Thursday, June 5, 2014

My experience in Multnomah County Probate Mediation involving cognitively impaired parties.

The mandatory mediation of probate disputes in Multnomah County seems to be working well and looks likely to become a permanent feature of probate litigation in Multnomah County. I can't say that lawyers have embraced the idea, but most of them now grudgingly admit that it resolves a lot of cases.

I have worked as either the mediator or for a litigant in a lot of mediated cases since the program began, and most of those cases have settled. That is exactly what the court expected would happen when it established the program. I think that the system is working well, with one exception. I have not seen a lot of successful results when one of the participants is cognitively impaired or mentally ill.

Mediation is a process in which a mediator who is trained in negotiation coaches the parties to negotiate with each other effectively. The mediator urges them to narrow and identify issues, makes them clarify their interests, and forces them to balance risk and reward. Negotiating well does not come easily for most people. In my own case, I had practiced law for many years and it was only when I went through mediation training that I discovered how bad I was at negotiation. When serving as a mediator in a case, I am  asking that the parties engage in difficult and unfamiliar tasks. It is hard for most people, but for.people with cognitive deficits or mental illness, it can be impossible.

I find that people with cognitive deficits and mental illness often have a hard time with the idea that people of good faith can disagree, not only on what should happen, but on what has happened in the past. They become fixated on either "truth" or the idea that a person on the other side of the case is a bad person who will be punished by the judge. Where most people easily accept that closure--the end of the conflict--has value, people with cognitive impairments are often unable to give a reasonable value to "ending the case here and now." Cognitively impaired and mentally ill people are less able to evaluate risk of loss, and cannot realistically evaluate the stress of the courtroom..

Cases involving cognitively impaired people do settle in mediation. My experience is, however, that they don't settle because the impaired person has made a rational decision to settle based upon risk and reward, but rather because lawyers, family members, and even the mediator, have forced settlement upon them. The settlements are sometimes repudiated under the local rule, because by the next morning the impaired person has regained the energy to fight.  More often, however, the settlements are sabotaged by subsequent behavior. I think most people have a little buyer's remorse about settlements in mediation, but in my experience only the impaired act upon it to sabotage the settlement terms.

I don't think the mandatory mediation program needs to be changed to accommodate this problem. The court can waive mediation upon good cause. I think it should be considered good cause, that a party, due to mental illness or cognitive decline, will most likely to be unable to reap the benefit that mediation offers.

Thursday, March 27, 2014

Legal Documents that Promise Too Much

I wrote in an earlier post about the fact that most estate planning trusts are simply unable to deal with the wide variety of ways in which incapacity —usually dementia of one sort or another—shows its ugly face. Despite the best efforts of trust designers, families still end up asking a court to intervene, and when that happens the trust can make solutions harder rather than easier. I think that we elder law lawyers are asking our documents to do too much.

I have written before about the role of legal forms in the practice of law and where lawyers get their forms. I completely rewrote my forms a couple of years ago to shorten and simplify them. I started doing it because a client asked me to simplify a long trust (a trust from a national provider of forms). As I went about taking out clauses that I had never seen anybody care about, I realized that my own forms were also bloated with clauses that had found their way into trusts decades ago and had simply been copied from one trust to another with no regard to whether they served any real purpose.

In the process of shortening and simplifying my estate planning forms—and translating them from legalese into plain human English at the same—I discovered that not only were my forms bloated as a matter of prose style, but most of the forms I use substantively attempted to do too much.

A will identifies your heirs (the people who would get your money if you had no will) and then tells the court who you want to get your stuff. The will may also tell the court who gets your money if one of the persons mentioned in your will dies before you do. I have had clients get seriously carried away with this question of out-of-order deaths, asking me what would happen if they were at a family reunion and all their relatives were killed by a meteor crashing into earth. I can answer that question, but I really don't want to put the answer in a will.

Life is unpredictable. The math of large numbers says we should treat highly improbable events as impossible. The same math says that when the numbers are large enough, the highly improbable event is also inevitable. Thus, the chances of winning the Powerball lottery are so small that it is reasonable for any person to consider it impossible. Nevertheless, when enough people play, it is inevitable that someone will eventually win.

Time spent preparing for low probability events takes time away from preparing for more probable dangers. Legal documents that attempt to anticipate all possibilities, I believe, are worse for a client than those that limit their scope to the most common situations. The complex language and legal structures built into estate plans designed to meet every contingency become less effective because of the complexity. An estate plan that anticipated every possible situation that life could throw at a person would be thousands of pages long. It would be unreadable, ignored, and worse than no estate plan at all.

The situation is akin to the parent who keeps his child in doors in front of the television all the time to avoid the risk of abduction by kidnappers—a low probability event—and as a consequent risks obesity and poor health—a fairly common risk.

I am moving toward an approach in which legal documents should be humble. They should acknowledge that they cannot anticipate every eventuality—life being simply too unpredictable—and rather than trying to take courts out of the plan, attempt to embrace what the court system offers.

Estate planners write trusts that anticipate capacity and plan for it. Incapacity, however, comes in too many ways and forms. I suggest that we trust writers continue to plan for the common case, but rather than attempting to make a trust that will never end up in court, we write our trusts to embrace the court system when unanticipated situations arise. Rather than trying to avoid conservatorships at all costs, the trusts could admit that some times they cannot be avoided and allow for the management of trust assets by a conservator during the lifetime of the incapacitated elder.

Similarly, I think people writing wills ought to quit tax planning for people who don't currently have enough wealth to pay estate taxes, quit writing trusts for minors who are unlikely to ever receive anything, and rely more on the law of intestacy. Planning for events that have a low likelihood is not harmless. It complicates and weighs down the plan, making it worse than it otherwise would have been.

It is time, I think for those of us who do this sort of thing to take a course in humility and write short, plain English documents that do a couple things well rather than everything badly.

Wednesday, February 26, 2014

Oregon Estate Planning Trusts are Failing when it Comes to Incapacity

One of the stories I tell when touting the advantages of an estate planning trust is that the trust, unlike a will, provides directions for use of your money in the case of incapacity. The trusts I write and the trusts I see all have instructions about what your loved ones should do with your money if you develop dementia. Every trust has a clause explaining who should make the decision that you cannot handle your own affairs and how the decision should be made. I have re-written that clause in my own form a hundred times, because every one of my ideas, in real life, ends up being silly.

I have felt guilty about inability to write (or steal from some other lawyer's form) a satisfactory clause to transition trust management upon incapacity. Having just come from another court hearing in which children were asking the court to appoint a guardian and conservator for their mother, I wonder if the fault is really mine. Incapacity—and by that I mean dementia—does not call ahead to announce it is coming and show up when expected. Sometimes elders see it coming and step down from money management. Sometimes children see it in its early stages, locate the trust, and take the steps to protect the elder from cognitive decline. In just as many cases, however, the elder cannot see her own loss of ability and the children, if there are any, for a wide variety of reasons are not in a position to step in.

Guardianships and conservatorships end up before a judge because there is a crisis. The elder is in physical danger or the elder's money is in danger of being lost. Estate planning trusts were designed to avoid this trip to court, but estate planning trusts and family crises do not play well together. If grandma is wandering on the freeway or sending all her money to African scammers, that old revocable living trust she has sitting on the top shelf in the closet is unlikely to provide the kind of protection she needs. Guardianships and conservatorships are regularly ordered for elders who have trusts because the protective mechanism contained in the trust proved to be ineffective. When this happens, the trust, which was designed to simplify procedures in case of incapacity, makes the situation worse.

We estate planning lawyers mislead clients when we tout the disability provisions in our revocable trusts. Sure, the trusts sometimes keep the client out of court, but mant times they don't. If the case does go to court, the trust is seldom helpful. If grandma is sending all her money to scam artists the court appoints a conservator. Often this will be a professional fiduciary. The conservator then discovers that all of grandma's money is held in trust, and the person named in the trust to take charge is the same cousin Joe who sat on his hands and let the situation become a crisis in the first place. He doesn't want anything to do with managing the money and the court wouldn't trust him to do it if he did.

What happens? More often than not, the court appoints the conservator to be trustee of the trust. Now we have the worst of both worlds--a conservatorship and a trust administration. A similar thing happens when you create an estate planning trust but only manage to put half of your property into the trust: when you die you get both a probate and a trust administration. One of the cases in my office now involves a woman who got the full Monty—a conservatorship while she was alive, a trust case while she was alive, trust administration at her death, and lastly, a probate. Just imagine the attorney fees. The trusts, designed to help, were thwarted by the complexity and unpredictability of human endeavor, and ended up being a hindrance.

Incapacity refuses to play by the rules. It is creative, hurtful and destructive. It pushes aside the plans we made to control it and takes off in unexpected directions. I don't believe that better trust drafting is the answer. I simply do not think that trusts, when it comes to incapacity, are up to the task we ask them to perform. At the end of the day, only a judge truly has the ability to look at incapacity in its varied forms and adapt the protective intervention to the situation before it. When we draft trusts we should admit this outright and instead of writing trusts to avoid court, write them in a way that helps the court when the crisis comes.

This gives me an idea for another blog post. I think I will call it Legal Documents that Promise Too Much. Stay tuned. That may be my next one.

Monday, February 24, 2014

An Update on Income Cap Trusts in Oregon

An income cap trust is, as I have explained in another post, a legal trick that allows people with too much income to qualify for Medicaid to qualify anyway. In brief, the trick works by putting all of the elder's income into a trust every month. At the end of the month the trustee pays all the income to the care center, and Medicaid picks up the difference between what the care center received and what it charges. It is a little more complicated than that, but not much.

In the past people learned about income cap trusts when the Medicaid intake worker announced that the elder didn't qualify for long term care benefits because the elder had too much income. The applicant—usually one of the elder's relatives holding a power of attorney—was advised to get a lawyer. The relative would contact me or some other Oregon elder law lawyer to get a trust.

I have done a lot of income cap trusts. I downloaded a copy of the recommended trust from the Oregon Department of Human Services website and made a few changes. I wouldn't have had to make any changes, but lawyers can't leave anything alone if it was written by another lawyer. When someone hires me to do an income cap trust, I take out my version, change the names to fit the new client, and print it out. Next I call the case worker and agree on the income and payment numbers so that my client, the trustee, will know who and how much to pay each month from the income of the elder. I have my client open a bank account to hold the trust funds, give him advice on how to administer the trust, and my job is done.

Doing income cap trusts is easy work and it pays well. I like that, but it has always seemed to me unnecessary. Medicaid intake workers handle complicated income and asset matters every day. I could never understand why they couldn't take it one more step and help applicants set up income cap trusts.

Now it seems that they have. I have talked to several people in the Portland metropolitan area who have applied for Medicaid, and, when it was determined that the applicant needed an income cap trust, the Medicaid worker handed out a fill-in-the-blank trust form and do-it-yourself instructions. One of these folks wrote me an email, asking me what if any value I could add by doing the trust for them instead of using the form. I couldn't think of a thing. With good forms and the cooperation of the Medicaid intake worker, there is no reason that a reasonably intelligent family member couldn't create and administer an income cap trust without a lawyer.

I think that Medicaid should have been doing this all along, and to the extent that some Medicaid offices are not doing it, I would encourage them to do so. The use of income cap trusts is so standardized that I, as a lawyer, have a hard time providing any value to the client. I will miss the income, I suppose, but I won't miss the work. Creating and funding an income cap trust is necessary drudge work, but it is neither difficult nor creative. I am all for letting unrepresented applicants do all but the most complex of them.

Wednesday, January 22, 2014

The Trouble With Trusts (in Oregon estate planning)

I love trusts. A contract, at its simplest is a legal relationship between two people. A trust, at its simplest is a legal relationship among three people. Maybe it's my farm background, but I like the three-legged stool, and I keep my copy of Oregon's trust code always near at hand.

Despite my love of trusts I have become discouraged about using them for estate planning. The source of my discouragement is not how trusts work, the theory behind the trusts, or the law governing trusts. Rather it is that people dealing with a relative who has died leaving a trust so often go crazy.

If you have a will you go through probate. In probate you file the will with the court and that begins a series of logical steps. You notify the heirs, inventory the assets of the dead person, pay the claims of creditors, prepare an account of everything you have done, and distribute the money. Executors appointed by the court seldom have a problem doing these things, because each step makes sense and each one is required by law. If, the executor fails do these things in a timely manner, the court sends out a nasty note saying that if the current executor can't get the job done the judge will be pleased to replace him or her with someone who can.

The same steps that are mandatory in probate are also either required or strongly suggested when it comes to managing trusts. When an estate planning trust becomes irrevocable because the creator of the trust has died, the new trustee should notify the beneficiaries of the trust, inventory the property owned by the trust, pay the claims of creditors, then prepare an account of everything the trustee did and then distribute the money. In one way or another Oregon's uniform trust code requires that a trustee do each of these things, and even if it didn't, doing them is a very good idea. In the case of trusts, however, if the trustee fails to do his job there is no court to write nasty letters. Without those letters people go nuts.

In my experience, non-professional trustees assume their duties with great enthusiasm and then proceed to do everything wrong. They fail to notify the beneficiaries of the trust that they are taking over as trustee, and then fail to provide the beneficiaries with a copy of the trust. They take a job that is best done in the open and treat their work as if it is secret. They fail to inventory the trust property, or if they do they keep the inventory secret. This naturally makes the beneficiaries suspicious about what the trustee is doing. The beneficiaries then ask what the trustee is doing, and, rather than being open and honest about the administration, the trustee gets all up in the air about it and tells the beneficiaries to go pound salt. The beneficiaries are now understandably pissed off because they haven't seen the trust, or the inventory, or the account--so they come to see me.

I see a stream of trust beneficiaries with the same set of complaints. The trustee is holding back documents, failing to answer questions, and is unduly and unnecessarily secretive. The beneficiaries suspect the trustee is mishandling the money, and who wouldn't think that.

More often than not the trustee is not mishandling the money; he is simply being a jerk. At great expense to all parties I pry the information out of the trustee and give it to the beneficiaries. By this time, however, the trustee and the beneficiaries are not speaking to each other.

I am tired of it. I may go back to wills. I do my share of cases in which the validity of a will or the actions of a personal representative may be at issue, but at least with wills the personal representatives don't go so crazy that they think they can administer the estate without giving the heirs a copy of the will. Maybe it is the threats from the court that keep them on the straight and narrow, but I really don't care. Trusts, no matter how much I personally love them, make people crazy, and crazy people make me crazy.

Probate is just not that bad, and it looks downright inviting if the alternative is having to deal with crazy people.

Tuesday, October 22, 2013

Family alignment in financial elder abuse cases in Oregon

I have written before that the people who file financial elder abuse cases under Oregon's elder abuse statutes are seldom abused elders. The only cases I ever see in my office are cases filed by fiduciaries: conservators if the elder is alive or executors if the elder has died. In the real world, the cases are filed by one family member against another. Most of the cases involve siblings: Cain and Abel battling over Adam's money.

Financial elder abuse cases filed by conservators and executors tend be attempts by one sibling against another to undo gifts made by the elder. For example, Adam gives Abel the house, and when it comes to reading the will it turns out that the house was the only thing of value that Adam owned. Cain is out of luck. He goes to his Oregon elder law lawyer and sues Abel for financial elder abuse on the grounds that Abel used undue influence to get Adam to sign the deed.

If old Adam has dementia instead of being dead, Cain either gets himself appointed conservator or gets his Oregon elder law lawyer to hire a professional fiduciary who will do the deed for him. Cain then files the elder abuse case while Adam is still alive. The goal is still the same--to bring the house that Adam gave away back into the estate so Cain can inherit it according to the terms of the will.

I have a case in which it is a daughter against mother over grandma's property, but the bulk of the cases I see are brothers and sisters fighting with each other. Seeing siblings fighting like this can be discouraging, but I have to remind myself that humans have a rich history of such fights. We have Cain and Abel of course, and in the old days when the becoming king of a nation was at stake, siblings murdered each other to protect an inheritance. Compared to that, going to court is actually quite civilized.

You may think that you are safe from brotherly litigation because you get along well with your siblings or because your parents have no money to fight over. Beware--these disputes suck in everyone close to the battlers. I know of a case locally where the court entered a judgment against the wife of one of two battling brothers because her husband spent his ill gotten goods paying the mortgage on the home where he and his wife lived. Being anywhere close to these disputes is dangerous.

I think the Oregon legislature had the best of motives when it passed the Oregon financial elder abuse statutes. It wanted to protect elders and punish those who would take advantage of them. I doubt they had in mind a full-employment law for probate litigators, but it seems to me that is what has happened. For people, who want to challenge the estate plan of a parent, it adds an additional legal weapon that can be put to use before the elder is even dead. For people who have received large gifts from elders, it makes for sleepless nights. And for lawyers like me who make a good living off of family discord, it means a regular income.

Powers of Attorney and changes in beneficiary designations on life insurance and retirement plans.

Recently I have had a lot of cases in which someone has used a power of attorney to change the beneficiary designations on an elder's life insurance or retirement plan. After the change, the elder dies, the life insurance company or the administrator of the retirement plan pays off according to the beneficiary designation, and then shortly thereafter we are in court.

Let's review. When a person dies, property passes in one of three ways. Property owned jointly with a right of survivorship passes to the joint owner. Life insurance, retirement accounts and pay-on-death accounts go to to the person named on the beneficiary form. The remainder of the property passes according to the terms of the will.

One of the ways to make the will less important or even worthless is to make sure all the major assets pass by joint ownership or beneficiary designations. In the case of real estate, a person might do this by talking the elder into "putting him on" the deed to the house. In the case of life insurance or retirement accounts the person mght convince the elder to change his beneficiary. Sometimes, however, the elder cannot change beneficiary designations. If a person who wants the change to happen has a power of attorney that allows the agent to change the designation, the agent can change the designation himself. If the agent changes the designation to himself, or someone closely related to him, then when the elder dies, we will be going to court.

Going to court is good for me, but not so good for the family.

I have had so many cases about a change of beneficiary made by an agent under a power of attorney that I have changed my standard power of attorney to eliminate the power of the agent to change  beneficiary designations. A power of attorney is intended to allow the agent to handle financial matters for the benefit of the elder.  Beneficiary designations control what happens after the elder has died. I do not understand how changing who gets money after an elder dies is helping a living elder. An agent under a power of attorney cannot change a will: why should the agent be able to change beneficiary designations.

Other lawyers do not share my concerns.  A lot of powers of attorney explicitly or arguably allow the agent to change beneficiary designations, and the agents under those powers seem willing to do it. What happens when they do? The elder dies and the person who used to be the beneficiary sues the person who got the money.

These tend to be complicated cases. Will contests and trust contests all look about the same. Lawyers challenging a change in beneficiary designation need to find a legal theory to get the case to court, and the theories vary from the sublime to the ridiculous. A discussion of those theories is far beyond what I can do in a blog, but I can assure you that when creative legal theories are necessary, the legal bills are high.

As for advice: don't use a power of attorney to change the beneficiary designations for someone else. This goes double if you think it is a good idea to make yourself the beneficiary. And it goes triple if your reasoning is that you have to name yourself because that is what the elder really wants but the elder is too incapacitated to do the deed him or herself. If you ignore warnings one, two and three, and the life insurance company or retirement account administrator pays off, be sure to stash at least half of the proceeds to pay your lawyer in the litigation that is sure to follow.