Friday, October 10, 2014

Strategies that don't work in Oregon will contests

The nice thing about being the lawyer in will contests is that the parties to the contest are arguing about money that fell from the sky. The money belonged to the dead person. Nobody involved in the will contest earned it and nobody involved in the contest is going to leave with any less money than they had when they came to the case. Somebody in the will contest is going to get a bunch of money without having to earn it, and somebody else isn't. In the big scheme of things will contests are not that serious. Lawyers I know have clients who will go prison if the case is lost. If my clients lose, they only lose the opportunity to spend somebody else's money.

On the other hand, an inheritance from family is for most people the largest single lump of unearned, untaxed money most people will ever receive. An inheritance can make a huge change in the life of the one who receives it and I perfectly understand why people are willing to fight tooth and nail to get the security that an inheritance can guarantee. I don't have any inheritances coming, so I get up every morning and go to work. I do it to get money. My wife suggests that I also do it because I love the practice and want to see justice done. She is wrong. I do it for the money. If I had a chance to get some money via an inheritance I would do that too.

In will contests the parties very seldom emphasize how much they want and need the dead person's money. They don't want to seem greedy so they devise other reasons for carrying on the fight. The other reasons tend to put the case on a moral plain, pitting good versus evil. There is an aspect of this to any legal case--that's why they call it "courtroom drama"-- but not everybody does it well. This article is about some of the moralizing in will contests that doesn't work.

The most common of the approaches that does not work is the, "I am pursuing this case solely to make sure that grandma's wishes are honored." If you truly believe that the only way to honor your dead grandma is to fight to the bitter end against your relatives over her money, keep quiet about it. It may be the truth and your motives may be pure--you just want to see grandma's wishes carried out. If, however, your battle to honor grandma also means you get a big pile of grandma's money, nobody is going to believe you. Enjoy your pure motives in silence. Will contests destroy families. No one believes that family-destroying litigation honors grandma  Probate lawyers have heard the "it's what she wanted" chant so often they are immune and simply don't care. The dead person is dead. He or she no longer has any wishes. Everybody involved is going to feel more kindly toward you if you simply say that you are continuing the litigation because you think you have a winnable case.

The next approach that doesn't work comes from the person who says, "Grandma was strong-willed and opinionated so her will could not have been the result of undue influence." This is often the first thing out of the mouth of someone accused of undue influence. I have written about undue influence elsewhere, so read up on it if the concept is new to you, The fact is that among elders, and maybe the population at large, strong-willed and opinionated people are easier to influence for selfish purposes than those who are more reserved and accepting. The laconic grandma who figures to just leave everything to her children--just like everybody else does--because she will be dead anyway is much harder to influence than the angry elder who dashes about changing her estate plan at every slight by a family member.

Elders often have money and need care. Little old ladies complain that elder men are looking for a nurse rather than a wife. A younger woman (in my world that means a woman in her fifties) willing to be a nurse can wrap a gruff and opinionated old man around her little finger in a matter of weeks. An elder is allowed to trade his money for care and, if he wants, he can leave everything to the person who brought him comfort in his last days. That is his right. If, however, the motives of the caregiver are selfish and the reward wildly out of proportion to the value of the care given, the recipient of this largess can expect a will contest. In the case where a distant cousin flies in from out of town--and who never made more than $30,000 a year in her life--suddenly gets a million dollars for the care given in the elder's last year, I think the cousin deserves all the agony that a will contest entails.

One of the tried and true methods of defeating an estate plan is to induce the elder to give away his major assets while still alive. That way the will is still good, but all the property is gone. A lot of my litigation involves unwinding gifts so that if the gift was a result of dementia or undue influence the property goes to the heirs rather than the recipient of the gift. In these cases I always hear, "She forced me to accept those gifts."

The "forced me to accept" approach is similar to the "she is strong-willed and opinionated" tactic. The recipient of the gift--often the elder's house--claims that he tried to refuse the gift but the little old lady would not take no for an answer. (But now that she is dead the recipient is, of course, morally obligated to keep the property.) Probate and elder abuse law is structured in a way that creates, in certain circumstances, an obligation to say no to gifts from old people (unless arranged by the old person's lawyer). If you are not strong enough  to stand up to old men and women and say no, then don't expect to keep the property. If you are too weak to say no and do expect to keep the gift, then you should  get your gift in cash rather than real estate. You will need the cash to pay your lawyer when you are named as the defendant in a financial elder abuse civil suit.

The final unsuccessful approach I want to discuss is the one that can be summed up as, "My opponent is a dirty, rotten, scoundrel." This is approach comes in a variety of flavors and tends to be part of every civil case. Parties like to use this approach. Lawyers put up with it because in the courtroom, as in life, good looking, honest, hardworking, and likeable people do better than ugly, dishonest, lazy and dislikeable people. Judge's have prejudices, and they like to see the benefits of life, including inheritances, go to good people. The problem with this approach is twofold. The first is that inheritance, like sunlight, falls on saints and sinners in equal portion. Parents usually leave their estates to their children no matter how despicable the rest of the world considers those children. Judge's know this and are only willing to let evidence of character, whether good or bad, sway them so much.

The second problem with this approach is that you can only say two bad things about another person without bringing condemnation down upon yourself. If you say three bad things, then you start to look like the scoundrel. Denigrating others is a dangerous tactic that backfires easily. People on God's list of good people spend very little time disparaging other people. If you are spending a lot of your energy doing that, you risk being removed from the list. In the courtroom, if you say three bad things about the person on the other side, the judge is more likely to consider the testimony to be evidence of your poor character than evidence of the other persons. You cannot beat people up and still be the good guy.

Witnesses in will contests are more likely to discredit their own testimony than to have it discredited by others. There are no juries to influence and judges have seen a lot. If the judge senses that a witness is covering up  a simmering cauldron and hate for the other side, the judge may well take over the questioning, uncover that cauldron and by doing so let the witness destroy his own credibility.

Monday, September 8, 2014

The difficulties of truth-telling in Oregon will contests and elder abuse cases.

It is hard to tell the truth. The more stressful the situation, the more difficult it is.

I do probate and elder law litigation in Oregon. One of the things lawyers do in will contests and financial elder abuse cases is take depositions. The lawyers in the case put the witnesses in front of a court reporter, make them swear to tell truth, and then ask what happened. In this way the lawyers find out what the witnesses on the other side of the case will say at trial.

To prepare my client for deposition I give some hints about how to respond to the other lawyer's questions, but most of my emphasis goes into the importance of telling the truth.

Having my client tell the truth is crucial to my case, because a client who gives one untruthful answer out of twenty casts doubt on all twenty. My clients tell me that they will tell the truth. They may even understand the importance of it to the case, but more often than not they are simply incapable of it.
In litigation the lawyers each develop a story. The challenger of the will has a story whereby the will was a result of undue influence. The proponent of the will has a story in which the will truly represents the last wishes of the person who wrote it.  The judge will listen to the evidence and either accept one of the stories, or construct from what he hears a story of his own. The witnesses in deposition and trial know what story their lawyer is trying to tell and they want to help. Often, in their zeal to help, witnesses hurt their own cases.

If all the facts supported the same story, nobody would be going to court. Cases are litigated because there is a dispute as to what happened. That means some of the facts point toward the challenger's story and some of them point to the proponent. Witnesses know this and when testifying they filter their answers through the lense of how the answer fits the story their lawyer is trying to tell. When asked a question with a straightforward answer that does not fit the witnesses story, even people who are generally truthful become evasive and defensive. Evasive and defensive witnesses are bad witnesses.

Stories and real life are not the same. When we go to the movies we don't see everything every character does every minute of the day. Facts are indifferent to the stories we tell, so authors and the editors cut out anything that doesn't contribute to the story. A different author or editor would pick out different things and create a different story. In real life heros sometimes do bad things, and villains can be philanthropic. In depositions the witness may well be asked about facts that don't fit the story the witness wants to tell. Nevertheless, it is better for the case if the witness bites the  bullet and tells it the way real life presented it.  I tell witnesses this all the time, but for some people the story--the narrative--has become real life, and they are unable to say anything that doesn't fit.

Litigants must accept that their lawyer cannot hide the facts that don't support the case. His job is to present the facts in a way that make his client's story more likely than the one presented by the other side. When the litigants attempt to hide facts that don't support their case, they appear from the outside to be unconvinced of the story they are propounding. Secure people accept their imperfections, and secure witnesses accept that there are flaws in the story they are presenting to the court. If the witness is truthful about the weaknesses in his case, his testimony is credible on the facts that support his case. If the witness is untruthful and evase about the flaws in the case, the suspicion is that he is also untruthful and biased about the strengths of his case

It is my job as a lawyer in a will contest or elder financial abuse case to put the facts in context and perspective. My clients want to help me, but they help the most by providing me with the most accurate information possible. The same client who complains about all the work involved in obtaining and compiling medical or financial records, is often the first one to be manipulative of the few pieces of factual evidence I have to work with. In doing so this client--the one who has stood in the way of getting the information I need--devalues the little bit of factual information I have.

In a will contest the fight is always over someone else's money. The litigants didn't earn it and haven't lost it. The best witness is the one who recognizes that he or she has no moral right to the money and is willing to simply lay out the bare facts so that a judge can decided who gets it. The moment the witness decides to help by shading his testimony, he reduces the chance that the judge will decide in his favor.

Thursday, September 4, 2014

Stop asking me to write powers of attorney for your demented family members.

People call me all the time asking me to write a power of attorney for the caller's mother, father, grandfather or uncle. The call usually goes something like this:

Clara Client: "My mother has Alzheimers and the bank says I need a power of attorney so I can take care of her money. If you write one up, I could pick it up this afternoon."

Me: "Describe her condition."

Carla Client: "She is forgetful. She leaves the stove on and can't operate the remote on the television any more. She needs someone to take care of her money and everyone says I need a power of attorney.

Me: "If she were presented with a power of attorney, would she be able to read and understand it."

Carla Client: "No. Well, maybe if it was in the morning, but she want's me to take care of her money."

Me: "Could she come in and see me?"

Clara Client: "She doesn't like to go out anymore, she wants me to take care of if.

Let's get this clear. I am never going to write this power of attorney, and a lawyer who will do it is crazy.

I write estate planning and related documents for clients of mine. If Clara Client's mother came in and wanted to name Clara as her agent in a power of attorney--and I thought that the mother had the capacity to understand the document--I would be pleased to write it. I do this sort of thing all the time. However, when a client comes in--the client being the person who is in my office--and wants me to write estate planning documents for someone else, I get scared.

Estate planning documents are not like leases and sales contracts. If you wanted to sell or lease a building to a third party, a lawyer might write the lease for you. You could present it to the proposed tenant, and the tenant would understand that the lawyer who wrote the document was working for you. The tenant might or might not get a lawyer to review the document, but the tenant would not think your lawyer was looking out for him. In estate planning it is different. When Clara client takes that power of attorney to her mother, her mother might reasonably believe that I wrote the document with the mother's best interests in mind, and that I was watching out for her. According to the rules that govern lawyers, if a person reasonably believes that I am watching out for her then that person is my client. So in the case of Clara, Clara's mother becomes my client even if I have never met her. Now I have two clients, Clara, who is paying me and Clara's mother, who has never met me. This has big implications and is the kind of thing that keeps me awake at night.

To me, a client who asks me to write a power of attorney for a third party is little different from a client asking me to write a will for a third party. I have had that happen. "My grandfather wants to leave everything to me. You write up a will saying that, and I will get him to sign it." Very few people have a hard time seeing what is wrong with this, but quite a few people see no problem with, "My grandfather wants to put all of his money under my control. You write that up and I will have him sign it."

I simply cannot be associated with creating a will or a power of attorney for a person who I have never met, and probably doesn't have the cognitive capacity to understand the document.

What might go wrong? In many cases, nothing goes wrong. I write the power of attorney for Clara Client. She uses is honestly and wisely and everybody is happy. Great. It all worked out and I made a hundred bucks off of my power of attorney form.

Ah, but what about the other cases. Clara Client takes the form I wrote, gets her mother to sign it, and uses the form to steal every cent her mother had. When the rest of the family figures this out, Clara is long gone and they go looking for someone to sue. Who do they look to? That's right, me. I am the guy who wrote a power of attorney, the tool by which the theft occurred, and after I wrote it, I gave it to the thief. Furthermore, I knew, while writing it, that Clara's mother probably didn't have the capacity to understand the document. I am on the hook for everything Clara took.

Here is the deal. If you want to stick a power of attorney in front of your demented relative and hope that it all works out, go down to Office Depot or download one on the internet. If the power of attorney is thereafter used properly--that is all expenditures by the agent are recorded, accounted for, and made for the benefit of the principal--everybody will be fine and you will have saved a hundred bucks. If the power of attorney is used improperly--by handing out grandma's money to relatives--when Adult Protective Services or the police come looking for Clara, I will be sleeping sound and secure in the knowledge that I had nothing to do with it. That's the way I want it.

Doing it this way even has some advantages for Clara. Let's assume Clara gets a power of attorney from Legal Zoom on the internet and leaves me out of it. Later it turns out that the power of attorney is insufficient protection and Clara needs to establish a guardianship or a conservatorship. I can take that case because I have never acted as attorney for her mother. Had I written the power of attorney, it is highly likely that Clara's mother would believe that I was protecting her legal interests. As I described above, that makes her my client, and once she becomes my client I am disqualified from ever bringing a guardianship or conservatorship case against her. Clara won't be getting a guardianship from Legal Zoom and she may be thankful that I am available for the job.

Tuesday, August 26, 2014

The Cruel Economics of Will Contests in Oregon - Part I

I spend a lot of time around will contests. I represent people challenging wills and people who are defending wills against challenges. I mediate and facilitate settlement of will contest cases filed by other lawyers. I write wills that I know will be contested, and thereafter testify in court about what I did. I think a lot about will contests. In this post I want talk math of will contests.
In almost every probate someone files a will and claims that the will accurately states the wishes of the decedent (the dead person) about how his or her property should be distributed. In a will contest, a challenger alleges either that the decedent died without a will or that the estate should be distributed according to the terms of an earlier will because the will admitted to probate is void. (For more on legal strategies for challenging a will in Oregon, click here.) If the decedent died intestate--that is, without a will--the State of Oregon has written one for him. A will contest always pits one proposed distribution against another.
Ordinarily, the proponent of each will is the person who will benefit most from it. If Adam is the decedent. Cain will advocate for the will that leaves everything to Cain, and Abel will advocate for the will that leaves everything to Abel. In will contests there is no way for a court to split the baby. Either Cain wins or Able wins. For this reason, will contests are a zero sum games.
Because there are only two possible outcomes--like flipping a coin--will contests lend themselves to a mathematical computation of value. If there were a hundred dollars on a table you got to flip a coin with another person to see who gets the money, you would have a 50% chance of winning the money. The opportunity to flip for the hundred dollars is worth .5 x $100, or $50. If you got to play the game a hundred times, you would win about half of the flips. If you won fifty flips out of a hundred you would take home $5,000, or $50 per flip. In the world of probabilities this is called expected value. If you only got to play once, but were not a risk taker you might agree with the other flipper not to flip at all and simply split the money. You and the other person each would take the expected value of the opportunity and walk away with fifty dollars.
No one would do a will contest for a hundred dollars, but a person might do one if there were $500,000 on the table. If Adam had died with a nice home and/or a good sized investment account, there might be this amount for Cain and Abel to argue about. Personal injury lawyers wait around hoping for a case in which there is $500,000 to divide. Probate lawyers get these cases all the time.
When you flip a coin, you know the odds of it coming up heads or tails. It is 50/50. In a will contest, however, the odds of winning are unknown. Let's assume that Abel got to the courthouse first and it is Cain that is challenging the will that favors Abel. If the odds of Abel winning are the same as flipping a coin--50/50--then the opportunity to play is worth $250,000. That is the expected value. It is also the default settlement value of the case.
Will contests, unlike coin flips, do not lend themselves to a simple calculation of the odds of winning. Emotions run high, with both sides willing to go to court because both loved Adam more than anyone else in the world and both believe they represent what Adam really wanted. If you can set emotions aside, however, the case can be evaluated in terms of chances of success in the same way as we did with the coin and the $100. Let's say that Cain's case is weak, and everyone who looks at the cases agrees that he only has a two in ten chance of winning. The math is the same as the coin flip with different numbers: .2 x $500,000 = $100,000. Cain's case is worth $100,000, and in an emotionless world, Abel would settle by taking $400,000 and giving Cain $100,000. Both Cain and Abel, like our coin flippers, walk away with the expected value of their respective cases.
(It is important here to avoid the kinds of errors that plague gamblers and politicians. First, Abel may say, "I have an 80% chance of winning this case and taking all the money. Why should I give Cain anything?" This reasoning conflates a high likelihood of something happening with certainty. The 80% chance of winning means that if you tried this case ten times before ten different judges, Abel would lose two of the cases. In real life, Abel only gets to try the case once and that once could be one of the one that loses.)
Unlike my example with the coin flip, a will contest is not free. It is like a lottery in that there is a cost to play. The cost of a will contest is the litigation costs--both attorney fees and court costs--and those costs need to be deducted from the value of the case in the same way that the costs of a lottery ticket reduce its expected value (The expected value of a lottery ticket is always less than you paid for it). So lets say that it costs $50,000 to litigate a will contest.  If Cain settles his case on an expected value of $100,000, he would owe his lawyer $50,000 (or less if he settles early) and walk away with $50,000 in his pocket.
But wait a minute, Cain knows early on that he has an 80% chance of losing his case. Thus it is quite likely that he will have to go to court, lose the case, get nothing, and end up owing his lawyer $50,000. When you don't win the lottery, you are still out the cost of the ticket. Thus, Cain faces a situation in which he must pay $50,000 for a .2 probability of receiving $500,000. Avoiding the $50,000 debt may be more important to him than the small chance of a large payoff. If Cain is wealthy and mathematically inclined he will pursue the .2 chance of getting $500,000 every time. If Cain is very poor and has no intention of paying his lawyer unless he wins he will similarly take it every time. If Cain, however, is an average guy who takes his debts seriously he may forgo both the case and the cost. The payoff may be mathematically justifiable but the risk of loss is too great.
Abel has it better. He only has a two in ten chance of getting nothing and ending up with a big bill for attorney fees. If he has a lot of money and is mathematically inclined, he will try or settle the case indifferent to the outcome because he knows that over the long run it was a wise investment. The middle class Abel will defend the case, but probably settle by giving Cain his $100,000 expected value. By settling the middle class Abel walks away with $400,000 and avoids the 20% risk of losing everything. If Cain won't settle for the expected value, Abel takes the case to court. If he wins he gets all the money and if he loses he is still middle class. The poor Abel will view the $500,000 potential inheritance as life-changing. He really does not want to walk away with nothing and continue being poor. He will settle by paying Cain somewhat more than the $100,000 expected value in order to eliminate the small risk of receiving nothing. Poverty makes for bad bargaining positions.
The expected value of a will contest is easy to figure if you can agree on the probability of success. In the real world, however, that seldom happens. Both sides think they have iron clad cases. In a subsequent post I will address the role of contingency fees on the math of will contests and then I will write about some factors that lead us to mistakes in determining the probability that a case will succeed.

Friday, August 15, 2014

Heir Hunters and How They Work When You Die Without A Will

I have written before about dying without a will and the fact that if you decide to do so the State of Oregon will write one for you. To figure out what will the state has written, lawyers consult a chart. If you die with children, your children get the money. If you don't have children, your parents get the money. After that your relatives get the money based upon how close a relative they are. In most cases, figuring out who gets the money when someone dies without a will is fairly easy. But sometimes it is not. When it is not, we probate lawyers run into people who make their money by finding distant heirs and taking a chunk of the inheritance in return for connecting the heirs to the probate. These folks are heir hunters.

I recently got a case in which a fellow died without a will, had no children and no living parents. His estate ended up going to a couple of elderly aunts and a fistful of cousins. The dead guy had not been the family type and therefore the relatives who stood to inherit barely knew who he was. In addition, the aunts and cousins were scattered throughout the United States. As the lawyer handling the estate it was my job to find all these relatives and make sure each one got his or her inheritance. To do this I hired a genealogist and put her to work trying to find the names and addresses of the aunts and cousins. If she found them, I would send them a notice telling them that they were entitled to an inheritance. But as I went to work trying to find these people, so did the "heir hunters." I went looking for heirs to fulfill my obligations to the court as an administrator of the estate. The heir hunters went looking for a cut of the action.

Heir hunters scour the probate filings and the death notices that must be filed in every probate. They are looking for cases like the one I described.  The heir hunter then attempts to locate the heirs before I can find them and sign them up as clients. The heir hunter tells the heir that he or she is entitled to an inheritance, but does not give the name of the dead relative or the court in which the probate is pending. The business then offers to "represent" the heir in the probate in return for a percentage of the inheritance.

If the heir signs a contract with the heir hunter the heir agrees to pay a percentage of his or her inheritance--from 20% to 50% but usually 33%--to the heir hunters. The heir hunter then refers the case to an attorney that has an ongoing business relationship with the heir hunting company. That lawyer then contacts me to tell me that he represents the heir. The rules that I must follow tell me that if person has a lawyer, I cannot talk to them directly, but can only talk to their lawyer. From that point on, I can only communicate with that heir through the lawyer for the heir hunters.

If there are a lot of heirs, one heir hunting company may end up representing many or even all the the people entitled to an inheritance. In the case I described, I found about half the heirs before the heir hunters could sign them up, but two different companies got to the remaining heirs before I could find them. The heirs that signed with the heir hunters will pay a percentage of their inheritance to the company. The ones I found will not.

You might ask what heir hunters actually do for the heirs they find. As far as I can tell--not much. So far the heir hunters in my case have notified me that they represent some of the heirs and asked me to provide them with further court filings. Neither of lawyers representing the heir hunters have filed an "appearance" in the case, something that would have entitled them to copies of all pleadings as a matter of right. I brought this up to one of the lawyers and was informed that he had not filed an appearance on behalf of his client because the filing fee was so high. It does not seem that he intends to actually do anything in the case except wait for me to finish the administration and collect his percentage.

In my experience, the heir hunters do little other than connect the heir to the lawyer doing the probate of the estate. Anything further than that--such as actually doing some work to protect their client's interest-- cuts into their profit.  I do my best to find all the heirs in cases like this. I hire a professional genealogist who charges by the hour and I pay her a lot. She will find the heirs, but sometimes the heir hunters find them  first. If I have a choice, I put her to work before I file the probate. That way I can get to the heirs before the notice is published. Sometimes, however, the probate needs to be opened quickly in order to protect estate property. In those cases it is a race, and when I lose the race the heirs lose a percentage of their inheritance.

A post like this should end with some advice. I guess my advice would be that if you are contacted by heir hunters attempt to delay. String them along while you talk to relatives--near and far--and try to find out who died. Waiting will also allow the person administering the estate time to find you. Probate administration takes a while. The heir hunter may say that action on your part is urgent, but it really isn't. Hold off and look around. If you get a lead on a dead relative who might have left you money, call the state court where you think he might have died. If you find something, look up the lawyer who is doing the probate. He will be glad to hear from you because he has probably been looking for you. Give the lawyer your address and get all your inheritance, not just the portion left after the heir hunter has taken its cut.

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.