Exploitation, abuse and neglect of seniors appears to be a  costly problem.  In September 2010, the U.S. Government Accountability Office (“GAO”) released its Cases of Financial Exploitation, Neglect, and Abuse of Seniors.  Although “GAO could not determine whether allegations of abuse by guardians are widespread,” GAO did find extensive evidence of “physical abuse, neglect and financial exploitation” of seniors.  According to the report,

GAO identified hundreds of allegations of physical abuse, neglect and financial exploitation by guardians in 45 states and the District of Columbia between 1990 and 2010. In 20 selected closed cases, GAO found that guardians stole or otherwise improperly obtained $5.4 million in assets from 158 incapacitated victims, many of whom were seniors. In some instances, guardians also physically neglected and abused their victims.

Fortunately, Arizona law has protections for vulnerable and incapacitated adults that suffer from financial exploitation (theft), abuse or neglect.  Arizona’s Adult Protection Act provides for civil and criminal penalties, including disinheritance of and double damages  against the wrongdoer.

If you or a loved one is a victim of abuse, neglect or financial exploitation, we can help.  Our experienced Arizona probate attorneys provide aggressive and compassionate representation in virtually all types of elder abuse cases.  Please contact us if you have any questions.

In probate law, the law presumes that a person has testamentary capacity.  Testamentary capacity is the mental state someone must have to adopt a valid last will and testament.  If someone wants to attack a last will and testament, they must overcome the presumption with some evidence of a lack of capacity or some other basis to undo the will, such as undue influence.  For example, the person attacking the will must show that the person did not know who his family was or did not what property he owned.  So, what happens if a person has a guardian appointed on the same day that he adopts a new last will and testament?  That was the issue addressed by the Court in Estate of James S. Blackford.

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James Blackford signed a last will and testament in 2003 leaving everything to his son.  In 2004, a guardian was appointed to care for Blackford.  By 2008, that guardian’s health had declined so he could no longer care for Blackford.  So, on May 28, 2008, the court held a hearing to determine whether Blackford could care for himself or a replacement guardian should be appointed.

At the May 28, 2008 hearing, Blackford claimed that he was healthy enough to care for himself and that he was self-sufficient.  His son argued that his father was not self-sufficient and that a guardian was necessary to care for Blackford.  The probate court found that Blackford “’remains impaired by a mental disorder to the extent that he lacks sufficient understanding or capacity to make responsible decisions regarding his person.”  The court also concluded that he was “an incapacitated person pursuant to A.R.S. Section 14-5101(1).”  Based on those findings, the court appointed a new guardian to care for Blackford.

On the same day that the Arizona probate court held the guardianship hearing, Blackkford adopted a new last will and testament.   In that will, he left everything to his grandson, thus disinheriting his son and undoing his 2003 will.

Not surprisingly, after Blackford died, his son challenged the 2008 will.  He claimed that the court found that Blackford was incapacitated and needed a guardian on the same day.  As a result, the son claimed that the 2008 will was invalid.  After various court proceedings, the personal representative filed a motion for summary judgment to uphold the 2008 will.  Because the son did not respond to the motion, the court granted the motion and validated the 2008 will.

The son then appealed that ruling.  He argued that there was evidence in the court’s file (the findings regarding Blackford’s need for a guardian) based on which the probate court should have found that Blackford could not have adopted a valid will on May 28, 2008.  The court of appeals found that the trial court should not have granted summary judgment.  The trial court should not have summarily validated the 2008 will.  The trial court had evidence in its file showing Blackford’s need for a guardian.  That, the court of appeals found, was enough evidence to create an issue of fact requiring a trial as to whether Blackford had testamentary capacity.   Even though the son did not respond to the motion for summary judgment, the trial court still should not have granted judgment upholding the 2008 will.

“We do not decide that the guardianship proceedings conclusively determined the issue of [Blackford's] testamentary capacity. As the court stated in In re Thomas’ Estate, 105 Ariz. 186, 189, 461 P.2d 484, 487 (1969), “[a]n adjudication of incompetency under the guardianship statute does not of necessity indicate a lack of mental capacity to execute a will.”

In other words, a person who needs a guardian may or may not still have testamentary capacity under probate law.  But, if a guardian is appointed it is a strong enough suggestion of lack of capacity so as to prevent the court from summarily finding that the person did have testamentary capacity.  Thus, the court of appeals sent the case back to the trial court for a trial regarding whether Blackford had testamentary capacity.

The son was successful on his appeal without having filed a response to the motion for summary judgment.  That does not mean it is okay to not respond to motions.

In Arizona, a person has been permitted for many years to designate who will receive bank accounts and real estate upon death.  For example, a person may designate a “pay on death” beneficiary for bank and other accounts, and may title real property as “joint tenants with right of survivorship.”  By doing so, ownership of the account or property transfers to the named beneficiary without having to go through probate.  Oddly, until recently, it was not possible under Arizona law for a person to designate a beneficiary to receive his/her motor vehicle.  So, a person could transfer a million dollar home by a simple joint tenancy title, but not an inexpensive vehicle.  Fortunately, that has now changed.

In 2011, Arizona law was amended to allow a vehicle owner to designate a beneficiary to receive ownership of the vehicle upon the person’s death.  A.R.S. § 28-2055(B) now provides that  “at the request of the owner [of a motor vehicle] and on payment of a fee prescribed by the department by rule, the certificate of title may contain, by attachment, a transfer on death provision where the owner may designate a beneficiary of the title.”

The Arizona Department of Transportation Motor Vehicle Division even provides a simple one-page form to designate a beneficiary, called a Beneficiary Designation for Vehicle Title Transfer Upon Death.

A guardian may be appointed for a person (the “ward”) where the ward is incapacitated and a guardian is necessary to care for the needs of the ward.  A guardian generally has the powers over the ward that a parent has over a child.  Among other things, the guardian may decide where the ward lives, and must provide for the ward’s care and education.   The guardian may also arrange for the ward’s medical care.

You may wonder whether a ward who has a guardian may still drive.  Fortunately, Arizona law has answered that question.  Pursuant to A.R.S. § 14-5304.01, a guardianship does not automatically terminate the ward’s driver license or prevent the ward from obtaining a driver license in Arizona.  Rather, upon appointment of a guardian, “the court may determine that the ward’s privilege to obtain or retain a driver license should be suspended and issue an order suspending the privilege.”  “If the court is presented with sufficient medical or other evidence to establish that the ward’s incapacity does not prevent the ward from safely operating a motor vehicle, it may decline to suspend the ward’s privilege to obtain or retain a driver license and issue an order allowing the ward to obtain or retain a driver license.”

In Estate of King, the Arizona Court of Appeals ruled that Arizona Revised Statute 20-1131(A)* (protecting life insurance proceeds from creditor claims) still applied even though the life insurance proceeds were payable to a trust and the trust agreement generically directed the trustee to pay the deceased’s expenses.

Kathryn King had created a trust.  Her minor son was the sole beneficiary of the trust.  She purchased a $2 million life insurance policy and named the trust as the sole beneficiary.  She died in November 2008.  When she died, her debts exceeded the value of her estate.  She had various real estate and other loans which the estate could not afford to pay without the life insurance proceeds. So, the creditors claimed that the estate was obligated to use the life insurance proceeds to pay their claims.

Specifically, the creditors argued that Section 20-1131(A) only exempted the life insurance proceeds from creditor claims if the life insurance was payable to a third-party.  They claimed that since the trustee of the trust was King’s legal representative that the exemption did not apply.  The Court disagreed.

“Life insurance proceeds paid to a decedent’s beneficiary are exempt from claims of creditors of the decedent’s estate pursuant to A.R.S. § 20-1131(A). We hold that the language of § 20-1131 is broad enough to also protect such proceeds when they are paid to a trust created by the insured in which the beneficiary is a third party.” The Court explained that a trust was an “entity” and that “entity” is included in the definition of “person” under Title 20 of the Arizona statutes.

 The fact that King was the trustee of the trust at the time that she purchased the policy did not change the Court’s decision.  “The Trust was the owner and beneficiary of the policy, and the policy was an asset of the Trust. As the Louisiana Court of Appeals aptly stated, an insured’s creditors cannot reach life insurance proceeds on the life of the insured because the proceeds ‘do not come into existence during his life, never belong to him, and pass by virtue of the contractual agreement between the insured and the insurer to the named beneficiary.’”

Thus, the Court found that the life insurance proceeds were exempt from the creditor’s claims pursuant to the statute.  The Court went on to analyze whether the directive in the trust to the trustee to pay various of King’s expenses constituted a waiver of the statutory exemption.  The Court held that there was no waiver based on the merely  generic directive to pay expenses in the trust and the absence of any specific directive to use the life insurance proceeds to pay such expenses if other assets were insufficient.

* Ariz. Rev. Stat. Ann. § 20-1131(A) provides that “If a policy of life insurance is effected by any person on the person’s own life or on another life in favor of another person having an insurable interest in the policy, or made payable by assignment, change of beneficiary or other means to a third person, the lawful beneficiary or such third person, other than the person effecting the insurance or the person’s legal representatives, is entitled to its proceeds against the creditors and representatives of the person effecting the insurance.”

Berk & Moskowitz, P.C. handles all types of estate, trust, will and probate disputes.  If you or someone you know has an estate or trust-related dispute, please contact us.

Arizona’s Adult Protective Services Act has broad coverage, far reaching remedies and allows for the recovery of substantial damages in many cases.  The Act protects vulnerable or incapacitated adults from abuse or financial exploitation.

But, the Arizona Court of Appeals has found that the damages recoverable under the Act do not include the “intrinsic or inherent value” of human life.  In the Estate of Winn v. Plaza Healthcare, Inc., the Estate brought a claim under the Adult Protective Services Act against the nursing home where Ms. Winn died.  The Estate alleged that the Defendant nursing home abused Ms. Winn in violation of the Act, thus causing her death.  Because there was no evidence that Ms. Winn suffered any physical pain or emotional distress or loss of earnings prior to her death, the Estate argued that it was entitled to recover for the “inherent or intrinsic value” of Ms. Winn’s life.  The trial court dismissed the claim, and the Arizona Court of Appeals affirmed.

The Court of Appeals explained that the Act “allows a vulnerable adult ‘whose life or health is being or has been endangered or injured by neglect, abuse or exploitation’ to file an action in superior court against certain persons or enterprises. If liability is established, the court may order ‘the payment of actual and consequential damages, as well as punitive damages, costs of suit and reasonable attorney fees, to those persons injured.’”  A.R.S. § 46-455(F)(4).  The Court noted that the issue was not whether there is some inherent value to human life because there certainly is; rather, the issue was whether the Act allowed the recovery for such loss.  It found that the Act did not allow for such recovery because such loss is not an “actual damage” recoverable under the Act.  While “actual damage” under the Act includes pre-death pain and suffering and other damages, because the legislature did not specifically include damages for death in the definition of damages in the Act, like it did in other laws, the Court concluded that damages for death are not recoverable in a claim under the Act.  Such damages could have been sought if the Estate had brought a claim for wrongful death under, for example, A.R.S. § 12-613.

If you anticipate a dispute or litigation regarding an estate, probate, will or trust, there are three important things that you should do to prepare.

Preserve the Testamentary Documents:  First and most importantly, it is crucial that you obtain and preserve the original last will and testament, trust and/or any other documents disposing of or transferring property.

Preserve Documents Showing Assets:  Second, you should obtain and keep copies of any records showing assets or income, such as bank and financial account statements, deeds, titles, stock certificates, insurance policies, promissory notes and any other records that may reveal property that is or should be part of the estate.

Hire an Experienced Estate Litigation and Probate Attorney:   There is no substitute for early advice from an experienced probate lawyer who regularly handles estate disputes and litigation.  Many people feel that they can handle an estate dispute on their own and hire an attorney too late, after crucial claims have been missed or rights lost. 

If you have questions regarding an estate, trust or probate dispute, contact the probate attorneys at Berk & Moskowitz, P.C.  We aggressively handle virtually all types of disputes.