Attorneys Fees in Probate and Guardianship Cases: Is the Chronicle Telling the Whole Story?

October 28, 2010

As I mentioned in my last post, the Houston Chronicle published a front-page article on Friday, October 22, 2010, regarding the attorneys’ fees approved by the Probate Courts in Harris County and the other large counties around the state. I wanted to provide insight into some of the issues raised in the article.

Attorneys fees in probate and guardianship cases can be incurred in 2 different ways – 1) a client can hire an attorney to represent them in a probate or guardianship case, or 2) the Court can appoint an attorney to work on a probate or guardianship case. In both cases, the attorneys are required to present their fees to the Probate Court for approval.

The Chronicle complains about the “high” fees that are charged in the various cases that are approved by the Probate Courts in Harris County. However, the article does not point out that many of the attorneys whose fees are submitted for approval are hired by ordinary citizens who are doing nothing but trying to handle a difficult situation through the Courts. When that client hires the attorney, the client agrees to the rate that will be charged, and the client agrees that they will pay the rate. Unlike any other area of law, however, the Probate Code requires most of those attorney’s fees to be submitted to the Court for approval before the client can pay the fees out of the estate assets. Regardless, though, it is the client who is asking the Court to approve the fees, and although the Court has to examine the fees to determine that they are legitimate, the Court should in most cases defer to the client who has retained the services of the attorney to monitor whether the fees are reasonable or not.

In cases where the Court has appointed an attorney to participate in a particular proceeding, the Court should, as the Chronicle point outs, review the fees charged and apply standards for approving those fees. In my experience, the Probate Courts in Harris County do an excellent job of monitoring these fees. While there could always be instances where the system has been abused, the reality is that the system works very well in Houston, and there is not a good case to be made that the system is as “corrupt” as the Chronicle wants to suggest that it is.

I find it curious that the Chronicle is so quick to judge the Probate Courts, but they have not offered any sort of solution to the problem that they think they have identified. Keep reading for more posts on this topic.

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The Houston Chronicle Again Interjects itself into the Probate Courts

October 25, 2010

On Friday, October 22, 2010, the Houston Chronicle published a front-page article regarding its perceived abuses and misuses of the Probate Courts by the Judges who preside over those courts and by the attorneys who practice in them. This article is a follow-up article to a two-part series that the Chronicle ran in the summer of 2008 on the same topics. In the article, the author cites to various statistics regarding fees that have been approved by the Probate Courts in Harris County and casts stones upon both the Judges and the attorneys who practice in these courts.

The Chronicle seems to take the opinion that the Harris County Probate Courts must be corrupt because the judges in those Courts approve attorneys’ fees for the attorneys who practice in those Courts. What the article does not tell you is that the Probate Code requires that attorneys in many probate cases and in all guardianship cases submit their fees to the Court for approval. The article also does not tell you that the Probate Courts are virtually the only Courts in the state of Texas where attorneys are required to submit their fees for approval to the Court in even the most basic and routine cases.

In an effort to shed some light on the allegations made by the Chronicle, I am going to post a short series of a couple of blog posts regarding the issue of the attorneys’ fees charged in the Probate Courts and the allegations that are raised by the Chronicle. I hope that you find the series helpful and informative.

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This Week In Probate And Guardianship Appeals

September 17, 2010

Case: Jefferson State Bank vs. Christa C. Lenk, Administratrix of the Estate of Mickey Carl Marcus

Court: Texas Supreme Court

The Supreme Court last week sent down a decision that has decided when the duty arises for an estate administrator to timely notify a bank of unauthorized transactions that occurred prior to their appointment.

In March of 2000, Mickey Marcus died with over $22,000 in his account at Jefferson State Bank. The following month, Melvyn Spillman presented the Bank with fraudulent letters of administration purporting to appoint him as administrator of the Marcus Estate. The Bank, relying on what it believed to be valid letters, gave Spillman access to the Marcus account. Throughout the next several months, Spillman withdrew most of the account balance. Spillman was arrested for perpetrating this fraud and several others.

In September of 2003, Christa Lenk was appointed as the Administratrix of Marcus’ Estate. She was aware of the fraud at the time of her appointment. However, following her appointment, she made no effort to contact the bank for over two years. In June of 2005, Lenk sent the bank a demand for payment of $185,785—the amount allegedly withdrawn by Spillman. When the bank refused to pay, Lenk sued to recover the funds.

The bank relied on Texas Business and Commerce Code Section 4.406 which precludes a customer from bringing a claim based on an unauthorized transaction if the customer fails to report the transaction to the bank within one year after the bank provides the customer with the relevant account statement. Both sides filed summary judgment motions. The trial court granted the bank’s motion, however the court of appeals overturned this decision. The Supreme Court then took the matter under advisement and has sided with the bank.

In their decision the Supreme Court has stated that the issue is whether the bank satisfied its initial burden to send or make available the statement to its customer. They held that in the context of a deceased customer that (1) the bank satisfies its burden by retaining account statements for retrieval by the estate administrator, and (2) the response period begins to run once an administrator is appointed.

The Supreme Court did however reject the bank’s argument that it satisfied its burden by sending statements to Spillman. They reasoned that even with reliance on a fraud, Spillman was never the bank’s customer, as required by Section 4.406(a). The bank instead satisfied its burden by retaining the statements, which the Court noted is the only real way a back can satisfy this burden. They held that once an estate administrator is appointed, a bank should not be faulted for failing to further send or make available the statements.

Therefore, the bank has a burden to retain statements, but the administrator’s burden to report unauthorized signatures does not arise until his appointment. Upon that appointment, the administrator has one year (unless otherwise contractually shortened) to notify the bank of any fraudulent or unauthorized transactions. Unfortunately for Lenk, she waited far too long to complain of these transactions, especially considering she knew of them upon the date of her appointment. Not only did she miss the year deadline, it turns out that Marcus and the bank had contractually shortened the deadline to 60 days.
Moral of the story:

If you are appointed as an Estate Administrator, you need to immediately obtain account information for the deceased and if you see any unauthorized transactions, you must report these to the bank at once. Do not rely on the year deadline because as we see here, even that may be severely shortened by agreement. If you have any questions about estate representation, do not hesitate to contact us at 713-260-3926.

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Appointees in Guardianship Proceedings Pt. 3: The Court Investigator

September 7, 2010

In previous posts, we discussed two of the three Court-appointed individuals used in guardianship proceedings throughout the State. For every guardianship proceeding, the Court appoints an Attorney ad Litem to act as the attorney for the Proposed Ward. In many cases, the Court may take an additional step and appoint a Guardian ad Litem to identify and represent the “best interests” of the Proposed Ward throughout the case. A third appointee that is generally found only in the guardianships of larger counties is the Court Investigator.

Each statutory probate court – the specialized probate courts found in the largest Texas counties – routinely appoints a Court Investigator upon the filing of an application for guardianship. The Investigator is designed to be as neutral and objective an observer as can be. They work for neither the applicant nor the Proposed Ward, and their background is often more filled with experience in social work than legal advocacy.

When appointed, the Court Investigator has an obligation to investigate the circumstances alleged in the applicant’s application for guardianship. Often, this involves face-to-face interviews with the applicant, the Proposed Ward, family, friends, caretakers and so on. The Court Investigator will almost certainly want to visit with the Proposed Ward where he or she lives, as most applications for guardianship allege that the Proposed Ward is less than fully capable of caring for themselves.

The Court Investigator’s role is very much what is sounds like. After investigating the circumstances, they will prepare and file a report with the Court. Depending on the contents of the report, it may be offered as evidence in favor of a guardianship, against a guardianship, or in favor of something in the middle. One of the key components of the report will be the Investigator’s conclusions regarding less restrictive alternatives. If something less restrictive than a complete guardianship would resolve the issue, the Court Investigator should identify it.

The Court Investigator’s office is also responsible for supervising the Court Visitor Program. Each statutory probate court is required to operate such a visitor program, and to utilize volunteers wherever possible. Court Visitors are often called upon to gather information similar to the Court Investigator and report that information back to the Court. In many cases, Court Visitors will be assigned to visit with Wards that have been under a guardianship for long periods of time. Their periodic information helps the Court determine if continuation of the guardianship is necessary.

As we take a step back from our review of the roles of appointees in guardianships, it is clear to see that in many cases, several individuals could be involved in the process. The filing of an application puts several wheels in motion for the applicant, the Proposed Ward, the Court and appointed personnel. Each person has their own role, and those roles are clearly defined by the same law which authorizes their appointment.

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Appointees in Guardianship Proceedings Pt. 2: The Guardian ad Litem

August 20, 2010

In a prior post, we took a closer look at Court-appointed attorneys and their specific roles in guardianship proceedings. In every case, whether the Proposed Ward can truly afford it or not, the Court appoints an attorney ad litem to act as the Proposed Ward’s legal counsel. While that appointment is mandatory, the Court has the option (not a requirement!) to also appoint another attorney, known as the “guardian ad litem” for the Proposed Ward. The two roles may sound a bit similar, but they are in fact vastly different.

Just as any attorney ad litem must obtain and maintain special certification by the State Bar in order to be eligible for the appointment, so too must every guardian ad litem. However, the mandatory certification is just about the extent of the similarities between the two appointed roles.

While the attorney ad litem is bound to advocate for the Proposed Ward’s legal interests, the guardian ad litem is primarily concerned with the Proposed Ward’s “best interests.” On occasion, legal interests and best interests are precisely the same thing. Other times, they very clearly are not.

Remember that the attorney ad litem must treat the Proposed Ward like any other client. Confidentiality and the duties of loyalty and zealous advocacy apply. However, the guardian ad litem is not bound by a similar relationship. The guardian ad litem’s job is not to follow the Proposed Ward’s desires and decisions, but instead, the guardian ad litem often acts as an additional arm of the Court to gather information and evaluate what the guardian ad litem believes to be in the bests interests of the proposed ward, even if that decision conflicts with what the proposed ward believes to be in his own best interest.

A guardian ad litem will meet with the Proposed Ward, observe their ordinary daily routine, interview the parties to the guardianship, review any medical information, and generally soak up as much objective evidence as possible. Then, they will usually take a solid position on what the Court should or should not do to best protect the Proposed Ward. Their position may echo the guardianship applicant’s desires, the Proposed Ward’s desires, or fall somewhere in the middle.

The limit of a guardian ad litem’s role remains about as murky as you might expect. What do “best interests” really mean? As a result of a less-than-concrete definition of duties, you find different attorneys applying their own best judgment to the task when called to do the job. The role of the guardian ad litem is certainly important in the cases where the Court chooses to appoint one. It would be nice if the legislature provided a bit more substance to the rules related to them in order for them to be uniformly and effectively applied in guardianships all across our State.

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Appointees in Guardianship Proceedings (Part 1): The Attorney ad Litem

August 9, 2010

Guardianship proceedings often involve procedures that can be a bit confusing to most clients, no matter their position in the case. Among the items that makes guardianships unique is the Court’s use of appointed attorneys to fill specific roles. Over the next few posts, I felt it might be useful to outline why the Court appoints different people, as well as discuss the roles that the legislature intended these appointees fill.

In every guardianship proceeding, the Court must appoint an attorney (known as the “attorney ad litem”) for the individual alleged to be incapacitated (generally referred to as the “Proposed Ward”). The Attorney ad Litem is selected by the Judge and must obtain and maintain special certification by the State Bar of Texas in order to be eligible for appointments. By appointing an attorney ad litem to represent the Proposed Ward, the Judge makes sure that the Proposed Ward receives due process – a fair shake in a judicial proceeding. The attorney ad litem becomes the Proposed Ward’s attorney – to represent the Proposed Ward throughout the guardianship process so that his/her rights are not taken away unfairly.

Like every other attorney-client relationship, the attorney ad litem must maintain his or her client’s confidentiality and loyally pursue the lawful objectives as the client instructs. Just like every other attorney-client relationship, the attorney ad litem should meet with the Proposed Ward, review the Court’s file and discuss potential options and outcomes with the Proposed Ward. At the end of the day, the Proposed Ward’s instructions are the attorney ad litem’s marching orders. If the Proposed Ward opposes the guardianship, the attorney ad litem bears the obligation of opposing the guardianship as vigorously as though the Proposed Ward had hired the attorney himself.

In too many cases, I have seen attorneys ad litem take a lackadaisical approach to their obligations – particularly when the Proposed Ward shows outward signs of actually being incapacitated. Sometimes, attorneys ad litem are content to simply go through the motions of acting like their client’s attorney. Nothing could be more detrimental to the process than this. In fact, an attorney ad litem’s minimal efforts or complacency could very well harm the Proposed Ward by inviting an appeal or some other action by an interested party. The saying that comes to mind is, “if it’s worth doing, it’s worth doing right.”

The attorney ad litem should be the first to point out defects in the form or substance of an application or pleading. If there is an issue with a doctor’s evaluation, the attorney ad litem should be the first to call it to the Court’s attention. If the guardianship applicant lacks standing or might be disqualified, the attorney ad litem has an obligation to raise the issue and fulfill their purpose. Attorneys ad litem are appointed to advocate the legal interests of the Proposed Ward, and nothing short of their zealous advocacy provides their client with the due process to which he or she is entitled.

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Temporary Guardianships: Perfect when they fit, Trouble when they don’t

July 6, 2010

In the past, this blog has identified many of the traditional elements of a guardianship matter, and has outlined many of the alternatives available under certain circumstances. Often, neither the traditional approach or the alternatives are a good fit. The situation might demand that action be taken quickly, particularly if the Proposed Ward and/or her property are at immediate risk.

Temporary guardianships and their procedural elements are frequently misunderstood, by clients and courts alike. In many cases, they are sought for the wrong reasons, or without adequate information, and they can sometimes do more harm than good. Today, temporary guardianships work very much like permanent guardianships. Their cornerstone differences are (a) a fast-tracked process, and (b) a temporary fix to what might be a permanent issue.

Under prior legislation, a temporary guardianship could be granted without notice to the Proposed Ward. I am consistently astonished by the continuing perception that this kind of procedure is still available in Texas. It is not. Many clients, attorneys and even judges apply the outdated procedure when they seek or grant an ex parte temporary guardianship, or one created before the Proposed Ward is ever even notified.

Today, the Probate Code is clear on the notice provisions of every temporary guardianship. When an application is filed, an attorney is appointed to represent the Proposed Ward. The Clerk issues specific notices and provides a copy of the application to every concerned party, including the appointed attorney. The Court sets a hearing date, generally within 10 days. If these steps are not followed, the Court cannot create a temporary guardianship. If it does, buckle up for the bumpy ride.

Temporary guardianships can be a wonderful tool when used appropriately. In a time when a hearing on a permanent guardianship might take weeks to coordinate, temporary guardianships get the ball rolling much faster. In true emergency situations, they can safeguard the Proposed Ward from imminent harm and even temporarily lock down the Proposed Ward’s estate if it is at risk. Used correctly, temporary guardianships can be true lifesavers. Sought for the wrong reasons, or created under repealed and rewritten laws, temporary guardianships can cause more trouble than they fix.

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LegalZoom Faces Class Action Suit

June 25, 2010

Somebody once said that there is no such thing as bad publicity. In a nutshell, bad news is still good publicity, so long as they spell your name correctly. LegalZoom.com is back in the news again, and the company might disagree with the age-old marketing adage right now.

For those not familiar with the self-appointed titan of online lawyering, LegalZoom was founded in part by Robert Shapiro, who you should remember was a leading element of O.J. Simpson’s legal team several years ago. The company provides a litany of online legal services and boasts the ability to serve individuals who might otherwise not be able to afford the expense of an actual attorney. For the most part, the nine-year-old company’s services seem centered on a do-it-yourself approach, specializing in providing what are claimed to be “common” or “routine” documents – things like Wills and documents to form a business.

Now, the company is playing defense. A recent class action lawsuit has accused LegalZoom of unfair and deceptive business practices. The company is accused of leading customers to practice law without a license, assisting in the unauthorized practice of law, and using fraudulent business practices.

The chief plaintiff, Katherine Webster, has sued as the Executor of the Estate of Anthony Ferrantino, and as Trustee of the Anthony J. Ferrantino Living Trust. LegalZoom provided several document forms, including a trust, a will and a power of attorney. Per the company’s model, the customer essentially wrote the documents herself by answering several questions, while a computer created the documents based upon the answers. But the documents were flawed, the plaintiff claims, and those flaws cost the Estate severely.

LegalZoom is not the only company of its kind. It’s just the only one that uses a well-known attorney-founder as its spokesperson, lending security and credibility that some might claim is unjustified. The suit at hand will determine if LegalZoom in fact made misrepresentations, buried disclaimers and omitted relevant facts when courting customers through its advertising. It should be interesting to follow, and should at least serve as a cautionary tale for clients with real and often complex legal issues. Perhaps another adage may teach all of us a valuable lesson – you get what you pay for.

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Top Ten Reasons to Re-do Your Will

June 10, 2010

10. You lost your Will. – While it is not impossible to probate a lost Will in Texas, it is exponentially harder to accomplish than with a valid written will. I won’t go into all the gory details, but unless you can show exactly how it was lost, and exactly what it contained, you are in for a very uphill battle. A copy can get you part of the way, but it will not get you to the finish line. So stop looking for it, we both know you won’t find it, just go get yourself a new one.

9. You don’t like what your Will says. – Sort of obvious I know, but many people fail to realize that simply tearing up a Will and ignoring it will not always ensure that it does not find it’s way to probate court. (See #10 for an example.) Also crossing out provisions and penciling in new ones will not cut it. If you don’t like what the old one says, you must get a new one that revokes all former Wills.

8. You have moved states. – Probate laws vary from state to state so the Will you executed prior to moving to Texas may or may not be valid now that you are in God’s country. Don’t leave it to chance, get in and get a new Will.

7. You have aquired property that you want to leave to someone specific. – Did Christopher Walken recently visit you and hand you your great grandfather’s WWI watch? Again, we’ll skip the details but do you really want to ignore the, um, sacrifice that Mr. Walken made and not do something to ensure that watch goes to your son or grandson when you are gone? Do not trust that simply telling someone will get the job done. The only way to ensure it gets there is to put it in your Will as a specific bequest. Don’t rely on the fact that you will be able to have your own Pulp Fiction moment with junior as you pass down that uncomfortable hunk of metal. If that happens great, but you need a fall back plan in case you check out early. Put it in your Will.

6. You won the lottery. – Or inherited a ton of money. Or got a promotion. Or let’s just say you somehow “acquired” new found wealth (hey we’re not asking any questions). The point is you now need some tax planning and it’s more than likely that the Will you had when you were dirt poor won’t cut it. Why give more to the Government than absolutely necessary? Go get a new Will and make sure your new found wealth is not used to bail out any more billionaires.

5. You got a divorce. – Very few Wills are ambiguous when it comes to who is contemplated by the term “spouse.” If your Will was… well that may be why you got divorced in the first place, but I digress. If instead your Will lists your Ex by name, and you don’t want that person getting everything now that they left you heartbroken and penniless, get in and get a new Will. Don’t wait till you get remarried, you can always add that new spouse on later (or not, again we’re not here to judge you).

4. You have a new baby. – Congrats! If this is your first child then you really want to think about getting a Designation of Guardian drafted along with a Will now that you are parent. If this is not your first child, does your Will mention the other children by name? Does it divide your estate based on a percentage? Does it provide specific bequests to the kids? If so, you need an update. If this is a late-in-life addition to your family, you probably want to think about a trust since now you can’t guarantee you will be around to ensure they are fiscally sound through college. Just try and remember when you were 18, if someone had handed you even a modest share (say 30k) is there any doubt you would have been rolling around in a new Camaro? (Man I wish I still had that car… and that hair.)

3. Your Will is not Self-Proved. – Texas law makes it very, very simple to probate a Will, if you have a properly drafted Will. Just because a Will is valid does not mean it accomplishes everything to simplify probate. Don’t make your loved ones have to drag two people to Court to testify that you were of sound mind when you drafted your Will. Get up off the couch and go get a new Will drafted. And this time go to a real attorney, your brother-in-law does not count. (unless of course he’s a board certified estate planner).

2. Your Will does not provide for independent administration. – Just because your Will says “without bond” does NOT mean that you have appointed your executor to act independent of Court supervision. If your Will does not provide for independent administration your beneficiaries are going to be forced to either jump through hoops to avoid a dependent administration or else be stuck with a much more costly and time consuming dependent administration of your estate. Why would you do that to them when a new Will is just a phone call away? Seriously, give me one good reason. You’re better than that.

1. You don’t have a Will to re-do. God forbid, but if you still don’t have a valid written Will, get yourself to your nearest probate attorney and get it drafted. Do not pass Go, do not collect $200, just do it. NOW!

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‘Easy Rider’ Estate is in for a Bumpy Road

June 2, 2010

I am not usually one to fall into following tabloid or celebrity news, but a couple of stories from the past few days recently caught my eye and seemed appropriate to at least mention here. No, I won’t plug the paparazzi-style website that piqued my interest, but if you follow traditional news, you know that actor / film maker Dennis Hopper passed away last Saturday, after his battle with prostate cancer. Hopper was married five times over his life. The last one might really cost him.

Hopper and his fifth wife were in the process of divorcing one another. He filed in January of this year. Under a prenuptial agreement, Victoria Duffy would receive 25% of Hopper’s Estate, and $250,000 in life insurance proceeds. As a catch, the two had to be married and living together when he died.

That last part’s the trick. Over the last several months, various court rulings resulted in Duffy residing at Hopper’s property, but in a completely separate house. In fact, Duffy was previously ordered to remain at least 10 feet away from Hopper. Nonetheless, the wheels of justice turn slowly, and the two remained married when Hopper passed away, so Duffy is halfway home to a large payout.

Interestingly enough, the stories say that Duffy is not challenging Hopper’s Will. She’s just trying to make sure that her deal under the prenup stands. One of Hopper’s children seems set on making sure that never happens.

So the fight, and there will likely be a big one, now moves from the divorce court to the probate court. Whatever becomes of Hopper’s Estate will demonstrate that court’s application of laws related to prenuptial agreements, contracts and probate. And the results may well prompt other not-so-celebrity types to fully evaluate their own estate plans. We may not all be Hollywood A-listers, but whether the estate is $40,000 or $40 million, the stakes are high enough to engage in smart planning.

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