Posts Tagged ‘North Dakota Supreme Court’

Nursing Home Resident’s Lawyer Did Nothing Wrong

FEBRUARY 23, 2015 VOLUME 22 NUMBER 8

From time to time we report on cases in which lawyers are disciplined for behavior involving clients who are older or have disabilities. We do that not out of any sense of schadenfreude, but because the behavior described in the disciplinary proceeding is illustrative of an important limitation on lawyers’ behavior.

This week, though, we have a different type of disciplinary proceeding to describe. The lawyer in question was not disciplined, and for good reason. Let us explain.

Neil French (not his real name) was in his mid-70s when he signed a power of attorney giving his daughter power to make financial and personal decisions for him. Three years later he had a heart attack, and ended up being transferred to a nursing home in his home state of North Dakota. He was signed in by his daughter, using the power of attorney; as part of the intake process, the facility had his daughter sign a form indicating that Neil was “incapable of making medical decisions” for himself.

A few months later Ilsa, a friend of Neil’s, contacted local lawyer Gregory Runge. Ilsa told Mr. Runge that her friend wanted to leave the nursing home and return to his own home. Mr. Runge double-checked the local court records to see that there was no guardianship or conservatorship proceeding pending, and he told Ilsa that there did not appear to be any reason Neil could not simply walk out of the nursing home. If necessary, he could revoke the power of attorney he had given his daughter — that would remove her authority to sign him in and force her to begin a guardianship proceeding if she thought he was incapable of making his own decisions.

In the course of checking out the story told to him by Ilsa, Mr. Runge looked up other court records. Though he could not find any guardianship proceeding he did find a request that the court issue a restraining order against Ilsa. The request was signed by Neil’s daughter, signing as agent under the power of attorney; it alleged that Ilsa had been guilty of “disorderly conduct” in her contact with Neil.

A few days later Mr. Runge heard from Ilsa again. She told him that Neil wanted him to bring a form revoking the power of attorney to the nursing home. Mr. Runge called Neil directly and confirmed that he wanted to leave, but that his daughter had been preventing him from going home. Mr. Runge told him that he could simply walk out of the nursing home, but agreed to bring the revocation document to Neil for his signature.

The next day Mr. Runge visited Neil in the nursing home. He explained that the power of attorney was revocable, and handed Neil a revocation form for his signature. A nurse came into the room as the two were talking, and Mr. Runge explained to her that Neil had revoked the power of attorney and intended to leave the home. Then Mr. Runge returned to his office.

A short time later Mr. Runge received a call from someone at the nursing home. They told him that Neil had been determined to be incapacitated, and that the revocation of his power of attorney would probably be ineffective. Mr. Runge responded that there did not seem to be any court finding of incapacity, that Neil had seemed to understand the significance of the revocation document, and that his daughter no longer had any authority over the decision since the power of attorney had been revoked. Neil left the nursing home later that day, and moved in to Ilsa’s apartment.

Neil did not return to the nursing home, and apparently his daughter did not initiate a guardianship proceeding. A welfare check conducted (apparently at the behest of the nursing facility) later on the day of his move found that his condition was “OK”, and that he did not want to return.

But Neil’s daughter did file a complaint with the North Dakota Supreme Court’s Disciplinary Board. She alleged that he acted improperly by preparing the revocation document without talking with her or other family members, or ascertaining Neil’s medical condition.

After a hearing, the Disciplinary Board’s local investigative committee issued a preliminary finding that Mr. Runge had violated the Rules of Professional Conduct. According to this finding, he had acted improperly by preparing a revocation of a power of attorney for a client with “limited capacity” whom he had never met. The finding also criticized him for not first communicating “with the client’s appointed representative, a family member who had been appointed in a durable power of attorney.” The committee recommended that Mr. Runge be “issued an admonishment” (the lowest level of discipline). The full Disciplinary Board upheld the proposed discipline.

After Mr. Runge appealed his admonishment, and the North Dakota Supreme Court considered the facts and holding. The state’s high court noted that North Dakota disciplinary rules give a lawyer direction about how to represent a client whose capacity may be diminished: the lawyer should maintain as close to a “normal” lawyer-client relationship as possible. Because Neil had not been found to be incapacitated by any court (there was no guardianship or conservatorship in place), and after Mr. Runge had met with him and discussed his options and the effect of revoking the power of attorney, it was entirely permissible for him to determine that Neil understood what he was doing and wanted to proceed. There was no requirement that Mr. Runge speak with Neil’s daughter before following his wishes, and the complaint against him was dismissed. In the Matter of Runge, February 12, 2015.

North Dakota, like the majority of states, has patterned its ethical rules governing lawyers after the American Bar Association’s Model Rules of Professional Conduct. So has Arizona. That means that the ethical rules governing representation of a person with diminished capacity in Arizona should lead to the same result as that reached by the North Dakota Supreme Court. It can be a challenge to determine whether a client with medical issues and complicated family dynamics really understands what they intend to do, but it is precisely the challenge that elder law attorneys navigate regularly and, frankly, enjoy. Mr. Runge should be commended for helping Neil accomplish his wishes.

Powers of Appointment and Trust Reformation

JULY 1, 2013 VOLUME 20 NUMBER 24
Sometimes things just don’t work out the way you intend. That is hardly a novel observation, but it can have a big effect on the work you hire a lawyer to do for you.

Let’s try an example. Suppose that you want to give some money to your grandchildren. You have four grandchildren, aged 10 through 17. You are planning on setting aside some money for education and to get them a start in life. You have done well in life, and are ready to put money aside right now.

Though your grandchildren are uncommonly smart (aren’t all our grandchildren above average?), they are pretty young. You agree with your lawyer that their money should be put in trust. You want to get the gifts completely out of your estate, however, so you decide to create irrevocable trusts — one for each grandchild. You ask your lawyer to draft the trusts, and you and your spouse intend to put $28,000 per year into each trust, at least as long as you are able to afford making the gifts.

The trusts are drafted; they name each grandchild’s parent (your daughter as to two of the grandchildren, your son as to the other two) as trustee. The documents are pretty much identical, and each is about twenty pages long. You have read them, but they are pretty hard to follow — though your lawyer has given you good advice about what they say. Did we mention that your lawyer is your son-in-law, the father of two of your grandchildren? He is very smart, and you know that he has thought through the provisions of the trust. You and your spouse sign, and you write the first of several annual checks to the respective trusts.

Four years go by. You by now have made $100,000 gifts to each of the grandchildren’s trusts. That is when you learn that your daughter and son-in-law are getting divorced. It’s unfortunate, but you are glad that you had the foresight to name your daughter as sole trustee rather than making her husband a co-trustee for their grandchildren.

Five years later, you have been making regular contributions to the trusts and they have grown significantly. Your grandchildren got scholarships for college and stayed close to home, so most of the money is still sitting there. Your family situation has gotten a little more complicated, though: your former son-in-law has remarried and had two more kids, and he  (and they) is pretty much out of your daughter’s life. Your son has also gotten divorced, but neither he nor his ex-wife has remarried.

Before the next installment, we feel constrained to remind you that this is your imaginary life. Your oldest grandson, now age 27, married, and making his way in the world, dies in a terrible auto accident. His trust had grown to over $200,000; what is to become of that money?

Look at the trust document. It says that your grandson had something called a “power of appointment.” That means he could have written a will designating who would receive the trust’s assets, but of course he did not make any will at all. What happens if he dies without a will? The trust says his money goes to his children, if he has any (he did not). It says nothing about his wife. The remaining money, it turns out, goes to his siblings.

But that means that two-thirds of the money you gave to your grandson would go to your former son-in-law’s children by his second wife. Surely that can not be what you intended. It hardly even seems likely that your former son-in-law had any such idea in mind when he wrote the trusts a decade ago. Is there any way to prevent the money from going to these children you don’t even know, and are not related to?

That story is a slimmed-down and somewhat sanitized version of a recent North Dakota Supreme Court case. It gives us a chance to write about not only the job of being a lawyer, but also the concept of court reformation of trusts.

One of the odd things about being a lawyer is the need to think through the many various ways that bad things could happen to our clients, whom we usually like very much. That’s also the reason legal language often seems so stilted and awkward; we are trying to clearly convey meaning in an uncertain future world. One convenient way to provide for future changes is to give trust beneficiaries (in appropriate cases, of course) the power to designate to whom trust monies will be given upon their own death. That power to appoint the trust to another person is a “power of appointment.” It can be general, or it can be limited (as in a power to appoint only to the beneficiary’s spouse, issue, parents or siblings, or only to charitable organizations, or only to beneficiaries named Dave, or whatever).

Effective use of a power of appointment, of course, requires the holder of the power to do something. That also explains why, when you make an appointment to talk about estate planning with a lawyer, she wants to know if you are a beneficiary of any other trusts, and to see the trust document(s); she is looking for powers of appointment that need to be exercised.

But back to our scenario: is it possible to convince a judge that you never intended family money to go to non-relatives? That you simply could not have imagined the sequence of events that played out back when you first signed those trust documents? Yes, as it turns out. Though the probate judge in the North Dakota case refused to allow reformation of the trust, the state Supreme Court reversed that holding and authorized a change to name only the deceased grandson’s siblings who were also descendants of the original trust creators. In Re Matthew Larson Trust Agreement, May 28, 2013.

Wise legal commentator Yogi Berra is often quoted for the legal maxim that describes how complicated a lawyer’s imagination must be. Turns out it wasn’t him, but probably was physicist Niels Bohr, who said “prediction is very difficult, especially about the future.” Bohr certainly was the source for this appropriate observation about the art of physics and lawyering: “an expert is a person who has found out by his own painful experience all the mistakes that one can make in a very narrow field.”

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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