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GUARDIANSHIPS AND CONSERVATORSHIPS IN ARIZONA
Law Offices of Chester B. McLaughlin
4545 E. Shea Blvd., Suite 173
Phoenix, Arizona 85028
I. Filing for Guardianship
-Chester B. McLaughlin, JD and Wendy Swainston
A. Guardianship of an Incapacitated Person Defined
A guardian is someone who is appointed by the Court to make decisions for an incapacitated
person. Guardianship is over the “person” rather than the estate of the individual. The court must
find by clear and convincing evidence that the person is incapacitated, that the appointment is
necessary for the demonstrative needs of the person, and that there are no less restrictive alternatives
to guardianship. A.R.S. § 14-5304. An incapacitated person is “any person who is impaired by
reason of mental illness, mental deficiency, mental disorder, physical illness or disability, chronic
use of drugs, chronic intoxication or other cause, except minority, to the extent that he lacks
sufficient understanding or capacity to make or communicate responsible decisions concerning his
person.” A.R.S. §14-1501(1). The proposed ward’s decision-making must be so impaired that he is
unable to attend to and provide such necessities as food, shelter, clothing, and medical care, thereby
risking physical injury or illness. Matter of Guardianship of Reyes 152 Ariz. 235, 731 P. 2d 130
(App. 1986), Matter of Guardianship of Kelly 184 Ariz. 514, 910 P. 2d 665 (App. Div. 1 1996)
A guardian has all the power and duties that a parent has with respect to a minor child.
A.R.S. §14-5312. The primary responsibilities include determining where the ward lives and
obtaining and consenting to medical care. Pursuant to Arizona Statute, the guardian also has the
authority to receive money and tangible property deliverable to the ward, and use the money for the
ward’s needs, but may not use it to pay for room and board the guardian or his immediate family is
providing, without court approval. A.R.S. §14-5312 (4)(b). As a practical matter, the Arizona courts
have not authorized a guardian to handle funds without meeting bonding or restriction requirements,
but this statute is useful in cases where there are minimal funds, and the appointment of a
conservator is deemed to be unnecessary.
A guardian is required to act in the ward’s best interest: the focus of the court is on “how to
serve the most effectively the best interests and temporal/moral and mental welfare” of the ward.
Countyman vs. Henderson 17 Ariz. App. 218, 496 P. 2d 861 (App. 1972) In determining the best
interests of the ward, the guardian is required by law to take into consideration the ward’s values and
wishes. A.R.S. §14-5312 (11). Similarly, in a guardianship proceeding, the court strongly considers
the wishes of the ward. For example, the ward’s wishes with regard to who should serve as his or her
guardian is given great weight, and normally will be followed unless the ward’s choice is clearly not
in his or her best interest.
The guardian of an incapacitated person is not liable to third persons for the actions of the
Ward merely by virtue of the fact that there is a guardianship A.R.S. § 14-5312. However, the
guardian may be liable for breaching his fiduciary duty as guardian.
Guardianship of an incapacitated person terminates upon the death of the Guardian or Ward,
a determination of incapacity of the guardian, or upon removal or resignation of the guardian. A.R.S.
§ 14-5306
B. When Guardianship is Required
In this author’s opinion, guardianship petitions are sometimes filed when it is not necessary.
A guardianship should be considered as a tool to achieve a practical objective such as obtaining
needed medical care or services. As noted above, the Arizona law provides that a guardian should
only be appointed if proven by clear and convincing evidence that it is necessary to provide “for the
demonstrated needs of the incapacitated person.” A.R.S. § 14-5304 (B).
If a health care power of attorney is in place or a statutory surrogate pursuant to A.R.S. § 36-
3231 has been identified, it should not be necessary to appoint a guardian to make health care
decisions. It could be argued however that placement in, for example, an assisted living home is not
“a health care decision” and therefore a guardianship would be required for such a placement of an
incapacitated person. As a practical matter, though, most residential care homes accept the authority
of statutory surrogates and agents appointed under health care powers of attorney.
A guardian may be required when there isn’t anyone who can be identified on the statutory
surrogate list. In addition, in cases where family members with equal authority are fighting for
control, a guardian may be required. This sometimes is manifested by a series of powers of attorney
appointing different people being executed by an incapacitated person who is being unduly
influenced. See Matter of Guardianship of Kelly 184 Ariz. 514, 910 P. 2d 665 (App. Div.1 1996) A
guardianship may also be required even when someone has legal authority to act for an incapacitated
person, if the person is being non-compliant with treatment and placement recommendations.
However, as a practical matter, this does not make it any easier for the guardian to force the person
into treatment unless the person can be “tricked’ into treatment or an ambulance company will
cooperate. In mental health guardianship cases in Maricopa County, the court on occasion has been
known to order the sheriff or police to transport the person. Finally, this author has also seen cases
where a guardianship petition was filed in order that the guardian could sign for the ward on joint
income tax returns for a married couple.
C. Loss of Civil Rights
A guardianship should always be a last resort, not only because of the cost and the potential
for an adversarial proceeding among family members, but also because the ward normally loses all
the personal rights of U.S. citizens. The guardian has a legal relationship to the ward akin to a parent
with a child. A.R.S. § 14-5312.
Pursuant to the Arizona Constitution Article 7 Section 2 (C), once a person has been
adjudicated as an incapacitated person, he is no longer qualified to vote at any election. The law
makes no distinction between the slightly impaired individual that needs the protection of a limited
guardianship and a full blown dementia patient. Once a person is deemed incapacitated, which is a
requirement for a guardian to be appointed, the Ward loses his ability to vote.
Pursuant to A.R.S. §28-3153, the Department of Motor Vehicles shall not issue a license to
drive a motor vehicle to a person adjudged to be incapacitated unless there is a court order allowing
the person to drive or the guardianship is terminated. There is no provision specifically in the law
for suspension but the court in Maricopa County sends the minute entry order to the Motor Vehicle
Department which presumably revokes or suspends the license. For these reasons, it is important
that in every guardianship petition, the petition address the issue of whether the Ward should drive.
D. The New Arizona Requirements for Limited Guardianship
In 2003, A.R.S. § 14-5303 (B) (8) was amended to include a requirement that a guardianship
petition address general versus limited guardianships in every guardianship case. However, even
prior to that amendment the Arizona law was clear that the court is to “encourage the development
of maximum self-reliance and independence of the incapacitated person.” A.R.S. § 14-5304 (A) The
guardian is also required to encourage the ward to develop “maximum self-reliance and
independence” and shall actively work toward limiting or terminating the guardianship and to seek
alternatives to guardianship. A.R.S. § 14-5312 (A)(7). The guardian is also required to find the
“least restrictive setting” for the ward to live in. A.R.S. § 14-5312 (A) (8).
The only difference now is that the court, and the parties in the petition, must address the
issue of limited guardianship. If a general guardianship is requested, the person must state that other
alternatives have been explored and why a limited guardianship is not appropriate. If a limited
guardianship is requested, the specific powers that are requested to be reserved in the ward must be
stated. For example, it may be that the ward cannot make medical decisions but is capable of
deciding where he or she lives. It is difficult, however, to draw lines in these cases determining
specific areas in which the ward is capable of making his or her own decisions.
E. Testamentary Appointment of Guardian
A.R.S. §14-5301 authorizes the informal appointment of a guardian nominated by the
Last Will and Testament of the proposed Ward’s parent (presuming both parents are dead or the
survivor is incapacitated), or spouse, upon providing seven days notice of intent to file to the
incapacitated person, and the person having his care, or his nearest adult relative. The nominated
Guardian files acceptance of appointment in the Court where the will is informally or formally
probated. However, if an objection to the appointment is filed by the alleged incapacitated person,
the appointment is terminated and the Guardian must proceed through formal appointment
proceedings. Note that an effective appointment of a spouse has priority over appointment by a
parent. A.R.S. §14-5301(B)
F. Standing to File and Priority to Serve
Any interested person may apply for the appointment of a guardian and the Court
may appoint any qualified person to act as Guardian. However, pursuant to A.R.S. §14-5311, the
following persons are given priority for appointment in the following order:
1. Guardian or Conservator of the person or fiduciary appointed or recognized
by the appropriate court of any jurisdiction in which the Ward resides;
2. Person or Corporation nominated by the Ward if, in the Court’s opinion, the
Ward has sufficient mental capacity to made an intelligent choice;
3. Person nominated in the Ward’s most recent durable power of attorney;
4. Spouse of the Ward;
5. Adult Children of the Ward;
6. Parent of the Ward, including nomination by Will or other writing of deceased
parent;
7. Relative with whom the Ward has resided for more than six month prior to the
filing of the proceeding;
8. Nominee of the person who is caring for or paying benefits to the Ward
9. Department of Veterans Services, if the Ward is a veteran; and
10. Fiduciary, guardian or conservator.
While the priority list is considered by the Court, the Court will ultimately appoint
the person it feels is in the best interest of the Ward to appoint. The Court is authorized, with good
cause, to pass over a person with priority and appoint another person with lower or no priority
without disqualifying a person with priority. A.R.S. §14-5311(D). In the Matter of the Guardianship
of Kelly 184 Ariz. 514 (App. Div.1 1996), the Court held that the best interest of the Ward was
served by appointing a non-family member as guardian when family members were unable to get
along with each other. The Maricopa County Superior Court sometimes determines that even
though the Ward nominates a particular family member as a Guardian through a valid power of
attorney, that the Ward’s best interest would be better served by appointing a public or private
fiduciary when another family member is objecting to the nominated person’s appointment.
G. Pleadings/Documents Required to be Filed
1. Petition: Pursuant to A.R.S. §14-5303(B) the Petition must contain statements
that describe the following:
a) Interest of the Petitioner in the proposed Ward;
b) Name, age, residence and address of the proposed Ward;
c) Name, address and priority for appointment of the person whose
appointment is sought;
d) Name and address of the Conservator, if any, of the proposed Ward;
e) Name and address of the nearest relative of the proposed Ward;
f) General statement of property and income of the proposed Ward (it is
recommended by this author that the petition also explain why no
conservatorship is required if none is requested);
g) Reason why guardianship or other order for protection is necessary;
h) Whether general or limited Guardianship is requested and why; and
Note that copies of these documents should be delivered to the Commissioner/Judge,
Court Investigator and Court Appointed Counsel.
2. Disclosure Affidavit. Pursuant to A.R.S. §14-5106, before being appointed as a
guardian, a proposed appointee must sign an affidavit answering
specific questions set forth by statute relating to whether the
proposed appointee has acted as a fiduciary in the past, and whether the appointee
has committed any felonies.
3. Order to Guardian. In Maricopa County, the guardian must sign an “Order
to Guardian” which sets forth all of the duties and responsibilities that the
court expects of the guardian. The guardian’s signature indicates that he or
she understands these duties and responsibilities and accepts them. The
judge or commissioner signs the order to guardian once the guardian has
been appointed. The Order to Guardian must be lodged not less than (5) days
prior to the hearing.
4. Physician’s Report. An evaluation must be conducted by a physician, psychiatrist
or registered nurse and a report filed with the court setting forth certain
information detailed in A.R.S. §14-5303(D). Some physicians have begun
refusing to complete a report without their patient’s consent due to HIPAA laws.
This poses a problem because without a physician’s report, the Court often rejects
the filing. If the physician refuses to complete the report, you should inform the
probate clerk and the JA before or at the time of filing regarding the refusal of the
physician and prepare a petition for an order directing the physician to provide the
evaluation prior to the hearing.
5. Probate Information Sheet. In Maricopa County - This sheet gives the court
biographical information regarding the petitioner including his physical
description, social security number, address, and telephone number.
6. Probate Cover Sheet. In Maricopa County - This information sheet provides
general information regarding the ward and the petitioner for the court
investigator and the court appointed attorney.
7. Petitioner’s Information Sheet. In Maricopa County - This sheet lists addresses
and telephone numbers for the alleged incapacitated person, the proposed
guardian, court-appointed attorney, and court-appointed physician.
8. Petition for and Order Appointing Attorney, Court Investigator and Physician. In
Maricopa County - When filing for permanent guardianship, without a petition for
temporary appointment, a separate Petition must be submitted at the time of the
initial filing for the court to appoint an attorney to represent the proposed ward as
well as a court investigator to interview the Ward and proposed guardian, visit the
Ward’s current or proposed place of residence, interview nursing home or
caregivers and the manager/administrator of the facility, investigate the ward’s
financial and health situation as well as the appropriateness of the appointment of
guardian. The Court Investigator may also transport the Ward as directed by the
Court. The petition must also request the appointment of a physician,
psychologist or registered nurse who will be conducting the evaluation of the
proposed ward. In Maricopa County, when a petition for temporary appointment
is filed, the request for the appointment of an attorney, court investigator and
physician may be requested in the temporary petition. In either instance, once the
court appointed attorney has been selected by the office of court appointed
counsel, the proposed Order is submitted to the Probate Registrar for approval.
In Pima County a proposed form of order is submitted with the name and the
address of physician to be appointed, and blanks for the Court to fill in the
investigator and attorney
9. Order Appointing Guardian and Letters of Guardianship. After hearing on the
Petition, if the Court finds that the proposed Ward is incapacitated, the
appointment of a guardian is necessary for the protection for the demonstrated
needs of the proposed Ward and the proposed Ward’s needs cannot be met by less
restrictive means, the Court will sign the Order Appointing Guardian and direct
the Clerk to issue Letters of Guardianship upon the filing of Acceptance. In
Maricopa all proposed orders must be lodged not less than five (5) days prior to
the hearing. Local Pinal County Rules require two days prior. However, in the
case of hearings on temporary guardianships, the Commissioners in Maricopa
County have different preferences for lodging temporary orders and letters.
10. JA Checklist. While not required in Maricopa County, this form is very helpful to
the JA and to yourself. It is a great way to double check that you have everything
you need and the JA will appreciate you providing it to her. The checklist simply
lists all the forms that should accompany your Petition. This is a great form to
explain to the JA why you are missing a physician’s statement or that the petition
for appointment of attorney is within the petition for appointment of temporary
guardian.
H. Notice
1. Form for Notice of Hearing. A Notice of Hearing must be prepared and mailed
setting forth the date, time and place of the hearing.
2. Parties to be served – A.R.S. §14-5309 (A)
a) The proposed Ward and his/her spouse, parents, and adult
children (note that for guardianship of a minor, the minor must be
served if he is age 14 or older. A.R.S. §14-5207);
b) Any person who has served as guardian and/or conservator or who has
the custody and care of the proposed Ward;
c) In case no other person is notified, at least one of the proposed Ward’s
closest adult relatives, if any can be found;
d) Any person who has filed a demand for notice.
3. Manner of Service – A.R.S. §5309(B) and §14-1401
a) Notice must be served personally on the proposed Ward
and his/her spouse and parents if they can be found within the State.
b) Notice to the proposed Ward’s spouse and parents, if they are not
within the state, and all other persons entitled to notice, except the
proposed Ward, may be mailed in accordance with A.R.S. §14-1401 or
hand-delivered. If the address or the identity of the person entitled to
notice is not known, then service must be made by publication
pursuant to A.R.S. § 14-1401(A)(3).
c) A minimum of 14 days notice must be given in all cases.
3. Proof of Notice. A Proof of Notice must be prepared evidencing the parties
served, and the date and manner of service, and must be filed prior to the hearing.
II. Filing for Conservatorship of an Adult
-Chester B. McLaughlin and Wendy Swainston
A. Conservatorship Defined – A conservatorship is over the “estate” and results from a
court protective proceeding when the court determines that a person cannot
effectively manage his estate because the person lacks the ability to do so and the
court appoints a conservator to secure administration of the estate. A.R.S. §14-
5101(5)
The burden of proof in conservatorship proceedings is not set forth in the statute, and
therefore, it must be presumed that it is a “preponderance of the evidence” as in other
civil cases.
B. When a Conservatorship is Required
A conservator may be appointed for an adult if the court determines pursuant to
A.R.S. §14-5401.2 both of the following:
1. The person is unable to manage his estate and affairs effectively for reasons
such as mental illness, mental deficiency, mental disorder, physical illness or
disability, chronic use of drugs, chronic intoxication confinement, detention
by a foreign power or disappearance, and
2. The person has property which will be wasted or dissipated unless proper
management is provided, or that funds are needed for the support, care and
welfare of the person or those entitled to be supported by the person and that
protection is necessary or desirable to obtain or provide funds.
Although “inability to act” must be established, a physicians’ report is not required as
is the case with a guardianship because there may be non-medical reasons for the
person’s inability to act. If incapacity is the basis, it is still recommended that a
physician’s report be obtained.
With respect to the second requirement of the statute, the petitioner must show that
the person is mishandling his own money or is being exploited resulting in “wasting”
the assets, or show that the person cannot access his own funds for some reason, such
as incapacity. Note that it must be proven to the court that the conservatorship is
“necessary”, i.e. there must be evidence that there is a lack of access to funds or that
assets are being wasted or dissipated. A conservatorship cannot be established as a
prophylactic measure “just in case”. Therefore, if there is an existing estate plan
(trust and/or financial power of attorney) executed when the person was competent,
there is usually no need for a conservatorship unless the fiduciary himself is
exploiting the person, or there is some legal bar to the fiduciaries access to assets
(such as assets outside a trust with no power of attorney) The Veterans
Administration however does not recognize financial powers of attorney and
therefore a conservatorship may be required where the incapacitated person is
receiving V.A. income. Social Security benefits can be secured without
conservatorship by a responsible individual applying to become a representative
payee with the Social Security Administration.
As in guardianships any interested person may file a petition for conservatorship.
This author has even represented a nursing home on occasion when a resident has
funds that he cannot access, and there aren’t any family members willing to act.
C. Pleadings/documents required to be filed
1. Petition: Pursuant to A.R.S. §14-5404(B), the Petition must contain statements
that describe the following:
a) Interest of the Petitioner in the proposed Ward;
b) Name, age, residence and address of the proposed Ward;
c) Name, address and priority for appointment of the person whose
appointment is sought;
d) Name and address of the Guardian, if any, of the proposed Ward;
e) Name and address of the nearest relative of the proposed Ward;
f) General statement of property and income of the proposed Ward;
g) Reason why conservatorship or other order for protection is necessary;
2. Disclosure Affidavit. Pursuant to A.R.S. §14-5106, before being appointed as a
conservator, a proposed appointee must sign an affidavit answering specific
questions set forth by statute relating to whether the proposed appointee has acted
as a fiduciary in the past, and whether the appointee has committed any felonies.
3. Order to Conservator. In Maricopa County, the guardian must sign an “Order to
Conservator” which sets forth all of the duties and responsibilities that the court
expects of the conservator. The conservator’s signature indicates that he or she
understands these duties and responsibilities and accepts them. The judge or
commissioner signs the order to conservator once the conservator has been
appointed. The Order to Conservator must be lodged not less than (5) days prior
to the hearing.
4. Physician’s Report. While an evaluation is not required by A.R.S. §14-5407, the
Court may, on its own motion, direct that an evaluation be conducted by a
physician, psychiatrist or registered nurse and that a report be filed with the court
prior to the hearing. As a matter of practice, the Maricopa County seems to
require a Report setting forth certain information detailed in A.R.S. §14-5303(D),
upon the filing of the original petition.
5. Probate Information Sheet. Maricopa County - This sheet gives the court
biographical information regarding the petitioner including physical description,
social security number, address, and telephone number.
6. Probate Cover Sheet. Maricopa County - This information sheet provides general
information regarding the ward and the petitioner for the court investigator and
the court appointed attorney.
7. Petitioner’s Information Sheet. Maricopa County - This sheet lists addresses and
telephone numbers for the alleged incapacitated person, the proposed guardian,
court-appointed attorney, and court-appointed physician.
8. Petition and Order Appointing Attorney, Court Investigator and Physician.
When filing for a permanent conservatorship, without a petition for temporary
appointment, a separate Petition must be submitted at the time of the initial filing
for the court to appoint an attorney to represent the proposed ward as well a court
investigator to investigate the ward’s financial and health situation as well as the
appropriateness of the appointment of conservator. The petition must also request
the appointment of the physician, psychologist or registered nurse who will be
conducting the evaluation of the proposed ward. When a petition for temporary
appointment is filed, the request for the appointment of an attorney, court
investigator and physician may be requested in the temporary petition. In either
instance, once the court appointed attorney has been selected by the Office of
Court Appointed Counsel, the proposed order is submitted to the Probate
Registrar for approval. In Pima County, a proposed form of order is submitted
with the name and address of physician to be appointed, and blanks for the Court
to fill in the names of the investigator and attorney
9. Order Appointing Conservator and Letters of Conservatorship. After hearing on
the Petition, if the Petition is granted, the Court will sign the Order Appointing
Conservator and direct the Clerk to issue Letters of Conservatorship upon the
filing of Acceptance and any required bond. Pursuant to Maricopa County Local
Rule 5.15, all proposed orders must be lodged not less than five (5) days prior to
the hearing. Local Pinal County Rules require filing two days prior to the hearing.
However, in the case of hearings on temporary conservatorships, the
Commissioners in Maricopa County have different preferences for lodging
temporary orders and letters.
10. JA Checklist. While not required in Maricopa County, this form is very helpful to
the JA and to the lawyer/petitioner. It is a great way to double check that you
have everything you need and the JA will appreciate you providing it to her. The
checklist simply lists all the forms that should accompany your Petition. This
checklist can also explain why you are missing a physician’s statement or that the
petition for appointment of attorney is within the petition for appointment of
temporary conservator.
Note that copies of all of these documents should be delivered to the
Commissioner/Judge, court investigator and court appointed counsel.
D. Notice
1. Form for Notice of Hearing. A Notice of Hearing must be prepared and mailed
setting forth the date, time and place of the hearing.
2. Parties to be served – A.R.S. §14-5405(A)
a) The person in need of protection, if that person is fourteen years of age
or older;
b) The spouse, parents and adult children of the person in need of
protection or if no spouse, parent or adult children can be located, at
least one adult relative of the person in need of protection, if such a
relative can be found;
c) Any person who has served as guardian and/or conservator or who has
the custody and care of the person in need of protection;
d) Any person who has filed a demand for notice.
3. Manner of Service – A.R.S. § 14-5405 (B) and §14-1401
a) Notice must be served personally on the person in need of protection
and his/her spouse and parents if they can be found within the State.
b) Notice to the person in need of protection’s spouse and parents, if they are
not within the state, and all other persons entitled to notice, except the
person in need of protection, may be mailed in accordance with A.R.S.
§14-1401 or hand-delivered. If the address or the identity of the person
entitled to notice is not known, then service must be made by publication
by publishing notice at least three times, the first of which must be 14 days
prior to the hearing date set for the hearing in a newspaper having general
circulation in the county where the hearing will be held. A.R.S. §14-
1401(A)(3)
c) A minimum of 14 days notice must be given in all cases.
4. Proof of Notice. A Proof of Notice must be prepared evidencing the parties
served and the date and manner of service and must be filed prior to the hearing.
C. Securing the Assets: Bonding vs. Restrictions
The Conservator’s first task upon appointment is to investigate what the assets are,
where they are located and secure them by re-titling them into the name of the
conservatorship. If there is real property, the Letters of Conservatorship must be
recorded. Tangible personal property should be secured to ensure its protection.
Conservators are required to bond for the net value of all assets and one year of
estimated income, less the value of any restricted assets unless otherwise directed by
the court. An exception to this rule is a conservator who is an authorized bank,
savings and loan, title company, trust company or public fiduciary. A.R.S. §14-5411.
In addition, the court has discretion to waive restrictions and bonding requirements to
the extent of regular fixed expenses paid for the benefit of the ward. A.R.S. § 14-
5411(A). This is rarely done, however, in Maricopa County.
Bonding: The bond amount should only cover what is needed to care for the Ward
and the remaining assets should be restricted to keep bond premiums low and provide
additional security to the Estate. In determining what assets to bond for the
Conservator should develop a budget based on anticipated expenses and income to
come up with the funds necessary to provide care for at least sixteen months and then
add a cushion for emergencies. The sixteen month budget is crucial because you want
to minimize court filings by using the annual accounting as the forum to unrestrict
additional funds and/or reset the bond for the following year and it can take several
months to approve an accounting. It should also be remembered that there are assets
that are nearly impossible to restrict, such as automobiles and tangible personal
property that will need to be included in setting the bond amount. Another reason to
bond is if the assets need ongoing active management such as a significant stock
portfolio with short term hold positions. The fiduciary also has a duty to diversify as
does a trustee. A.R.S. §14-5417. If the existing portfolio is not sufficiently
diversified, then bonding for the portfolio may make sense to allow the selling and
buying within the account. In the alternative, the court can pre-approve an investment
plan.
Restricting: All assets that are restricted cannot be accessed without a Court order
allowing the release of funds. The Conservator must present the institution with the
Order that restricts the asset and a Court approved form for the manager or other
authorized person to complete for filing with the Court. In some instances,
institutions may refuse to sign the Proof of Restriction citing that they do not want to
be subject to the Court’s jurisdiction. You can argue the decision but in the end, it
may be easier just to request an order from the Court to transfer the funds to another
institution that will comply with the Court’s order. It is also important to ensure that
the Conservator understands that restricted assets may not be accessed without a court
order, as some institutions may fail to properly comply with the Court’s order.
F. Selling real property: If the real property owned by the Ward is unrestricted, the
Conservator may sell the property at a reasonable price without Court approval.
However, any sale of property to the Conservator, or any relative or agent of the
Conservator, is voidable unless the transaction is approved by the Court after notice
to interested persons and others as directed by the Court. A.R.S. §14-5422. If the
real property is restricted the Conservator must file a motion to unrestrict requesting
that a bond be set for the value of the property before the property is sold; otherwise a
petition to authorize and confirm the sale is necessary. In Maricopa County, if a
petition for confirmation of sale of real property is filed, notice must be given stating
the hearing date and that bids above the proposed sales price will be accepted by the
Court unless otherwise ordered by the court, The notice must be posted on the
property and published once in a newspaper of general circulation in Maricopa
County at least fourteen days prior to the hearing. Local Rule 5.11 (d). Therefore, the
Conservator should sign the real estate sales contract as “subject to court approval” if
the real property is restricted.
G. Investing Conservatorship Assets/Court Approval:
Pursuant to A.R.S. §14-5417 a Conservator is held to the same standard of care
applicable to trustees as described by A.R.S. §14-7302. However, in Maricopa
County, the Court requires that a Conservator obtain approval from the Court prior to
investing the Ward’s restricted assets in mutual funds or in anything other than
government bonds, certificates of deposit, and other “safe” investments. The Court
has developed a guideline for mutual funds and routinely disallows “load” funds.
H. Single Transaction Authority:
In some cases, a full conservatorship is not necessary to achieve protection for the
Ward’s assets. A.R.S. §14-5409 authorizes the Court to issue an order for the
protection of the Ward’s assets without appointing a Conservator. This process have
been very helpful in the cases where we want to protect the Ward’s assets by funding
a trust that the Ward intended to fund, gift assets to children or an irrevocable trust to
qualify for public benefits, or to authorize the sale of real property owned jointly
between husband and wife, where a spouse is not capable of executing a deed. The
petition is prepared much in the same manner as a permanent conservatorship
petition, but the reasons why an ongoing conservatorship is not required should be
clearly given. The petition usually requests the appointment of a special conservator
with the limited authority to carry out specific duties. In most cases, a bond is not
required of the special conservator due to their limited authority to control assets,
although sometimes the Court will restrict the use of the assets. Upon the completion
of the authorized transfers or action, the special conservator files proof that all
authorized duties have been completed and requests to be discharged.
III. Temporary/Emergency Guardianship and Conservatorship Proceedings With or Without
Notice
-Chester B. McLaughlin and Wendy Swainston
If an emergency exists and immediate action by the Court is required to protect the Ward
and/or his/her assets the Court may appoint a temporary guardian and/or conservator pending
a hearing on the permanent appointment A.R.S. § 14-5310; A.R.S. §14-5401.01. Temporary
appointments with notice generally expire on the date of the permanent hearing. However,
temporary appointments can be extended for six months or longer for good cause. An
emergency petition cannot be filed in Maricopa County without a permanent petition being
filed simultaneously.
The requirement for an emergency appointment of guardian is that the person has no
guardian or an appointed guardian is not effectively performing the duties of a guardian and
the welfare of the person requires immediate action. This is often the case when a person
refuses to seek medical attention or is a danger to himself or others and refuses to be placed
into a supervised living arrangement.
The requirement for an emergency appointment of a conservator is that the person has no
conservator or an appointed conservator is not effectively performing the duties of a
conservator and the affairs of the person require immediate action. This occurs when nobody
has access to the Ward’s assets to pay for the Ward’s expenses, or the assets are in danger of
being wasted or dissipated, or another person who has access to the assets is improperly
managing them.
Most emergency hearings in Maricopa County are scheduled to be heard within 2 to 5 days
of the filing, depending on the Court’s availability, and require notice to be given to all
persons entitled to notice, including the Ward. However, in extreme circumstances pursuant
to A.R.S. § 14-5401.01 and § 14-5310, the Court may waive the notice if all of the following
occurs:
1. It clearly appears from specific facts shown by affidavit or by the verified
petition that immediate and irreparable injury, loss or damage will result
before the proposed protected person or his attorney can be heard in
opposition.
2. The petitioner or petitioner’s attorney certifies to the court in writing any
efforts to give the Ward notice or the reasons supporting the claim that notice
should not be required;
3. The petitioner or petitioner’s attorney files a request for hearing on the
petition for appointment of a temporary conservator with the court;
4. The petitioner or petitioner’s attorney certifies that notice of the petition, order
and all filed reports and affidavits will be given to the Ward by personal
service within 72 hours after the entry of the order.
If a temporary without notice is granted, the appointee’s authority will expire in thirty days
unless the Ward’s attorney consents to an extension. The Ward may request a hearing with
two days notice to the appointee, object to the appointment, although even without a request,
Maricopa Court will generally, on its own, set an additional hearing within 72 hours to allow
the Ward an opportunity to object. There are very few cases that fit the requirements for a
temporary appointment without notice and Maricopa County judges/commissioners are very
leery about waiving a Ward’s right to notice. A request for appointment without notice
should be used only when absolutely necessary in extreme situations, for example, when an
exploiter might “take off with the money” if the exploiter or the Ward is given notice, or if
the Ward might physically harm the petitioner or leave the jurisdiction if he was informed of
the proceeding.
FOR PRINTERS INFORMATION ONLY: ORDER OF MATERIALS
IV. Bridget Swartz’ materials on minors guardianship & conservatorship
V. Selecting the Fiduciary
- Chester B. McLaughlin, J.D., Heather Frenette and Richard VanDerHeiden
A. Difference between Petitioner and Fiduciary
The Petitioner and the party(s) that the petitioner requests to be appointed do not have
to be the same person(s). Any interested person can file the petition. Therefore,
where is being requested that more than one person be appointed as guardian or
conservator, all of the proposed appointees do not have to sign the petition. This can
be an advantage when some of the proposed co-appointees live out of state.
However, all appointees still have to sign the Disclosure Affidavit which must be
filed with the original petition. In some cases a family member may not want to
serve, but wants to ensure that their loved one is protected. Therefore that family
member could petition to have a private fiduciary or the public fiduciary appointed.
This ensures control over the process up to a certain point and can expedite the
process. On the other hand, the private fiduciary or public fiduciary themselves can
initiate the petition, although there may be delays.
B. Use of Co-Fiduciaries
Use of co-fiduciaries can be an advantage, assuming the co-fiduciaries can all get
along together. It is an advantage in particular if the consistent availability of one
fiduciary is in question. It can also be a way to divide up responsibilities. It can
further serve as a way to avoid family members feeling left out, which can sometimes
result in battles for control and contested proceedings. On the other hand, if the co-
fiduciaries cannot work together, then co-appointments are not a good idea. If co-
fiduciaries are appointed it is important that they are all aware of the fiduciary actions
of the others since they can all act independently of each other. Therefore,
communication is critical.
FOR PRINTERS INFORMATION ONLY - ORDER OF MATERIALS
V. C. Heather Frenettes’ materials
V. D. Richard Vanderheider’s materials
V. E. Veteran’s Administration section – no materials
VI The Role of Court-Appointed Legal Counsel for the Ward
-Chester B. McLaughlin, Chris Anderson, Catherine Leas, Jonathan Schubert
In every guardianship and conservatorship case involving an adult, an attorney is appointed
to represent the interest of the Ward. In conservatorship cases involving a minor, the court has the
discretion to appoint an attorney if the interests of the minor are inadequately represented. A.R.S. §
14-5407(A). A panel of distinguished court-appointed lawyers serving in Maricopa County will be
answering the following questions (space is provided for taking notes):
1. How long have you served as court-appointed counsel?
2. What are the steps you take as court-appointed counsel in preparing yourself and your client
for the initial hearing ?
3. What is court-appointed counsel’s role in post-appointment? When should court-appointed
counsel withdraw?
4. There are no clear guidelines as to when court-appointed counsel should seek reimbursement
from the estate versus the court. Where do you draw the line? Do you bill any differently on
court-appointed cases from other cases?
5. Is your role to advocate for the client’s wishes or the best interest of the client? When you
have a client who is clearly incapacitated, but is able to voice his or her wishes, but you
believe the client’s wishes are clearly not in his or her best interests, how do you proceed?
What do you say to the court? If the incapacitated client wants to contest the matter and you
clearly have no chance of prevailing, how far do you go in putting on a contested case?
What if there are limited estate resources? If the incapacitated client cannot voice his or her
wishes at all, how do you proceed? Do you ever ask to be appointed as a guardian ad litem?
Under what circumstances? (Please cite any law or ethical rules that support your position.)
6. There are often family disagreements in cases regarding who should serve as guardian and
conservator. When do you feel it is necessary to appoint a private or public fiduciary in those
situations? Usually, sometimes, or avoid unless absolutely necessary? Do you believe it is
generally more effective to take a “stand off” position or to take a strong position, assuming
your client is not clear on what he or she wants? (Examples helpful.)
7. Sometimes court-appointed attorneys are thought to be too passive in cases. What are some
of your recommendations regarding how court-appointed counsel can “make a difference” in
cases? Do you ever take a major leadership role in settling cases? Under what
circumstances?
8. What are some frequent mistakes you see petitioners/guardians/conservators and their
counsel make?
9. What can petitioners/guardians/conservators and their counsel do to assist court-appointed
counsel in his or her duties and make the case/administration as efficient as possible?
FOR PRINTERS INFORMATION ONLY: ORDER OF MATERIALS
VI. Anderson, Leas and Schubert materials
VII. Pamela Wilson’s materials
Law Offices of Chester B. McLaughlin
4545 E. Shea Blvd., Suite 173
Phoenix, Arizona 85028
VIII Guardianship and Conservatorship Administration
- Wendy Swainston
A. Inventory and Appraisement - Pursuant to A.R.S. §14-5418, within 90 days of
permanent appointment, the Conservator must file an Inventory and Appraisement of
all assets owned by the Ward and the value of each asset as of the date of the
Conservator’s appointment (temporary appointment if applicable). The purpose of
the Inventory is to provide a starting balance for the annual accountings the
Conservator is required to file. The Conservator must identify all assets and verify
the value either by financial statement, appraisal, or other means. Once the Inventory
and Appraisement is complete the Conservator is required to file the original with the
Court and send copies to the Ward, if over the age of 14 and if he has sufficient
mental capacity to understand the matter, and to any parent or guardian with whom
the Ward resides.
B. Estate Management Plan – Maricopa Local Rule 5.7 - The Conservator is required to
prepare and file an Estate Management Plan within 90 days of permanent
appointment and with each annual account. The Estate Management Plan must
inform the Court of the estimated fiduciary fees, attorney fees, a summary of the
Conservator’s management plan for the next accounting period including any major
changes in the management of the estate or placement of the Ward expected to occur
in the next accounting period. A copy of the Estate Management Plan should be
mailed together with the Inventory or Accounting to persons entitled to notice of the
accounting and inventory.
C. Annual Guardians Report – The Guardian is required to prepare and file a written
report to the Court each year setting forth the type, name and address of the Ward’s
residence and the name of the person in charge; the number of times the Guardian has
visited with the Ward in the last 12 months; the date the Guardian last saw the Ward;
the date the Ward was last seen by a doctor; major changes in the Ward’s physical or
mental condition, the Guardian’s opinion as to whether the Guardianship should
continue; and a summary of the services provided to the ward by a governmental
agency and the name of the individual responsible for the Ward’s affairs with that
agency. A.R.S. §14-5315 requires that the Report be filed on the anniversary of the
Guardian’s appointment. However, Maricopa County generally sets the date for
filing 90 days from the anniversary. A copy of the Report should be sent to the Ward
and his/her conservator, spouse, parents (if not married), attorney and any person who
has filed a demand for notice.
D. Annual Physician’s Report – The Guardian is required to submit with his/her
Guardian’s Report, a report from the Ward’s physician, or if none exists, a summary
of the physician’s observation on the Ward’s physical and mental condition. While
A.R.S. §14-5303(C) allows an evaluation for filing the initial petition for
guardianship to be conducted by a physician, psychiatrist or registered nurse, A.R.S.
§14-5315(C)(6) is not as broad. It precludes any report other than the report of the
Ward’s physician.
E. Accountings - The Conservator is required to prepare and file a written report to the
Court each year setting forth all financial transactions for the accounting year. The
Conservator must show the beginning balance of the account (the inventory assets
and values), itemize all funds he received on behalf of the Ward, including the
income, gifts, and refunds, every disbursement paid out of the Conservatorship estate,
and the ending balance of each asset at the end of the accounting period. The
Conservator should provide as much information as possible. Persons who review
the accounting must be able to track each asset, so if transfers between accounts were
made, show the transfer as additional information. The more information you
provide, the better the reader will understand the accounting. Supplying explanations
in an informational schedule will also reduce time and money spent answering
questions. Large purchases or the reason for keeping a car for an incapacitated
person should be explained, for example. In accordance with the Maricopa County
Accounting Guidelines, each accounting should be made up of schedules: Beginning
Balance; Receipts, Gains on Sales or Increases in Value, Disbursements, Losses on
Sales or Decreases in Value, and a Summary of Account which provides the totals of
each schedule and a summary of the assets on hand at the end of the accounting
period. A petition for approval of the Accounting is filed and (in Maricopa County)
a copy is delivered to the Court Accountant to review for compliance with the
guidelines and to point out any inaccuracies, apparent omissions or questionable
transactions. The Court Accountant issues a report and recommendation to the Court
suggesting any additional information he/she believes should be provided by the
Conservator before the accounting is approved. The accounting is set for a non
appearance hearing before the Commissioner with a recommendation from the Court
Accountant that the Court approve the accounting or that the Court request additional
information. Even if the Court Accountant has recommended approval, the Court
may have its own questions and may require the Conservator to provide receipts and
bank statements. A.R.S. §14-5419(A) requires that the Accounting be filed on the
anniversary of the Conservator’s appointment. However, the Maricopa County Court
generally sets the date for filing 90 days from the anniversary. A copy of the
Accounting, notice of hearing and Court Accountant Reports should be sent to the
Ward and his/her guardian or spouse if no guardian has been appointed. If the
guardian and conservator are the same person, or if the spouse is the conservator,
there is no spouse or the spouse is incapacitated, a parent or an adult child of the
Ward must be given notice. A.R.S. §14-5419(C).
Attorney and Fiduciary Fees: The petition for approval of the accounting must
include a request for approval of attorney and fiduciary fees paid during the
accounting period. Maricopa Local Rule 5.7 requires that requests for approval of
fees and costs must be accompanied by a statement of the net value of the estate,
together with a detailed statement of services rendered, including task performed, the
date and amount of time of each task, the name and position of the person who
performed the task, and the results achieved. The total time, hourly rate and total
charge made by each person must be reported in the statement and the total fee must
be clearly stated in the Petition.
A guardian or conservator who is not related to the Ward by blood or marriage (to the
5th degree), see Arizona Code of Judicial Administration §7-202(a), may not be paid
for their services without that person being certified by the Supreme Court to act as a
private fiduciary for others, pursuant to A.R.S. § 14-5651(A). §14-5651(J)(1)(a)
defines a fiduciary as a person, who for a fee serves as a court appointed guardian or
conservator for one or more persons who are unrelated to the fiduciary. In
accordance with Maricopa County Local Rule 5.7, a petition for approval of fees
must be accompanied by a statement setting forth the net value of the estate, a
detailed statement of services rendered, including task performed, date and amount of
time of each task as well as an itemization of costs by date, payee, purpose and
amount, and the petition must clearly state the total time, hourly rate and total charge
for each person reported in the statement. Therefore, it is important that the
guardian/conservator keep track of his time from the beginning if he intends to be
paid for his services. As far as a reasonable rate, it should be set based on what is
customary in the community for that particular service. Maricopa County has
developed a guideline for determining reasonableness of a fiduciary’s fees.
IX Mental Health Guardianship
- Chester B. McLaughlin, J.D.
A. Provisions of Mental Health Guardianship Law
1. A standard Title 14 Guardian may consent to outpatient psychiatric treatment but
only a Title 14 Guardian with mental health powers may admit his ward to a level one
inpatient psychiatric facility. To appoint a Title 14 Guardian with mental health
powers, the Court must find by clear and convincing evidence that the person is
incapacitated as a result of a mental disorder. A person is incapacitated if he is
incapable of making responsible decisions concerning his person. A mental disorder
is a substantial disorder of emotional process, thought, cognition or memory (A.R.S.
§ 36-501 (22)). The court must also find the person is currently in need of inpatient
mental health care and treatment (A.R.S. § 14-5312.01 (B)) (although the Maricopa
County Superior Court has read “currently” broadly)
2. One mental health expert opinion is required for the guardianship
with mental health powers. The mental health expert may either be a physician or a
Doctor of Osteopathy specializing in psychiatry, or a licensed psychologist (A.R.S. §
14-5312.01 (B)).
3. If the guardian places the ward in an inpatient psychiatric facility then he must give
notice of the placement to the ward’s attorney within forty-eight (48) hours. The
attorney may request a hearing in which case the Court must schedule the hearing
within three days of the request (A.R.S. § 14-5312.01 (D)).
4. The attorney appointed by the Court remains assigned to the case until discharged by
the Court; the Court is required to ensure that a ward who has a guardian with mental
health powers is represented by an attorney at all times (A.R.S. § 14-5312.01 (K)),
except that after the appointment of the guardian, the court can remove the court
appointed attorney if the court determines that his services are no longer necessary or
desirable.
5. The ward’s attorney has the right to access the ward’s medical, psychiatric,
psychological and other medical records (A.R.S. §14-5312.01 (H)).
6. If necessary to assess a request for mental health treatment or to review the ward’s
placement in the facility, the court may order an independent psychiatric or
psychological evaluation and the cost of this evaluation will be paid for by the county
if the patient has insufficient funds to pay for the cost. The Court may accept a
report based on an evaluation conducted by the facility if the Court finds the report
meets the requirements of the evaluation (A.R.S. § 14-5312.01 (L)).
7. The duration of a Title 14 Guardianship with mental health powers is in the discretion
of the Court. However, the guardian must file an evaluation report annually by a
physician or psychologist who meets the requirements of the statute. The report must
indicate whether the ward currently needs inpatient mental health care and treatment.
(The Maricopa County Court however is reading “currently” broadly and will allow
renewal even if the patient does not need inpatient treatment immediately if history
shows that he/she might very well need hospitalization during the next year). If the
report is not filed in Court or indicates that the patient does not need inpatient mental
health care treatment the guardian’s authority to consent to treatment ceases. If the
report supports the continuation of the guardianship then the guardian’s authority to
consent to treatment continues. However, the court-appointed attorney can contest
the continuation if he files a request for a Court hearing. The hearing must be set
within ten days after the report is filed (A.R.S. § 14-5312.01 (P)).
8. Emergency Admissions A statutory surrogate can consent to inpatient psychiatric
hospitalization in an emergency pursuant to A.R.S. § 36-3231. The admitting officer
for the inpatient hospital must find that the person is incapable of giving informed
consent and is likely to suffer serious physical harm or illness or to inflict serious
physical harm on another person without immediate hospitalization. However, the
patient must be discharged if a petition for court ordered evaluation or temporary
guardianship is not filed within forty-eight (48) hours, or on the following court day if
the forty-eight (48) hours expires on a weekend or holiday. If the patient has not been
admitted, under federal “EMTALA” transfer laws, discharge is unlawful if the patient
has not been stabilized, and the federal law would supercede the state law that
requires discharge.
9. There are a number of obligations, which are required of the inpatient provider (see
below).
B. The Facility Obligations under a Title 14 Guardianship with Mental Health Powers.
1. A behavioral health treatment facility must assess the appropriateness of the ward’s
placement every thirty (30) days and provide a copy of the assessment to the ward’s
attorney. In addition the ward’s attorney is entitled to attend the ward’s evaluation,
staffing, treatment team and case management meetings (A.R.S. § 14-5312.01(E)).
2. When the ward is admitted to an inpatient treatment facility the guardian must provide
the facility with the name, address, and telephone number of the ward’s attorney, and
the facility must include this information in the ward’s treatment record (A.R.S. §14-
5312.01 (F)).
3. If the facility receives a written request from the ward for release or any change in
placement or change in the type or duration of treatment, the ward’s attorney must be
notified of the request within twenty-four (24) hours of the facility’s receipt of the
request (A.R.S. § 14-5312.01 (G)).
4. Once the guardian is notified by the medical director of the inpatient facility than
the ward no longer needs inpatient care it is the guardian’s responsibility to place the
ward in the least restrictive treatment alternative within ten (10) days of the notice
(A.R.S. § 14-5312.01 (I)).
C. Advantages of a Title 14 Mental Health Guardianship over Title 36 Court-Ordered
Treatment:
1. An emergency hearing can be held within a week, or if the hearing is without
notice, within a day;
2. The guardian may have more choice in where to hospitalize the ward, for
example, In Maricopa County, court-ordered treatment must be given at the
county hospital;
3. The patient will not be exposed to possible multiple hospital transfers;
4. A Title 14 Guardianship order is more likely to be issued than Title 36 Court-
Ordered Treatment;
4. A family member appointed as guardian retains control over the process.
5. Disadvantages are that the Title 14 Guardianship is more costly and family
member or other person must be willing to take responsibility. in addition, it
may be more difficult to hook-up with services provided through value
options or other public regional behavioral health authorities.
D. Disadvantages are that the Title 14 Guardianship is more costly and a family member
or other person must be willing to take responsibility. In addition, it may be more
difficult to hook-up with services provided throught Value Options or other public
regional behavioral health authorities.
X Public Benefits Planning in Single Transaction/Conservatorship Proceedings
-Chester B. McLaughlin, JD and Bridget Swartz, JD
A. Special Needs Trusts: Establishment and Administration
A ward of the court under guardianship or conservatorship, or proposed ward, who
has limited resources and income may qualify for needs-based public benefits. These
benefits include acute care Medicaid (AHCCCS in Arizona), a type of public medical
insurance for the indigent, or long term care Medicaid (Arizona Long Term Care
System (ALTCS) in Arizona), which pays for the overwhelming cost of long term
care in the home or in a variety of residential placement settings, including many
nursing homes. The ward may also be receiving Supplemental Security Income from
the Social Security Administration.
In some instances these benefits can be preserved even if the ward has assets
or income that exceed the financial eligibility requirements of the program. The
federal law has carved out exceptions, allowing a disabled person to qualify for
benefits while preserving assets in a trust if certain requirements are met. A trust for
a disabled person under age 65 for example, which is most frequently used to shield
personal injury settlements, is specifically authorized pursuant to 42 USC § 396 p (d)
(4)(A). The requirements for this trust are more specifically set forth in Bridget
Swartz’ materials included in this outline. For ALTCS, the rules governing the
treatment of distributions from these trusts are set forth in A.R.S. § 36-2934.01. The
Social Security Administration also recognizes these trusts for the purposes of
qualifying for supplemental security income benefits.
An income only trust, pursuant to 42 USC § 1396 p (d)(4)(B) allows an
individual who exceeds the income eligibility limit for ALTCS (concurrently
$1692/month for a single person) to qualify for benefits if the individual’s income
does not exceed the average cost of care for the county in which the person resides as
calculated by ALTCS (currently $4,027.61 in Maricopa County).
A pooled trust established in accordance with 42 USC § 1396 p(d)(4)(C) can
protect the assets of a disabled person of any age, but the trust must be established
and managed by a non-profit association. A separate account is maintained for each
beneficiary of the trust and the accounts are pooled for investment and management
purposes. The Medicaid transfer penalties (a period of disqualification from benefits)
will apply to any transfers to these trusts, unless the trust also meets all the
requirements of a (d)(4)(A) trust. This trust may be appropriate for use by private
fiduciaries where assets are being “spent down” in a nursing home assuming there are
no interested beneficiaries, even if the conservator has to wait out a penalty period
before applying for benefits.
If the ward is incapacitated often the only way these three trusts can be
established is through court approval (a power of attorney is only sufficient for the
income only trust). The petitioner should request approval of the trust through the
court’s single transaction authority pursuant to A.R.S. § 14-5409, and ask the court to
appoint the proposed appointee as “special conservator” to execute the trust.
Normally the court will require the trust assets to be bonded for or restricted in the
same manner as conservatorship assets.
FOR PRINTERS INFORMATION ONLY: ORDER OF MATERIALS
X. PUBLIC BENEFITS PLANNING
Bridget Swartz’ materials
Law Offices of Chester B. McLaughlin
4545 E. Shea Blvd. Suite 173
Phoenix, Arizona 85028
B. ALTCS Planning: Court-Approved Transfers, Including Protecting the Ward’s Home
from Estate Recovery
1. Transfers for ALTCS Eligibility
If an individual is “spending down” his assets on long term care expenses,
ALTCS planning (gifting assets) should be considered, particularly if the
individual has expressed an interest in preserving assets for his devisees/heirs.
In addition, court-approved gifting can also preserve assets for the person in
need of care, assuming the donees to whom the assets are gifted hold the
funds for the person’s benefit. There are, of course, no guarantees they will
do so. Any gifting for ALTCS qualification must be disclosed to ALTCS if
done within 3 years of the application or within 5 years, if transfers to an
irrevocable trust have been made. A penalty is calculated for any disclosed
gifts equivalent to one month of disqualification from the ALTCS program for
every approximately $4,000 gifted. The penalty runs from the date of the gift.
There is plenty of authority for court-approved gifting. A.R.S. § 14-5409(A)
and (C) authorize the court to transfer property to achieve any secondary or
care arrangement to meet the foreseeable needs of a person in need of
protection. More specifically, pursuant to A.R.S. § 14-5408 (4), the court may
authorize gifts on behalf of an unprotected person out of her estate to donees
in amounts that are consistent with the protected person’s best interest and
intentions. A.R.S. § 14-5408(4) lays out other considerations for the court in
determining whether court approved gifting is appropriate. Other state courts
including those in Florida, New York, Wisconsin and New Jersey have found
that guardians may engage in Medicaid planning for a ward when such
planning is in the best interest of the ward and would carry out the ward’s
probable acts if the ward were competent to address the situation. Matter of
Conservatorship of F.E.H., 154 Wis 2d 576; 453 N.W. 2d 882 (Wis 1990);
Matter of Labis, 314 N.J. Super. 140; 714 A.2d 335 (N.J. 1998); Matter of
John XX, 226 A.D. 2d 79; 652 N.Y.S. 329 (N.Y. 3d Dept 1996); Rainey v.
Mackey, 773 So. 2d 118 (Fla.App. 4 Dist. 2000). In addition, in Guardianship
of Connor, 170 Ill. App. 3d 759, 525 NE 2d 214 (Ill. 1988), an Illinois court
ruled that a guardian has a fiduciary duty to investigate “Medicaid planning.”
Ideas of equal protection and inherent fairness require that wards be allowed
the same opportunities to engage in Medicaid planning as those who are able
to act for themselves. Matter of Labis, 314 N.J. Super. 140; 714 A2d 335 (NJ
1998); Matter of Baird, 167 Misc 2d 526; 634 N.Y.S.2d 971 (NY 1995).
Gifting to an irrevocable trust approved by the court, although causing a five-
year look-back period, can provide creditor protection, preservation of the
estate plan, and income tax advantages. The trust allows for income to be
distributed to the ward but not principal. Principal can be distributed to
children or others who presumably could use the funds for the ward’s benefit.
2. Transfer of the Home to Avoid ALTCS Estate Recovery
When an individual is on the ALTCS program and is single, his or her interest
in the personal residence is subject to “estate recovery” by the ALTCS
program when the person dies in an amount equal to the cost incurred by the
ALTCS program in providing care to the individual during the individual’s
life time.
To avoid estate recovery the house can be transferred to someone else.
However, there are several problems with this approach. First, the A/R may
not be competent to execute a deed. Second, the uncompensated transfer will
cause a period of disqualification from the program unless the property is
transferred to a spouse, which is an exception to the rule. Third, the heirs will
lose the step up in tax basis on the property they would have had if the
property had been inherited when the A/R died.
There are three alternatives to an outright transfer: Joint tenancy with right of
survivorship with a non-spouse, a beneficiary deed or the life estate with
retained powers deed.
A joint tenancy deed will cause a transfer penalty based on 50% of the tax
assessed value of the property if the joint tenancy is with one other person.
Also, if the other person dies first the property will come back into the A/R’s
estate.
The beneficiary deed does not convey a present interest in the property so
there is no transfer penalty. The A/R also does not have to be concerned
about loss of control over the house and a step-up in tax basis is maintained.
Early indications are this deed will work if done prior to the individual
obtaining ALTCS benefits.
The last possibility is the life estate deed with a retained power to sell in the
grantor and a remainder interest to the named remainder beneficiary. Doing a
normal life estate deed conveys the remainder interest which has a fair market
value, and the deed results in an uncompensated transfer based on the
remainder interest valued according to the ALTCS tables. However, if the life
estate holder retains the power to sell, no interest has been conveyed
according to ALTCS. (MS 906.44.B.1.c.iii) This deed retains a step-up in
basis, avoids probate and presumably, estate recovery, and does not result in a
transfer penalty.
The planner however now needs to be careful about advising the client about
the risks of doing these deeds. Pursuant to A.R.S. §14-6102 non-probate
assets can be pulled into a probate to satisfy a creditor’s claim. There is a
concern (although it hasn’t been done to date) that ALTCS as a creditor could
initiate a probate and attempt to pull into the probate a beneficiary, joint
tenancy or life estate deed. The life estate deed and joint tenancy deeds might
provide more protection in that a present interest has arguably already been
conveyed reducing the value of the remaining interest subject to the claim. In
addition, with the life estate deed, it is difficult to conceive what value the life
estate interest has when the person has already died!
A greater concern is that ALTCS has recently argued in one case where a life
estate deed with retained powers was done when someone was already on
ALTCS and dying, that executing the deed was a fraudulent conveyance to
avoid a creditor in violation of A.R.S. §44-1004. This is currently being
litigated and it is unknown whether ALTCS will attempt to apply this
approach in other cases on a broader basis. Therefore it is questionable
whether any of these deeds would be effective if done to avoid ALTCS as a
creditor, although it appears ALTCS only makes the claim of fraudulent
conveyance if the person was already on ALTCS at the time the deed was
done. For a married couple, the deed perhaps with the best chance is a
separate property deed to the community spouse from a competent A/R. There
is no penalty for this transfer. The community spouse can then disinherit the
ward or establish a testamentary trust for the A/R’s benefit, to avoid the ward
inheriting the house.
Courts in other states have granted authority to transfer the ward’s residence
in order to protect the property from estate recovery. See Matter of Labis, 714
A2d 335 (1998), Matter of Baird, 634 N.Y.S.2d 971(1995), and Matter of the
Guardianship of F.E.H., 154 Wis. 2d 576 (1990). In considering the factual
circumstances of the case, the courts relied on the standard of substituted
judgment and determined whether the transfer was in the best interest of the
ward, specifically whether the transfer would benefit the ward, his estate, or
members of his immediate family. In Matter of Labis, the court noted that
ideas of equal protection and inherent fairness require that an incompetent
individual should be allowed the same opportunities to engage in Medicaid
planning as those who are able to act for themselves.
FOR PRINTERS INFORMATION ONLY: ORDER OF MATERIALS
XI. Alicia Gray’s materials
XII. Court Commissioners’ materials
XIII. Table of Contents for Exhibits, and then Exhibits
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