Guardianships

November 4, 2010

New York Guardianship Court Evaluator Report Can Support Finding of Incapacity

The New York Mental Hygiene Law provides for the appointment of a Guardian for and individual’s property management and personal needs. Article 81 of the statute requires that a Court find clear and convincing evidence to determine that a person is incapacitated. Mental Hygiene Law Section 81.12.

As discussed on our New York Probate Blog, there are numerous participants in a Guardianship proceeding, including the petitioner, the Alleged Incapacitated Person (AIP), the Court Evaluator and sometimes a Court appointed attorney representing the interests of the AIP. Among these persons, the Court Evaluator always plays an essential role. He or she provides the Court with independent information concerning such issues as the need for a Guardian and the AIP’s capacity, the appropriateness of the proposed Guardian, the nature and extent of the AIP’s property and the powers that the Guardian should possess. In some instances, the investigation by the Court Evaluator and information provided by the Court Evaluator’s report may constitute the major basis for the Court’s ultimate decision as to capacity and Guardianship appointment.

Such was the case in Matter of Incorporated Village of Patchogue v. Zahnd, NYLJ March 12, 2010 at 29 (Col. 1) (Supreme Court, Suffolk County 2010). In Zahnd, the attorney for the AIP asked the Court to dismiss the Guardianship Proceeding on the ground that the petitioner had failed to present “clear and convincing evidence” that the AIP was incapacitated.

The Court had appointed the New York State Mental Hygiene Legal Service as Court Evaluator. Over the objection of the AIP’s attorney, the Court determined that it would allow the Court Evaluator to present its report and testify before deciding the motion to dismiss. Essentially, the Court found that the Court Evaluator’s report and testimony was essential to a full determination of incapacity and such submission was in accordance with the Mental Hygiene Law. Thus, based upon the proof provided by the petitioner and the information supplied by the Court Evaluator, the Court denied the application to dismiss the Article 81 proceeding.

Guardianship proceedings can be very complex and involve numerous issues. Professional guidance and analysis is usually essential for the protection of anyone involved in these proceedings.

October 26, 2010

Incompetancy May Not Prevent the Transfer of a Deed In A Foreclosure

by Jules M. Haas

Article 81 of the Mental Hygiene Law provides for the appointment of a Guardian for the personal needs and property management of a person who is found to be incapacitated. Guardianship proceedings are typically commenced by close relatives and friends who desire to protect the interests of a person who is at risk and cannot adequately handle their own affairs.

The personal and property interests of incapacitated persons are varied and concern such issues as the payment of debts and obligations and securing assets such as homes and other real property through property management and even Court proceedings. Recently, the Supreme Court in Richmond County was required to decide a case where a person for whom the Court had appointed a Temporary Guardian had lost her home through a foreclosure.

The case of U.S. Bank, N.A. v. Bernhardt, 28 Misc3d (1234(A), (August 10, 2010),
was decided by the Honorable Anthony Giacobbe. Initially, the Court-appointed Temporary Guardian asked the Court to vacate the default judgment of foreclosure on the grounds that the alleged incapacitated person was not properly served with the Summons and Complaint. Following a hearing the Court determined that service was not proper and vacated the default judgment of foreclosure.

However, since the property had already been sold to a third party at the foreclosure sale, the Court was next faced with the issue as to whether the Court should allow title to the property to remain in the new owner or should revert back to the alleged incapacitated person. After weighing many factors including: (i) the good faith of the purchaser; (ii) that neither the bank nor the purchaser was aware of the homeowner’s alleged incapacity; (iii) the lack of evidence that the homeowner was incapacitated when the foreclosure action occurred; and (iv) that the homeowner was in default under the mortgage and failed to demonstrate any ability to pay the mortgage arrears, the Court decided that it would not set aside the foreclosure sale. It, therefore, allowed the purchaser who obtained title through the foreclosure sale to remain as the owner of the property.

The Bernhardt case is a striking example of unfortunate consequences that may occur where a person is possibly unable to handle or safeguard their affairs and legal proceedings or other conditions result in harm or damage to their property or personal interests. It is important to consider the benefits of a New York Guardianship Proceeding and consult with an attorney experienced in these matters.

October 12, 2010

New York Guardianship Law Provides For Reasonable Compensation of the Guardian

by Jules M. Haas

New York Guardianship law, as set forth in Article 81 of the Mental Hygiene Law, contains many provisions delineating such matters as procedural requirements and Guardianship powers. Among these many items is an important section concerning Compensation of Guardian. Section 81.28 of the Mental Hygiene Law provides, in part, that “The Court shall establish, and may from time to time modify, a plan for the reasonable compensation of the guardian or guardians.” Such compensation is usually paid from the Incapacitated Person’s assets.

While the statutory language leaves the compensation issue open to determination in each Guardianship case, the Courts typically refer to the statutory commission provisions for Trustees, Executors and Administrators contained in the New York Surrogate’s Court Procedure Act for a basic standard in calculating and awarding Guardian’s compensation. For example, Section 2307 of the Surrogate’s Court Procedure Act provides the following basic schedule for the award of Executor’s and Administrator’s Commissions:

(a) For receiving and paying out all sums of money not exceeding $100,000 at the rate of 5 percent.
(b) For receiving and paying out any additional sums not exceeding $200,000 at the rate of 4 percent.
(c) For receiving and paying out any additional sums not exceeding $700,000 at the rate of 3 percent.
(d) For receiving and paying out any additional sums not exceeding $4,000,000 at the rate of 2 ½ percent.
(e) For receiving and paying out all sums above $5,000,000 at the rate of 2 percent.

Section 81.28 allows the Court in its discretion to modify a Guardian’s compensation despite the generally accepted parameters and, in appropriate cases, to deny the Guardian payment of fees, particularly where the Court finds that the Guardian did not satisfactorily perform his or her fiduciary duties. Such was the case in In Re Conners, 881 NYS2nd 613 (Supreme Court Kings County 2009), where Judge Betsy Barros, denied compensation to the attorney/Guardian, stating in part:

In this matter, the guardian failed to preserve his
ward’s assets, failed to preserve her trust, failed to
file an initial report, filed his bond some five months
after the order and judgment was entered, and failed to
obtain his commission. When the windfall of executor
failure to preserve his ward’s trust, is coupled with the
trustee commissions already obtained, this Court finds
that yet a third commission to Mr. Connors would be an
unjustified reward for his services as guardian.

As pointed out by the Court, a Guardian owes an individual duty of loyalty to the Incapacitated Person and should not be compensated if this fiduciary duty is breached.

Interestingly, the issue of Guardianship compensation may arise when a Guardianship petition is dismissed after an appeal following the appointment of a Guardian. In such situations, the Court must determine which party is responsible to pay the Guardian for the services rendered prior to the dismissal. If the Court finds that the Guardianship petition was not brought in good faith, it may require the petitioner to pay the Guardian’s compensation. For example, in Matter of Isadora, 773 NYS2d 96 (AD2d 2004), the Appellate Division determined that the lower Court should not have revoked a power of attorney and health care proxy and appointed a Guardian. In reversing the Judgment, the Court directed that the Guardian’s compensation be paid by the petitioner.

September 30, 2010

Whether Guardianships or Trusts, Special Needs Children Require Comprehensive Estate Planning in New York

by Jules M. Haas

The Times Herald recently published an article on caring for a child with special needs after your death.

Parents or guardians of special-needs children, or adult children living at home, need to plan for the eventuality of the child’s care after their passing. A New York City probate lawyer or guardianship attorney can assist you by outlining the various options. Among the variables and factors for consideration are the size of the estate left behind and the person’s needs.

An Article 81 Guardianship can permit you or someone else to care for an adult with special needs and empower you to make the decisions necessary to assist with day-to-day life, including medical and health care needs.

Estate planning becomes particularly important, both to make sure that available assets are left to care for a loved one with special needs and to make sure the appropriate safeguards are in place for the management of those funds for the best interest of the child.

In many cases, you must also concern yourself with not making a person with special needs ineligible for federal medical care and other benefits. Failure to establish a Special Needs Trust or other vehicle for life insurance proceeds and other inheritance can have devastating consequences. A Special Needs Trust is a legal entity, which can manage and disburse money to a child with disabilities, without making the child ineligible for federal benefits, such as Medicaid.

September 24, 2010

A New York Fiduciary Accounting Provides Disclosure Of Financial Activities

by Jules M. Haas

A New York Fiduciary is generally required to provide a full accounting of his or her financial transactions. Fiduciaries include estate Executors and Administrators, Trustees and Guardians of incapacitated persons. The information set forth in the accounting can be simple or complex depending upon the nature of the estate or trust that is the subject of the accounting.

The Surrogate’s Court and the other Courts that have jurisdiction over the matters that are the subject of the accounting are guided by standard rules regarding the accounting process. For example, Article 22 of the Surrogate’s Court Procedure Act contains numerous sections that delineate the accounting process. Surrogate’s Court Official Form No. 12 provides the standard format for an “Account of Executors and Administrators”. Despite the variety of fiduciaries that are subject to these rules, in virtually all instances the accountings require that the fiduciary describe in detail: (i) the assets or items that were received: (ii) the payments or distributions that were made; and (iii) the balance of assets that remain on hand. The information contained in the numerous accounting Schedules can be extensive. Accounting for many types of equity holdings such as stocks and bonds particularly where sales, stock splits, mergers or other transactions occur can result in very lengthly and quite complex transaction descriptions.

Accountings will disclose additional financial information including a computation of fiduciary commissions, and the payment of estate and income taxes. The important aspect of the accounting process is that the beneficiaries of the estate or trust are entitled to receive and review the accounting. Any objectionable items can be brought to the attention of the Court overseeing the accounting process and rectified if appropriate. The accounting process is also helpful to the fiduciary who is given the opportunity to disclose all of his or her activities and make distributions of assets and obtain an approval of his or her actions.

Accountings can be informal, meaning that the parties can all agree and accept the accounting without formal Court proceedings. On the other hand, formal accounting proceedings require that the accounting be filed with the Court and approved or finalized through formal Court proceedings including discovery and hearings or a trial.

September 17, 2010

The Use Of A New York Health Care Proxy Can Face Complex Issues

by Jules M. Haas

A New York Health Care Proxy can be a valuable part of an estate plan. It provides the means by which someone can appoint an agent to make health care decisions on their behalf in the event they are not able to make these decisions for themselves.

New York Public Health Law sections §2980 through 2994 provide the statutory guidelines for the New York Health Care Proxy. The law defines a “health care proxy” as “a document delegating the authority to make health care decisions, executed in accordance with the statutory requirements.” The statute further provides that “a competent adult may appoint a health care agent…”

The Health Care Proxy form must be “signed and dated by the adult in the presence of two adult witnesses” and “the witnesses must also sign the proxy”.

While the designation of a health care agent seems fairly straight forward, the actual appointment and utilization of the proxy can involve many complications. For example, the statute requires that the person creating the proxy be competent. Quite often, the issue of a person’s competency regarding the execution of a health care proxy is raised in an Article 81 Guardianship Proceeding where questions can arise concerning the validity of the appointment made by the alleged incapacitated person. Section 81.29 of the Mental Hygiene Law allows a Court to “modify, amend or revoke” a previously signed Health Care Proxy if the Court finds that it was made when the person was incapacitated or if there has been a breach of fiduciary duty by the agent. Public Health Law Section 2992 also provides a procedure for the commencement of a Court proceeding to determine issues such as the validity of the proxy or to have the agent removed or to override the agent’s health care decisions.

Complications may also appear when the health care agent attempts to exercise his or her authority on behalf of the appointing person. In Stein v. County of Nassau, 642 F. Supp.2d 135 (E.D. 7/23/09), a Federal District Court was called upon to review various aspects of the proxy statute. As reviewed by Daniel G. Fish in the New York Law Journal on August 20, 2010, Mr. Stein signed a Health Care Proxy and appointed his wife as his agent. When he became ill at home, his wife called for emergency assistance and she instructed that the ambulance to transport Mr. Stein to the hospital where he had been previously treated. Despite Mrs. Stein’s presentation of the signed proxy, the emergency personnel refused her request to go to the hospital she designated and claimed that the Health Care Proxy was not valid outside of a hospital-like setting. The Court found, as part of its decision, that the Health Care Proxy was valid everywhere and not just in a hospital-like setting.

September 7, 2010

Disqualification of New York Administrator Requires Specific Evidence of Wrongdoing

by Jules M. Haas

New York Administrators and Executors, also known as fiduciaries, have many responsibilities with regard to administering an estate and their relationship with estate beneficiaries. Very often, due to a fiduciary’s acts or failure to act or a conflict of interest, beneficiaries ask the Court to disqualify a fiduciary or to revoke their Letters of Administration or Letters Testamentary. However, such a request to the Court requires specific allegations for the Court to actually disqualify a fiduciary.

Such was the case in a recent decision by Bronx County Surrogate Holzman in Estate of Maria Minelli, New York Law Journal August 31, 2010. In Minelli, one of the decedent’s sons asked the Court to revoke the Letters of Administration that had been issued to his sister. The son claimed that his sister had fraudulently transferred real estate that had been the subject of an Article 81 Guardianship proceeding regarding the decedent. The son also claimed that his sister was involved with a fraudulent application to the New York City Department of Social Services.

After reviewing the evidence, the Court denied the son’s application to revoke his sister’s Letters of Administration and found that there was “no evidence to support the bald, conclusory allegations …” Since removal of a fiduciary is a significant act, the Court will always require very specific and clear evidence upon which to base its decision. While the removal of an Administrator or Executor may occur, the Court needs to have a strong foundation to support such relief.

The Minelli case also points to the interaction between Article 81 Guardianship proceedings and the administration of a decedent’s estate. It is common for many issues relating to property transfers and asset ownership to be investigated and determined in a Guardianship proceeding which may occur many years prior to the death of the incapacitated person. Therefore, it is important to fully examine and resolve these matters in the Guardianship case. If property is wrongfully transferred or disposed of at the time of the Guardianship proceeding, it may be too late to resolve these issues years later when the incapacitated person dies.

August 24, 2010

Clark Case May Be Subjected to Guardianship Oversight in New York

by Jules M. Haas

Update: MSNBC reports that New York City officials have begun welfare checks on the 104-year-old heiress and the Manhattan district attorney has launched a criminal investigation into the handling of her finances.

Where in the world is 104-year-old Huguette Clark? One only hopes that she has a world-class New York City estate lawyer who has her best interests at heart. Apparently, Ms. Clark has been confined to a hospital for many years.

She certainly has her choice of living accommodations, what with a $100 million Pacific Coast estate, a $24 million home in Connecticut that she apparently bought a half-century ago but never visited, and a $100 million apartment overlooking Central Park — rumored to be the largest residence on Fifth Avenue.

All are immaculately maintained and all have been unoccupied for decades. Clark has spent the last two decades in a hospital room — according to MSNBC.

With few family members — her father was in his 60s when she was born and was eligible for service in the Civil War — the lone heiress to a copper fortune is being looked after by an accountant with a criminal background and a 78-year-old attorney, MSNBC reported.

Clark has always been reclusive and fabulously wealthy — her father was a Senator from Montana at the turn of the century. She grew up in a 121-room mansion at 962 Fifth Avenue at 77th St.

It is unknown whether she has a living trust or other comprehensive estate planning. Elderly wealthy people are at risk of being victimized by fraud – particularly when no close relatives exist. Why she has spent more than 20 years in a hospital room has not come to light. Nor is it clear whether she is the subject of an Article 81 Guardianship Proceeding.

Such guardianship would permit a responsible adult to look after her finances. However, such a position of authority could be abused, despite court oversight. Since the story has come to light, more eyes are watching. The Manhattan District Attorney has started an investigation. Yet it has not been determined if Clark is under guardianship or if her vast estate is even subject to proper oversight.

Experienced New York City guardianship and probate attorneys have seen the best and worst of these types of situations. It is unusual to say the least to have as a client a 104-year-old eccentric woman who is fabulously wealthy who has spent two decades secluded in the hospital. We hope her caretakers come forward with a full accounting and that she is not victimized by fraud or abuse.

August 20, 2010

The New York Supplemental Needs Trust Is Useful To Protect Assets And Provide Added Benefits

by Jules M. Haas

There are many situations where a person who is disabled has assets available for his or her present use or may be in the position to receive assets at a later date such as a beneficiary under a Last Will or Trust.

While owning assets is usually beneficial, persons suffering from disabilities are often recipients of, or are qualified to receive, government benefits such as Medicaid or Supplemental Security Income. As a result, a conflict arises because the ownership of assets typically disqualifies a person from receiving the governmental benefits that would otherwise pay for the services that the private funds would be expended on.

In a perfect world a planner would want the disabled person to receive the maximum benefit from governmental resources and preserve or reserve the private and personal assets to spend on extras items and services that the government does not provide.

A Supplemental Needs Trust (SNT) can provide a mechanism whereby someone who is disabled can be the recipient of both government benefits and private assets. Truly the best of both worlds.

New York Estates, Powers and Trusts Law Section 7-1.12 provides the statutory requirements for the creation of these trust fund agreements. Paragraph (a)(5) of the statute defines a Supplemental Needs Trust as “a discretionary trust established for the benefit of a person with a severe and chronic or persistent disability (the “beneficiary”) which conforms to” the statute’s guidelines.

The rules and intricacies for the establishment and use of a Supplemental Needs Trust can be complex. For example, the trust can be set up in the Last Will of a parent or other individual who wants to benefit the disabled person without interfering with the payment of governmental benefits. Another example of the use of a SNT is in a situation when the person who is disabled is the recipient of funds from a personal injury action or inheritance. A Court, in the context of the settlement of the action or within an Article 81 Guardianship Proceeding, may allow the establishment of the SNT so that the assets can be available during the person’s lifetime to provide added benefits and improve his or her quality of life and the activities of daily living. In these Court created trust situations, the assets remaining in the trust following the death of the disabled person may be subject to a lien to reimburse the government for benefits it had previously paid.

Depending upon your situation, a Supplemental Needs Trust can be very useful in any plan for the care and benefit of a person with disabilities. It is important to carefully examine each situation so as to avoid trust disputes at a later date such as government claims that the assets are not protected.

August 18, 2010

The New York Court Evaluator Plays An Important Role In Article 81 Guardianship Proceedings

by Jules M. Haas

A New York Article 81 Guardianship Proceeding is commenced when a petition is filed with the Court. The general requirements of a petition were previously reviewed in a post dated August 16, 2010. Upon receipt of the petition the Court will then sign an Order to Show Cause in which Order the Court will set the date for the Court hearing and also appoint a Court Evaluator.

The job of the Court Evaluator is to make an independent investigation to assist the Court in determining whether the alleged incapacitated person is, indeed, incapacitated, and whom to select as the appropriate person to be appointed as Guardian. This investigation encompasses all other aspects surrounding the AIP such assets, the availability of advance directives such as powers of attorney and health care proxies and the future plan for the financial and personal welfare of the AIP.

Section 81.09 of the New York Mental Hygiene Law provides extensive guidelines for the Court Evaluator. For example, the statute identifies who can be appointed as a Court Evaluator which list includes an attorney-at-law, physician, social worker and the Mental Hygiene Legal Service.

The Court Evaluator will typically meet with all of the persons and witnesses involved with the proceeding, including the AIP, and review all of the papers and records that relate to the issues involved. The statute provides that the Court Evaluator may even apply to the Court for permission to review the AIP’s medical and psychological records. The Court Evaluator also has authority to take emergency action to protect the AIP’s property in the event the property may be misappropriated, wasted or lost before the Court hearing.

Following the investigation, the Court Evaluator will prepare a Report for the Court along with recommendations regarding issues such as the appointment of a Guardian, the appropriate person to act as Guardian and the powers of the Guardian. The Court Evaluator attends all Court proceedings and typically testifies as to the Report and recommendations. The Court relies a great deal upon the information presented by the Court Evaluator in making the final decision in a Guardianship proceeding.