Elder Issues in Dissolution

1. Elder Issues in Dissolution Robert B. Fleming Fleming & Curti, PLC www.elder-law.com

2. Elder Issues in Dissolution Robert B. Fleming Fleming & Curti, PLC www.elder-law.com

3. Capacity, Guardianship and Guardians ad litem • Incapacity, incompetence, vulnerability • Guardianship, conservatorship, guardians ad litem • Process, costs and time • “Best interests” and “substituted judgment”

4. Ethical Considerations • ER 1.14 Client with diminished capacity (a) When a client's capacity to make adequately considered decisions in connection with the representation is diminished, whether because of minority, mental impairment or for some other reason, the lawyer shall, as far as reasonably possible, maintain a normal client-lawyer relationship with the client.

5. ER 1.14(b) When the lawyer reasonably believes that the client has diminished capacity, is at risk of substantial physical, financial or other harm unless action is taken and cannot adequately act in the client's own interest, the lawyer may take reasonably necessary protective action, including consulting with individuals or entities that have the ability to take action to protect the client and, in appropriate cases, seeking the appointment of a guardian ad litem, conservator or guardian.

6. ER 1.14(c) Information relating to the representation of a client with diminished capacity is protected by ER 1.6.  When taking protective action pursuant to paragraph (b), the lawyer is impliedly authorized under ER 1.6(a) to reveal information about the client, but only to the extent reasonably necessary to protect the client's interests.

7. ER 1.14 (comment 5) If a lawyer reasonably believes that a client is at risk of substantial physical, financial or other harm unless action is taken, and that a normal client-lawyer relationship cannot be maintained as provided in paragraph (a) because the client lacks sufficient capacity to communicate or to make adequately considered decisions in connection with the representation, then paragraph (b) permits the lawyer to take protective measures deemed necessary. Such measures could include: consulting with family members, using a reconsideration period to permit clarification or improvement of circumstances, using voluntary surrogate decisionmaking tools such as durable powers of attorney or consulting with support groups, professional services, adult-protective agencies or other individuals or entities that have the ability to protect the client.  In taking any protective action, the lawyer should be guided by such factors as the wishes and values of the client to the extent known, the client's best interests and the goals of intruding into the client's decisionmaking autonomy to the least extent feasible, maximizing client capacities and respecting the client's family and social connections.

8. A.R.S. §46-454(B) An attorney, accountant, trustee, guardian, conservator or other person who has responsibility for preparing the tax records of an incapacitated or vulnerable adult or a person who has responsibility for any other action concerning the use or preservation of the incapacitated or vulnerable adult's property and who, in the course of fulfilling that responsibility, discovers a reasonable basis to believe that exploitation of the adult's property has occurred or that abuse or neglect of the adult has occurred shall immediately report or cause reports to be made of such reasonable basis to a peace officer, to a protective services worker or to the public fiduciary of the county in which the incapacitated or vulnerable adult resides.

9. Guardianship and Conservatorship • Guardianship “of the person” — Conservatorship “of the estate” • Ruvalcaba by Stubblefield v. Ruvalcaba • “Best interests” vs. “substituted judgment” • Guardians ad litem • Practical considerations: • Will it help? • What will it cost? • How long will it take?

10. What to look for • Diagnosis — “mentally ill” does not equate to “incapacitated” • Requirements: mental condition, effect on ability, need for appointment • Caveat: guardianship/conservatorship will not produce services, improve mental health or functioning, or give the guardian or conservator unlimited powers

11. Gov’t. Benefits and Dissolution • Social Security retirement benefits • Social Security dependents’ and survivors’ benefits • Social Security Disability Insurance (SSDI) • Supplemental Security Income (SSI) • Medicare • Medicaid / AHCCCS / ALTCS

12. Social Security • Dependents (50%) and survivors (75%) • Divorced spouses (dependents and survivors) and the maximum family benefit • Remarriage by divorced spouse • Before age 60 • After age 60 • Effect of divorce, annulment or death of new spouse • Marriage by adult disabled dependent child

13. Supplemental Security Income • Marriage of SSI recipient • Divorce and SSI • Transfer of assets penalties • Special case: effect of divorce by parents on disabled child’s SSI benefits

14. Medicaid (AHCCCS) • NB: AHCCCS eligibility usually considers earned income only, not assets • No transfer penalty

15. Arizona Long Term Care System • Availability of marital assets (“deeming”) • Community Spouse Resource Deduction • Pre- and post-nuptial agreements

16. Intermission

17. Holdovers from yesterday • ALTCS (long-term care Medicaid) eligibility issue: home is exempt resource, but what about lien? What can community spouse do to protect the home? • Guardianship/conservatorship issue: doesn’t spouse have priority for appointment as guardian and/or conservator? What if he/she is the problem?

18. WT v. Division of Medical Assistance and Health Services, 916 A.2d 1066 (NJ Super. Ct. 2007) • Institutionalized husband and community wife divorced (“from bed and board”). Marital assets of $686,000 were divided $250,000 to husband, balance to wife. Sixteen months later husband applied for Medicaid. • Medicaid agency treated unequal property division as uncompensated transfer. • Intermediate appellate court reverses. New Jersey does not require “equal” division of property on divorce, but rather “equitable” division.

19. Statutory disinheritance A.R.S. §14-2804: “…the divorce or annulment of a marriage … [r]evokes any revocable (a) Disposition or appointment of property… (b) Provision in a governing instrument… (c) Nomination in a governing instrument…” (see Appendix B)

20. Problems with disinheritance • How does a divorced spouse manage to leave property to his/her former spouse if he/she wants that result? • What about ERISA plans? • What about pending divorce proceedings? • What about separation?

21. Can you disinherit a spouse? • Elective share statutes (“electing against the will”) • Arizona’s approach: statutory allowances • §14-2402 homestead allowance—$18,000 • §14-2403 exempt property—$7,500 • §14-2404 family allowance—?, but $12,000 presumptively OK • Total: $37,500 • NB: Failure to claim statutory allowances is a “transfer” for ALTCS purposes

22. What about the preliminary injunction? “Neither party shall transfer, encumber, use as collateral on a loan, conceal, sell, or otherwise dispose of any of the parties‘ joint, common, or community property, unless related to the usual course of business, the necessities of life, or court fees and reasonable attorney fees associated with an action filed under this article, without the parties' written consent or the court's permission.”

23. Divorce, probate style • Collecting spousal maintenance (requires explicit language in the agreement or decree) • Property division (contract claim surviving death of decedent) • Child support: • Presumably survives death of parent • ARS §25-327(C) permits support to be “modified, revoked or commuted to a lump sum payment to the extent just and appropriate…”

24. Trusts and dissolution • Effect of dissolution on joint revocable trusts • Prenuptial agreements and trusts • “Special needs” trusts

25. Special needs trusts • Purpose of special needs trust: to permit beneficiary to remain eligible for public benefits • Self-settled special needs trusts, support obligations and asset protection • Ohio (Myers v. DeVore) and Pennsylvania (Mencer v. Ruch) cases on calculating child support • Collecting support award

26. Directing child support payment to SNT • Spousal maintenance and property division • Child support “permanently and irrevocably” assigned to SNT • Residual beneficiaries? • In-kind Support and Maintenance (ISM)

27. More resources • www.ssa.gov • www.elder-law.com • www.specialneedsalliance.com • Fleming & Davis, The Elder Law Answer Book, Panel Publishers • Hegland & Fleming, Alive and Kicking: Legal Advice for Boomers, Carolina Academic Press