WHAT IS YOUR DUTY WHEN YOUR FIDUCIARY-CLIENT IS DERELICT IN HIS DUTIES?

April 11, 2013 § 2 Comments

It seems to be a more and more frequent problem that when we issue orders in delinquent estates, an attorney pops up and says something like, “Well, judge, the reason we haven’t filed an inventory, or any accountings since 1997 is that I lost contact with the fiduciary.”

Who’s got the problem in that situation? 

Well, UCCR 6.02 says this about that:

In guardianships and conservatorships an attorney must be faithful to both fiduciary and the ward and if it appears to the attorney that the fiduciary is not properly performing duties required by the law then he shall promptly notify the Court in which the estate is being administered. Failure to observe this rule without just cause shall constitute contempt for which the Chancellor will impose appropriate penalties.

And what exactly are those “duties required by law?” Here’s what UCCR 6.02 says:

Every fiduciary and his attorney must be diligent in the performance of his duties. They must see to it that publication for creditors is promptly made, that inventories, appraisements, accounts and all other reports and proceedings are made, done, filed and presented within the time required by law, and that the estates of decedents are completed and assets distributed as speedily as may be reasonably possible.

It’s pretty clear from the language of the rule that your neck is in the noose along with your fiduciary. If the requirements are not met, you are as responsible for the lapse as is your fiduciary. Oh, and explaining to the chancellor that you had no idea that the Uniform Chancery Court Rules had this provision will in all likelihood only make things worse.

Here are some helpful posts from the past … Five Mistakes that Fiduciaries MakeFive More Mistakes that Fiduciaries MakeApproaching Zero Tolerance … and … Essential Procedures in Guardianships and Conservatorships.

If the landscape of your probate practice is littered with failures to file accountings, inventories and other reports, and you have estates that due to sheer neglect are languishing unclosed far beyond what is reasonable, look no farther than yourself for a place to lay the blame. That’s where the judge will look.

THE SYMPTOMS OF PROBLEM ESTATES

August 30, 2012 § 2 Comments

Arizona courts pioneer in a lot of ways. The latest accomplishment involves monitoring of probate matters.

That state requires that probate cases be classed as minimum risk, moderate risk, or maximum risk. Each file is evaluated to classify it based on certain factors or indicators. Insted of our one-size-fits-all system, the level of reporting and monitoring in Arizona is tailored to meet the needs of the particular case. Each category requires court personnel to meet periodically with the ward or beneficiaries. Minimum risk cases involve a telephone interview every other year, moderate risk require an annual visit, and maximum risk call for a variety of measures including case compliance audit or even forensic investigation. Each level is prescribed meaures of accounting appropriate to the risks inovlved.

I found the risk indicators used by the court to be quite interesting. In fact, I have seen cases where multiple risk indicators were present in cases before our courts. There are 39 used in Arizona. Here are some of them:

  • No family members.
  • Large estate.
  • Dispute among the parties.
  • Late or no inventory or accountings.
  • Inaccurate or no record keeping.
  • Unacceptable accounting practices.
  • Disproportionate or unusually large transactions.
  • NSF checks and bank charges, late payment charges, payment of interest or penalties.
  • Use of ATM’s or gift cards.
  • Health, business or personal problems of the fiduciary.
  • Financial problems of the fiduciary, such as tax liens, judgments or bankruptcy.
  • Difficulty in obtaining a bond or failure to renew it.
  • Attorney with a history of neglecting or mishandling probate matters.
  • Fiduciary with limited experience (especially where the estate is large or complex).
  • Poor or no supervision of fiduciary by the attorney.
  • Ignoring requests of court and show cause court orders.
  • Pattern of rebuffing reqquests for information by attorneys and court.
  • Unauthorized gifts or loans.
  • Pattern of complaints against the fiduciary.
  • Transfers between bank accounts, particularly when close in time to inventory or accounting dates.
  • Lack of contact between guardian of the estate or conservator and the ward.

These are what the courts look at to decide whether a fiduciary should be removed, or whether some other action should be taken to protect the interest of the ward or beneficiaries, but many of these you should monitor yourself in carrying out your role as attorney for the fiduciary. These are the symptoms of an ailing probate matter that require your immediate therapeutic attention. Some of them can be fatal. And if you fail to act promptly, some of them can cost you money. 

[The information here comes from Future Trends in State Courts, 2012, published by the National Center for State Courts]

FIVE MISTAKES THAT FIDUCIARIES MAKE

July 18, 2012 § 7 Comments

  1. Failure to file an inventory. In every type of probate matter, it is required that an inventory be filed, usually within 90 days of appointment of the fiduciary. Often the will waives inventory, but the better attorneys I know always file an inventory, whether waived or not. Why? Because the inventory (a) sets a base line for later accountings, and (b) covers the lawyer’s rear from later claims by other heirs or beneficiaries that items are missing. Better to get those matters out up front where they can be dealt with than to let it hold up closing the estate. MCA 93-13-33 provides that an inventory must be filed within three months of appointment in a guardianship or conservatorship, and even requires an annual inventory. A guardian who fails to do so may be removed and be liable on his or her bond.
  2. Failure to publish notice to creditors. This requirement is mostly overlooked in guardianships and conservatorships. MCA 93-13-38(1) expressly states that “All the provisions of the law on the subject of executors and administrators, relating to settlement or disposition of property limitations, notice to creditors, probate and registration of claims, proceedings to insolvency and distribution of assets of insolvent estates, shall, insofar as applicable and not otherwise provided, be observed and enforced in all guardianships.” And remember that the statutory affidavit of creditors must be filed before publication of the notice to creditors. MCA 91-7-145(2) says that “Upon filing such affidavit …” it shall be the duty of the fiduciary to publish. An affidavit filed after the publication is a nullity.
  3. Failure to get authority of the court for expenditures. Perhaps the most pervasive error of fiduciaries. MCA 93-13-38 requires the conservator to improve the estate of the ward, and to “apply so much of the income, profit or body thereof as may be necessary for the comfortable maintenance and support of the ward and his family, if he have any, after obtaining an order of the court fixing the amount” [emphasis added]. Every expenditure must be approved in advance. Emergency expenditures may be ratified, but only if properly proven to be for the ward’s benefit, and properly supported by vouchers. Caution: as set out below, self-dealing expenses may be neither approved or ratified.
  4. Failure to keep the ward’s estate separate and to avoid self-dealing. It often happens that a son or daughter is appointed to serve as conservator of momma’s or daddy’s estate. The child simply adds his or her name to the parent’s account and proceeds from there. This complicates matters because that joint account belongs 100% to each person whose name is on the account, and becomes the property of the survivor on death. That is certainly not an appropriate or even legal arrangement for a guardian or conservator. The fiduciary in every kind of probate matter needs to open a separate estate, guardiandhip or conservatorship bank account, and make all financial transactions through it and through it alone. MCA 91-7-253 prohibits the fiduciary from paying herself any money from the ward’s estate without prior court approval, and loans to the fiduciary and family members are prohibited also. The statute says that the court can not ratify or approve such payments. If the fiduciary has some expense that needs to be reimbursed, make sure the fiduciary has proper documentation and petition the court for authority. Don’t expect a cash payment or check made out to cash to be approved without abundant supporting documentation.
  5. Failure to get court permission to move the ward to another county. It’s prohibited to relocate the ward to a county other than the one in which the fiduciary was appointed, unless approved in advance by the court. MCA 93-13-61.

CHECKLIST FOR DOING AN ACCOUNTING IN A PROBATE MATTER

April 11, 2011 § 16 Comments

_____ State the time period covered by the accounting, starting with the date of the last accounting, or if a first account with the date the estate, guardianship or conservatorsip was opened.

_____ List all assets of the estate as of the ending date of the last accounting. (MCA §91-7-277, §91-7-93, §93-1333, §93-13-67, and §93-113-259 and UCCR 6.03).

______ List the date, source, and amount of each item of income since the last accounting. (MCA §91-7-277, and §93-13-67).

______ Total the income and state a total.

______ List the date, payee, explanation or description, amount, and authority (the date of each authorizing court order) for each disbursement since the ending date of the last accounting. (MCA §91-7-277, 91-7-279, §93-13-67p, and §93-13-71 and UCCR 6.04 and 6.05).

______ Attach all documents supporting all income and disbursements. This is the “voucher” requirement that was previously posted about here. The required documentation includes ALL statements of any accounts or investments showing income or disbursements. This may also include canceled checks and receipts. (See statutes and rules cited above).

______ Total the disbursements and state the totals.

______ List and explain for all non-financial assets that appeared on the previous accounts, but are no longer in the control of the fiduciary.

______ A request for payment for the fiduciary including a bill or itemization to support request. (MCA §91-7-299 and §93-13-67 and UCCR 6.11).

______ A request for attorney fees, including a bill or itemization to support said request. (MCA §91-7-281 and §93-13-79 and UCCR 6.12).

______ Close with a summary calculation of the value of the estate coming into the hands of the fiduciary at the opening of the accounting period, a total of the income, a total of the disbursements, and a total balance in the fiduciary’s control that will be the beginning figure for the next account.

______ Have the fiduciary sign and swear to the accounting. (MCA §91-7-277 and §93-13-37 and UCCR 6.02).

Thanks to Jane Miller, Senior Staff Attorney for the 12th District.

DUTIES OF THE ATTORNEY IN PROBATE MATTERS

August 9, 2010 § 2 Comments

Not too long ago, during a proceeding involving a minor’s settlement, the following exchange took place between a veteran lawyer (who practices primarily in Circuit Court) and me:

Judge:  Your claim for attorney’s fees has to be supported as set out in Rule 6.11.

Lawyer:  I am sorry, your honor, I was not aware of your local rules.

Judge:  That is not a local rule; it is the Uniform Chancery Court Rule.

Lawyer:  When were uniform chancery rules adopted?

If ignorance is bliss, that is one happy lawyer.

Sometimes I feel that even lawyers who are fully aware of the Uniform Chancery Court Rules (UCCR) have no idea what they include because they do not bother to read them.  Take the requirements for lawyers in probate matters.  From time to time, I have to remind lawyers of their duties, and when I do it often happens that they are surprised to learn of it.  Could it be that lawyers nowadays are just too busy to familiarize themselves with the law?  Now that’s a scary thought.

My best advice is to get out your rule book and read UCCR 6.01 – 6.17 right now.

Okay, I know you’re too busy to do it right now, so here is an overview:

  • Rule 6.01 requires that every fiduciary must have an attorney unless the fiduciary is licensed to practice law.  The attorney’s compensation will be fixed by the Chancellor, and the attorney may not withdraw unless permitted to do so by the Chancellor.  As a practical matter, you will not be allowed to withdraw unless and until an attorney takes your place, so you need to think twice before entering an appearance in a probate matter. 
  • Rule 6.02 expressly states that “Every fiduciary and his attorney must be diligent in the performance of his duties.  They must see to it that …” publication to creditors is promptly made, inventories and accounts are timely filed and presented, all other statutory requirements are timely and properly met, and that ” … estates of decedents are completed and assets distributed as speedily as may be reasonably possible.”  In plain English, that means that the lawyer is every bit as responsible to the court as is the fiduciary.  Your professional standing, reputation with the court, and even your license in some cases, are on the line.  It also means that estates are not to be kept open for years while the attorney deals with other matters.
  • Rule 6.02 also provides as to guardianships and conservatorships that the attorney shall report promptly to the court a guardian’s or conservator’s failure to perform his or her duties, and if the lawyer fails to do so, the lawyer may be held in contempt.
  • Rule 6.03 requires that every accounting must include a statement of all assets of the estate.  For money, bonds or securities, a computer printout is not adequate; the accounting must include a sworn certificate by an officer of the bank that the funds are actually on deposit in the amount claimed. 
  • Rule 6.04 is perhaps the most overlooked of all, but it is perhaps also the most crucial.  It requires that every disbursement be accompanied by a voucher in the form required by §91-7-279 and 93-13-71, MCA.  It is not enough to recite in the accounting, for example, that “The guardian spent $50 on clothes for the ward as authorized by the court in the last accounting.”  The accounting must include vouchers documenting the expenditure.  In reporting the expenditures, Rule 6.05 mandates that where the expenditures are spelled out in the accounting, the voucher number, date of the disbursement, name of the payee, purpose of the expenditure, and date of any court order authorizing the payment must be stated.
  • Rule 6.06 spells out how to deal with lost vouchers.
  • Rule 6.07 states that claims arising after death of the decedent such as for funeral bills, monuments and attorney’s fees, must be approved by the court before payment.
  • Any request for funds for support of a ward must include the present amount of the estate, the amount of the ward’s income, and the amount of any previous allowance, according to Rule 6.08.  Any request to expend funds for necessities that are the responsibility of the parent will not be approved unless the guardian justifies the request under oath.
  • Rule 6.10 deals with settlement of wrongful death or injury claims.  An outline for handling minor’s settlements is here.
  • Rule 6.11 sets out the required information to support a claim of the fiduciary for a commission or extraordinary compensation, which includes the total amount of the estate handled, the total amount disbursed, the balance on hand, the nature and extent of services rendered, the expenses incurred by the fiduciary, and the total amount of any amount previously allowed.  The rule also states that neither fees for fiduciaries nor for attorneys shall be based on the value of any real property.
  • Rule 6.12 governs petitions for attorney’s fees.  The attorney must support the request with the same information required of a fiduciary as in Rule 6.11, and an itemized statement of services rendered.  There are separate requirements for recovering damages for wrognful death or personal injury, and where a contingent fee contract has been approved.
  • Rule 6.13 requires that the fiduciary swear to and sign every pleading, accounting and report.  It is not adequate, as sometimes happens, that the attorney sign the documents.
  • Rule 6.14 provides that a copy of the will must be attached to the petition to open the estate.  Recently a lawyer (from out of town) argued with the clerk that the rule means that only a copy needs to be submitted, and that he should retain the original.  That is not the meaning of the rule, and it is not the law.  § 91-7-31, MCA, requires that the original will, when admitted to probate, shall be recorded and retained by the clerk.  The rule merely requires that a copy of it be attached to the petition for ready reference by the court and other interested parties, and so that the original can be secured.
  • Finally rule 6.17 bears stating verbatim:  “If, without cause, an attorney fails to file accountings or other matters in probate cases (estates, guardianships and conservatorships) after being so directed in writing by the Court, the Court may consider such misconduct contempt.”  Misconduct; such a meaningful, menacing word fraught with professional peril.

Practice Tip:  Quit relying on forms to do everything and start reading the rules.  I repeat:  Start Reading The Rules.  You stake your career on your performance; start staking your performance on knowledge of what you are doing.  You have a professional duty to your client to know the law, to inform, advise and guide your client, and to keep your client as well as yourself in compliance.  As the attorney in a probate matter the rules make it clear that you will be held every bit as responsible as the fiduciary when things go wrong.  The fiduciary, however, seldom has a law license and career on the line like you do.

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