Conservatorship and Elder Law Issues in Estate Planning, with Aaron Feldman

0:01 In some ways estate planning is often theoretical because you make the plan before you have the actual needs. Though sometimes you have to scramble after the fact to solve a problem with things that should have been done beforehand. We're lucky to have today Aaron Feldman, an attorney who really does a lot of estate planning and probate and survivorship related issues. But they kind of intersect in real life in some cases. Aaron, thank you for joining us again today. Oh, pleasure to be here. Thank you Bill for having me. I know we're chatting today about a case where you have a client who kind of the intersection of power of attorneys and maybe avoiding conservatorship and perhaps a foreclosure. Talk a little bit about why it's so important to plan ahead and if you don't, what kind of situations you might be facing. So when we talk about estate planning, we talk about a comprehensive estate plan. Which has a number of essential documents to protect you in all phases. We have a trust to avoid probate. But we also have a power of attorney during your lifetime to handle things that may come up if something is outside of your trust such as a retirement account. And we also have health care directives for health care decisions. So all of these are essential documents and what we were talking about before we came on air is a situation where a gentleman has a significant stroke. He is never going to return to his condominium. It has a reverse mortgage.

1:21 And as you know, if you are not able to return to that home, your reverse mortgage terms say then the loan is basically due. And so how do you sell that to save whatever equity you have left when you don't have a trust in place. And how do you do that and avoid a conservatorship which is a long-term and very expensive solution. So in this case, we are fortunate that while he did have a stroke, he maintains cognitive ability. So he understands and can speak a little bit about his preferences. And therefore he can sign even just a crude mark like an X which is still legal in terms of notary. to say that this is what he wants. But it did take, you know, talking to title companies because those are your gatekeepers in real estate transactions. And they had to send us their forms. And we had to review them and modify them and explain the situation to them to their satisfaction in order to complete the transaction. How did, if you're able to disclose, how did the reverse mortgage lender find out that the client was no longer making the subject property their primary residence?

2:41 I do not know. To be honest with you. I do not know. But there may be an annual form that he was There is an annual form. For most of the reverse mortgages, the HECMs, the FHA guaranteed ones, there's an annual form. If it doesn't get filled out, then it can lead to a default. So I try to tell people that you need to look for it. The originator should be reaching out to you. If they don't, they're lazy sometimes. So that I think that's the right clue. Probably they didn't get the form and then they initiated. And then you used the term that he was not I want to paraphrase you. He was the client is has capacity. He has mental capacity. Right.

3:25 Who makes that decision? And what's the standard applied? Meaning I understand you feel that way and or the title company feels that way and or the notary. But I imagine if somebody didn't feel that way, somebody's raising red flags. So who makes that decision? And what's the standard for that decision? So it starts with the lawyer. it's something that I have to assess. It's not a medical standard. It's a legal standard. You know, do they understand the nature of the action they're taking? Do they understand the nature of their family if they're doing a will, for example? Do they know who their the bounty of their affections is, the old English term, I think. And so you just have to assess them on that level. And my experience is that if an attorney has been part of the process, the title company will accept that assessment and move forward with the transaction. Unless, for example, a notary were to raise their hand and say this did not work. this is not a good situation. And in this case that I we've been talking about, the title company is sending their notary. They're not letting me just pick a notary.

4:42 Because we a common now, I find. In real estate transactions, that's becoming very common that the title company has a particular vendor list that they accept and won't accept others. And that's particularly important where capacity might be an issue. Right. Because I see cases and examples where documents were notarized that no reasonable notary should ever have notarized. And it's causes other problems that we're not here to talk about necessarily today. But the flip side of this case is another case that I handled about six years ago where we did have to go into a conservatorship. in that case, my client's wife had dementia. They wanted to sell a small rental property to pay for the caregivers to have her stay in the home. Which is a good noble cause, right? The problem was he downloaded a power of attorney form off the internet five or six years prior to that when she had capacity-ish, maybe. I don't know. I didn't know them. But the title company, because there was no attorney involved in that transaction or in that creation of that document, said we're not going to close this escrow until you prove that she had capacity when she signed the power of attorney.

6:06 Right. Well, how do you do that? She was a Kaiser patient. [laughter] That's always By the way, in this story, that's always part of the story is they're a patient at Kaiser. I don't mean to put down Kaiser, but come on, get your act together, guys. This is every time it's been a medical issue of getting a doctor to make a decision in my real estate experience, it's been Kaiser. Okay, I'm sorry. I got off of my soapbox. Well, in this case, the other problem with Kaiser is turnover. Yes. Of course. That doctor was nowhere to be found. So they And of course, they're already deep in escrow. They have a closing date. They're going to be in violation of their contract to sell the property. Right. They might have liabilities to the buyers. And so not only do they need a conservatorship to sell the property, they need a temporary emergency order to close that escrow or face financial potential damages. So bottom line is that once they're in a conservatorship, we have to do accountings with the court. It turned into about a $50,000 expense that could have been avoided with a simple estate plan and a durable power of attorney and other, you know, essential documents right off the bat.

7:32 So that is a an even worse example of what can happen when you don't prepare ahead of time. You know, go back to the notary. In every case where I've seen obvious fraud on a notary, the notary is always either related to the bad guy or bad gal and or geographically nearer the house where the bad guy or bad gal dragged somebody in there that that they were able to maybe pressure to notarize somehow. It was it's never an independent professional service. And so when just for the record, whenever you call me and ask me for a notary, I want to say no. Call the escrow. Call the title. They'll give you a company. I you know, cuz I don't want every it to come back on me. I had picked the notary and something was done wrong. And it seems like a small checkpoint, but I think it's an important checkpoint. Right. And in my practice, I have a notary on staff. and you know, my notary and I both have eyeballs on the situation. And you know, neither of us are going to have a document because the problem documents are typically not prepared by lawyers, either. Never. In my experience, never. Again, it's funny you're saying this to me. I'm I'm not putting together my 10 transactions of fraud in my career in the last couple years. And there's certain patterns I never noticed. No attorney involved. self they did their own documents of some sort, some sort of download. The notary was either down the street at FedEx or UPS or something or a friend of somebody.

9:06 It's funny you're saying this to me. I'm just It's all like the pieces of the puzzle are falling into place here. I've seen this one. Yeah. So that's a whole group of problems that we tend to find. But there are other there are other problems that you run into when you find documents that are prepared. And because California does have certified document preparers, right? and so they are good at filling out forms. They can generate an estate plan. They just can't give you any legal advice. And that in itself can lead to various problems. And one of the problems I have in a probate right now is that a woman had properties in joint tenancy with her significant other unmarried relationship and decided to create trust because you know trusts are good. You avoid probate. Well, then her boyfriend dies. While she thinks the property is in the trust, so she sells one of the properties. The title company misses the fact that she only transferred half of the property into her trust because of her joint tenancy. Classic. They close escrow and all of a sudden the lender picks up on it after the fact Oh, wow.

10:27 And now has a claim against the title company. Oh, wow. And the title company reaches back to my client and says, "You need to open up a probate for his estate and you need to get that title cleared up." And it was just a very unfortunate situation and all she needed at the time she created her trust was to go back to her boyfriend and say, "Hey, sign these quitclaim deeds back to me. You're now protected in the trust. I was protecting you with joint tenancy in case something happened to me, but this is a better way to do it." He would have signed it. It wouldn't have been any problem at all. In the case of the joint tenancy, the decedent was your client the sole heir with meaning would it all work out the way it was supposed to work out or were there other heirs that had a claim? It could have worked out very badly. Yeah. You're You're right on. Yeah. He had no children, but he had siblings and they weren't legally married. So, with that and he had no will. He didn't even have a will that left everything to her, which she should have had. So, his brothers were the three heirs to the estate. But, for some reason they understood the situation. They knew that their brother didn't put a dime into the property and it was all her money. And so, they were very gracious and signed off on assigned the estate to her.

11:57 It didn't have to go that way. And I bet nine times out of 10 it won't. Oh, no, I'm sure [laughter] I'm sure at least nine out of 10. If there's money available, there'll be people who will object and somebody will tell them you can shake them down and get some money out of this, so why not pursue it? And yeah, there's no shame in that anymore. That's definitely I've seen some of I got a couple of those going on right now as a matter of fact. So, wow. and then who pays for all the fees on the probate in that one? Again, if you can't disclose that, I understand, but I'm just keep But, title company makes a mistake in this case, they missed the chain of title. That's what you're paying for, by the way. I They don't like to be told that, but I'll I'll say it. That's what they're paid for and they missed it. Do they pay for the expenses or they try to strong-arm the client into paying for it? They are blaming my client. There is a piece of paper in your escrow packet that you basically confirm and represent to them that you have good title to sell this property. Right. Notwithstanding that the whole reason you're paying them is for them to check that out.

13:03 Correct. Basically, they're off the table and that they have teams of professionals who theoretically would know the law and deal with this every single minute of every single work day. Your client who may know nothing about real estate when they bought their house and never discussed with a title about one time in their entire life, they're responsible for identifying it to the title company. Yeah. Not only do they are they making my client pay fees, they wouldn't even say they're sorry, you know? It's like, "Please acknowledge that you're part of this mistake, too." And they haven't to this day yet. and again, it's not the biggest probate in the world and you know, so it's $12,000 in fees. It's not worth chasing the title company about it. you know, it's a small claims case, really. You know, I work hard to avoid my title company taking claims. Obviously, if I know something's wrong, I'm going to tell them ahead of time and encourage them to make a decision and you know, they're they're big boys and girls and that's their business and they have teams of support to help and make I always remind them it's called title insurance, not called title guarantee.

14:19 Of course, if the court could order something, we don't need title insurance. We don't need title insurance cuz the court hasn't yet ordered it, but they like to have, you know, three pairs of belts and two pairs of suspenders in every transaction. but I do feel like there are cases where this is their business and I have no sympathy when they force it down on a consumer. It just to me seems so wrong, but you can't fight everything and you know, it's it's a difficult part. Well, the other the other piece of this, I was not around or involved in their real estate transaction, which was sometime in 2024. But, presumably, she was working with a real estate professional and I'm willing to bet that you would have sniffed this out. You know, that a good real estate professional talking with the client, understanding the situation, would have found what was it was there to see. It was there to see. Well, yeah, if the prelim comes and it says title to the trust, I probably wouldn't go back before that because they don't know me to put that in unless they've checked it out. And I suspect that's what happened in this case was they wrongly put the whole thing in the trust and then discovered later that only her interest was transferred and not his, but you know,

15:38 You're right. Maybe that's a Maybe that's more of a lawyer type question and answer because you know, when I talk to clients, I tend to get more into the history of the of the relationship. I would have found out more about the man who passed away and the situation. Yeah. I'm going to look at that before I pulled these before. Often I order the prelim. I might have picked up on it myself. And I have seen those and brought to title company's attention and then we work it through, but yeah, those Look, it's worth looking at and if any real estate agent on the call or attorney, we should always have a preliminary title report before we list property. And really, if you're going to sell property before you file the probate. There's just no reason the title company will tell you that. There's no reason not to get them on the line. They'll give you a profile, that's nice, but the prelim is actually they're done some work and they're they're, you know, in a sense offering to guarantee it. And just as you explained, Aaron here, even insurance policy, you may not get insured cuz they may come back to you and tell you it's your fault. That's a whole different conversation about the nature of insurance companies in general is to collect premiums, not to pay claims. And make political donations, but that's a whole 'nother That's another podcast. I avoid that one.

16:58 Yeah. So, okay. So, I think that if I can just go back a little bit and I don't mean to wear this to the nub, but I do think it's it's instrumental to explain there's a different duty for you as an attorney than there is for me as a real estate agent when I meet with a client. Obviously, I don't want to do something stupid and if I suspect they don't capacity, I don't want to get started because it means I can't close. But, I don't necessarily have the duty to make that assessment. Even if I do, my assessment isn't significant. so, if you're advising a real estate agent, how would you advise me, you know, where do I need to pull the red flag? Where am I no longer serving my client? Because by definition, if I say they don't have capacity or I think they don't, I might be causing them a problem. They you know, instead of just selling the house, now they need a conservatorship or instead of selling the house, they need power of attorney. So, I could be damaging their rights also. Where would you advise me as a real estate agent if I see something I'm not really sure where that standard is, what to do? So, I think one of the red flags that we would look to is when was the document created? Okay? So, if the document is very fresh, within a month or two, then you may want to take a deeper look.

18:18 That's just something that suggests that maybe one child has been for strong-arming mom or dad into signing documents and giving them powers they shouldn't have. It's so interesting. I intuitively would thought the opposite, that newer is better, but it makes sense the newer would be more recently involved in some sort of nefarious activity. The older has been established for a while that they've already done it that way. And then again, was it prepared by a lawyer? that's that's not 100% guaranteed. Not all lawyers are as diligent as they should be in terms of determining capacity or determining whether there's undue influence involved. you know, for a realtor, it's it's harder. so, you're just But, that's what I would look for is is there an attorney's name on the document somewhere? Mhm. And how recent is it? And if you if you miss on both of those questions, you know, it's like it's no attorney, very recent document, I would want to know more about the principal's capacity, you know, because somebody's coming to you saying, "I have I'm the agent under the power of attorney. Let's Let's go. Let's sell this property." So, let's talk about maybe building the barn and putting the cows in before they get out and locking the door. estate planning can help avoid some of these issues. obviously, there people who start to have some diminished capacity.

19:57 My experience personally is that they kind of parts of the day they're better than and worse. Generally, I found morning early afternoon was better, you know, late night they were tired physically and then became tired mentally as well. we talk about, you know, when mom and dad are starting to show some signs, what can you do with an estate plan if it's too late? and what can be what can be done and if it isn't too late, what can we do? So, there's two different categories for this. One is they already have an existing estate plan and we want to make some changes to tune up like a tune up, for example. so the question then is all right, should there be a co-trustee, you know, if there should a child step into a role and take over as either co-trustee or sole trustee even sometimes? so that will help manage their affairs and one of the things for reasons for doing that is to avoid financial elder abuse. because that's another problem where mom or dad or both or they're both still the trustees, but they are subject to outside fraud. So, we want to bring in sometimes a child, sometimes even a professional fiduciary to assist them cuz they need help.

21:20 That's one level. I have a case right now where the wife, they did an estate plan with me 8 9 years ago. The wife was just diagnosed with dementia and her she and her husband are very proactive, which is really a key to this whole conversation. They came to me and said, "My wife's been diagnosed and we want to make changes now so that we're ready because we know that this is progressive and in her case, unfortunately, it's early onset aggressive form of dementia. So, it's not going to be that much time to sit around and wait before taking action on their documents. And again, the fear in this situation, believe it or not, is that the spouse that doesn't have dementia somehow dies first. That is the nightmare scenario. Right. Right. And it happens. You know, it famous case recently, Jay Leno, who you have to think after his career has spent, I would think, tens of millions of dollars on various legal fees along the way of his tremendous career and his didn't have a plan in place that allowed him to make medical decisions for his wife without going to court for powers of conservatorship.

22:52 And you think, you know, now I don't know the details. Did he have a plan that wasn't sufficient or there's a defect in it? You know, I'm assuming whatever it was, it wasn't done sufficiently. Heartbreaking. And then I actually saw him at a fund at a an event that he that he was at where the week before he had fallen down a hill and broken several ribs in his arm. And still came and played. And he was amazing. He's an amazing talent. But I thought to myself, with all this time with his wife, what happened if he had passed? Cuz he's going to court to get power and didn't have it yet to make medical decisions for his wife, long time wife. It's a terrible story. But like you say, nightmare scenario. Now what happens? They now have to go back almost start clock over again, you get a court appointed conservatorship. That's a nightmare scenario. And again, who's available in terms of a family member to take that on? Like in the Leno scenario, No children. if they have children, yeah.

23:52 Yeah. He's a very generous man and he spends all of his time now raising money for different charities and the one that I saw him at, he gave back his fee and doubled it with his own check on top of it. I mean, he's just an incredibly gracious man and to go through this with his wife just must be heartbreaking. And it's public. You know, I think that's the part about it is this guy who's known to be very private, all of this is in public. And then again, imagine, God forbid if he had passed, then what happens to his wife? that that is a really tragic potential

24:26 The sharks, you know, with all that money, there's all kinds of people looking to find some way in the door. I mean, it's it unfortunately, you put enough money there'll be people trying to find a way in. Well, the Britney Spears case is the prime example of that. Yes. She didn't have dementia, but she got into a conservatorship and the lawyers, the fiduciaries, the CPAs, I mean, everybody had their hand in the cookie jar. It was tens of millions of dollars in fees for everybody. In my Probate Weekly podcast, I interviewed an attorney who was key in the in following that case and wrote a book on the subject and raised some very strong opinions. And I and I was I was in that courtroom that court building every day for years before when that was going on and they had the free Britney rallies and all that. Right.

25:18 And she told me stuff about people who I knew, I was shocked. And again, you put enough money on the table, my experience in most state most people, not everybody, but most people will do anything for enough money. Yeah. It's sad. It is sad, but

25:33 [clears throat] theoretically, Britney Spears case led to some changes in laws and procedures to make conservatorships a little harder to get. And that's good and bad because there obviously the cases I work on, they're not There's no question about the need for the conservatorship in a case. And there's not money or people trying to get after money like there is in a Jay Leno or Britney Spears, you know. Those are wealthy people. These are just regular folks trying to deal with a problem and getting resources. So, but it is now very there's just a couple other hurdles you have to jump through to get to that conservatorship and get it approved. Should be hard for the state to take control of somebody's affairs. On the other hand, there are cases where people need it and it's and it's hard. It the best advertisement I think for a practice to avoid conservatorships would be making a client sit in court and watch a couple hearings on conservatorships because having been in the courtroom and watched these arguments, there's some objector because the conservator the conservator took the conservatee out for lunch at McDonald's and they had there's three orders of fries, only two of you. You know, who ordered the third order of fries? And you're spending half an hour in court and quibbling over the hours for the court appointed attorney and the attorney [unclear] with his children. It's just nonstop scrutiny and it's just very expensive. So, I think for anybody who's married, anybody who has kids, you know, do me a favor, have an estate plan, do the best you can to avoid it because otherwise you don't want to know what otherwise looks like. It's not pretty.

27:18 Exactly. And again, the once you start down the conservatorship road, you're in it for life. I mean, it's you're not going to get a conservatorship set aside, you know, even if you use the conservatorship to create a revocable trust to avoid probate, which we often have to do. So, you know, you have to spend the money to get into conservatorship, then there's a petition process to create an estate plan because you don't want probate at the back end. Right. That's expensive. Right. and even if you fund the trust, the court may say, "Well, that's all well and good. You're not a conservatorship estate now. The money's in the trust. We're going to make the trust court supervised, though, because Right. you know, we were we started court supervised. We're not going to give that up." Right. And I think, you know, again, I don't I'm not an attorney, but I believe if his children is in California, you have two levels. You have guardianship and then conservatorship. So, then you it's like the whole process for the kids and then they become 18 and you do the whole process again if they're special needs for conservatorship. Like there's no one all the way through the process. So, it's like two for one. Well, in my practice, and I do a lot of work in the special needs community, so I'm glad you brought that up. so we do limited conservatorships for developmentally disabled. It's a subcategory of conservatorships.

28:45 Typically, it's for the person only because these are individuals who don't have an estate, haven't worked, aren't going to work. They're just going to receive SSI or SSDI when they're older. But so we do those and prior to 18, we rarely see a guardianship if the parents are alive and taking care of their child. They don't they have legal authority to make all the decisions they need to child is a minor. But the limited conservatorship is because once you turn 18, you're an adult under the eyes of the law and theoretically, a doctor, hospital, classroom, you know, in the education system, they can lock the parents out of the room and say, "We're going to make decisions without you." And that's a big concern. So, my office, we do a lot of work with limited conservatorships because that's part of the community we serve. Wow. You know, I know attorney down in Los Angeles who also specializes in that and it's amazing the opportunities you know, for protecting assets, financially helping those people who need it get the support they need, the families that I mean, it's a tremendous burden even without the help they get. So, it's it's one of those things where it's just very heartwarming to see people commit to that. I know the people do that business, I don't think they make the any money on the special needs part of the business, but they do make it because there's a karma that comes from helping people. You can't help it, business is going to come your way. So, hopefully the same thing happens to you as well.

30:28 Well, it's very gratifying. it's a it's a very gratifying population. I have been affiliated up here with an organization called the Down Syndrome Connection Bay Area and they're in the East Bay where I practice and they're they're tremendous organization. They do so much for families that it's a it is a joy to work with that organization and those families. Just the attorney I mentioned that we're friends with and he has a daughter with special needs and she married a young man and they live in an apartment nearby, but they're actually building a it's a mixed-use project, condos and retail on the first floor for I think the term they use is neurodiverse populations. It's kind of designed for a population of that and mighty portion of it to be that. And so, they're actually opening that up here next few months. We're excited to watch this thing develop and go from an idea and raise money to it to actually being here in our community. So, you know, there's a lot of people who are committed to that work. Not enough, unfortunately, more and more people with those kinds of challenges and fortunately, there are people like you and them to help that. So, I sure appreciate the work that you do on the behalf of the community. Yeah, and the other area of planning that involves some specialization is related to Medi-Cal. again, you know, Medi-Cal pays for in-home support services.

31:52 Medi-Cal also pays for skilled nursing home care if you need that. And there are asset and resource income limits that apply for those different programs. So, it's a very specialized area of estate planning, which again, if you're heading in that direction, again, if you are highly wealthy, you're not looking at Medi-Cal to for your spouse or your parents' nursing home care. You're you're you're going to private pay, you can afford it and that's fine. This is more for middle-class families who want to use the rules as best they can and will have something left to pass on to their children as legacy. And there are ways of doing that within the rules of the law that allow them to do that. But again, that takes advanced planning. You know, you can't wait till the last minute when somebody has already lost capacity and then try to put something in place. Like most things in life, you got to plan ahead for success or else Yeah. you'll miss out on it. Right. Well, obviously, you're a wealth of information. We got a little bit over our time that I had allotted, so I just want to thank you so much for being generous in the past as well as today with your time. For people who want to get more information, obviously, there's of elder care, special needs in particular, estate planning in general, based up in northern California, Aaron Feldman is one of the leading attorneys in the area. He's been a guest on my podcast before. feel free to reach out. the website is feldmanlawgroup.com and there's a picture and contact info and so on. The number below is contact info. If you if you're listening to this on the audio, feel free to reach out to me, but Aaron Feldman, feldmanlawgroup.com, [phone number shown on screen].

33:43 Aaron, thank you so much for your time today and always supporting our community up educating us and helping us be more effective in working with our customers. I really appreciate being on here and thank you for your time. Thanks so much. and this is [The Estate Planning Podcast]. We get together every week and most commonly interview estate planning attorneys, specialists in different fields, practitioners, but also vendors help us be more effective in our business. if I can help in any way, please reach out at Bill Gross Probate on social media and as always, make today your best day ever. Thanks so much.