2016 Arizona Probate and Elder Law Legislation Updates
By Kent Berk on February 8th, 2016 in Elder Abuse, Elder Law, Estate Litigation, FINANCIAL EXPLOITATION, LITIGATION, Probate, PROBATE LITIGATION
During the 2016 State of Arizona Fifty-second Legislature Second Regular Session, the House of Representatives has proposed three bills and the Senate has proposed one bill with proposed amendments to Arizona’s elder laws. The proposed revisions involve powers of attorney, claims for financial exploitation under Arizona’s Adult Protective Services Act, A.R.S. 46-451 etc. and guardianships.
Powers of Attorney
A.R.S. § 14-5501 sets forth, among other things, the requirements to create a valid durable power of attorney in Arizona. Basically, a “durable” power of attorney is one that either (a) stays in effect notwithstanding that the principal (the one granting the power) becomes incapacitated or disabled or (b) becomes effective when and if the principal becomes incapacitated or disabled.
Pursuant to A.R.S. § 14-5501(B), the intent to create a durable power of attorney may be expressed by the following or similar language in the power of attorney:
1. “This power of attorney is not affected by subsequent disability or incapacity of the principal or lapse of time.”
2. “This power of attorney is effective on the disability or incapacity of the principal.”
House Bill 2394 includes one proposed substantive amendment to A.R.S. § 14-5501. If approved, the Bill would add Subsection F to the statute and require that, in addition to the other requirements, powers of attorney must include a warning notice to the agent and a space for the agent to initial acknowledging that the agent has read the warning. Specifically, proposed Subsection F would require:
F. IN ADDITION TO THE OTHER REQUIREMENTS OF THIS SECTION, A POWER OF ATTORNEY MUST CONTAIN A NOTICE IN SUBSTANTIALLY THE FOLLOWING FORM AND A SPACE FOR THE AGENT TO INITIAL TO INDICATE THAT THE AGENT HAS READ THE FOLLOWING LANGUAGE:
BY ACCEPTING THE RESPONSIBILITY AS AGENT UNDER THIS POWER OF ATTORNEY, I UNDERSTAND THAT:
1. AN AGENT IS SUBJECT TO SPECIFIC DUTIES UNDER ARIZONA STATUTES THAT GOVERN THE EXERCISE OF AUTHORITY UNDER A POWER OF ATTORNEY.
2. A PERSON IN A POSITION OF TRUST AND CONFIDENCE TO A VULNERABLE ADULT, INCLUDING AN AGENT DESIGNATED IN A POWER OF ATTORNEY, MUST USE THE VULNERABLE ADULT’S ASSETS SOLELY FOR THE BENEFIT OF THE VULNERABLE ADULT.
3. FAILURE TO CARRY OUT THESE DUTIES MAY SUBJECT AN AGENT TO CIVIL PENALTIES UNDER SECTION 46-456, ARIZONA REVISED STATUTES, OR CRIMINAL PENALTIES UNDER TITLE 13, ARIZONA REVISED STATUTES.
This proposed amendment really does not change anything in the law. Agents under powers of attorney are almost always acting in a position of trust and confidence to the principal, such that the agent is required to comply with A.R.S. § 46-456. So, in my view, the proposed amendment is just a way of reinforcing the current law and giving explicit notice to the agent that he/she must use the vulnerable adult’s assets solely for the benefit of the vulnerable adult.
However, the proposed amendment will, in my view, create unintended problems. The warning notice to the agent is incomplete and inconsistent with Arizona’s financial exploitation statutes. Arizona’s financial exploitation statute provides certain exceptions to the rule that the fiduciary use the vulnerable adult’s assets solely for the benefit of the vulnerable adult, None of the exceptions are described in the warning notice proposed in HB 2394. Thus, the notice provided for in the HB2394 proposed amendment to Section 14-5501 will create an inconsistency and potential confusion regarding the agent’s duties. Most importantly, the warning may prevent fulfillment of the principal’s true wishes.
For example, A.R.S. §§ 46-451(D), 46-456(A) & (J)(3); and 13-1802(C) contain the following 6 exceptions to the rule that the person in a position of trust and confidence (such as an agent under a power of attorney) use the vulnerable adult’s assets solely for the benefit of the vulnerable adult:
- The Superior court gives prior approval, finding that the transaction is for the benefit of the vulnerable adult;
- The transaction is specifically authorized by the adult in a valid durable power of attorney or a valid trust
- The transaction is required in order to obtain or maintain eligibility for Arizona’s medicaid program, AHCCCS [A.R.S. § 36-2901 et. seq.]
- The person in the position of trust to the vulnerable adult is the adult’s spouse and the transaction furthers the interest of the marital community, including applying for benefits pursuant to title 36, chapter 29 or for supplemental security income, medicare or veterans’ administration programs.
- The transaction is consistent with the clearly stated wishes of the vulnerable adult found by the court to be made without coercion and while the vulnerable adult was of sound mind; or
- The transfer is given as a gift, which is consistent with a pattern of gifting before the adult principal became vulnerable.
Just taking, for example, the second exception from the list, the power of attorney may specifically provide for the agent to make a transfer or engage in a transaction that is not solely for the benefit of the vulnerable adult. But, the required warning will specify that the agent must only use the vulnerable adult’s assets for the benefit of the vulnerable adult, or face civil or criminal liability. As a result, agents may decline to exercise otherwise proper authority specifically granted in the power of attorney. If so, the fundamental purpose of probate law – to ascertain and give full force and effect to each person’s true wishes, will be frustrated or destroyed. At a minimum, the proposed amendment will create confusion and inconsistency in the law, thus likely leading to more litigation.
The problem with HB 2394 can be easily resolved. I suggest simply revising the Subsection 2 of the proposed warning notice to provide:
2. A person in a position of trust and confidence to a vulnerable adult, including an agent designated in a power of attorney, must use the vulnerable adult’s assets solely for the benefit of the vulnerable adult, UNLESS ONE OF THE EXCEPTIONS TO THE “SOLE BENEFIT” REQUIREMENT ARE MET.
It will be interesting to see whether the Arizona legislature adopts, revises or rejects the amendment to Section 14-5501 proposed in HB 2394.
Indeed, another proposed amendment, House Bill 2576, would accomplish the same purpose of HB 2394 without creating the inconsistencies and problems presented by HB 2394. Like HB 2394, HB 2576 would also require durable powers of attorney to include a warning notice to agents. But, the warning notice that would be required in new subsection (F) of A.R.S. § 14-5501 under HB 2576 would simply state that:
F. IN ADDITION TO THE OTHER REQUIREMENTS OF THIS SECTION, A POWER OF ATTORNEY MUST CONTAIN A NOTICE THAT BY ACCEPTING AUTHORITY UNDER THE POWER OF ATTORNEY THAT THE AGENT IS SUBJECT TO SPECIFIC DUTIES UNDER STATE LAW THAT GOVERNS THE EXERCISE OF AUTHORITY UNDER A POWER OF ATTORNEY, WHICH MAY INCLUDE DUTIES TO A VULNERABLE ADULT UNDER SECTION 46‑456. THE POWER OF ATTORNEY SHALL INCLUDE A SPACE FOR THE AGENT TO INITIAL TO INDICATE THAT THE AGENT HAS READ THE NOTICE. AN AGENT IS NOT RELIEVED OF CRIMINAL LIABILITY UNDER SECTION 13-1802 OR 13-1815 SOLELY BECAUSE THE POWER OF ATTORNEY DOCUMENT DOES NOT CONFORM TO THE REQUIREMENTS OF THIS SUBSECTION.
This warning notice is consistent with Arizona’s financial exploitation statute and would avoid the confusion presented by HB 2394.
HB 2576 also includes a proposed new section, A.R.S. § 14-5508, which would provide for liability of an agent under a power of attorney:
A. AN AGENT IS LIABLE TO THE PRINCIPAL FOR DAMAGES IF THE AGENT, WITHOUT LAWFUL AUTHORITY, KNOWINGLY TAKES CONTROL, TITLE, USE OR MANAGEMENT OF THE PRINCIPAL’S PROPERTY WITH THE INTENT TO DEPRIVE THE PRINCIPAL OF THE PROPERTY. PROOF THAT AN AGENT TOOK CONTROL, TITLE, USE OR MANAGEMENT OF THE PRINCIPAL’S PROPERTY WITHOUT ADEQUATE CONSIDERATION TO THE PRINCIPAL MAY GIVE RISE TO AN INFERENCE THAT THE AGENT INTENDED TO DEPRIVE THE PRINCIPAL OF THE PROPERTY.
B. IF IN A CIVIL ACTION BROUGHT BY OR ON BEHALF OF A PRINCIPAL THE COURT FINDS THAT THE AGENT HAS VIOLATED THIS SECTION, THE COURT SHALL AWARD THE PRINCIPAL ACTUAL DAMAGES AND REASONABLE COSTS AND ATTORNEY FEES, AND THE COURT MAY AWARD ADDITIONAL DAMAGES IN AN AMOUNT UP TO TWO TIMES THE AMOUNT OF THE ACTUAL DAMAGES.
Proposed section 14-5508 is consistent with A.R.S. § 13-1802(B).
A.R.S. § 46-456(A) requires a person who is in a “position of trust and confidence” to a vulnerable adult to use the adult’s assets solely for the benefit of the adult unless an exception applies. Section 46-456(J)(5) defines “position of trust and confidence” for purposes of Arizona’s financial exploitation statutes:
5. “Position of trust and confidence” means that a person is any of the following:
(a) A person who has assumed a duty to provide care to the vulnerable adult.
(b) A joint tenant or a tenant in common with a vulnerable adult.
(c) A person who is in a fiduciary relationship with a vulnerable adult including a de facto guardian or de facto conservator.
(d) A person who is in a confidential relationship with the vulnerable adult. The issue of whether a confidential relationship exists shall be an issue of fact to be decided by the court based on the totality of the circumstances.
(e) A beneficiary of the vulnerable adult in a governing instrument.
HB2394 and HB 2576 would add a subsection (f) to A.R.S. § 46-456(J)(5) and include “AN AGENT UNDER A POWER OF ATTORNEY OF WHICH A VULNERABLE ADULT IS PRINCIPAL” as a person in a position of trust and confidence for purposes of Arizona’s financial exploitation statute.
This amendment, in my view, is not necessary, since subsection (d) includes “A person who is in a confidential relationship with the vulnerable adult.” Certainly, an agent under a power of attorney is in a confidential relationship with the principal/vulnerable adult. But, the amendment would clarify and reinforce that an agent under a power of attorney is required to comply with the standards in A.R.S. § 46-456.
Senate Bill 1102 includes a couple of amendments to Arizona’s guardianship statutes.
First, SB 1102 would add a new subsection (C) to A.R.S. § 14-5312, which sets forth the guardian’s general powers and duties. The new section would impose new duties on guardians:
C. A GUARDIAN SHALL MAKE GOOD FAITH EFFORTS TO MAINTAIN THE WARD’S HISTORICAL RELATIONSHIPS AS EVIDENCED BY PAST PATTERNS AND PRACTICES AND ENSURE THAT THE WARD HAS REASONABLE ACCESS TO FAMILY AND FRIENDS.
Second, SB 1102 would add a new section, A.R.S. § 14-5316, requiring the guardian to give notice to family members of an adult ward’s hospitalization or death:
A. A GUARDIAN SHALL NOTIFY THE FAMILY MEMBERS OF AN ADULT WARD IF EITHER OF THE FOLLOWING OCCURS:
1. THE ADULT WARD IS ADMITTED TO A HOSPITAL FOR A PERIOD OF MORE THAN THREE DAYS.
2. THE ADULT WARD DIES. THIS NOTIFICATION SHALL INCLUDE INFORMATION ABOUT ANY FUNERAL ARRANGEMENTS AND THE PLACE OF BURIAL.
B. FOR THE PURPOSES OF THIS SECTION, “FAMILY MEMBERS” MEANS:
1. THE ADULT WARD’S SPOUSE.
2. THE ADULT WARD’S PARENTS.
3. ALL THE ADULT CHILDREN OF THE ADULT WARD.
4. ANY PERSON WHO HAS FILED A DEMAND FOR NOTICE.
5. IF NO PERSON LISTED UNDER PARAGRAPH 1, 2, 3 OR 4 OF THIS SUBSECTION CAN BE NOTIFIED, AT LEAST ONE OF THE ADULT WARD’S CLOSEST ADULT RELATIVES, IF SUCH AN ADULT RELATIVE CAN BE FOUND.
Berk Law Group is Here to Help
If you have questions regarding powers of attorney, financial exploitation of a vulnerable adult or guardianships in Arizona, please do not hesitate to contact our Arizona probate and elder law attorneys.