Lisa M. Price
National Certified Guardian
Principal, Entrust Fiduciary Services, Inc.
250 N. LITCHFIELD RD., SUITE 115, GOODYEAR, AZ 85395
Concern: Rule 8(B) states that if notice is not made upon all persons required in the manner prescribed by A.R.S. Title 14 "within 120 days after filing of the initial petition or application, the court, upon its own initiative after notice to the petitioner or applicant, may dismiss the petition or application without prejudice."
I am not sure I completely understand this provision. If notice is not properly given prior to a hearing the petition or application should not be granted. The time frame of 120 days would be long after a petition or application would have already been heard and decided. Is this referring to situations where a petition or application is filed but no hearing is set?
Recommendation: This section should either be stricken or the committee should supply comments as to its purpose.
Rule 10, Arizona Rules of Probate Procedure
Concern: Rule 10(C)(1)(b) indicates that the fiduciary shall refrain from charging to attend court proceedings unless it is required by law, court order or other circumstance. I understand the purpose of this provision is to conserve fees. Unfortunately, I believe it will do the exact opposite. As a licensed fiduciary I am bound by the Arizona Code of Judicial Administration §7-202(J)(1)(e), which states in part, "Regardless, the fiduciary alone is ultimately responsible for decisions made on behalf of the ward, protected person or estate." As such, I am the only person who could answer questions on behalf of a particular case. I could provide numerous examples where I have attended a hearing expecting it to be "routine" only to have someone attend the hearing and object or have the court have questions that only I could answer. If I were not at the hearing, the court would then have to reset the hearing which is a waste of judicial resources and ultimately will increase costs to the ward, protected person or estate.
Recommendation: Strike this section in its entirety.
Concern: Rule 10(E)(1) indicates that court-appointed attorneys or GALs must participate in a training program as prescribed by the Arizona Supreme Court. The section goes on to state that,
"the attorney must file a copy of the certificate of completion with the Administrative Office of the Courts or the Supreme Court's designee no later than ten days after entry of the appointment order." This would seem to imply that each time someone is appointed as a CAA or GAL they must re-file the certificate of completion with the court.
Recommendation: Strike the language "no later than ten days after entry of the appointment order." This would make it consistent with a similar provision contained in Rule 10(F)(1) related to court investigators.
Rule 10.1, Arizona Rules of Probate Procedure
Concern: Rule 10.1(C) allows an attorney to file a motion to allow the fiduciary to attend a hearing without counsel. I have a number of concerns about this provision. As with Rule 10(C)(1)(b), although a fiduciary and/or the fiduciary's attorney could justify attending hearings, I believe that the fact that it was an "option" for the attorney or fiduciary to not attend a hearing will lead to increased fee objections from other parties. Additionally, the suggestion is that it will save administrative fees for an attorney to not attend a hearing; yet in order for that to happen the attorney must first file a motion which has to be reviewed by the fiduciary. Again, this will only increase administrative fees, not reduce them. Lastly, Rule 17(D), Arizona Rules of Probate Procedure, allows a party to appear at a hearing and orally object to the petition. As with the example above, while a hearing may be expected to be routine a party is always able to attend and object. Failure of the fiduciary to be represented by counsel may only result in a delay in the proceedings which would result in a waste of judicial resources and additional administrative expenses to the estate.
Recommendation: Rule 10.1(C) should be stricken in its entirety.
Rule 10.2, Arizona Rules of Probate Procedure
Concern: Rule 10.2(C) is almost verbatim from Senate Bill 1499 with the exception of the last line which states "At any stage of the proceedings, the court may order that competitive bids for good or services be obtained." There was significant time spent discussing the competitive bid process during the negotiations regarding SB1499 and HB2424. While the assumption may be that the "market rates for goods and services" addressed in this section relate only to fiduciary or attorney fees, this is not the case. This section opens up a request by the court or an interested party to request a competitive bid for nursing home costs, in-home care costs or fiduciary fees. As anyone who has ever dealt with a competitive bidding process can tell you, rarely is a project completed on time or within the budget. Additionally, as we explained to the legislature, simply charging a lower hourly rate does not mean that your fees will ultimately be less than another service provider as the practices of the office determine the fee much more so than the hourly rate.
Recommendation: Strike the last sentence of Rule 10.2(C).
Rule 22, Arizona Rules of Probate Procedure
Concern: Rule 22(C)(2) indicates that when funds are restricted they must be "deposited into an interest-bearing, federally insured restricted account at a financial institution engaged in business in Arizona." How does this affect brokerage accounts? Brokerage accounts are not federally insured. It would be my assumption that the courts would not suggest that we violate the Prudent Man Standard or Prudent Investor Standard by placing all funds of our wards in interest-bearing money market accounts. Additionally, what if the accounts being restricted are IRAs or other accounts with a payable on death beneficiary designation? To change the investment strategy may be changing the estate plan of the ward or protected person which we are statutorily forbidden to do.
Recommendation: Strike the following language: "Funds shall be deposited in an interest-bearing, federally insured restricted account at a financial institution engage in business in Arizona." The remaining restriction language is appropriate.
Rule 30.1, Arizona Rules of Probate Procedure
Concern: This is, by far, the most egregious of all rule recommendations. There was significant time spent addressing this issue at the legislature during the last six months. After hours of discussion, the legislature agreed that this was not a good use of resources and would ultimately serve no benefit to the parties.
The first issue of this "good faith estimate" is that it is to be supplied by the petitioner, not the proposed appointee. I am not sure how the guardian ad litem, adult protective services, or family member is to obtain a good faith estimate to provide in the petition. The second issue with this proposal is that prior to appointment, I have no legal authority to have access to the information that would be necessary to complete a good faith estimate. Rarely do I have a clear picture of assets or a proposed ward's medical situation. I cannot tell you what the costs for medical care are going to be as I don't know what the ward's placement needs will be. I cannot tell you what my fees or the fees of my attorney will be as I have no idea how complex a case may be. Anyone who has practiced in this area for any length of time knows that what you believe may be the issues of a particular case can change very quickly upon appointment. Additionally, we are dealing with the lives of real people which can change on a daily basis. When this issue was discussed during the meetings of the Probate Committee there were a number of analogies made to cars and mechanics who can give you an estimate as to what it will cost to fix a car. Not only was I offended by this analogy, it is completely inappropriate. A car is a fixed object. You can narrow down a problem with a car and provide a reasonable estimate as to what it will cost to fix it. You cannot do this with a human being and to suggest you can is inappropriate and irresponsible.
The proposed rule indicates that the petitioner is to provide an estimate based on information which can be reasonably known or projected at the time the petition is filed. Should this rule pass, my petitions will all state, "I have no legal authority to gain access to the information which would be necessary to provide a good faith estimate at this time. An appropriate budget will be filed at the time of the inventory and appraisement."
Recommendation: Rule 30.1 should be stricken in its entirety.
Rule 30.2, Arizona Rules of Probate Procedure
Concerns: Rule 30.2 allows the CAA to be discharged if the court finds "that the cost of the continued representation exceeds the probable benefit to the protected person." I believe this is bad policy. A probate proceeding does not cease upon appointment of a guardian or conservator. If the individual has been deemed incapacitated, they are unable to protect themselves and their interests and ensure their due process rights are not being violated. The discharge of a CAA in a conservatorship only proceedings where the protected person has the ability to understand an accounting or understand a court proceeding would be acceptable but in cases where the protected person has been adjudicated incapacitated, there should always be a court-appointed attorney involved in the case.
Recommendation: Specify that a CAA can be discharged in a conservatorship only case but must be maintained when there has been a finding of incapacity.
Rule 30.3, Arizona Rules of Probate Procedure
Concerns: Overall, I have no objection to providing the court with a budget and a sustainability projection. The problem with this proposal is that it requests an estimate of projected life span. I believe it is simply bad public policy to propose to my ward, their family, interested parties, or the court how long I think someone may live. Bad public policy aside, my office only acts in a conservatorship, personal representative or trustee capacity; none of which would allow me access to the medical records which would be necessary to provide an estimated life expectancy. I can and would be happy to supply an estimate based on current income and expenses of the exact month the funds would be exhausted but I cannot possibly tell you if my ward or protected person will outlive that time frame. As an example, I was appointed for a man 14 months ago who was on hospice services. Shortly after our appointment, and because of our involvement, he actually graduated from hospice services for a short period of time. As many know, a hospice admission assumes a life expectancy of six months or less. My "sustainability" projection to the court would have been off by quite a bit in this case.
I simply do not see the benefit in providing the life expectancy approach. Again, I can tell you, based on current income and expenses, the month the funds will be exhausted and I can tell you what my plan would be for the ward or protected person at that time. This can all be done without the life expectancy calculation.
Recommendation: Remove the requirement to provide a life expectancy calculation when providing a sustainability projection.
Rule 30.4, Arizona Rules of Probate Procedure
Concern: Overall, there is no concern with the concept of a budget and I have been a proponent and supporter of budgets from day one. The concern is with the form being proposed by the probate committee. The form is much, much too complicated. Any form that requires eight pages of instructions to explain a two page form is too complicated. The drafters must keep in mind that 85%+ of probate cases are managed by non-professionals. The budget must be in a format that an average person would be able to use and understand it and apply to their own household.
Recommendation: I have attached a proposed budget form which could easily be adopted for the sustainability projection and the summary of assets for the annual accounting.
Concern: Rule 30.4(D) requires that an amended budget be filed within thirty days if the expenditures for any category exceed the approved budget by more than ten percent or two thousand dollars, which ever is greater. This is only going to lead to more administrative expenses and provide zero benefit to the ward, protected person or interested parties. If I have a client who is in assisted living, had a fall and breaks her hip and requires placement in a skilled nursing facility that is going to cause an increase in the budget by more than ten percent or two thousand dollars. Will that make a difference in how I manage the case? Of course not as the best interest of the ward/protected person is what take precedent. Or what if the air conditioning unit goes out on the home owned and lived in by my client. I have only estimated $2,000 for the year for household expenses and now I must expend $5,000 for a new air conditioning unit. How is it beneficial to the ward/protected person for me to update the budget and for my attorney to file that with the court and notice all parties? A $5,000 air conditioning unit now just cost the ward/protected person $6,000 due to the additional administrative expenses.
Recommendation: Strike paragraph D in its entirety.
Concerns: In general the forms are not appropriate for non-professionals. As 85%+ of probate cases are managed by non-professionals this will make it more difficult for those individuals to complete their duties. I will respond to these forms in more detail at a later date.
Proposed Statewide Fee Guidelines
Concern: The drafters of these fee guidelines appear to believe that fiduciaries and attorneys are the same. We are not. First, attorneys are not audited by the State Bar; nor do they have a 23 page document of audit expectations that they are bound by. As licensed fiduciaries, we are required to keep impeccable files and document every piece of mail that comes into our office. While this may be seen as clerical work, it is imperative to my operations and my ability to successfully pass an audit by the Administrative Office of the Courts. As long as this level of record keeping is required by my licensing entity, I will charge for the time. I believe the main issue not addressed by the drafters of the fee guideline is that clerical time is being charged at a much higher billing rate than one would expect for clerical work. A better approach would be to limit the rate that could be charged for clerical work. For example, my billing rate is $105/hour while the clerical rate (even if I am performing the task) is charged at $40/hour. This is a reasonable rate for clerical services. I have already heard significant concern within the fiduciary industry about the ability to cover overhead expenses (including the salary of the person required to perform these tasks) at our current billing rates. Most offices have indicated that should these guidelines be approved, they will simply raise their rates to cover the cost of these positions. In the long run, a higher billable rate for all other tasks will result in more in administrative costs. As an example, from January 1, 2011 to current, my office has billed 314 hours of clerical or administrative tasks for a total of $12,388.00. Alternatively, if I were to raise my hourly billing rate by $10.00/hour across the board for all other tasks (not including any time billed for clerical or administrative tasks) the total additional income would be $15,677.00. Clearly this is a benefit to me and my office, but not the ward.
The second issue I have with the fee guidelines is Section 3(D) related to the number of hours that should be expended on a particular task. Given that the Probate Committee and the Workgroups collected zero statistical data over the course of the last year, I would be curious to know how these figures were generated. While the document attempts to make it clear that these are just "guidelines" it also states very clearly that the fiduciary should be prepared to explain why they charged more than the hours contained in the guideline. This will, without a doubt, result in higher administrative fees as interested parties, particularly aggrieved family members, are going to object when the time spent shopping in one month was seven hours instead of six. Now the fiduciary will spend an hour explaining why that particular ward needed so much attention that month.
Again, while the committee and workgroup members all indicated that it was not their intent that any estimate of fees (the ones contained in the good faith estimate) would be used against the fiduciary and were only to be set out as a guideline to give the parties an "estimate" of fees and costs, Section 4(A) appears to contradict that position. This section is clear that the judge is to look at the estimate of fees in determining the reasonableness of the compensation requested. Once again, the drafters are failing to take into account that we are not dealing with static cases; we are dealing with human beings whose needs change from one day to the next.
I also have an issue with Section 4(F) regarding the delegation of duties to another individual. I agree that all fiduciaries (and attorneys) should delegate tasks to other staff whenever possible to conserve fees. That being said, as licensed fiduciaries our Code of Conduct contained in Arizona Code of Judicial Administration §7-202 limits our ability to delegate a number of tasks to non-licensed staff. Additionally, while not explicitly written in the ACJA, many fiduciaries have reported findings on audits when they delegate tasks to non-licensed staff.
Recommendation: The best way to handle fee disputes is to simply use the findings of Sleeth v. Sleeth, all of which are currently contained in statute, rule or case law and were simply consolidated into one case.
I appreciate all of the work conducted by the various committee and subgroup members. Thank you for consideration of my comments.