Garland Law Offices, P.A.

What Can Tim Conway’s Demise Can Teach Us About Elder Law?

“To avoid family squabbles later, think hard now before giving a loved one decision power over your finances and your health.”

Comedian Tim Conway was hilarious in his comic skits on The Carol Burnett Show in the 1970s. One of his comedy classics featured his ad-libbing and out-of-turn laughter in a famous skit, where he plays a hapless dentist with Harvey Korman as his patient. America loved Tim Conway.

Kiplinger’s recent article, “Choose Agents for Power of Attorney, Health Care Proxy Carefully” reports that the 84-year-old Conway was in the headlines recently for vastly different reasons. When he was incapacitated by dementia, his family fought over his care. One of Conway’s daughters from his first marriage and his second wife battled in Los Angeles probate court for his sole conservatorship.

Conway’s case illustrates that as more adults age with blended families in charge of their care, family disputes over decision-making authority are increasing. A person’s second spouse may be listed as health care proxy or the agent under the power of attorney. However, that doesn’t mean the adult children from the first marriage—who may have hard feelings—won’t start a legal challenge.  Siblings with different opinions on the costs and quality of care also may want to find a way to take control. This may result in a judge appointing a guardian or revoking a relative’s authority. This can only mean more resentment and more legal bills.

Families can avoid the time and expense of litigation, by attempting mediation of the problem before going to court. A geriatric care manager or a social worker can assess a loved one’s care needs and offer a professional opinion to assist a family looking for a solution. There are also other strategies you can try to avoid a fight.

To begin with, choose carefully when you give a person decision-making power over your finances and your health. It’s best to select a person who’ll try to get you the best care possible and not worry about their inheritance. A child with financial problems might not be the right choice for your financial power of attorney. For seniors living alone, there are of care-management agencies that will act as agents for a fee. However, make certain that you understand the fees and costs involved.

Once you’ve designated an individual as your health care proxy, have a conversation with them about why you selected them.  You should be specific about what type of care you want to receive.

You can also guard against a potential battle, by adding terms in your will that say if your children unsuccessfully challenge your choice of agent or health care proxy, they could have their inheritance eliminated or reduced.

Reference: Kiplinger (November 29, 2018) “Choose Agents for Power of Attorney, Health Care Proxy Carefully”

Virginia Supreme Court Examines Power of Attorney Statute

 

“Neither of these provisions makes an attorney-in-fact liable for the alleged misuse of his or her principal's property solely by a third party (including by a separate agent over whom he or she has no express authority), or to affirmatively act to recover such property when stolen”

In 2010, Bobbie Wynder appointed Leroy Mangrum to be her attorney-in-fact by a general power of attorney. She died in June 2013. A year later, Wynder's four stepchildren, also the beneficiaries under her will, filed a suit against Mangrum for disclosure of all transactions and financial records from his time as Wynder's attorney-in-fact.

From the partial accounting he provided, the stepchildren saw several transactions for which they sought more information. One was a withdrawal by Mangrum's wife, Doris, of $36,000 from a savings account held jointly with survivorship by Wynder, Doris, and Brenda Chavis, one of the stepchildren, and Mangrum's surrender of Wynder’s $116,000 annuity. The annuity proceeds were initially deposited in Wynder's checking account but were then withdrawn and deposited into Mangrum's own account. The plaintiffs also sought an order that Mangrum restore any assets transferred in violation of state law.

The Supreme Court of Virginia explained in the case of “Mangrum v. Chavis” that the circuit court found that Doris's withdrawal was improper and that Mangrum improperly surrendered the annuity. In its order, the court found that he "failed to account properly with care, competence and diligence" as required by the state’s power of attorney act. The court awarded judgment to the stepchildren, ordered Mangrum to restore $152,000 to Wynder's estate, and to pay $19,000 in attorney's fees.

On appeal, Mangrum contended that the circuit court erred by ordering him to restore $36,000 to Wynder's estate as a result of Doris's withdrawal of that amount from the joint savings account. He argued that the circuit court expressly found that Doris alone made the withdrawal—not that he was responsible for it. The stepchildren also acknowledged that Doris acted alone. He claimed there was no evidence that he ever had authority over the money after it was withdrawn. The withdrawal didn’t arise from or depend upon his power of attorney for Wynder.

The stepchildren argued that he had duty to preserve Wynder's estate plan and a duty not to act in a way that would create a conflict of interest. They argued that he breached these duties by not preserving the funds in the joint account—even if he didn’t withdraw them himself. The stepchildren also argued that he had knowledge of the transaction and benefitted from it, which created a conflict of interest.

The Supreme Court explained that Doris, as a joint account holder, was Wynder's agent for the purposes of the funds Wynder owned in it and was liable as an agent for any breach of fiduciary duty. But this agency relationship between Wynder and Doris was separate from, and foreclosed liability under, the agency relationship between Wynder and Mangrum.

The trial court expressly found that only Doris withdrew the $36,000, not that Mangrum directed or participated in the withdrawal (even if he benefited from it). Because his agency relationship was established by the power of attorney, and Doris's agency relationship was established separately by her status as a joint account holder, they didn’t owe their fiduciary duties to Wynder jointly. Thus, as a separate agent, Mangrum couldn’t be liable for Doris's acts, unless he had a duty to supervise her.

Virginia Code § 64.2-1612(B) doesn’t imposes such duties, the Supreme Court said. The laws states that an attorney-in-fact must "[a]ct so as not to create a conflict of interest that impairs the agent's ability to act impartially in the principal's best interest," and that an attorney-in-fact must "[a]ttempt to preserve the principal's estate plan, to the extent actually known by the agent, if preserving the plan is consistent with the principal's best interest based on all relevant factors, including [t]he value and nature of the principal's property."

The Supreme Court found that the provisions of the act didn’t make an attorney-in- fact liable for the alleged misuse of his or her principal's property solely by a third party (including by a separate agent over whom he or she has no express authority).

The Supreme Court reversed the portions of the circuit court's judgment, awarding the plaintiffs $36,000 based on Doris's withdrawal of that amount from the joint savings.

Reference: Supreme Court of Virginia (March 1, 2018) “Mangrum v. Chavis”

Rhode Island Supreme Court Decides Power of Appointment Issue in Probate Case

“In the case before us, however, if the exercise of the power of appointment were deemed valid, the very terms of Constantine's will would place the assets of the irrevocable trust in his residuary estate, thereby subjecting them to the demands of creditors.”

The Supreme Court of Rhode Island recently heard a case where plaintiff Elaine Jaffe (Jaffe) and defendant William C. Pournaras (William)—the two surviving children of Constantine W. Pournaras—argued over a Superior Court judgment granting Elaine's request for declaratory relief and prohibiting William from transferring assets of the decedent's irrevocable living trust into his estate.

Findlaw recently published the case of “Jaffe v. Pournaras.” In this case, Constantine, who passed away  in 2012, executed signed documents during his lifetime that are at issue: a revocable living trust (the living trust), an irrevocable living trust (the irrevocable trust) and a last will and testament.

The living trust named Constantine as trustor and sole trustee with William as the sole successor trustee. According to Jaffe, the living trust was "funded with approximately $500,000." The living trust provides that, upon Constantine's death, the trustee (William) "shall pay the property located at 43 Knollwood Avenue, Cranston * * * to * * * POURNARAS [William]* * *"; the living trust also provides that, if the trust owned liquid resources, the trustee shall pay $50,000 from those liquid resources to Jaffe, not including the aforementioned real property.

The irrevocable trust names William as trustee. Jaffe says that William advised her that the irrevocable trust contained assets worth approximately $694,000. The irrevocable trust reserved to Constantine the power "to appoint any part or all of the [t]rust [e]state to or for the benefit of any of [his] descendants, in equal or unequal amounts, either directly or in [t]rust, as [he] may direct." It also specified that this power of appointment is "exercisable by written instrument during [his] lifetime or by [w]ill or any [c]odicil thereto[.]" The power of appointment, however, is limited and cannot "be exercised in favor of [Constantine's] estate, the creditors of [his] estate or in any way that would result in any economic benefit to [him]." The trust also directs William, as trustee, to divide the trust assets into "separate and equal shares" between Jaffe and William, as his surviving children, upon Constantine's death.

The will names William as personal representative and provides that he "shall distribute [Constantine's] residuary estate to the then acting [t]rustee" of the living trust (William). Section 5.01 of the will defines "residuary estate" as, in relevant part, "any property over which [Constantine] may have a power of appointment * * * less all valid claims asserted against [his] estate * * *."

In 2014, the will was admitted to probate, and Jaffe filed a complaint seeking declaratory and injunctive relief to prevent William from transferring the assets of the irrevocable trust into Constantine's estate, and to have William removed as trustee. She alleged that he intended to transfer assets from the irrevocable trust to Constantine's estate by exercising the limited power of appointment in the irrevocable trust. But William argued that the will was intended to be an exercise of the limited power of appointment contained within the irrevocable trust.

Chief Justice Paul A. Suttell said in his opinion that the court's primary objective when construing language in a will or trust is to ascertain and effectuate the intent of the testator or settlor, if that intent is not contrary to law. Plain language of the will or trust is considered first, and the court won’t resort to considering extrinsic evidence, where the intent is clear "from within the four corners of the will[.]"

Jaffe argued that the plain language of the irrevocable trust was clear and expresses Constantine's intention to prohibit the limited power of appointment from being exercised in favor of Constantine's estate or creditors of his estate. She argued that Constantine could have, but didn’t exercise his limited power of appointment by his will to appoint the property to a third party, such as directly to his living trust or to [William]. She said the language in the will didn’t constitute a valid exercise of the power of appointment, because it would contravene the plain language of the irrevocable trust, which expressly prohibits the exercise of the power of appointment for the benefit of Constantine's estate. The Supreme Court agreed.

The Chief Justice found that if the exercise of the power of appointment were deemed valid, the very terms of the will would place the assets of the irrevocable trust in his residuary estate, subjecting them to the demands of creditors. That would be contrary to Constantine's intent, as expressed in the irrevocable trust.

The Supreme Court found the language of the irrevocable trust to be clear and unambiguous, so extrinsic evidence wasn’t needed to determine Constantine's intent. The power of appointment was to be executed "for the benefit of any of [his] descendants, in equal or unequal amounts," and "not * * * in favor of [his] estate[.]" Thus, the Superior Court didn’t err in holding that the defendant's intended exercise of the limited power of appointment contained in the irrevocable living trust was invalid.

Reference: Findlaw (February 23, 2018) “Jaffe v. Pournaras”