouses, and that the state legislature presumably could have created such a claim if legislators thought it necessary. Mrs. Brown’s spousal maintenance award, however, ended with her husband’s death. Estate of Brown v. Estate of Brown, October 2, 2002.
Although Arizona uses “conservator” rather than “guardian of the estate,” the laws of the two states are similar in other respects. The same result should be expected in Arizona, especially where no divorce proceedings have been finalized.
