Posts Tagged ‘joint tenancy’

Iowa Allows Medicaid Recovery Against Joint Tenancy Property

APRIL 10, 2006  VOLUME 13, NUMBER 41

As many states have become more aggressive about recovering the costs of Medicaid care from the estates of deceased beneficiaries, one issue has appeared to be insoluble. Federal law permits states to make a claim against property held in joint tenancy at the time of a Medicaid recipient’s death. Property law principles in place for centuries, however, make it clear that a deceased joint tenant has no interest in the property. A recent case from the Iowa Supreme Court unsettles that long-standing concept.

Mary Serovy, a widow living in the family home where she and her late husband had raised their children, found that she could no longer get along on her own. She made a deal with her son and daughter-in-law; the younger couple would pay to build an addition on the house where they could live, and Ms. Serovy would transfer the property into joint tenancy with them. That way, all three of them figured, Ms. Serovy would have some help to allow her to stay at home, and the property would transfer to her son and daughter-in-law automatically at death.

The multi-generational arrangement worked well for almost a decade, but eventually Ms. Serovy could not stay at home any longer. She moved into a nursing home and, since she owned practically no assets other than her home, she quickly became eligible for Medicaid assistance. When she died less than a year later, in 1998, the Iowa Medicaid agency had paid $28,707.54 toward her care. Since her only asset—the house—transferred automatically on her death, no probate proceeding was required.

Five years later, the Medicaid agency decided it was time to make its claim against Ms. Serovy’s estate. It petitioned for appointment of an executor and asserted its right to sell the home and recover up to one-third of the proceeds. The probate court agreed with the agency, and ordered the home sold.

The Iowa Supreme Court reversed the sale order, but approved the claim against Ms. Serovy’s home. According to the justices, Iowa state law permits its Medicaid agency to assert a claim against joint tenancy property. If that authority is meaningless because a joint tenant’s interest is extinguished at death, then the Iowa statute would be meaningless. Since the courts assume that legislatures would not pass meaningless laws, the Iowa statute must mean that the state can claim the interest Ms. Serovy had just before her death.

Ms. Serovy’s son and daughter-in-law also made another argument. They insisted that the Iowa law should be ruled invalid because it would impair the contract entered into between them and Ms. Serovy. Not so, said the court—the contract only required Ms. Serovy to transfer the home into joint tenancy, and she had accomplished her part of that agreement even before the law went into effect. Nothing in her agreement with the younger couple required her to ensure that they receive the house outright at her death.

The probate court did err by ordering the sale of the property too quickly, however. The Supreme Court justices agreed that the Medicaid agency can take Ms. Serovy’s one-third interest in the property, but it must file a separate action to force sale of the home to satisfy its claim. Estate of Serovy, March 24, 2006.

Although this may be the first instance in which a state statute authorizing Medicaid recovery against joint tenancy property has been approved by any state’s highest court, it raises more questions than it answers. Why didn’t Ms. Serovy’s son and daughter-in-law qualify to receive the house outright under the federal provision permitting transfers of homes to a child who lives with the Medicaid recipient for two years prior to entry into the nursing home, and provides care that delays nursing home placement? Doesn’t Iowa’s hardship provision (mandated by federal law) afford Ms. Serovy’s son and daughter-in-law an opportunity to argue that sale of the residence would effectively throw them out of their own home? Why isn’t the state’s claim barred for its failure to pursue the matter for five years after Ms. Serovy’s death? All of these arguments may have been made in her case, but the Iowa Supreme Court holding does not address them.

Multiple Owners Have Equal Interests In Joint Bank Account


When individuals look for ways to simplify the handling of their estates, they frequently decide to simply put their heirs’ names on assets. Parents, for example, often make their children joint owners on bank accounts—reasoning that the money will then be easier to get to if needed, and no probate proceeding will be necessary for the children to get the accounts after the parent’s death. There are dangers, of course, in creating joint tenancy accounts. A recent Connecticut case illustrates one of those dangers and also provides insight into how the law views joint tenancy bank accounts.

Salvatore Vessichio may have had probate avoidance in mind when he added the names of his two daughters, Charlene Vessichio and Sally Ann Durso, to his BankBoston account three years ago. When Mr. Vessichio died a short time later, Charlene Vessichio went to the bank, withdrew the entire account balance, paid for her father’s funeral, and placed the remaining proceeds in a brokerage account in her own name.

Her sister, Ms. Durso, demanded her half of the account. Ms. Vessichio refused to turn it over, pointing to a Connecticut state statute which specifically authorized the bank to release a joint tenancy account to any one of the joint tenants. Ms. Durso then filed a lawsuit against her sister.

The trial court concluded that Ms. Durso and Ms. Vessichio had owned an equal interest in the bank account, but that payment of Mr. Vessichio’s funeral expenses was a legitimate use of the money. The court ordered Ms. Vessichio to return half of the remaining account balance to her sister. The Connecticut Court of Appeals agreed, noting that the statute on which Ms. Vessichio relied was really intended to protect the bank from claims by joint tenants, not to protect the joint tenants from claims against one another. Durso v. Vessichio, August 26, 2003.

Arizona law is very similar. The presumption is that joint tenancy property is owned equally among all joint tenants, but that each named account owner is entitled to manage the entire account. That is one reason that placing a child’s name on an account as a joint tenant is dangerous—Ms. Vessichio could have withdrawn the entire account and held the proceeds in her own name even before her father died, thereby depriving him of his own funds.

When one joint tenant has contributed more than his or her share of a joint account, however, the interests of the joint tenants are proportional to their actual contributions. In other words, in an action against Ms. Vessichio by her father he should have been able to secure return of the entire account, not just a one-third interest. Her ability to withdraw the account balance, however, would have put him through a legal proceeding to establish his rights.

Joint Tenancy Account May Be Different In Different States

JUNE 16, 2003 VOLUME 10, NUMBER 50

In January 2002, Family Services, Inc. (FSI), of Barron County Wisconsin was appointed to serve as guardian of the estate of Emma W. (Arizona and some other states use “conservator of the estate” to mean the same thing.) At that time, Emma W. owned her home, had a bank account in her name, and owned a little more than $100,000 worth of certificates of deposit (CDs) in joint tenancy with her sons Paul and Gary. Six months later Emma W. still owned her home but no CDs; Paul and Gary, through their lawyer, let FSI know that they had cashed in the CDs.

FSI sought a court order to recover the proceeds from the CDs, arguing that the appointment of a guardian precluded Paul and Gary from removing their mother’s funds from the accounts. The trial court ruled that as joint owners of the CDs Paul and Gary had full authority to withdraw the funds. The Wisconsin District Court of Appeals has now agreed. In the Matter of the Guardianship of Emma W., May 28, 2003.

The appellate court was unmoved by FSI’s public policy argument that preservation of a ward’s estate is more important than a joint owner’s ability to withdraw funds. The Court relied on the plain language of a Wisconsin statute which provides that “unless there is clear and convincing evidence of a different intent … a joint account belongs, during the lifetime of all parties, to the parties without regard to the proportion of their respective contributions to the sums on deposit and without regard to the signatures required for payment. The application of any sum withdrawn from a joint account by a party thereto shall not be subject to inquiry by any person….”

Arizona has no statute like Wisconsin’s regarding joint bank account ownership. As we have previously noted in Elder Law Issues (see our February 11, 2002, issue–“Creditor Files Claim Against Parent’s Joint Tenancy Account“–as an example), Arizona follows the common-law principle that joint accounts are owned in proportionate to the contribution of those named on the account title.

Having jointly titled accounts can be convenient in the event of incapacity, since the joint owner has easy access to those funds to pay bills. And a joint account avoids probate for the surviving owner.

Remember, however, that joint tenants can expose all account assets to their creditors. Furthermore, the bank may have no idea that your joint tenant actually contributed less than $100 (or nothing) to your joint account, and the bank will likely comply with a request for withdrawal of all funds by any owner. You should be aware of the danger inherent in naming joint owners on any financial account.

State Must Formally Adopt Its Medicaid Estate Recovery Rules


In our American system of government the legislature is in charge of making law and policy, and the administrative branch’s job is to interpret and implement those laws without imposing the bureaucrats’ own ideas on the legislature’s programs. That ideal conception, however, runs afoul of the reality of government. Because it is simply impossible to anticipate every variation of a problem, much of the actual administration looks like, and is, legislative in nature.

To keep the making and implementation of administrative policies as public and responsive as possible, most states have adopted laws requiring agencies to publish their planned regulations, submit them to public comment, and consider input from citizens. The law compelling these practices is usually called the Administrative Procedures Act (APA) or some similar name. Arizona has such a law, as does California.

Medi-Cal, California’s version of Medicaid, includes a provision requiring its administrative agency to seek reimbursement for Medi-Cal payments from the estates of at least some deceased Medi-Cal recipients. California law defines “estate” to include the deceased beneficiary’s probate estate, as is true in Arizona and every other state. But California goes further, and permits its estate recovery program to pursue any property that belonged to the deceased beneficiary at the time of death, including property held in joint tenancy or “other arrangement.” The problem: “other arrangement” is not defined in the California law.

Medi-Cal administrators decided that the law should apply to annuities and life estates in at least some circumstances. It first pursued, then decided not to pursue, annuities. In the case of life estate property, Medi-Cal decided to seek recovery if the Medi-Cal beneficiary had once owned the property and transferred it to another person, reserving both a life estate (that is, the right to live on the property for life) and a right to sell the property and retain the proceeds. Neither decision was made as part of a public rule-making process.

A non-profit group, California Advocates for Nursing Home Reform (CANHR) sued to force Medi-Cal to properly publish and adopt its rules. The State objected, and a trial judge dismissed CANHR’s complaint.

The California Court of Appeals has now reversed that decision, finding that there is at least some evidence of improper rule-making. CANHR will now be given a chance in court to prove its allegation that Medi-Cal relies on “underground guidelines and criteria” in pursuing estate recovery. CANHR v. Bonta, January 8, 2003.

Niece’s Will Contest Dismissed Because She Lacked Standing


Adelaide Briskman was 82 when she died in Florida. She left property in that state and in Pennsylvania, and a will that she had signed just five months before her death. She also left a controversy between her family and the beneficiary she had named in her will.

In the last months of her life Ms. Briskman had transferred most of her property to Mark Resop, the branch manager of her bank. The assets were mostly placed in joint tenancy, including over $2,000,000 in an investment account and her Florida condominium. Mr. Resop promptly began to spend the money she transferred into joint tenancy, and he sold her condominium shortly after her death.

The only significant asset not transferred into Mr. Resop’s name before Ms. Briskman’s death was a commercial property in Pennsylvania which housed a branch of Mellon Bank. Mr. Resop petitioned the Pennsylvania courts for admission of the will naming him as beneficiary, and he was appointed as executor. A year later Ms. Briskman’s niece, Julie K. Palley, filed a challenge to that will, alleging that Ms. Briskman was incompetent when she signed the will, or in the alternative that Mr. Resop had exerted undue influence to get her to sign the instrument.

If Ms. Palley was successful in challenging her aunt’s will, an earlier will would have become the “last” will of Ms. Briskman. That earlier document named her lawyer at the time, one Richard Rosin, as executor, and it would have left her estate to various charitable causes.

The Pennsylvania probate court ruled in favor of Ms. Palley, finding the will to be invalid. Mr. Resop appealed to Pennsylvania’s intermediate appellate court. That court saw the case differently.

In the opinion of the appellate court, Ms. Briskman’s niece simply had no standing to contest her aunt’s will. If she had been successful, the court pointed out, she would not have been named as executor—that role would have fallen to Ms. Briskman’s lawyer. She also would not have received any portion of her aunt’s estate, since it would all go to charity. If she had nothing to gain by her challenge, said the appellate court, she had no business filing it, and the court ordered that it be dismissed and Mr. Resop reinstated as executor. Estate of Briskman, September 9, 2002.

Although the circumstances of Mr. Resop’s acquisition of Ms. Briskman’s property may appear suspicious, there is good news in the appellate court decision. Laypersons often express concern about someone challenging their wills, and anxiety about will contests is a common theme in estate planning. In fact, only someone who stands to gain from such a contest is even permitted to object to probate of a will; that is one of the reasons that will contests are relatively rare.

Creditor Files Claim Against Parent’s Joint Tenancy Account


Ruth Libros, like many parents, wanted to make it easy for her children to manage her affairs if she became incapacitated. She also wanted to make sure there would be no costly or time-consuming probate proceedings upon her death. She decided one way to achieve both results was to put her largest assets, including her Morgan Stanley Dean Witter brokerage account, in joint tenancy with her two children.

One of the reasons lawyers often give for not establishing joint tenancy accounts is the possibility that one’s own assets may become exposed to one’s children’s creditors. Ms. Libros learned about this problem the hard way.

Three years after Ms. Libros opened the joint tenancy account a Philadelphia law firm specializing in personal injury actions (Deutsch, Larrimore & Farnish, P.C.) secured a judgment against Ms. Libros’ daughter Joyce Johnson. The $300,000 judgment represented the law firm’s attempt to recover funds stolen by Ms. Johnson while she was a bookkeeper at the firm. For some unspecified reason, Ms. Libros paid a portion of the judgment against her daughter; the law firm noticed that the brokerage account on which the check was drawn listed Ms. Johnson as a joint owner.

Deutsch, Larrimore & Farnish  filed a Writ of Execution against the brokerage account—in other words, they sought to seize the account to satisfy their judgment against Ms. Johnson. Ms. Libros objected, citing Pennsylvania law on joint tenancy bank accounts. She prevailed, but the law firm appealed to the Superior Court (in Pennsylvania, the intermediate appellate court).

Pennsylvania law, like that in Arizona and most other states, makes it clear that a joint bank account belongs to the listed account holders in proportion to their contributions. In other words, Ms. Libros’ account did not belong to her children because they had not put in any of the money. That merely restates an ancient common-law principle about joint accounts.

The law firm, however, pointed out that the Pennsylvania law did not specifically mention brokerage accounts, and it argued that Ms. Libros had made a gift to her children when she put their names on the account. Ms. Libros pointed out that neither of her children had put any money into the account, nor had either of them ever withdrawn funds or otherwise acted as if they owned any portion of the account. Her children’s names were on her account, explained Ms. Libros, only as a “convenience,” to make it easier for them to gain access to her money in the event she became incapable of taking care of her own finances, or upon her death. The Superior Court dismissed the law firm’s claim and agreed with the lower court—Ms. Libros’ account could not be seized by her daughter’s creditors just because she had put it in joint tenancy. Deutsch, Larrimore & Farnish, P.C., v. Johnson, January 22, 2002.

Ms. Libros’ legal dilemma should not be lost on parents facing the same question in Arizona. While Ms. Libros was successful in protecting her account, she incurred significant legal fees and suffered years of anxiety over the possibility that her life savings might be lost.

A far better approach for someone in Ms. Libros’ situation would be to establish a “Transfer on Death” title on her brokerage account. That, along with a well-drafted durable power of attorney, would have accomplished what she set out to do without exposing her account to legal challenges.


On April 29, 2004—seven long years after the issue first arose—Ms. Libros finally obtained some finality in the legal defense of her Morgan Stanley Dean Witter account. On that date the Pennsylvania Supreme Court affirmed the ruling described above, agreeing that Ms. Libros’ brokerage account should enjoy the same protection that a bank account or any account at another financial institution would receive. Although Ms. Libros prevailed, the uncertainty and financial cost to defending her position was almost certainly incalculable. Just to underscore the uncertainty, two of the Justices of the Pennsylvania Supreme Court would have reversed the earlier decisions and directed the trial judge to review whether Ms. Libros’ account might actually have been available to the law firm holding the judgment against her daughter.

Arizona Community Property Is Not Always Subject To Probate


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.

Living Trusts Are Valuable Tools Alright, But Watch That Pitch


“Since the Revocable Living Trust avoids the expensive and lengthy legal process known as ‘probate'” proclaims a national insurance sales agency in its brochure, “it is fast replacing the Last Will and Testament as the preferred method for asset distribution.” Elsewhere, the same insurance agency promises that the “Living Trust avoids probate and is less expensive, quicker and private. The Living Trust completely eliminates the court process.”

In their zeal to sell living trusts, many non-lawyer document preparers and not a few lawyers resort to half-truths and the occasional outright misrepresentation. A review of the literature handed to seniors at a recent Tucson “estate planning” seminar (really a pitch for living trusts, annuities and insurance) reveals some of the misinformation:

The pitch– “Aren’t trusts only for the rich? No. Anyone with property or assets totalling more than $30,000 should consider a trust to avoid probate.”

The truth–in Arizona, estates of up to $50,000 in personal property plus $50,000 in real estate can be transferred through a very simple affidavit process. But even more fundamentally, even larger estates seldom go through the probate process. Holding property in “joint tenancy with right of survivorship” is a popular way to avoid the probate process, particularly between spouses. Bank accounts, stock certificates, bonds, brokerage accounts, annuities, life insurance and many other assets can be titled as “POD–payable on death” (or “TOD–transfer on death”) to avoid the necessity of probate. The simple reality is that probate is initiated in a tiny minority of cases, and often only as to a fraction of the decedent’s assets.

The pitch– “At your death, the court must first validify [sic] your will. This process is called probate. During probate not only is your estate tied up, it is also publicly recorded making your private information available for anyone, family friend, or stranger.” And elsewhere: “A recent survey indicated that it takes sixteen months for the average estate in America to clear probate.”

The truth–the probate process is, indeed, the mechanism by which the court determines the validity of your will. In almost every case, that determination is simple and straightforward–will contests are extremely rare. More importantly, your estate will not be “tied up” during the probate process. Your personal representative will be authorized to liquidate assets as may be needed, pay your debts, distribute living expenses to your spouse and children, and even make distributions of some of your estate. Despite the common belief that estate information is publicly available, there is no requirement that an inventory or accounting be filed unless requested by one of the beneficiaries. And the typical probate process, at least in Arizona, takes about six months, with many probates being opened and closed virtually simultaneously.

The pitch– “This [probate] is also the process that can cost your heirs up to 8% of your estate.” Another pamphlet trumpets that “Probate expenses…can cost between 3% to 12% of an estate’s gross value.”

The truth–the cost of probate proceedings must (at least in Arizona) be based on the actual work required to administer the estate. If the personal representative chooses not to charge (which is usually the case, especially when the personal representative is also an heir), then the only costs will be legal fees. While those fees may be substantial, they are more likely to be 1% than 8% of the estate. Arizona law is more restrictive than some states, but even in those states which provide for a percentage fee for the attorney handling a probate, it is more likely to be 3% than 8%. Administering a living trust will also cost something, though likely not as much as a probate for a comparable estate.

Living trusts are an important estate planning tool–and option– for many people. They may be particularly valuable for those who have real estate in more than one state, or disabled (or spendthrift) children, or large estates requiring careful tax planning. But living trusts are seriously oversold, and consultation with a competent estate planning attorney is the best way to make the necessary cost-benefit analysis. Be wary about getting legal advice from an insurance agent.

Conservator Should Not Change Ward’s Estate Plan

JULY 22, 1996 VOLUME 4, NUMBER 4

Howard and Jennie Smith were married in 1967. It was a late marriage for both of them; each was in their mid-fifties. Mrs. Smith had a son from a prior marriage, but Mr. Smith had no children. The Smiths maintained separate bank accounts for the rest of their marriage.

In 1980 the Smiths executed mirror-image wills, each leaving half his (or her) estate to the survivor and the other half to family. While Mrs. Smith left her half to her son, Mr. Smith chose his grandniece, Shaun Murray.

A few years after writing his will, Mr. Smith effectively changed his estate plan by putting his checking account and two CDs in joint tenancy with Ms. Murray. The total value of accounts retitled in her name was just short of $50,000.

In 1992, eight years after he put Ms. Murray’s name on his accounts, Mr. Smith became ill. His wife applied to be appointed as his conservator, noting that he could no longer handle his own financial affairs. Her petition was granted, and she promptly closed his checking account, placing $17,000 into a conservatorship account.

In January, 1993, Mr. Smith became critically ill and was rushed to the hospital. Mrs. Smith then cashed out the two remaining CDs (which still named Ms. Murray as joint tenant) and transferred them to the Conservatorship account as well. When later asked why she took this step, she replied that it was for “medical reasons.” Mr. Smith died five days later.

The Conservatorship account funds, including both the remaining portion of the original checking account transfer and the entire contents of the CDs, became part of Mr. Smith’s probate estate. Since his will left half to his wife, the effect of the transfers was to give her half of what would have gone to Ms. Murray.

Ms. Murray sued Mrs. Smith, arguing that she had breached her fiduciary duty in closing the CDs and should distribute the entire contents of those accounts to Ms. Murray. At trial, Mrs. Smith (then 85 years old) explained that she had transferred the CDs because she was worried that Mr. Smith’s medical bills could become overwhelming. As it turned out, the entire cost of Mr. Smith’s medical care and the administration of his Conservatorship estate combined for a total bill of about $4800. The Conservatorship account at the time of Mr. Smith’s death totaled $49,041.08 (including the two CDs).

The trial court ruled that Ms. Murray had the burden of proving that Mrs. Smith’s actions were a breach of her fiduciary duty, and that she had failed to meet that burden. Ms. Murray appealed.

The Tennessee Court of Appeals overruled the trial court. Once it is shown that the Conservator benefited from the transaction, said the court, it is presumed that she breached her duty and the burden is on her to prove otherwise.

Tennessee’s conservatorship law requires court approval before the conservator can change the nature of the fiduciary’s investment. Mrs. Smith did not follow that procedure, and she effectively changed her ward/husband’s estate plan. In order to be approved, Mrs. Smith would have to show that her actions were necessary to protect and promote the interests of Mr. Smith.

Mrs. Smith was ordered to return the $14,000 from the two CDs to Ms. Murray. The remaining assets in the Conservatorship account were split between the two women in accordance with Mr. Smith’s will. Murray v. Smith, Tennessee Court of Appeals, July 2, 1996.

Arizona law does not require court approval before changing the nature of a ward’s investments. But it does require the conservator to adhere to the ward’s estate plan to the extent possible; the result in Arizona would almost certainly be the same as the Tennessee ruling.

Private Fiduciary Appointed Because Of Family Fight


When Rose Kelly died in Phoenix in 1993, she left behind five children and her husband of many years, Francis. Mrs. Kelly had taken care of Mr. Kelly for several years prior to her death; his advancing confusion and memory loss made it difficult for him to take care of his own personal or financial affairs.

In the course of settling Mrs. Kelly’s estate, her children learned that Mr. Kelly’s Will left his home to a favored grandson (Jeffrey), who had been actively involved in Mr. and Mrs. Kelly’s life for his entire adult life. Jeffrey’s mother Connie (one of Mr. Kelly’s four daughters) had also been actively involved, having lunch with her father at least six days a week.

Upon learning of the Will, Mr. Kelly’s son Donald took Mr. Kelly to a lawyer in Phoenix to prepare a new Will. The result: Jeffrey’s bequest was deleted, and Mr. Kelly named Donald as agent under a durable power of attorney. Over the next few weeks, Donald changed all his accounts (over $400,000 in assets) into joint tenancy between Mr. Kelly and Donald.

Relationships among the Kellys deteriorated rapidly, and a family meeting was called to try to resolve differences. The gathering broke up abruptly when Mr. Kelly threatened Connie and Jeffrey. Soon after, another daughter (Joyce, who had been estranged from Mr. Kelly for years) moved in to take care of him, and Connie and Jeffrey found that they could not visit their father and grandfather without suffering verbal threats and abuse.

Believing that part of the problem was the control of Mr. Kelly by other family members, Connie filed a petition to be appointed as conservator and (later) guardian. Donald and Joyce countered that Donald should be appointed.

At the hearing, Connie’s attorney produced a multi-disciplinary evaluation by two physicians, a psychologist and a social worker. Their conclusion was that Mr. Kelly needed both a guardian and conservator, and that the best hope for Mr. Kelly would be appointment of an independent fiduciary.

The court-appointed investigator agreed, writing that “the only way I can see to diminish the conflict and aggressiveness of the family is to remove them one step from the decision-making process.” Judge Skelly appointed Nancy Elliston, a Phoenix private fiduciary, as both guardian and conservator. (Ed. note–completely unrelated to the situation with the Kelly family, Nancy Elliston subsequently developed her own legal problems. See Phoenix Leader In Private Fiduciary Industry Goes To Jail, the January 31, 2000, Elder Law Issues)

Donald and Joyce appealed the appointment of Elliston as guardian (they had agreed that she could be appointed conservator). They contended that their own expert disagreed with the multi-disciplinary evaluation, and that family members should have priority over strangers. Joyce, Elliston and Mr. Kelly’s attorney all disagreed.

The Arizona Court of Appeals determined that, even though one expert did not feel the guardianship was necessary, the trial court could choose to believe the multi-disciplinary evaluation instead. The Court also upheld the appointment of Elliston. Arizona law establishes a priority list for appointment of guardians, with family members near the top and professional fiduciaries at the bottom. However, the law permits the trial court to ignore the priority list if the “best interest” of the ward requires appointment of someone else. In this case, said the Court of Appeals, the trial judge properly determined that family members were unlikely to act in Mr. Kelly’s best interest. Quoting from an earlier case from Iowa, the Court noted that “from time to time wards need more protection from kin than from strangers.” Kelly v. Elliston, Arizona Court of Appeals, Division One, January 25, 1996.

Unfortunately, the Kelly family feud is all too common an occurrence. Private fiduciaries exist (and thrive) precisely because of such family difficulties.

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