Elder law, estate planning, and probate in plain language by Orrin R. Onken -- Elder Law Attorney
Wednesday, June 24, 2015
Types of Professional Fiduciaries in Oregon Guardianship and Conservatorship Cases
Family battles over inheritances are the stuff of great novels. In the courts, however, the family battles over the appointment of a guardian or conservator can be as contentious and difficult as any will contest. The cases arise because there is an elder who is alleged to need help in managing care or money. Sometimes the battle arises because the elder has lawyered up and opposes the appointment of anyone to take charge of his or her affairs. More commonly, however, these conflicts end up in the courtroom because the children of the elder are battling each other for position and control within the family. Whenever squabbling siblings are at the center of the dispute someone will propose that a professional fiduciary be appointed. (A fiduciary is someone who works for the benefit of another, and I use the term here to mean the person nominated to serve as a guardian or conservator.) Court visitors are fond of this option, and judges—who often want quiet as much as they want justice—often prefer appointing a professional to sorting out the conflicting accusations of the elder’s children.
Professional fiduciaries come in a variety of shapes and sizes. At one end of the spectrum are the trust departments of large financial institutions. Most bank and investment houses have a trust department that will serve as fiduciary for grandma if the money is right. The banks are neither uniform nor transparent about how much they charge for these services, but you should not expect a financial institution to accept your case unless grandma has at least half a million. Each year, these fiduciaries charge a percentage of the amount being managed. A common charge is two percent of the value of the trust per year. Thus, if you put in the minimum amount of $500,000, the bank will charge at least $10,000 for managing grandma’s money. They may charge additional fees for financial management and investment advice. Bank trust departments and dedicated trust companies claim great skill in managing money and bringing in large returns. These claims had more weight prior to the recent recession. In any case, they employ professional money managers and produce long incomprehensible quarterly statements of profit and loss.
There is some question these days whether actively managed investments can ever return more than computer managed index funds, particularly when the manager is scraping off at least two percent every year for his efforts, but that is a subject for another post.
Banks have special exemption that allows them to be serve as a trustee of trusts without a court order or court oversight. Thus, the banks and investment houses occupy the world of large trusts, more so than the world of guardians and conservators.
The next candidates for the job of professional fiduciary are fiduciary firms. These are small businesses, usually partnerships or sole proprietorships, made up of social workers with a head for bookkeeping. They can serve as guardian, conservator, or both. The firms consist of one or more certified professional fiduciaries and a staff of case workers, bookkeepers, and office professionals. These folks are always appointed by a court, and specialize in attempting to both protect the elder and stabilize the battling family. They manage money by stopping the bleed out to greedy relatives and attempting not to lose it thereafter. They are more likely to leave the elder’s money with the people who are currently managing it than to take up active management of investments. What they do well is protect the elder’s physical well being and make sure the elder’s money does not disappear.
This group of professional fiduciaries gets paid by the hour rather than by commission. The partners tend to charge about a hundred dollars an hour with case workers and office staff charging substantially less. Their charges must be court approved.
The last rung on the ladder of professional fiduciaries consist of sole practitioners. These folks are certified professional fiduciaries who practice out of their homes or out of small offices. They may contract with case workers and even have a small office staff, but when you get one of these you are depending on the skill of the person appointed to serve, not on a functioning bureaucracy. They are not money managers and don’t pretend to be. They are social workers willing to protect the elder's money. These people are the most “hands on” of the bunch and are likely to have the most interaction with the families. This intimacy is good if you get along with the fiduciary and not so good if the relationship goes sour.
Every professional fiduciary comes with a lawyer. Professional fiduciaries develop relationships among elder law lawyers and use the same two or three lawyers whenever the can. They refer work to their favorite lawyers and those lawyers refer work to them. Lawyers and law firms have personalities. Some firms are grumpy; some are friendly; some are humble; and some are pompous. If you are considering inviting a professional fiduciary into your family, it is worthwhile inquiring who will be doing the legal work.
Professional fiduciaries also have reputations for being good at certain kinds of cases. Some work hard to bring fighting families together; others are known for being tough and whipping misbehaving families into line. Some are great at forensic accounting, and others are good at locating publicly funded social services. It can be hard to tell what kind you are getting. Online reviews are useless, because no matter how skilled and compassionate the fiduciary is, at least half of his or her clients are going to hate her. The haters write the online reviews. The best bet is to have an elder law lawyer you trust recommend someone. Your lawyer is likely to recommend someone he or she likes, but because the lawyer knows several different fiduciaries, this biased recommendation is better than none at all.
Once a professional fiduciary has come into your family, you might as well accept that the fiduciary will be there until the elder dies. Courts who find a family so dysfunctional that a professional is warranted almost never turn around and rule that the professional is no longer needed. If you truly need to get rid of a professional, consult the article I wrote on the subject here.
Another concern about professional fiduciaries is that they tend to favor the party that selected them. When I am trying to recruit a professional fiduciary for a case, I sell my case in the same way that clients sell their cases to me. I explain how this is an easy case with plenty of assets to pay their fees. If the fiduciary likes the case, and thinks I may well bring more just like it in the future, the fiduciary is going to make close call decisions that favor my side. That is a fact of life. The fiduciary is going to answer my calls a lot faster than the calls from the lawyer who opposed his or her appointment. If you have a choice, it is better to be from the side of the family that supported the appointment of the fiduciary than from the side that opposed it.
Having a professional fiduciary managing the care of grandma can be a blessing or a curse. I have seen a relationship between a mother and children destroyed because the children were put in charge of her money, and then repaired when the children turned the job over to a professional. On the other side, I have seen fiduciaries trample family feelings and run roughshod over existing family systems in pursuit of some mythical “best interests” of the elder. There is a saying the social service world that a “barely adequate” family member produces better results when it comes to care taking than does a well trained professional outsider. Professionalism has its advantages and its dark side. When considering a professional fiduciary a family must balance risk and reward; not an easy thing to do when enmeshed in the high emotions of a protective proceedings.
Sunday, June 7, 2015
Pointers for Evaluating Your Case in Oregon Will and Trust Contests
Being a probate litigator, or litigator of any stripe, for that matter presents the lawyer with a conflict of interest. His job is to advocate for his client and argue in favor of the client’s position. Were a trial a football game, the lawyer would be both the coach—designing the game plan, and the quarterback—charged with leading the team to victory. Simultaneously, the lawyer is expected to be giving the client smart, unbiased advice on the client’s chances of winning or losing the case. He is not just the coach and the quarterback, he is also the bookie—expected to handicap the case and give his client the best information possible about the potential outcomes. This allows the client to make intelligent decisions about settlement and trial. In this post I will pass over the lawyer as the coach and quarterback. I want to concentrate on the lawyer as bookie.
Predicting is hard. In the second election of Barack Obama major polling organizations, with all their computers and highly paid actuaries, failed miserably in predicting Obama’s easy victory. Predicting the outcomes of civil trials is more difficult than predicting the outcome of elections, and the lawyers who must do the predicting are not as skilled, informed, or as objective as the statisticians at the Gallup company.
Most of the mistakes made by lawyers and clients in predicting the outcome of civil trial arise out of confirmation bias ("the tendency to search for, interpret, or recall information in a way that confirms one's beliefs or hypothesis). The lawyers and parties give more emphasis and credibility to the evidence that supports their side than they do to the evidence that supports the other side. We interpret the world around us in a manner that supports or beliefs about it, and discount those facts that don’t support that view.
Trial work takes massive preparation—probably five to ten hours of lawyer time for every hour of court time. There is an old saying that the lawyer who wins a lot of cases spends as much time preparing his opponent’s case as he does his own. The wisdom in this legal aphorism is that the lawyer must understand and appreciated the case the other side will be making in order to competently oppose it. He must avoid confirmation bias in all its insidious forms so that he can make intelligent decisions while at the same time being a cheerleader for his team. It is a difficult job.
In my years practicing law, my clients and I have learned some hard lessons about confirmation bias and many other errors in prediction. I have some suggestions.
You Have a One in Four Chance of Losing Any Case that Goes to TrialA prominent Portland litigator suggested to me that no case that goes to trial has a better than eighty percent chance of winning. That means the chances of losing are one in five. I think he overestimates. When the odds of losing get greater than seventy-five percent, the defendants move to Paraguay or declare bankruptcy. If you have a trial date in a civil case and settlement negotiations have broken down, you have at least a one in four chance of losing.
If you are a client and think that you can’t lose, you are wrong. Confirmation bias has probably so fogged your mind that you cannot see the truth. If your lawyer tells you there is no chance of your losing, then that lawyer has let the role of coach and quarterback impair his ability to accurately handicap the case. The courtroom is an unpredictable place. Witnesses fail to show up or testify as expected. Judges can be grumpy or prejudiced.
The same lawyer who gave me the eighty percent rule also observed that trial strategies conducted in the months before seldom last longer than the first witness. Yogi Berra said, “Prediction is hard, particularly about the future.” If you find it easy and it is about the future of your case, you are doing it wrong.
Witnesses Count and Count Your WitnessesJudges (we don’t have juries in probate cases) want to hear from witnesses who were present and paying attention when the important events in the case took place. A good witness has four qualities: He or she was present when the crucial events occurred, will testify truthfully no matter what the question, doesn’t have an axe to grind, and shows respect toward all the people in the courtroom. A single quality witness can carry a case and overpower several witnesses who do not pass the four part test. When the witnesses for both sides are of equal quality, more is better.
Lawyers and clients should count witnesses before they even file the case. The lawyer must ask who will testify for him and how convincing will they be. How many people will testify for him and how many will testify against him. I am often approached by potential clients who tell me that his or her grandmother was unduly influenced to give the family home or some other large asset to a family member who is not them. I ask how it is that they know the gift was the result of undue influence. The response is that grandma never would have done it without there having been undue influence. I ask if my potential client saw anything else or knew of any witnessed to the undue influence. The client responds that she didn’t actually see it because she was out of state and hadn’t seen grandma in years and that all her relatives who might have been witnesses are aligned against her. So I add up the witnesses. I have one—my client who was out of state the whole time, didn’t see or hear anything, and is estranged from the entire family. Grandma may well have been subject to undue influence, but the witnesses are not there. Which brings me to a related rule.
The Other Side is not Going to Produce the Evidence You Need to WinIn civil cases lawyers get to do what is called “discovery.” That means that the lawyers can make the other side produce documents related to the case and question the witnesses for the other side in sworn depositions. My clients are often quite certain that the other side will produce incriminating documents that will allow me to win. Trust me, that never happens.
Depositions are generally more useful than requests for documents, because depositions let me know whether the person will qualify as a “good witness” according the four tests I set out in the paragraph above about witnesses. The witnesses for the other side never give me in deposition the evidence I need to win: they simply let me know how strong the evidence against me will be.
Cases that go to trial are won or lost on the quality of the evidence that the parties can produce on that day, in that room, before that judge. As lawyer and client, we have to find that evidence and make sure it appears on the day of trial. The other side is not going to do it. So, if lawyer and client are proceeding on the theory that their version of events is the truth, and the truth will magically appear at trial because they are the good guys, the good guys may end up going home losers.
Clients need to understand that they need to bring to court both a legal theory upon which the court might award them some money and some evidence to prove that the events that make the other side responsible actually happened. Suspicion, rumor, and hunches will not suffice.
You Will Not Win By Calling the Other Side Names.Will and trust cases are emotional. The parties don't like each other and there is a tendency to want to make the character of the participants the issue. The reasoning is loosely as follows: the will should be overturned because Joe gets all the money and Joe is a bad person. Unfortunately, inheritances, like sunshine, fall on saints and sinners alike. The issue is not who deserves it, but who the decedent wanted to have it.
This is not to say that character plays no role. The courts mirror society in general. Good looking people are treated better than ugly ones. Polite people fare better than rude ones and people of good character do better than swindlers. On the other hand, if you point Joe's bad character once, you may be doing the court a favor. If you point out Joe's bad character another time, you are being emphatic. However, if you do it a third time, you are being an ass, and people think you are the person with bad character.
The lawyers have a list of things they must prove in order to win the case. The judge has the same list in front of him or her up on the bench. The evidence is supposed to be about something on the list, not the character of the parties. If you veer too far from the list trying to show that the other side is made up of slime balls you can end up looking like a slime ball yourself.
When calling the other side names, keep it short, sweet and to the point. Then move on to the real evidence.
Subscribe to: Posts (Atom)