Posts Tagged ‘guardians fees’

Court Reviews Fees Charged by Fiduciary and Attorney

SEPTEMBER 9, 2013 VOLUME 20 NUMBER 34

There is a lot going on in Arizona with regard to the fees charged by guardians, conservators, trustees, personal representatives — and their attorneys. There has been quite a bit of controversy in news articles (particularly, but not exclusively, in the Phoenix area) and online. Professional fiduciaries have been subjected to close scrutiny, and stories have circulated about estates being emptied by legal and fiduciary fees.

Courts have reacted to the impression created by those stories. Much more attention is paid today to court proceedings seeking approval of fees, and the complexity and cost of accounting has risen. Occasionally, courts simply mandate lower fees because, well, the proposed fee seems high.

A recent Arizona Court of Appeals case indicates that probate court judges will need to be more thoughtful before imposing fee reductions. The case involves a Phoenix-area judge who ordered a 50% reduction in the fees charged by a fiduciary and its attorney.

In the Conservatorship of Helen Maxwell (not her real name), the court-appointed fiduciary had requested fees of $96,859.60 and its lawyer filed a bill for $28,501.64. Noting that the work had (“for the most part”) been “reasonable, necessary and in the best interests of” Helen, the probate judge in Phoenix nonetheless halved the fees of both applicants.

The reason? Helen’s estate was only worth about $800,000, with most of that in illiquid real estate. Helen simply could not afford the fees and costs, said the probate judge. It would not be in Helen’s best interests to approve the total amount of fees requested, “even though they were rightfully earned.”

The Court of Appeals reversed the probate judge’s ruling and sent the matter back for more consideration. Noting that they had recently given some guidance in how to judge fiduciary and legal fees, the appellate judges ordered the probate judge to weigh the costs against the benefits obtained by the fiduciary and its lawyers, and to consider a set of factors spelled out in recently-adopted court rules before ruling on the fee request.

What factors should the considered when the probate judge takes the matter up again? In addition to balancing the cost against the benefit, the court should look to:

  1. The result obtained by the fiduciary and its attorney
  2. The disclosure by the fiduciary, in advance, of the likelihood of high costs
  3. The fiduciary’s (and the attorney’s) skill and expertise
  4. The kind of work done, and the skill level required to accomplish it
  5. The actual work done, and the time spent doing it
  6. The fees charged by others in the business and in the community
  7. The risks and responsibilities undertaken by the fiduciary

In the Matter of the Conservatorship of Mallet, August 22, 2013.

It is unclear what will happen next. The fiduciary whose fees were challenged has left the business, and Helen herself died while this appeal was pending. We’ll update you if we learn of a follow-up outcome.

Arizona Probate Court Changes Coming in 2012

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

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

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

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

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

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

Guardians’ Fees for Advocacy Work Disallowed by Court

DECEMBER 12, 2011 VOLUME 18 NUMBER 42
Last month we saw an interesting variation on fee requests for guardianship and conservatorship proceedings. A Washington State Supreme Court case dealt with the payment from wards’ estates to a professional fiduciary organization in unusual circumstances.

James R. Hardman and his mother Alice Hardman are certified professional guardians under Washington State’s guardianship regulation program. As in Arizona, the program is operated by the state Supreme Court, and requires testing, training and reporting to a court-operated agency. In addition, Washington professional guardians are required to report to the local probate judge once each year on the finances and welfare of each individual ward — just as all other guardians do.

The Hardmans are guardians of the person and the estate (in Arizona we would say guardians and conservators) of “more than 20” developmentally disabled adults residing at a state-run residential facility known as Fircrest School. They handle their wards’ finances, make health care decisions and determine the proper placement for each ward, and no allegations were raised that they do that work anything other than conscientiously and well. Because they are so deeply involved in the developmental disability community, they are also very active in advocacy efforts. They lobby state, local and federal agencies and elected officials and they vigorously oppose efforts to transfer Fircrest residents to residential placements that they believe provide inadequate care.

The Washington guardianship regulation scheme assumes that guardians like the Hardmans should be paid no more than $175/month from their wards’ funds for guardianship services. There is a mechanism for seeking more fees, however, when it is required because the ward has unusual issues. The regulation particularly describes the possibility of convoluted property transactions, interaction with criminal courts for a ward who has gotten into legal trouble, extensive or emergency medical services, or similar complications.

The Hardmans estimate that their advocacy work consumes 80-100 hours per month. They believe that it benefits all of their wards. They sought approval of not only the ordinary $175/month payment in each case, but an additional $150/month from each ward to compensate them for advocacy for the residents of Fircrest.

The effect of approving the higher fees would have a direct effect on the state programs for the developmentally disabled. Because reasonable guardians fees are deductible from a resident’s share of cost under Washington law (this varies from state to state, and would not be handled the same way in Arizona, for instance), the $150/month per ward would effectively reduce the total amount paid by residents to the state by as much as about $50,000 paid to the Hardmans.

Although the first judge hearing the matter agreed and allowed the Hardmans their higher fees in a single case, the next two times it was considered their request was denied. The case ended up before the state Supreme Court, which ruled that the Hardmans could not collect fees from their individual wards to fund their general advocacy work.

There are a number of problems, in the state high court’s view, with the Hardmans’ request. The actual amount requested, and the justification of the amount of time spent, was different in the two cases considered by the court. The direct benefit to individual wards was not clear to the Justices. The advocacy work might arguably benefit the class of guardianship wards, but the high court did not believe it was “necessary” to the actions of a guardian — a requirement of the state law governing fee requests.

One of the more intriguing ideas promoted by the Hardmans was that denial of their request would effectively deprive their wards of their constitutional rights to free speech and to petition the government for redress of grievances. Not so, ruled the Justices — they could still speak out through advocates provided to them by the system, and nothing prevented the Hardmans from continuing their own advocacy work. It was just not required that their guardians should be compensated for that advocacy — particularly since that would put the probate judge in each individual case in the untenable position of having to decide which “speech” would need to be protected and paid for. In the Matter of the Guardianship of Lamb, November 23, 2011.

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