Presented By Thomas J. Murphy
Murphy Law Firm, Inc.
Presented to Maricopa County Bar Association’s 13th Annual Arizona Paralegal Conference
September 28, 2012
The intricacies of the procedures and practices of the Arizona probate courts can be troublesome for even experienced probate practitioners. It can be an embarrassing minefield for those practitioners who only occasionally practice in the probate courts. The purpose of this article is to provide practitioners and their staff with a quasi-checklist of mistakes that often occur and are that are easily avoided or remedied once recognized.
Title 14 of the Arizona Revised Statutes is the probate code that grants jurisdiction to the probate court system for all or most matters relating to trusts and the estates of decedents, minors and incapacitated adults. This article will focus on the guardianship and conservatorship component of the probate courts. Guardianships deal with the personal affairs of a minor or incapacitated adult, such as where the person will live, which doctor the person will visit, which school or program the person will enroll in and so on. A conservatorship deals with the person’s financial matters. Often, the same person will be both guardian and conservator. Sometimes, one but not both forms of protection will be sought.
The probate code uses the term “ward” for a person for whom guardianship protection is sought and “protected person” when a conservatorship is sought. In conversations, probate practitioners commonly use the term “ward” interchangeably for both guardianships and conservatorships. I will do the same in this article.
- DIFFERENT STANDARDS FOR IMPOSITION OF GUARDIANSHIPS AND CONSERVATORSHIPS – There is a significant — and often overlooked — difference regarding the level of mental functioning that must be proven in a guardianship or conservatorship proceeding. Guardianships require proof of “incapacity” (not “incompetency”), defined as someone who is impaired “to the extent that he lacks sufficient understanding or capacity to make or communicate responsible decisions concerning his person”. ARS 14-5101(1). Conservatorships, however, only require proof that a person “is unable to manage the person’s estate and affairs effectively” and that “the person has property which will be wasted or dissipated unless proper management is provided”. ARS 14-5401(2). This is a lower standard of proof, so that a conservatorship can be imposed on a person who is not incapacitated but may nevertheless be unable to effectively manage his or her finances. Arizona Probate Code Practice Manual, Sec. 8.1. This distinction can be particularly important in financial exploitation cases where a person may be of capacity but still very susceptible to exploitation.
- NOTICE – A petitioner must personally (i.e., through a process server, not via mail) serve any proposed ward who is over 14 years of age. ARS 14-5309 & 14-5405. It has been my experience that the probate courts strictly interpret this so that the ward, and not the ward’s attorney or other representative, must be served. Also note that notice cannot be waived unless the ward is present at the hearing. ARS 14-5309(b) & 14-5405(b). However, once service is made, there is no requirement that the ward personally appear at the hearing. The ward’s attorney can waive the ward’s presence and this is frequently done. Often, a petitioner will inquire whether to bring the ward to the hearing – this is a decision to be made by the ward’s attorney, not the petitioner or petitioner’s attorney.
- NOTICE – A petitioner must personally serve spouse of ward. ARS 14-5309(b) & 14-5405(b). This is true even if the petitioner is the ward’s spouse.
- NOTICE – A petitioner must personally serve the parent of the ward. ARS 14-1401, 14-5207, 14-5309(b) & 14-5405(b). (Noticing the long-lost parent is discussed in paragraph #6).
- NOTICE – For a guardianship or conservatorship of a minor, probate courts will require the petitioner to obtain the consent of both parents to the appointment unless parental rights have been severed. ARS 14-5204
- NOTICE – A petitioner must publish notice when person entitled to notice cannot be found, such as the long-lost father. Rules of Civil Procedure 4.1(n) & 4.2(f). Notice by publication is 2-step process:
- Step #1 –An investigation must be undertaken with reasonable diligence and good faith to locate person. ARS 14-1401(a)(3); Mullane v. Central Hanover Bank & Trust Co., 339 US 306, 70 SCt 652 (1950); Tulsa Professional Collection Service, Inc. v. Pope, 485 US 478, 108 SCt 1340 (1988); Sprang v. Petersen Lumber, Inc., 165 Ariz 257, 261-2 (CA1, 1990). Petitioner’s attorney should retain an investigator to conduct the customary background check by examining the local county records, reviewing local phone book, etc. in the last city or town where the person was last known to inhabit. Then have the investigator prepare a written report detailing efforts undertaken to locate the person. Attorney should then attach this report to a pleading (either as a “report of counsel” or in affidavit form) explaining how the last known address was determined.
- Step #2 – The petitioner must also publish three times in the county where the hearing will be held with the first publication occurring at least 14 days prior to the hearing. ARS 14-1401(3). Practitioners should note that this differs from the civil rules that require four weeks and publication in the county of the last known address. RCP 4.1(n) & 4.2(f)
- NOTICE – Notice must be given at least 14 days prior to the hearing. ARS 14-1401. Be mindful of this when scheduling a hearing with court staff who may schedule a hearing within the 14 days.
- NOTICE – Once a practitioner has determined who needs to be provided with notice, there are new rules that set forth what must be stated in the notice form. See the new Rule 9(b) of Probate Practice for the language, in both Spanish and English, that must be included in any notice form.
- NO NOTICE, NO JURISDICTION – Practitioners need to strictly adhere to the various notice requirements since failure to properly notice interested parties is a jurisdictional defect. Ronan v. First National Bank of Arizona, 90 Ariz 341 (1962); Bowen v. Graham, 140 Ariz 593 (1984); Kadota v. Hosogai, 125 Ariz 131 (App, 1980).
- VENUE FOR PROCEEDINGS INVOLVING MINORS – It is not always clear which division of Superior Court should hear matters regarding minors. Rules 61 through 63 of Procedure for the Juvenile Court require that all guardianships for minors be filed in the local juvenile court but those rules make no mention of a conservatorship for that same minor. See also ARS 8-871. Probate courts in most counties interpret ARS 14-5401 and -5402 as requiring the probate court, and not the juvenile court, to hear all petitions for conservatorships of minors. If both a guardianship and conservatorship is sought, the petition should be filed in the probate court.
- DOCTOR’S REPORT – It is best to get the doctor’s report before you file petition to make sure you can prove incapacity or inability to effectively manage finances. It has been my experience that, if the treating physician does not agree with the appointment, the petition has no chance of being granted. The petitioner’s attorney should send a cover letter to the doctor explaining the factual situation that has lead the family to file the petition. Often, the doctor is not aware of the out-of-office developments. The attorney should also provide the doctor with the statutory definitions of incapacity and inability to effectively manage finances. Occasionally, doctors will invoke the HIPAA privacy rules and refuse to provide a report. If the petitioner has a health care power of attorney, advise the doctor of this and that should eliminate any HIPAA concerns. Otherwise, make sure that particular doctor is named in the order (the same order that appoints counsel for the ward) that will be generated at the outset of the case.
- BONDING – Make sure that the petitioner is bondable prior to the conservatorship appointment. It is very embarrassing to both the petitioner and the attorney to have incurred the time, effort and expense of obtaining the appointment only to learn that the appointee is not bondable. Practitioners should discuss this with the petitioner early on in the proceedings and begin the bond approval process well in advance of the hearing. There are a number of items that a bonding company will consider. For instance, has the petitioner ever filed for bankruptcy? Bonding companies will typically look back five years for a bankruptcy filing. Are there any judgments? Bonding companies are generally willing to bond if the judgment stems from medical bills for an uninsured person but any other type of judgment will be very problematic. Bonding companies are very interested in any family dissension or if the petitioner is indebted to the ward. If the petitioner is a successor appointee, the bonding companies will normally insist that the previous conservator file a final accounting within 90 days of your client’s appointment. The bonding companies will also want to know if any previous bonds have not been exonerated. If the ward owns a business, the bonding companies will normally insist on the appointment of a fiduciary who is knowledgeable in the business. Finally, make sure that the spouse of petitioner is creditworthy.
- BONDING – With each annual accounting, practitioners need to review whether the bond amount is appropriate. If the ward has incurred substantial expenses during the past year, such as nursing home expenses, practitioners should consider seeking court approval to change the amount of the bond or to unrestrict a particular account.
- FINGERPRINTING – If the petition is for a minor, then fingerprinting for the petitioner is required for appointment but only if the petitioner is a non-blood relative of the minor. ARS 14-5206(b). Allow at least 12 weeks for the return of the fingerprint report. Most probate courts will conduct the hearing in the interim and approve the appointment but the letters of appointment will not issue until the fingerprint report is filed with the court.
- DRIVERS LICENSE – Make sure to address in the petition and the form of order whether the court should revoke the ward’s driver’s license. The imposition of a guardianship or conservatorship no longer automatically revokes the ward’s license. ARS 28-3153(a)(8). The petitioner and court-appointed counsel should discuss this with the ward well in advance of the hearing since the loss of driving privileges is often viewed as a huge loss of liberty by the ward.
- CONFORMED COPIES – Always provide court staff with conformed copies of all pleadings, and especially for pleadings that are filed within several days of the hearing. It may take a week or more for a filed pleading to be imaged on the county’s computer system or physically placed in the court’s hardcopy file.
- PROPOSED FORMS OF ORDER – When submitting a proposed form of order for the court’s signature, always provide extra copies to be conformed together with stamped envelopes addressed to each party who has entered an appearance. Proposed forms of order are not filed with the court clerk but rather are lodged with the staff of the court who is hearing the matter. This is required by Rule 5(j)(2)(B) of Civil Procedure and, in Maricopa County, Local Rule 3.2(i). Always leave several rows of blank spaces within the form of order to allow the court to handwrite any last-minute changes due to testimony taken at the hearing or other unforeseen developments.
- EMERGENCY HEARINGS – The hearing on a permanent hearing is typically scheduled four to six weeks after the filing date of the petition. Occasionally, a pressing event may occur where the petitioner cannot wait four to six weeks for the matter to be heard. If an emergency exists that a court finds “requires immediate action”, then ARS 14-5310(b) permits a temporary appointment with little or no notice. There is no definition or explanation of what constitutes an emergency but it clearly requires more than inconvenience or unwanted delay. Most probate courts will require “immediate and irreparable injury, loss or damage” that is required for obtaining a temporary restraining order under Rule 65(d) of Civil Procedure. The most common examples are a dire medical situation where the ward is unable to provide consent to treatment or where the assets of the ward are being stolen and the ward does not realize it or is unable to stop it. Beware that all probate courts that I have dealt with do not consider an upcoming date for the closing of a sale of real estate as an emergency.
- LOSER PAYS – If the petitioner withdraws the petition or fails to prevail at hearing, the petitioner could be personally liable for the fees of petitioner’s attorney and the fees of the ward’s attorney as well as the court investigator and court accountant. ARS 14-5314 & -5414. Make sure the petitioner is apprised of this at the outset.
- COURT-APPOINTED COUNSEL’S FEES – Make sure the petitioner is aware that ward’s estate, not the County, pays fees of court-appointed counsel. ARS 14-5314 & -5414. As a matter of professional courtesy, petitioner’s counsel should warn court-appointed counsel at the outset of the proceeding if it is likely that there will be insufficient funds in the ward’s estate to pay fees.
- COURT-APPOINTED COUNSEL’S WITHDRAWAL – Court-appointed counsel remains on case until a motion to withdraw is filed and granted. Until that time, court-appointed counsel must be noticed and copied on all annual accountings, reports of guardian and any other pleadings.
- COURT-APPOINTED COUNSEL IS NOT GAL – Conflicts between counsel and the ward prior to appointment of G/C may necessitate appointment of guardian ad litem (“GAL”), in accordance with ARS 14-1408 and Rule 17(g) of Civil Procedure. Court-appointed counsel advocates the positions of the ward, whether or not counsel agrees with them. A GAL must act in the best interests of the ward, which may greatly differ from what the ward desires. See Ethics Opinions #90-12 & 2000-06 and ER 1.14. Any party may, by motion, seek the appointment of a GAL. Make sure to indicate in the motion if there is any special expertise that will be required of a GAL. See Rule 18(b) of Probate Procedure.
- COURT-APPOINTED COUNSEL – DUTY TO REPORT FINANCIAL EXPLOITATION? Occasionally, counsel for the ward may learn of facts that strongly suggest that the ward has been or is being financially exploited. However, the ward often does not want to pursue the issue if it involves a child, close friend, companion or other loved one. Does the mandatory reporting requirement of ARS 46-454 & -456 override attorney-client privilege? Ethics Opinion #2001-02 says reporting the exploitation by the attorney is not an ethical violation but the opinion expressly does not address the implications of the attorney-client privilege. General consensus among Phoenix probate litigators is to disclose matter to the court, usually on an ex parte basis, who may in turn notify law enforcement authorities.
- PUBLIC FIDUCIARY – The county public fiduciary is the fiduciary of last resort who serves when no one else is willing to do so. ARS 14-5602. Frequently, this will involve homeless or destitute individuals who have no immediate family members who can be located. The mistake made here is that a petitioner will nominate the public fiduciary without first coordinating with that office. Never assume that the public fiduciary will graciously accept the appointment. While conscientious and well-intentioned, many public fiduciaries are underfunded and understaffed. With looming budgetary constraints, this situation is not going to improve. I have seen public fiduciaries become very displeased and even outright irate if they have an appointment foisted upon them without their prior notice and input. And when prior coordination is accomplished, never assume that the public fiduciary will agree with your assessment of the need for a guardian or conservator.
- SETTLEMENTS – The probate court is required to approve any settlement of a personal injury or wrongful death claim for a minor or ward of the court. ARS 14-5424(d) and Rule 37 of Probate Procedure. Never assume that the probate court will summarily approve a settlement, even if all parties were represented by counsel in the initial litigation. Be prepared to address the strengths, weaknesses and other unusual aspects of your case. If the settlement was in the amount of the insurance policy limits, were there other sources of payments? Expect scrutiny of the life care plan, especially if the plan was the same one used for litigation purposes or is one that may be dated. If the settlement is structured, be prepared to address: guarantee periods and its interplay with rated age, whether counsel concurs with the rated age, inflation protection, death benefits, commutation riders and the impact of the settlement on eligibility for public benefits such as SSI, AHCCCS and Section 8 housing. Does the settlement include a special needs trust? How was the fixed income allocation determined and how does that compare with the annuities (ie, annuities do not have to make up the entire fixed income component)? Are there “bump up” provisions for the costs of education, future surgeries or replacement of medical equipment such as wheelchairs? How many competitive bids for the annuity were obtained and considered? What are the ratings of the annuity companies being used? Is more than one annuity company being used (ie, two companies each servicing one-half of the structure)? What are the income tax consequences during the ward’s life and the estate tax consequences upon the ward’s death? A wise practitioner should prepare and file a memorandum well in advance of the hearing date that addresses these issues. At the hearing, make sure the client and the family understand the nature of the hearing when the court asks them for their opinions on the settlement – the judge is not asking them if they are thrilled and delighted with the result but only that it is acceptable to them and they agree to it.
- FREE RENT – If the petitioner or other adult family member is living with the ward and not paying rent, the Court will require rent be paid unless a very compelling reason exists.
- PURCHASE OF AUTOMOBILE FOR MINOR – The Court will frequently deny this, considering this to be an obligation of parent. If approval of a purchase is sought, be prepared to address the practical issues such as: who will hold title to the car (ie, the minor, the conservator or, if one exists, the minor’s trust)? Who will pay for the insurance, annual registration fees and maintenance? How much liability coverage should be purchased? The probate court will be more inclined to approve the purchase if the minor is a demonstrably responsible person, such as obtaining good grades. Approval is also more likely if the purchase price is not a significant portion of the conservatorship estate.
- ALTCS PLANNING – The petitioner and court-appointed counsel should be prepared to consider AHCCCS/ALTCS planning when nursing home or other healthcare expenses exceed income.
- PRESERVING WARD’S ESTATE PLAN – When a conservator is spending the ward’s funds, there is a requirement that the conservator “shall take into account any known estate plan of the protected person known to them”. ARS 14-5427. This does not mean that the estate plan must be slavishly followed, especially if circumstances have dramatically changed since the will, trust or other documents was created. The statute does not state that there is an obligation on the conservator to conduct a search for these documents but it would certainly be advisable to do so.
- RECEIPT OF ASSETS UPON TERMINATION – When a conservatorship is terminated, there is one final step that is often overlooked – the filing of a receipt of conservatorship assets. ARS 14-5430. This mistake happens most often when a minor reaches the age of 18 years. The termination order will direct the conservator to distribute the assets to the former minor. (Make sure the order provides for the release of any restricted funds, to include the bank and the last four digits of the account number). But one final step remains — the former minor must sign a receipt or other transfer document evidencing the receipt of assets as directed in the order. The court file cannot be closed until that receipt is filed.
- APPROVAL OF ATTORNEY’S FEES –There is a common misconception among probate practitioners that all attorney fees must be approved by court. This is not so — see Comment to Rule 33 of Probate Practice (that also permits contingent and other non-hourly fees). Practitioners should file a petition for approval of fees only if court approval of fees is desired, such as if a party is likely to object to the fees. If court approval is desired, attorney should have the matter placed on court’s non-appearance calendar and should notice all interested parties of the hearing date.
- APPROVAL OF ATTORNEY’S FEES – SETTLEMENT – If approval of a settlement is being sought where an underlying lawsuit was never filed, the petition seeking approval needs to include specific approval for attorney’s fees in the settled case, in a manner compliant with Rule 33.