Posts Tagged ‘Florida Court of Appeal’

Mediation in Guardianship Proceeding Can Be Effective, But Raises Questions

FEBRUARY 8, 2016 VOLUME 23 NUMBER 6

Sometimes court proceedings are necessary in order to resolve differences of opinion — but almost everyone recognizes that it is good to seek resolution by a simple agreement when the parties can resolve their differences outside court. Mediation, for instance, is a great way to resolve many legal disputes. The parties to a lawsuit (or a potential lawsuit) meet with a professional mediator, and they discuss (either in separate sessions or, sometimes, in a common meeting) how they might work things out short of a court hearing. The result can be positive, and is almost always less expensive than a full court process. If a mediation has been handled particularly well, both parties (or all parties, for sometimes there are multiple positions being espoused) think they got less than they really wanted but more than they might have gotten if the case had gone to trial.

But what about guardianship (and conservatorship) proceedings? How can someone who is alleged to be incapacitated participate in mediation? Assuming the mediation is successful, how can someone who lacks legal capacity even agree to the settlement reached after mediation?

Because of the particular nature of guardianship and conservatorship proceedings, it can sometimes be impossible to enter into a meaningful mediation. One other problem: after a court hearing appointing a guardian or conservator, the legal fees of the petitioner (the family member or professional bringing the action) and the subject of the proceeding are both usually paid from the subject’s assets. But how will the cost of mediation be shared, and what incentive does everyone have to participate?

Notwithstanding these problems, guardianship mediation can and does work. At Fleming & Curti, PLC, for example, we frequently encourage mediation, whether we represent the family member petitioning, the family member objecting, or the subject of the proceedings. Mediation can result in a less-restrictive outcome (perhaps the subject of the proceedings could create a trust, or sign a power of attorney, for example), and gives the subject of the proceeding a much clearer voice in making decisions (as, for instance, when the subject objects to the proceedings — but particularly objects to the possible appointment of one family member).

But guardianship mediation still can be problematic. A recent Florida case showed why that can be.

Arnold Gabriel (not his real name) is a paranoid schizophrenic living in Florida with his aunt. He knows that he has mental health issues, but he thinks he gets along pretty well with the help of his aunt and his cousin, Linda Freeman. But Arnold’s brother Walter does not agree — he thinks that Arnold is at risk in the community, and that someone needs to be monitoring his condition and care at all times.

Walter filed a petition with the Florida courts seeking to be appointed as guardian of Arnold’s person — he hoped to be given authority to determine Arnold’s physical placement, and he thought Arnold probably needed to go to a state facility. Arnold disagreed, and so did cousin Linda. Linda filed a counter-petition, seeking to be appointed as guardian of both the person and property (what we in Arizona would call conservator) over Arnold. The Florida court set a hearing on the competing petitions.

Meanwhile, the three parties and their attorneys agreed to try mediation. They set a time and met with a mediator, and everyone agreed to try a less restrictive alternative. Walter’s petition for guardianship of the person, and Linda’s petition for guardianship of the person and property, would both be dismissed. Linda would act as Arnold’s agent for both medical and health decisions, and both she and Arnold would agree to share medical and financial information with Walter so that he could monitor his brother’s care and condition. They also agreed that Arnold would be re-evaluated by a neutral care manager every six months to see if his care needed to be reviewed. Arnold and Walter would agree to communicate better about Arnold’s status and condition.

Both Walter and Linda dismissed their respective petitions, and things appear to have gone well for about a year. Then Arnold decided not to share information with his brother, and filed a court proceeding seeking a determination that the agreement was void and unenforceable.

Arnold claimed that he had felt pressured to enter into the agreement out of fear that his only alternative was to be committed to a state mental facility. Besides, he and Linda argued, Arnold lacked the mental capacity necessary to enter into an enforceable agreement. One piece of evidence showing he lacked the necessary capacity: the court evaluation undertaken in connection with the initial guardianship petition had resulted in a determination that he lacked capacity.

The Florida trial judge granted Walter’s motion for summary judgment, ruling that the mediation agreement was enforceable and Arnold would need to live up to it. Furthermore, the court ordered that Arnold’s estate should bear the legal costs incurred by Walter in pursuing the guardianship and enforcing the settlement agreement.

The Florida Court of Appeals upheld the trial judge’s ruling. There was no legal impediment to Arnold entering into the agreement, reasoned the appellate judges, because there had not been any court finding that Arnold was incapacitated. The trial judge’s interpretation of the agreement — and the award of legal fees — made sense in the circumstances. Gort v. Gort, February 3, 2016.

The appellate court noted that there is an earlier Florida case — Jasser v. Saadeh (Fla. App. 2012) — that appears to support the exact opposite holding. In that case, the mediation agreement had included a provision that the subject of the proceeding would sign a trust, and the trustee would manage her finances. The problem with that, said the appellate court in this later case, was that (a) the subject’s condition was dementia, not schizophrenia, and was therefore more related to her capacity, and (b) the issue in that earlier case was capacity to sign a trust, not capacity to enter into a settlement agreement.

Candidly, though, those distinctions have to be seen as difficult to support — the real issue, we submit, is whether the courts can be comfortable with an allegedly incapacitated person signing a given settlement agreement. Our position: the law should be made clear that the courts should support non-judicial settlement, and mediation in these difficult, emotional cases should be encouraged.

New Florida “Trust Protector” Case Shows How the Idea Can Work

DECEMBER 8, 2014 VOLUME 21 NUMBER 44

We’ve written several times about the relatively new concept of “trust protectors.” The idea is that a trust can be much more flexible if someone — necessarily someone who is entirely trustworthy — has the power to make at least some kinds of changes after the trust becomes irrevocable. The precise power of a trust protector can usually be spelled out in the trust document, but frequently includes the power to amend the trust (or even terminate it), to change beneficiaries or to remove a trustee and name a successor.

While trust protectors have been the subject of much writing, they are still new enough not to have been spotted in the court system very often. Some of that, of course, is because the very existence of a trust protector can sometimes avoid the need for court action — or head off a court contest, if someone is unhappy with the trust’s administration. Mostly, though, the idea is too new, and has not even been formalized in many states.

Arizona has a specific statute allowing trust protectors. States are increasingly codifying similar provisions, often as part of the Uniform Trust Code, which has been adopted now in over half of the states. Florida is one of those states, having adopted its version of the Uniform Trust Code — expressly including a provision for trust protectors — in 2008. Now a new appellate case out of Florida gives some insight into how the trust protector might be used.

Zach Moore (not his real name) was a successful businessman who retired to Florida, where he lived with his second wife Patty. He had two children from his first marriage. Like many people, Zach decided that he should have a revocable living trust; he signed trust documents in 1999 and rewrote them in 2008, the same year that Florida adopted the Uniform Trust Code. His new trust included a provision permitting the trustee to name a trust protector in order to amend the trust to clarify any ambiguity in the future. He also included some specific language making it clear that after his death the trust was to be primarily for his wife’s benefit, and that his children’s shares would be created only on her death. He and Patty were named as trustees, and upon his death Patty would continue as sole trustee.

Zach died in 2010, and Patty took over as sole trustee. Not long after that, Zach’s two children brought a suit against Patty alleging that she was not managing the trust properly, and demanding an accounting from her. She filed a motion to dismiss, alleging that they were not beneficiaries of the trust at all — their separate-share trusts, she argued, would be created only upon her death.

The trial judge disagreed, ruling that the trust would divide into separate shares, not be transferred to new trusts. That meant that the children were beneficiaries, although their interests did not arise until Patty’s death. Still, they would have standing to challenge her administration of the trust.

Patty’s response: she appointed a trust protector, as provided for in the trust document. That trust protector amended the trust to make clear that upon Patty’s death the then-trustee was to distribute the remaining assets to a new trust, which would then split into two shares for Zach’s children.

Did that resolve the issue? Not quite. The trial judge ruled that the purported amendment by the trust protector was ineffective, because it did not benefit all the beneficiaries of the original trust — it would leave Zach’s children with no power to challenge Patty’s actions as trustee.

Patty appealed, and the Florida Court of Appeals reversed the trial court’s ruling. The appellate judges first noted that the then-new Florida Trust Code allowed for inclusion of trust protectors, and that the powers given to the trust protector in Zach’s trust were not outside the scope of the law. Importantly, the appellate court specifically rejected the children’s argument that the Uniform Trust Code makes court modification the only way to amend an irrevocable trust.

The Court of Appeals went on to note that the trial judge’s reading of the trust to find a single trust dividing into shares was not unambiguously clear from the trust document. That meant that the trust protector’s actions to clarify an ambiguous provision was clearly within his authority — and the amendment was valid. “From the trust protector’s affidavit,” wrote the court, “it appears that the husband settled on the multiple-trust scheme for the very purpose of preventing the children from challenging the manner in which the wife spent the money” in the trust he had established. That purpose should be upheld, decided the appellate judges; the court specifically approved the trust protector’s amendments. Minassian v. Rachins, December 3, 2014.

Arizona’s trust protector statute is, if anything, broader than Florida’s statute. Powers that can be assigned to a trust protector are spelled out, with the specific provision that they are not limited to those listed. Trust protectors can be an important and effective way to address possible future disputes; it can make sense to include a trust protector, especially in a case where future contentiousness is anticipated.

 

Powers of Attorney: Draft With Care and Use as Instructed

APRIL 7, 2003 VOLUME 10, NUMBER 40

Recently two different state courts addressed the exercise of authority made pursuant to a durable financial power of attorney. These cases illustrate why care should be taken both in drafting a power of attorney and in choosing an agent.

In Florida, after David R. James II died, four children from his first marriage tried to evict their father’s widow from the home the couple had shared. Mr. James’ children argued that they could evict Rosalie James because David James, III, using his father’s power of attorney, had taken title to the home during Mr. James’ life.

The Florida Fifth District Court of Appeal upheld the lower court ruling in Rosalie James’ favor. The Appellate Court based its decision in part on Rosalie James’ argument that her husband’s power of attorney did not authorize gifts in excess of $10,000 per child — an amount far less than the value of the home. Robert James v. Rosalie Kaye Bruno James, March 7, 2003.

Meanwhile in North Dakota, Rodger and Paul Marquardt also ended up in court after their mother, Laura Marquardt, died. Rodger claimed that all proceeds from an annuity his mother had purchased should belong to him since his mother named him as beneficiary. However, the agent his mother named under her power of attorney, First Western Bank & Trust, had changed the annuity beneficiary prior to Mrs. Marquardt’s death.

Rodger argued that his mother’s power of attorney did not authorize her agent to change the beneficiary. The trial court agreed with Rodger about the power of attorney and that his mother’s will made clear that the annuity was his. While brother Paul appealed the ruling, he did not challenge the lower court’s decision about the power of attorney. First Western bank & Trust v. First Lutheran Church Foundation, Supreme Court of North Dakota, February 19, 2003.

Elder Law Issues periodically reminds its readers that powers of attorney are important, powerful and potentially dangerous instruments. Since 1998 in Arizona, agents under powers of attorney have been prohibited from taking any step for the benefit of anyone except the person who executes the power of attorney (the principal) unless the power is expressly listed and separately initialed by the principal and a witness. Powers of Attorney must be witnessed and notarized; the witness must be able to say that the principal acted freely and not under duress.

Arizona’s law reflects a growing concern about abuses tied to powers of attorney. Selection of an agent and the choice of powers to grant that agent both require careful consideration.

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