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Arizona Probate Trust Estate & Elder Law Disputes

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Adopted, But Not Disinherited – An Example of Arizona Intestacy

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On January 13, 2022, the Arizona Court of Appeals provided an excellent illustration of intestate succession when it decided In the Estate of Dougherty. In doing so, the Court also clarified when an adopted person may inherit through their birth parents. While this decision does not provide some new, earth-shattering precedent, it does hammer down Arizona’s intestate succession procedure when the decedent’s descendants are the only surviving heirs.

When someone dies without a will, or other estate plan, that person has died “intestate.” Intestate succession is the statutory process for distributing an intestate decedent’s estate. Arizona has a comprehensive intestate succession process, which Dougherty discusses at length.

In Dougherty, Klifton Hoyer was the decedent, Verle Dougherty’s, natural grandson. Verle died intestate and had 3 children: Steven, Larry, and Lorna. Larry and Lorna predeceased (died before) Verle. Larry left four surviving heirs and Lorna was survived by Klifton, who had been adopted by his step-mother as a child. Steven served as personal representative of the Estate.

The Appellate Court was asked to solve the question of how much of Verle’s estate Klifton was entitled to receive. It answered by affirming the probate court’s ruling that Klifton was entitled to 2/15 of Verle’s Estate instead of 1/3 as argued by Klifton. This Article will discuss Dougherty, its implications, and provide some key takeaways.

The Probate Court issues an Inheritance Order determining Klifton has a right to inherit from his birth mother.

At the case’s outset, the probate court first had to resolve the question of whether Klifton could inherit as an intestate heir. Steven, as personal representative, petitioned the probate court to issue an order determining whether Klifton was entitled to inherit through his mother, Lorna, because Klifton was adopted. The probate court ruled Klifton was entitled to inherit through Lorna as a matter of law.

Klifton’s step-mother was married to his natural father. Arizona law allows adopted children to, “inherit from or through” both natural and adoptive parents, when the child is adopted by a stepparent spouse of a birth parent.  A.R.S. § 14-2114(B). In an attempt to comply with the statute, the probate court issued an inheritance order stating that, “[Klifton] is entitled to inherit the share of his mother, [Lorna], in the intestate [e]state of [Verle].”

The motion to clarify the inheritance order.

A year after the inheritance order was issued entitling Klifton to inherit, the issue became one of quantification. Steven, as personal representative, filed a motion to clarify the inheritance order and for a determination of the share to be distributed to Klifton.

Klifton argued that the court’s language in the inheritance order meant he was entitled to the same share Lorna would inherit if she were alive, which was 1/3 of Verle’s Estate. In response, Verle’s Estate—joined by Larry’s four children—argued the inheritance order’s language deviated from Arizona’s intestate succession laws. As such, Klifton could not inherit 1/3 of the Estate, but was entitled to only a 2/15 share.

The Probate Court clarifies Arizona’s intestate succession scheme.

In Arizona, when a decedent is survived only by their descendants, their intestate estate passes to the descendants by representation per capita at each generation. A.R.S. § 14-2106. If a predeceased descendant has surviving issue, then the remaining shares are combined and distributed in the same manner at the next generation.

For example, if Larry, Lorna, and Steven were all alive when Verle died, then they would each be entitled to a 1/3 intestate share. Since Larry and Lorna predeceased Verle and were represented by surviving descendants, their shares are combined and then divided equally per capita among the surviving descendants at the next generation. This means that 2/3 of Verle’s Estate is divided among Larry’s four children and Klifton equally, which entitled Klifton to a 2/15, or 13.33% share of Verle’s Estate. See Figure 1 below for an illustration of by representation per capita distribution as applied to the Dougherty Estate.

In accordance with these rules, the probate court ruled on Steven’s motion to clarify, specifying that Klifton is entitled to a 2/15 share. In doing so, the court chastised the inheritance order’s language and rejected Klifton’s interpretation of it. Notably, the court declined to adopt an ‘“interpretation … that is not allowed under the law.’” Klifton then appealed.

Ambiguous inheritance orders must be interpreted in accordance with the law.

Klifton wanted 1/3 of Verle’s Estate. The chief issue in Dougherty was whether the inheritance order stating that, “[Klifton] is entitled to inherit the share of his mother, [Lorna], in the intestate [e]state of [Verle],” was consistent with Arizona law. Upon plain reading of the inheritance order, it could be implied that the probate court ruled that Klifton could inherit Lorna’s 1/3 share. And that was what Klifton argued. While admitting the order was ambiguous, the Appellate Court rejected that argument and held that inheritance orders must be interpreted in alignment with Arizona’s probate laws. Specifically, the court interpreted the order to mean that the “inheritance order most plausibly meant that Klifton was entitled to inherit through his mother, by representation.”

As mentioned above, Arizona follows a ‘by representation per capita’ system to distribute intestate estates if there are only surviving descendants. Klifton essentially argued for a per-stirpes structured distribution to support his position that he was entitled to a 1/3 share of Verle’s Estate. In contrast to Arizona’s well-defined per representation system, under per stirpes, a surviving descendant is entitled to inherit the entire portion that would have gone to their ancestor, in this case Klifton’s mother, Lorna.

Klifton also argued that the initial judge who issued the inheritance order intended to convey him a share different than what he was entitled to under Arizona law. He posited that the order was not ambiguous because it did not cite the statute that defines “by representation.” As a result, he argued the judge did not want the personal representative to follow that statutory scheme.

The Appellate Court held that the probate court correctly ruled on Steven’s motion to clarify the inheritance order that Klifton was entitled to a 2/15 share of Verle’s Estate. The court further ruled the inheritance order provided a guide for the personal representative to calculate Klifton’s share rather than an order specifying what share Klifton, in fact, was entitled to receive. Elaborating on its conclusion, the court noted that it is not the probate court’s duty to list every single statute that may be applicable in administering estates.

Appeals must have merit.

Notably, the Appellate Court issued sanctions against Klifton for asserting a meritless position on appeal. An appellate court may issue sanctions if an appeal is filed that “any reasonable attorney” would believe “is completely without merit.”

Klifton had no legal basis for his appeal. When asked by the probate court, Klifton’s counsel admitted that the only basis for its position that Klifton was entitled to 1/3 was that the inheritance order stated that Klifton was entitled to inherit “the share of his mother,” without any other good-faith basis to support its position. Ironically, the Appellate Court pointed out that Lorna was not entitled to anything because she predeceased Verle and that a literal interpretation of the inheritance order’s language would render Klifton with no inheritance.

Key Takeaways From Dougherty:

  • The Dougherty opinion is a memorandum decision, not a published opinion, so it has limited precedential effect.
  • Arizona Court of Appeals clarifies the bounds of when an adopted child may inherit through a natural parent.
  • Attorneys representing clients in probate litigation must interpret orders in accordance with corresponding statutory law.
  • Arizona intestate succession follows a representation per capita at each generation system to determine distributive shares of an intestate estate.
  • Appeals must have merit.

 

Court of Appeals gives little guidance in Adult Protective Services Act Statute of Limitation Case

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On August 10, 2021, the Court of Appeals issued its decision in In Re Norvelle.  The case offers some interesting lessons, although it gives us very little guidance on the issue we have been waiting for the Court to address – what constitutes “actual discovery of the cause of action?”  Read our statutes of limitation article for an introduction to statutes of limitation in financial exploitation, abuse and neglect cases.

In Norvelle, Sisters sued their Brother for allegedly financially exploiting their Father.  Father had suffered a stroke in 2012.  Due to Father’s impairments, Brother moved in with Father to assist him until Father died in 2016.  The parties seem to have agreed that Father was a vulnerable adult, entitled to protection of Arizona’s Adult Protective Services Act.

In 2017, Brother’s attorney sent Sisters a letter informing them of the status of the Father’s trust, disclosing that it only held assets worth about $196,000 and that other unidentified assets had been transferred outside of the trust.  The value of the trust was substantially less than what Sisters expected.

Sisters were concerned that Brother had taken financial advantage of Father.  So, in July 2017, Sister’s attorney sent a letter to Brother’s attorney detailing their concerns and demanding further disclosure of information and documents.  Crucially, “Brother’s counsel responded in a letter dated August 24, 2017. It set forth the details of all Father’s assets, including the amounts of each account and insurance policy, and what had been transferred to [Brother] upon Father’s death. Sisters concede that they received this letter, but they did not respond.”

Brother evenly distributed the balance of the trust assets among the beneficiaries, including Sisters.  Although it appear that he was not required to do so, Brother also undertook to distribute the assets that he received outside of trust among all of the beneficiaries and made appropriate distributions to most beneficiaries, but stopped making payments to one of them when the Sisters started  legal proceedings against him.

Later, in January 2019, after all of the lump sum payments had been made, Sister’s counsel again wrote to Brother’s counsel, “repeating their concerns and demanding an accounting and distribution schedule for Father’s remaining assets.”  Brother’s counsel responded that there would be no additional payments since all assets had been distributed.

On July 15, 2019, Sisters filed a “Petition for Leave to File a Financial Exploitation Claim.”  Sisters had to request permission to file their complaint for financial exploitation because they did not have automatic standing to do so without the Court’s advance permission.  Read more about standing.

On October 8, 2019, the Court granted Sister’s Petition for Leave.  They filed their Complaint on December 5, 2019.

Presumably after they conducted  some discovery, in September 2020, Brother asked the trial court to summarily dismiss Sister’s Complaint.  He argued that it was filed beyond Arizona’s two-year statute of limitation.  Although Sisters responded to that motion, they did not oppose Brother’s statement of facts.  They also failed to provide any evidence showing that there was a disputed fact requiring trial as to whether they “actually discovered the cause of action” more than two years before they filed their Complaint.

The Trial Court found for Brother and dismissed the case

The trial court agreed with Brother and dismissed the Complaint.  The court found that the August 24, 2017 letter from Brother’s counsel started the running of the two-year period.  The trial court  made two “adjustments” before concluding that the two-year period began running no later than September 1, 2017:

First, the court added mailing time following the date that the August 24, 2017 letter was mailed.  As such, the court found that the two year period started running on September 1, 2017.

Second, the trial court “equitably excluded” from the calculation of the period a total of 47 days from July 15, 2019 (when Sisters filed their Petition for Leave) and October 8, 20219 (the date that the court granted that Petition and gave Sisters permission to file their Complaint).  The Court of Appeals did not address whether this equitable exclusion was proper, since it was irrelevant to the determination of that case – Sisters’ Complaint was untimely even with the benefit of the additional 47 days.

As such, the court found that the statute of limitation expired on November 25, 2019.  However, Sisters did not file their Complaint until December 5, 2019, after the limitation period expired. Therefore, the court dismissed the Sisters’ Complaint.  Sisters appealed.

The Court of Appeals Affirmed the Trial Court

First, Sisters argued that there was a disputed question over when Sisters had “actual knowledge” of their claim, such that the court was required to hold a trial.  However, at the hearing on summary judgment, the court “expressly asked Sisters’ counsel to confirm that the August 2017 letter was ‘the triggering date for [the] statute because at that point you knew everything you needed to know.'”  The Sisters’ attorney agreed.

Given the Sisters’ agreement that they had actual knowledge of their causes of action when they received the August 2017 letter, the trial court concluded that they had “sufficient notice of the basis of their claim not later than August 31, 2017.”

Second, Sisters argued that they initiated their lawsuit by filing their Petition for Leave in July 2019, within the two year period.  The trial court and Court of Appeals rejected that argument.

A claim for financial exploitation is asserted through a civil action.  A.R.S. §§ 46-455(K) and 46-456(B).  In turn, civil actions are governed by the Arizona Rules of Civil Procedure.  The Rules provide that Civil actions are initiated by the filing of a complaint with the court.

So, the filing of Sisters’ Petition for Leave did not constitute the initiation of a civil action.  The filing date of the Complaint, not the Petition, was the relevant date to determine whether Sisters filed within the two year statute of limitation.  Sisters filed their Complaint after the adjusted two year period expired.  As such, the Court of Appeals affirmed the trial court and found in favor of Brother.

Unfortunately, the Court of Appeals did not delineate, in general, what information will constitute “actual discovery of the cause of action” to trigger the statute of limitation.  The Court just found that the information Sisters received was sufficient to be actual discovery and start the clock running in that case.

The Court also did not identify who must have “actual knowledge” to start the time.  Typically, the statute of limitation begins running under the “discovery rule” when the plaintiff knows or with reasonable diligence should have known about the claim.  But that can get tricky when dealing with claims on behalf of vulnerable adults.  They often do not know that they have been abused, neglected or exploited and certainly do not typically have the ability or resources to hire an attorney to prosecute an action.  So, someone else (such as an agent under a power of attorney or conservator) will pursue the action on behalf of the vulnerable adult.  Does the statute of limitation for such claims start when the victim (the vulnerable adult) or the person who is bringing the claim on behalf of the vulnerable adult has “actually discovered the cause of action”?  We currently do not know the answer to that question.  The Arizona Adult Protective Services Act does not specify.  The Norvelle Court did not address that issue.  Rather, the Court implicitly accepted that it was Sisters’, not Father’s, actual discovery of the cause of action that began the two year period in that case.

In Re Norvelle Takeaways

The Norvelle opinion is a memorandum decision, not a published opinion, so it has limited effect.

But, it still provides some helpful takeaways:

  • If you are or you represent the trustee, personal representative or other person being accused of exploitation, providing full disclosure, like Brother, may trigger the running of the limitation period.
  • The date of filing a complaint for exploitation, not the date of filing a petition for leave, will likely be the date for the court to determine whether the claim was timely filed.
  • However, the court may equitably stop the running of the statute of limitation from the date of filing any petition for leave until the date that the petition is granted.
  • If you have a basis to do so, fully respond to any motion and provide a proper list of contested facts and supporting evidence.
  • What constitutes “actual discovery of the cause of action” has not been defined.
  • The Court has not identified “who” must actually discover the cause of action.

Our Firm is Here to Help

If you have any questions about claims for financial exploitation or abuse/neglect of vulnerable adults in Arizona, including the statutes of limitation, please don’t hesitate to contact us.  Our experienced caring attorneys are here to help.

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Kent Berk to Present at Arizona Fiduciary Association Fall Workshop

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Probate Attorney Kent Berk - Berk Law Group, P.C.Scottsdale, Arizona probate and elder law attorney Kent S. Berk will present a seminar at the 2021 Arizona Fiduciaries Association Fall Workshop.  Kent will co-present Scams & Exploitation of Elderly/Vulnerable Persons with Courtney Bennett from the Arizona Attorney’s General Office.

Topics will include:

  • Purposes & Construction of the Adult Protective Services Act
  • Who is Protected?
  • Who is subject to the Act?
  • Standard of Care and Exceptions
  • Remedies
  • Reporting Obligations
  • Other issues, e.g. standing and statute of limitations

AFA Fall Workshop Information

When: October 22, 2021
8:00 AM – 4:00 PM

Location: The High Country Conference Center Flagstaff, 201 W Butler Ave
Flagstaff, AZ  86001; 928-523-9521

Click for more information and to register.

Please join Kent and Courtney for an interactive and lively discussion regarding claims and remedies for scams and exploitation of vulnerable adults.

Learn more about Kent.  Read about financial exploitation claims in Arizona.

Free to Leave: Interested Persons Pursuit of Financial Exploitation Claims

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Black and white photo of two people holding handsArizona’s Adult Protective Services Act, “APSA” for short, was adopted to expand the rights and claims to remedy abuse, neglect and financial exploitation of Arizona’s large population of vulnerable adults. Arizona courts are required to construe the statute broadly to protect vulnerable adults.  You can find a comprehensive discussion of financial exploitation claims here on our website.

In summary, there are four basic requirements to establish a claim for financial exploitation in Arizona pursuant to A.R.S. § 46-456(A):

  1. A person who is in a position of trust and confidence;
  2. To a vulnerable or incapacitated adult;
  3. Uses the vulnerable adult’s property for purposes other than the adult’s sole benefit; and
  4. There is no applicable exception that permitted the person in a position of trust and confidence to use the funds or other property other than for the vulnerable adult’s sole benefit.

There are many nuances to pursuing claims for financial exploitation.  One is the issue of “standing” – who may pursue a claim for financial exploitation? Read on to learn more!

Free to Leave: Interested Persons Pursuit of Financial Exploitation Claims

The Arizona Court of Appeals recently issued an opinion that clearly defines and provides direction to litigants and Arizona trial courts as to the determination of granting leave to interested persons to pursue a financial exploitation claim on behalf of a vulnerable adult or, if the vulnerable adult is deceased, the vulnerable adult’s estate. As a result of the Arizona Court of Appeals’ decision in In re Stephens Trust, — P.3d — (App. 2020), a trial court must grant a petition for leave when the petitioner demonstrates he/she is an interested person and that no one with a higher priority has or is likely to file a claim for financial exploitation on behalf of the vulnerable adult and/or their estate.

Who May Pursue Financial Exploitation Claims

Under A.R.S. § 46-456(G), the vulnerable adult, their conservator, or the personal representative of the vulnerable adults estate each have priority to pursue claims for financial exploitation. However, if “an action [for financial exploitation] is not filed by the vulnerable adult or the duly appointed conservator or personal representative of the vulnerable adult’s estate, any other interested person, as defined in section 14-1201, may petition the court for leave to file an action on behalf of the vulnerable adult or the vulnerable adult’s estate.”

Leave to Pursue Financial Exploitation Claim

One lingering question remained under subsection G of the statute for those desiring to petition a court for leave to pursue a financial exploitation claim – what must “any other interested person” prove in order for a court to grant permission to pursue a financial exploitation claim? The statute is silent on that issue.

In a matter of first impression, this question was addressed by the Arizona Court of Appeals in the recently published Stephens opinion. The appellant, Ms. Sona Heguy, filed a Petition for Leave to File Complaint of Financial Exploitation of a Vulnerable Adult (the “Petition”). Ms. Heguy filed the Petition to pursue a financial exploitation claim on behalf of her father Keith Stephens’ estate. Ms. Heguy was Mr. Stephens’ adult daughter, heir, and only surviving child from his first marriage.

Ms. Heguy attached a draft of the complaint to the Petition and in it, she alleged, among other things: Mr. Stephens suffered a stroke while vacationing abroad in 2011 and never fully physically recovered; Mr. Stephens was placed in a locked memory care unit at a senior living facility in 2013; several changes were subsequently made to a trust that included leaving his then-wife as sole trustee in 2014; and from 2014 through 2016, Mr. Stephens’ wife used trust funds to buy each of her children a home, fund European and Japanese vacations for her children, and pay off debts and other obligations of Ms. Heguy’s daughter.

The Pima County Superior Court denied the Petition. In doing so, the trial court ruled that Ms. Heguy “could not ultimately prevail on her claims” because the allegedly improper transactions were either authorized by Mr. Stephens’ trust or were for the benefit of his marital community and, thus, not actionable under A.R.S. § 46-456(A)(2) and (A)(4).

The Arizona Court of Appeals reversed the trial court’s decision, finding that the trial court’s denial of the Petition based upon the merits of the potential financial exploitation claim, and not whether Ms. Heguy was entitled to leave to pursue the same, was an abuse of  discretion.

The Court of Appeals conclusively established the “trial court’s proper role under § 46-456(G)” as follows:

[W]hen leave of court is sought to file a financial exploitation complaint, the court should determine whether the petitioner is an interested person under §§ 46-456(G) and 14-1201. If not, the court may summarily deny the petition…If the petitioner is an interested person under the statute, the court should determine whether another with priority to file an exploitation complaint—“the vulnerable adult or the duly appointed conservator or personal representative of the vulnerable adult’s estate”—has already filed or is likely to file such a complaint. § 46-456(G). If so, the court may summarily deny the petition. The court should not, as the trial court did here, address the merits of the proposed complaint; it should, solely for purposes of granting or denying leave to file the complaint under § 46-456(G), accept the factual allegations of the proposed complaint as true, and without regard to potential defenses.

(Internal citations omitted and emphasis added.)

So, under the simple standard set forth in Stephens, the Court’s role is limited to merely determining whether the petitioner is an “interested person” and, if so, whether anyone with priority has or will file the claim for exploitation.

A.R.S. § 14-1201(33) broadly provides that “’Interested person’ includes any trustee, heir, devisee, child, spouse, creditor, beneficiary, person holding a power of appointment and other person who has a property right in or claim against a trust estate or the estate of a decedent, ward or protected person. Interested person also includes a person who has priority for appointment as personal representative and other fiduciaries representing interested persons. Interested person, as the term relates to particular persons, may vary from time to time and must be determined according to the particular purposes of, and matter involved in, any proceeding.”

Effect on Litigation of Financial Exploitation Claims

Unfortunately, victims of financial exploitation are often unable to pursue financial exploitation claims on their own behalf as a result of any number of reasons, some which may include their own vulnerable condition, fear of retaliation by the wrongdoer, and/or because they have passed away before they could ever step foot inside of a courthouse. Further, and far too often, the alleged financial exploiter is the person who would otherwise have priority to pursue claims for financial exploitation (e.g., he/she is in a position to be and/or is actually acting as the vulnerable adult’s conservator or estate personal representative). Fortunately, with the Arizona Court of Appeal’s recent opinion in In re Stephenson Trust, vigilant individuals who qualify as “interested persons” now have a clear path to the eventual pursuit of financial exploitation claims on behalf of their loved ones.

If you have any questions about claims for financial exploitation of vulnerable adults in Arizona, please give us a call at 480.607.7900 or contact our office.

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Power to Control Disposition of Remains

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power to control cremation or burial in ArizonaThe death of a loved one is traumatic enough.  Disputes over the power to control the disposition of remains in Arizona only adds to the stress.  So, what happens when a person dies without leaving clear instructions for cremation or burial of his remains? Who gets to decide?

Ghostley- Decedent’s Remains In Purgatory

In the Matter of the Remains of James David Ghostley, Deceased, No. 2 CA-CV 2018-0197, January 22, 2020, these questions were the topic of a Division Two Arizona Court of Appeals decision.

After their son, Mr. Ghostley, died in 2018, his divorced parents disagreed about the proper disposition of his remains. Father filed a Petition in Pima County probate court to resolve the dispute. A hearing was held. A.R.S. § 32-1365.02(J) authorizes “a court of competent jurisdiction” to resolve disputes between persons listed in § 36-831(A) “concerning the right to control the disposition, including cremation, of a decedent’s remains.”

Testimony from the decedent’s girlfriend and his father indicated that the decedent had expressed his wishes to be cremated and his ashes spread in places he loved. Mother testified that she objected to cremation on religious grounds and, because they were very close, her son would not opt for cremation knowing it would cause his mother emotional torment. Another witness testified to the close relationship decedent had with his mother and that they both practiced the same religion that dictates burial and not cremation.

The Court ruled that decedent “wished to be cremated and that cremation is reasonable and that his wishes do not impose an emotional or economic hardship on any party.” The Court also ordered the cremains to be divided between father and mother. Mother appealed.

In its opinion affirming the probate court, the Court of Appeals looked to the Arizona Revised Statutes (ARS) governing who has the power to direct the disposition of human remains in Arizona. ARS § 36-831 lists the priority of who may act. First is a surviving spouse followed by “a person designated” by power of attorney. Section A.5 names the “dead person’s parents.”

Section D states: “If there is more than one member of a category listed in subsection A, paragraph 3, 4, 5, 6, 7, 8 or 9 of this section entitled to serve as the authorizing agent, final arrangements may be made by any member of that category unless that member knows of any objection by another member of the category. If an objection is known, final arrangements shall be made by a majority of the members of the category who are reasonably available.” In this case, there was no majority.

The Court of Appeals first addressed whether the Court had the power to referee the underlying dispute over whether Mr. Ghostley’s remains should be cremated or buried, or just decide who among those with equal priority should make that decision. The Court of Appeals concluded that various “broad language [in the statute], read in the context of the statutory scheme and the pertinent legislative history, authorizes trial courts to resolve the merits of underlying disputes between litigants of equal statutory standing.” Thus, the Court had the discretion to determine the decedent’s wishes, whether there was a relevant hardship and whether any hardship was sufficient to outweigh the decedent’s wishes.

The Court then looked to ARS § 36-831.01(A) which states: “If the person on whom the duty of burial is imposed pursuant to section 36-831 is aware of the decedent’s wishes regarding the disposition of his remains, that person shall comply with those wishes if they are reasonable and do not impose an economic or emotional hardship.”

Mother argued that the probate Court erred in finding that cremation would not result in “emotional hardship”. Looking at the statute giving priority to “the decedent’s wishes,” the Court found that a party’s distress concerning the disposition of a decedent’s remains “constitutes an emotional hardship only when it is sufficiently weighty to overcome the statutory presumption favoring a decedent’s wishes.” In other words, the decedent’s wishes are given priority. There, the Court of Appeals found that the trial Court did not abuse its discretion in finding that mother’s emotional distress did not outweigh the decedent’s wishes to be cremated.

Finally, mother argued that the probate court erred by not applying the common law right of sepulcher. The “right of sepulcher” dates back hundreds of years in common law. The right of sepulcher is the right to choose and control the burial, cremation, or other final disposition of a human body. The Court here ruled that the Arizona statute directly on point overrode any common-law doctrine to the extent that it varied from that doctrine.

The probate court granted mother’s motion to stay cremation pending resolution of the appeal. That means that the remains of Mr. Ghostley waited for disposition since October 2018. Unfortunately, the absence of any written directive of burial wishes allowed this dispute to continue, surely at substantial economic and emotional expense, for well over a year after Mr. Ghostley died.

Burial authority is frequently contained in a Durable Financial Power of Attorney; a Medical Power of Atorney, Healthcare Directive or a Living Will. Also, many religious organizations have prepared detailed language to include in these documents clearly stating their tenets regarding end of life and disposition of remains.

This case is just one more example of why it is important to hire a qualified estate planning attorney and ensure that you have all of your affairs in order. Berk Law Group handles all types of probate, estate and trust disputes and litigation, including burial and disposition disputes, but does not perform estate planning work. We can recommend various estate planning attorneys if you need a referral.

Learn more about the duties and powers to bury or cremate a decedent in Arizona.  If you have any questions about the power to control the disposition of a loved one’s remains in Arizona, please give us a call at 480.607.7900 or contact our office.

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Settlement Agreement Unenforceable if Not Signed by All Beneficiaries

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Estate Litigation Attorney | Scottsdale, AZSettlement agreements are an often used alternative to lengthy, expensive probate, trust and estate litigation and trial in Arizona. A settlement agreement is typically a binding agreement that usually disposes of the case without further litigation.

Under most circumstances, only parties to the agreement will be bound by the terms of a settlement agreement. This method of resolution may get sticky when the litigation involves the trustee or trustees of a trust and some of the trust beneficiaries, but not all of them. Further issues may arise if the trustees agree to resign and be replaced by a successor trustee and the successor trustee is purportedly bound by the agreement. In those situations, further disputes and further litigation may arise over the enforceability and scope of the settlement agreement under Arizona law.

These issues were address in Matter of Book, a recent Arizona Court of Appeals decision.  There, a settlement agreement that released the original co-trustees individually, personally, and in their fiduciary capacities was held to be unenforceable against the new trustees because the terms of the agreement were deemed antagonistic towards the interests of the contingent beneficiaries of the trust who were not parties to the settlement agreement.

The person who established the trust (called the trustor) designated $2.1 million to be paid to four specific beneficiaries (the “primary beneficiaries”) in specific cash gifts within thirty days after the trustor’s death. The remaining assets of the trust were to be distributed to two universities (the “contingent beneficiaries”) in designated percentages.

After the trustor’s death, two trustees assumed control of the administration of the trust. They failed to distribute the four specific gifts to the primary beneficiaries within the thirty-day deadline and allegedly engaged in other wrongdoing. Two of the four primary beneficiaries filed a complaint against the co-trustees for breach of fiduciary duty, seeking removal of the co-trustees and an award of damages. A third primary beneficiary intervened during the litigation. While the fourth did not participate, he signed the settlement agreement once it had been reduced to writing. However, the contingent beneficiaries did not participate in the litigation or sign the settlement agreement, although they appeared through counsel during negotiations.

The terms of the settlement agreement provided that mutual releases were given by the beneficiaries of the trust, that claims against the original co-trustees were released in their individual, personal, and fiduciary capacities, and that the agreement settled “all claims known an unknown, liquidated and unliquidated, foreseen and unforeseen that would in any way arise out of the claims and disputes that have been asserted in [the litigation].” Further, the co-trustees agreed to resign and be replaced by successor trustees. Effectively, the settlement agreement purported to release the original trustees from any liability in any of their capacities and precluded claims against them by the successor trustees under the prior litigation or that could be brought in the future pertaining to the co-trustees’ breach of fiduciary duties.

The Court found that, while the settlement agreement acknowledged that the contingent beneficiaries were not parties to the agreement and were not bound by it, the agreement itself was antagonistic towards the interests of the contingent beneficiaries because the agreement purported to release and discharge all claims against the original trustees. The contingent beneficiaries maintained an interest in the trust property as they still had a remainder interest after the four specific cash gifts were distributed. Since the contingent beneficiaries were not parties to the settlement agreement, they did not release the original co-trustees from liability for the purported breach of fiduciary duties. As such, the Court found that the settlement agreement could not preclude the new trustees, on behalf of the contingent beneficiaries, from bringing a new action against the original co-trustees for breach of their duties.

In doing so, the Court rejected the original trustees’ argument that they could insulate themselves from liability by entering into the settlement agreement on behalf of the contingent beneficiaries under A.R.S. § 14-1406. Basically, that statute permits a trustee to represent and bind the beneficiaries of a trust, but only “to the extent there is no material conflict of interest between the representative and the person represented or among those being represented with respect to a particular question or dispute.” (Emphasis added.) The Court found that the attempt to release and cancel any claims that could be brought by or on behalf of the contingent beneficiaries was against public policy and, therefore, unenforceable and void.

Pursuant to Arizona’s trust law, trustees have various duties. For example, under A.R.S. § 14-10802(A), a trustee is required to “administer the trust solely in the interests of the beneficiaries.” Pursuant to A.R.S. § 14-108011, the trustee must “take reasonable steps to enforce claims of the trust.” The new trustees were required to fulfill those trustee duties like any other trustee in Arizona. The Court reasoned that, since the original trustees breached their duties, resigned, and were replaced by the successor trustees, the successor trustees could not be foreclosed by the settlement agreement from bringing claims on the contingent beneficiaries’ behalf. Such a foreclosure would be a violation of legislation and public policy.

Thus, the Court held that the settlement agreement could not be applied to prevent the successor trustees from bringing new litigation against the original trustees on behalf of the contingent beneficiaries. Because the settlement agreement at issue did not include a severability provision (a provision that the remainder of the agreement would be enforceable even if part was not), the entire agreement was unenforceable. So, the Court “unwound” the entire settlement.

If you have a question regarding settlement agreements in a probate matter or this recent Court of Appeals decision, or need help administering an estate or trust, please contact us.

Interest or No Interest – Interesting Issue in Arizona Probate Claims

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Settlement of claims of minor | Scottsdale, AZ Personal Injury Attorney | Berk Law Group, PCUnder Arizona law, at the time of appointment, the personal representative of an estate must provide notice to creditors, known and unknown. For unknown creditors, the personal representative must publish a notice to creditors in a newspaper of general circulation in the county where the decedent lived. For known creditors, the personal representative must give notice by mail or other delivery.

Creditors of the estate then have four months after publication or sixty days after the mailing or other delivery of the notice, whichever is later, to present their claims. A.R.S. § 14-3801. Claims may then be allowed or disallowed by the estate.  If disallowed, the creditor can then file a lawsuit to have the Court determine the validity of the claim.

Absent a judgment in another court providing otherwise, “allowed claims bear interest at the legal rate for the period commencing sixty days after the time for original presentation of the claim has expired…” A.R.S. § 14-3806(E).  That provision does not differentiate between claims for definite and indefinite amounts.   Thus, the probate code is inconsistent with Arizona’s general rule that “prejudgment interest is generally not awardable on unliquidated claims.” Metzler v. BCI Coca-Cola Bottling Co. The Arizona Court of Appeals has now tackled this inconsistency and held that all allowed claims against an estate bear interest.

A liquidated claim is a claim for a sum certain, like the balance due on a promissory note.  On the other hand, an unliquidated claim is one that is not for a sum certain, like a claim for emotional distress or pain and suffering.

In its recent decision in Estate of Chalker, the Arizona Court of Appeals held that the Arizona probate code mandates interest on all allowed creditor claims, even if for an unliquidated sum. In this case, the Petitioners were attorneys who represented the decedent in a divorce action in 1994. The decedent owed Petitioners approximately $273,000 in fees and costs.  In 1999, Petitioners and decedent entered into a new fee agreement that entitled Petitioners to be paid 50 percent of the decedent’s Fidelity Investment accounts once the accounts were recovered by the estate.

Upon decedent’s passing and the personal representative providing notice, Petitioners filed a timely claim against the Estate. Ultimately, the superior court decided that the 1999 fee agreement did not entitle Petitioners to 50 percent of the Fidelity Investment accounts that were recovered. The superior court held that Petitioners were only entitled to an award in quantum meruit for the fair value of services rendered, but that no interest was to be paid on those awards.  Thus, the Court allowed the claim, but refused to add interest on the amount due. Petitioners appealed the ruling.

In reversing the superior court’s decision to deny interest on the amount due, the Court of Appeals, citing A.R.S. § 14-3806(E), reasoned that the plain language of the statute required that allowed claims bear interest. The Court agreed with the Petitioner’s argument that, because the superior court ultimately awarded Petitioner’s fees in quantum meruit (the claim was allowed), the claim must be “paid in the same manner as presently due and absolute claims of the same class” by “bear[ing] interest at the legal rate.”

The Court further reasoned that the statute does not differentiate between liquidated or unliquidated claims. Thus, while the Court acknowledged Arizona’s general rule that is inconsistent with awarding prejudgment interest on unliquidated claims, the Court held that it must apply the given statutory language in the Arizona probate code.  As a result of this decision, all allowed creditor claims, whether liquidated or unliquidated, bear interest.

If you have a question about creditors claims in an Arizona probate matter or this recent Court of Appeals decision, or need help administering an estate, please contact us.

When Helping Yourself Doesn’t Help

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Will and estate planning - Berk Law Group, P.C.The Arizona probate process is strictly governed by laws enacted by the legislature and by rules adopted by the Arizona Supreme Court. Individuals are not prohibited from entering into this technical area, but there are many pitfalls out there.

The Arizona Court of Appeals recently decided a case that illuminates the perils of self-help. In the Matter of the Estate of Norma Jean McConnell, her son filed several documents with the court that he had created himself, demanding to be appointed as the personal representative to administer her estate under her last will and testament.

The Judge could have dismissed the proceeding because the son had not filed the will with the Court as required, had not been appointed as personal representative and he was incarcerated, so it was unlikely that he could fulfill the duties of personal representative. However, the Judge, in an attempt to be helpful, appointed the Maricopa County Public Fiduciary’s office to investigate and file a report.

Maricopa County maintains an office, the public fiduciary, whose job it is to look after the neediest of the population who have no one else to turn to. Where appropriate, the Court may appoint the public fiduciary to serve.

In the McConnell case, the public fiduciary’s investigation found that Norma owned no real estate in the County; her abandoned assets had been turned over to the Arizona Department of Revenue (unclaimed property), but it was valued less than $75,000; no other assets were located; and, the assets that were found could be claimed by a Small Estate Affidavit of Collection, without the need for a probate.  The court then denied son’s demand that he be appointed as Personal Representative.

He appealed the case.  The decision there upheld the lower court rulings. Without the will being filed, the son could not be appointed to administer the will. Further, his incarceration prevented him from performing the duties required by statute.

Although everyone has access to court-approved forms and instructions for filing a probate case by stopping by the closest court facility or going online for self-help forms, sometimes it is best to consult an experienced Arizona probate lawyer. Each document has certain statutory requirements. Various deadlines apply. Not every estate is subject to a probate proceeding. As in this case, in Arizona, where non-real estate assets total less than $75,000, and other requirements are satisfied, there is a quick and easy way, a small estate affidavit, to transfer the assets to the beneficiaries without the need to open probate or to have a personal representative appointed.

Estate administration and litigation is what we do at Berk Law Group. Sometimes the best help is not your “self” but someone who knows what to do. If you have any questions or need any assistance in a small or large estate, please don’t hesitate to contact us.

2018 Probate and Trust Legislation Update

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The process of transferring property from a deceased person to his or her beneficiaries is governed by Arizona statutes.  Although the general procedures in Arizona are similar to those in most other states because of the adoption of the Uniform Probate Code and the Uniform Trust Code, most states make their own tweaks and changes.

Senate Bill 1204 was introduced to the 2018 Arizona 53rd Legislature, 2nd Regular Session, to address several issues affecting probate and trust administration and to make some changes to Arizona’s version of the uniform laws.  The Bill was passed by both houses of the legislature and signed by the Governor, meaning the changes will become law effective August 3, 2018.  Here are some of the key revisions affecting the Arizona Probate and Trust Codes.

Arizona Probate Code Changes

Arizona Revised Statute (“A.R.S.”) § 14-2517 has dealt with the enforceability of penalty clauses in wills, commonly called “no contest” clauses and less commonly called “in terrorem” clauses.  This statute states that such clauses are not enforceable if the beneficiary bringing the challenge had “probable cause” to bring the challenge.  The Bill clarifies the challenge can come as a “contest, proceeding or action.”

The Bill also clarifies which rules are applicable to probate proceedings.  Over the past several years, the Arizona Supreme Court has established and amended the various rules that had been created by various county Superior Courts into a statewide Arizona Rules of Probate Procedure.  Accordingly, the amended A.R.S. § 14-1304 states that the Arizona Rules of Probate Procedure now apply to all probate matters.

Arizona has three methods to implement the terms of a decedent’s will.  The first is a summary administration for certain enumerated small estates.  The second is known as informal probate and, if certain requirements are satisfied, allows a matter to proceed without the involvement of a judicial officer.  Finally, there is the formal probate proceeding which involves a judge because of special circumstances or contests.  Because no hearing is mandated in informal proceedings, A.R.S. § 14-3306 does not require notice prior to beginning the process.  However, after the application has been accepted by the court, notice of the proceeding must be given to heirs or devisees.  The Bill clarifies the timing and to whom notice is given in informal probates.  If you want to learn more about the different types of probate in Arizona, watch our video.

The Bill made one major change to A.R.S. § 14-3403 which applies to a notice of hearing on the petition for a formal proceeding.  Previously, the statute required the publication of the notice one time at least fourteen days prior to the hearing.  This requirement was to notify “unknown” persons of the court proceedings. [Read more…]

Can I have a witness?

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Mesa, AZ Probate Dispute | Probate Dispute Attorney | Berk Law Group, PCArizona’s Revised Statutes (A.R.S.) set out the standards that must be met in order to create a last will and testament. Options include a handwritten or holographic will and a properly witnessed prepared will.

A.R.S. § 14-2502(A)(3) requires that, in the second case, a will be signed by the testator (maker of the will) and be “[s]igned by at least two people, each of whom signed within a reasonable time after that person witnessed either the signing of the will or the testator’s acknowledgment of that signature or acknowledgment of the will.” But who is a proper witness?

Most Arizona attorneys will ensure a proper execution occurs by having two witnesses present along with a notary public. This results in what is called a “self-proving” will. But what happens if there is only one witness signature along with a notary? This is the background in a recent Arizona Court of Appeals decision entitled “In re Estate of Bradley.”

After Ms. Bradley died, her son, who was not named as a beneficiary in her will, complained that the will was not valid because it lacked the signature of two witness. If the will was not valid, the son would stand to inherit.

At a hearing on the petition to probate the will, both the person who signed as witness and the Notary Public testified that they were present and witnessed Ms. Bradley sign the will. The son argued that because the notary was there to “notarize” she did not count as a “witness.” The Court of Appeals disagreed. The Arizona statute does not place any such limitation on who is a proper witness, just that two individuals are either present to see or are told by the signer that she signed. That is what happened here and the court accepted the notary as the second witness.

Proper execution of any legal document is important.   Improper execution of a will or trust is one of the reasons people end up in court. Proper review and overview by an attorney can often prevent expensive and time-consuming litigation. The attorneys at Berk Law Group can review your documents for proper execution and avoid costly headaches later.  And, if you end up court, our attorneys can help you try to resolve the matter as efficiently as possible.  Please contact us if you have any questions.

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