The New Rules’ Practical Impact
Written by Craig Wisnom
Our other newsletter article this month talks about the comprehensive new set of rules and forms for the probate court. Practically speaking, how will this impact you and your clients?
The probate rules that have come into force this year are intended to provide more transparency, oversight, and prevent inappropriate exhaustion of a protected person’s assets. Most of these rules do so by adding new forms, paperwork, and reporting, and that means more time, and usually higher costs.
Some rules are intended to reduce costs, such as requiring parties to consider alternative dispute resolution mechanisms like mediation when a matter is contested, and setting standards for how time is to be calculated when fees are billed on an hourly basis. Other rules are intended to avoid nasty “surprises” as to fees by requiring up-front fee disclosures and budgeting.
One purpose to the new rules is to prevent excessive attorney and fiduciary fees, so there are new statutes and rules aimed at punishing unreasonable or “vexatious” conduct by parties and attorneys. In a perfect world, such rules would deter and reduce unreasonable behavior. But the types of cases where such conduct arises typically have parties on each side convinced they are correct, and the other side is being unreasonable and vexatious (if not outright evil!). Despite their intent, these rules may provide yet another item for opposing sides to litigate. (It’s not hard to picture siblings sparring, “I’m not unreasonable, you’re unreasonable.” “I’m going to sue you for vexatious conduct!” “I’m going to sue you for that!”) For the one who ends up on the losing side, the price can be steep: all or some of the opponent’s fees and court expenses.
Among other changes: Guardians, conservators, and personal representatives are now required to undergo training consisting of online slideshows that explain the duties and responsibilities involved. Conservators are charged with estimating whether assets and income will last for the duration of the protected person’s needs (aka sustainability), following a budget (and amending it if circumstances send it off track), and filing their accountings on mandatory forms. Budgets may be challenged by any interested person, and the conservator must prove it’s reasonable. Fees for guardians, conservators, and attorneys also must be reasonable and necessary. The court is charged with evaluating compensation, but it’s the person asking to be compensated who must prove reasonableness and necessity.
So what should the client and his or her attorney do?
The greatest benefits can be obtained through early planning. A relatively simple set of estate planning documents that cost several hundred dollars while you are competent can save your family thousands of dollars, and uncounted hours in the courtroom, if you become incapacitated. Your wishes regarding a guardian or conservator in the event of incapacity can be conveyed in health care and/or durable powers of attorney, and how you deal with specific situations can be address with a living will. The documents, however, must be specific in order for the court to follow it, so it is critical your documents have the needed language. It is also advisable to have documents updated regularly, at least every five years.
In addition, court oversight can be further avoided with the use of a revocable living trust, which, while more expensive to establish than a will, offers further savings later on. A trust can provide for a trustee to deal with your finances in the event of incapacity, avoiding the need for a conservator entirely, and provide for the trustee to administer the estate at death, avoiding the need for a probate to appoint a personal representative. Other ways to avoid court oversight is to make sure non-probate assets such as bank accounts, life insurance, and retirement plans have designated beneficiaries, and consider transferring real estate with a beneficiary deed. Every situation is unique, and one size does not fit all, but thoughtful and effective estate planning can save your family and other beneficiaries an incredible amount of time, money, and stress.
Unfortunately, for many families, it’s too late to do any planning, but before entering the courtroom arena, clients should be aware of the costs, risks, and oversight, and determine if there are any other workable ways to protect their loved one. If court appointment is necessary, go into the process as informed as possible about what will be involved, because knowing the rules from the start will make the process less painful.