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Mind over Matters New Rules for Medi-Cal
8 ry -0 cto 07 ire TION 20 A D T SEC U CB LLO LA PU Special Issue: Elder Law October 2007 / $4 E A R N MCLE CR E D I T New Rules for Medi-Cal Eligibility page 35 Mind over Matters Los Angeles lawyer Sherrill Y. Tanibata discusses the factors determining diminished capacity among elders page 28 PLUS Mediation and the Elderly page 12 Financial Elder Abuse page 19 Litigating Civil Elder Abuse page 42 California Aon Attorneys’ Advantage Insurance Program Building the Foundation for Lawyers’ Protection ONE BLOCK AT A TIME The Sponsored Program is Back... And Better Than Ever • A.M. 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Simply visit the Aon Insurance Solutions website today. www.aonsolutions.com/lacba2 To speak with an Aon representative, call toll free 800-634-9134 Some insurance products in this program may be underwritten by carriers not licensed in California. CA Insurance License #: 0795465 Sponsored By: 4B1BB006 Want to accomplish double the work with half the effort? Get LexisNexis Total Practice Advantage™ “By using Total Practice Advantage and other LexisNexis products, each lawyer at our firm has become more productive …” —Joseph Blum, Senior Partner, Frey Petrakis Deeb Blum & Briggs With its unique ability to integrate the legal and business sides of your practice, LexisNexis Total Practice Advantage creates opportunities to work more efficiently —with almost every task you do. Improved case and document management, communications, calendaring and billing put you on track for increased productivity, bigger profits, happier clients—and double the satisfaction. Two Great Offers! Get a Gas Card Valued At $20 And A Free Case Study!* A MEMBER BENEFIT OF Find out how to double your gas cards ... www.lexisnexis.com/double * Some restrictions may apply. Offer ends November 30, 2007. Must be an attorney practicing at a 1 – 50 law firm to be eligible for this offer. One offer per law firm only. Must answer 6 survey questions to receive one $20 gas card. TPA9500 LexisNexis and the Knowledge Burst logo are registered trademarks and LexisNexis Total Practice Advantage is a trademark of Reed Elsevier Properties Inc., used under license. © 2007 LexisNexis, a division of Reed Elsevier Inc. All rights reserved. F E AT U R E S 28 Mind over Matters BY SHERRILL Y. TANIBATA The standard for capacity among elders varies according to the legal context 35 Care Package BY JAMES A. BUSSE JR. New state and federal rules are tightening the eligibility requirements for Medi-Cal aid to pay for nursing home costs Plus: Earn MCLE credit. MCLE Test No. 163 appears on page 37. 42 Crossing the Line BY BRYAN CARNEY Emerging case law suggests that a finding of elder abuse requires deliberate disregard of a patient’s condition over an extended period of time D E PA RT M E N T S Los Angeles Lawyer the magazine of 10 Barristers Tips Default judgment—dying without a will BY ELIZABETH A. NIXON The Los Angeles County Bar Association October 2007 Volume 30, No. 7 COVER PHOTO: TOM KELLER 23 Practice Tips Mandatory reporting requirements for financial elder abuse BY JAMES P. BESSOLO 12 Practice Tips The challenges of mediating disputes involving elders 52 Closing Argument The science of eyewitness testimony BY CAROLINE C. VINCENT BY ALEX YUFIK 19 Practice Tips Litigating financial elder abuse claims 49 Classifieds BY JULIA L. BIRKEL, JOHN M. BYRNE, AND DR. 50 Index to Advertisers SUSAN I. BERNATZ 10.07 51 CLE Preview Mickey Kessler deftly handles the role of the joint realtor in dissolution cases. He is responsive, communicative, honest, hard-working, determined, undaunted by the conflict of a divorce, and he tops it all off by keeping his smile! I recommend him highly. ROBERTA L. MURAWSKI, LAW OFFICE OF ROBERTA L. MURAWSKI LosAngelesLawyer VISIT US ON THE INTERNET AT www.lacba.org/lalawyer E-MAIL CAN BE SENT TO [email protected] EDITORIAL BOARD Chair Need a Realtor? From beginning to end, I offer my full spectrum of real estate-related services specifically designed to serve the family law and estate/probate practices. Moreover, these no-cost services are offered without obligation. Mickey Kessler How Can I Help You? Associate Manager Direct 310-442-1398 Real Estate for the Family Home ~ references available upon request ~ www.mickeykessler.com/familylaw.html CHAD C. COOMBS Articles Coordinator ANGELA J. DAVIS JERROLD ABELES DANIEL L. ALEXANDER HONEY KESSLER AMADO ETHEL W. BENNETT R. J. COMER KERRY A. DOLAN GORDON ENG ERNESTINE FORREST STUART R. FRAENKEL MICHAEL A. GEIBELSON TED HANDEL JEFFREY A. HARTWICK STEVEN HECHT LAWRENCE J. IMEL MERIDITH KARASCH JOHN P. LECRONE KAREN LUONG PAUL MARKS DEAN A. MARTOCCIA ELIZABETH MUNISOGLU RICHARD H. NAKAMURA JR. DENNIS PEREZ GARY RASKIN JACQUELINE M. REAL-SALAS DAVID SCHNIDER HEATHER STERN GRETCHEN D. STOCKDALE TIMOTHY M. STUART KENNETH W. SWENSON CARMELA TAN BRUCE TEPPER PATRIC VERRONE STAFF Publisher and Editor SAMUEL LIPSMAN Senior Editor LAUREN MILICOV Senior Editor ERIC HOWARD Art Director LES SECHLER Director of Design and Production PATRICE HUGHES Advertising Director LINDA LONERO Account Executive MARK NOCKELS Marketing and Sales Coordinator VICTORIA PUA Advertising Coordinator WILMA TRACY NADEAU Administrative Coordinator MATTY JALLOW BABY LOS ANGELES LAWYER (ISSN 0162-2900) is published monthly, except for a combined issue in July/August and a special issue in the fall, by the Los Angeles County Bar Association, 261 S. Figueroa St., Suite 300, Los Angeles, CA 90012, (213) 896-6503. Periodicals postage paid at Los Angeles, CA and additional mailing offices. Annual subscription price of $14 included in the Association membership dues. Nonmember subscriptions: $28 annually; single copy price: $4 plus handling. Address changes must be submitted six weeks in advance of next issue date. POSTMASTER: ADDRESS SERVICE REQUESTED. Send address changes to Los Angeles Lawyer, P. O. Box 55020, Los Angeles CA 90055. Copyright © 2007 by the Los Angeles County Bar Association. All rights reserved. Reproduction in whole or in part without permission is prohibited. Printed by R. R. Donnelley, Liberty, MO. Member Business Publications Audit of Circulation (BPA). The opinions and positions stated in signed material are those of the authors and not by the fact of publication necessarily those of the Association or its members. All manuscripts are carefully considered by the Editorial Board. Letters to the editor are subject to editing. 4 Los Angeles Lawyer October 2007 96))(),27(@:(;;,5;065 ([:[VULÄLSK1VZLWOZVU^LZLL[OLIPNWPJ[\YL ^OPSL UL]LY SVZPUN ZPNO[ VM [OL WLYZVU ZP[[PUN HJYVZZ[OL[HISL·`V\ 6\Y M\SSZLY]PJL JLY[PMPLK W\ISPJ HJJV\U[PUN MPYT ZLY]LZ W\ISPJ HUK WYP]H[LS` OLSK JSPLU[Z [OYV\NOV\[ [OL <UP[LK :[H[LZ HUK PU[LYUH[PVUHSS`° >L WYVTPZL V\Y [OV\NO[M\S H[[LU[PVU [V `V\Y ULLKZ·JHSS \Z MVY H JVTWSPTLU[HY`TLL[PUN[VKPZJ\ZZ`V\YZP[\H[PVU (ZZ\YHUJLHJJV\U[PUN ,_LJ\[P]LZLHYJO 7\ISPJJVTWHUPLZZLY]PJLZ ;H_ZLY]PJLZ =HS\H[PVUSP[PNH[PVUZ\WWVY[ HUKMVYLUZPJZLY]PJLZ ^^^ZQHJJV\U[PUNJVT WROOIUHH )\ZPULZZJVUZ\S[PUN ¶7YVÄ[LUOHUJLTLU[ ¶-PUHUJLZV\YJPUN ¶4LYNLYZHUKHJX\PZP[PVUZ ¶-HTPS`V^ULKI\ZPULZZPZZ\LZ ¶:\JJLZZPVUWSHUUPUN ¶,_LJ\[P]LPUJLU[P]LJVTWLUZH[PVU ¶)\ZPULZZWSHUZHUKI\KNL[PUN /RV$QJHOHV2UDQJH&RXQW\6DQ)UDQFLVFR(DVW%D\6LOLFRQ9DOOH\+RQJ.RQJ 6WRQH¿HOG-RVHSKVRQ,QF 3KRWRJUDSK\-RKQ/LY]H\ LOS ANGELES LAWYER IS THE OFFICIAL PUBLICATION OF THE LOS ANGELES COUNTY BAR ASSOCIATION 261 S. Figueroa St., Suite 300, Los Angeles, CA 90012-1881 Telephone 213.627.2727 / www.lacba.org (949) 388-0524 CHARLES PEREYRA-SUAREZ MEDIATOR, ARBITRATOR AND EXPERT WITNESS RELEVANT EXPERIENCE: • Trial/Appellate Attorney, U.S. Justice Department Civil Rights Division • Federal Prosecutor in Los Angeles • Litigation Partner in Two National Law Firms • Judge Pro Tem, Los Angeles Superior Court • Diverse ADR and Expert Witness Practice 445 S. Figueroa St., Suite 3200, Los Angeles CA 90071 Tel 213.623.5923 Fax 213.623.1890 http://www.cpslawfirm.com JACK TRIMARCO & ASSOCIATES POLYGRAPH/INVESTIGATIONS, INC. 9454 Wilshire Blvd. Sixth Floor Beverly Hills, CA 90212 (310) 247-2637 TEL (805) 984-7042 FAX Jack Trimarco - President Former Polygraph Unit Chief Los Angeles F.B.I. (1990-1998) CA. P.I. # 20970 Member Society of Former Special Agents Federal Bureau of Investigation 6 Los Angeles Lawyer October 2007 email: [email protected] www.jacktrimarco.com Former Polygraph Inspection Team Leader Office of Counter Intelligence U.S. Department of Energy ASSOCIATION OFFICERS President GRETCHEN M. NELSON President-Elect DANETTE E. MEYERS Senior Vice President DON MIKE ANTHONY Vice President ALAN K. STEINBRECHER Treasurer JULIE K. XANDERS Assistant Vice President JOHN D. VANDEVELDE Assistant Vice President ERIC A. WEBBER Assistant Vice President ANTHONY PAUL DIAZ Immediate Past President CHARLES E. MICHAELS Executive Director STUART A. FORSYTH Associate Executive Director/Chief Financial Officer BRUCE BERRA Associate Executive Director/General Counsel W. CLARK BROWN BOARD OF TRUSTEES P. PATRICK ASHOURI PHILIP BARBARO, JR. JOHN M. BYRNE KIMBERLY H. CLANCY LINDA L. CURTIS PATRICIA EGAN DAEHNKE DANA M. DOUGLAS KATHERINE M. FORSTER ALEXANDER S. GAREEB VICTOR GEORGE LAURIE R. HARROLD BRIAN D. HUBEN K. ANNE INOUE CINDY JOHNSON PHILIP H. LAM RICHARD A. LEWIS ELAINE W. MANDEL PATRICIA L. McCABE DAVID F. MICHAIL ANNALUISA PADILLA ELLEN A. PANSKY ANN I. PARK THOMAS F. QUILLING STEPHEN L. RAUCHER SUSAN E. REARDON ROGER D. REYNOLDS DEBORAH C. SAXE MARGARET P. STEVENS KIM TUNG NORMA J. WILLIAMS ROBIN L. YEAGER AFFILIATED BAR ASSOCIATIONS BEVERLY HILLS BAR ASSOCIATION BLACK WOMEN LAWYERS ASSOCIATION OF LOS ANGELES, INC. CENTURY CITY BAR ASSOCIATION CONSUMER ATTORNEYS ASSOCIATION OF LOS ANGELES CULVER-MARINA BAR ASSOCIATION EASTERN BAR ASSOCIATION GLENDALE BAR ASSOCIATION IRANIAN AMERICAN LAWYERS ASSOCIATION ITALIAN AMERICAN LAWYERS ASSOCIATION JAPANESE AMERICAN BAR ASSOCIATION OF GREATER LOS ANGELES JOHN M. LANGSTON BAR ASSOCIATION JUVENILE COURTS BAR ASSOCIATION KOREAN AMERICAN BAR ASSOCIATION OF SOUTHERN CALIFORNIA LAWYERS' CLUB OF LOS ANGELES COUNTY LESBIAN AND GAY LAWYERS ASSOCIATION OF LOS ANGELES LONG BEACH BAR ASSOCIATION MEXICAN AMERICAN BAR ASSOCIATION PASADENA BAR ASSOCIATION SAN FERNANDO VALLEY BAR ASSOCIATION SAN GABRIEL VALLEY BAR ASSOCIATION SANTA MONICA BAR ASSOCIATION SOUTH ASIAN BAR ASSOCIATION OF SOUTHERN CALIFORNIA SOUTH BAY BAR ASSOCIATION OF LOS ANGELES COUNTY, INC. SOUTHEAST DISTRICT BAR ASSOCIATION SOUTHERN CALIFORNIA CHINESE LAWYERS ASSOCIATION WHITTIER BAR ASSOCIATION WOMEN LAWYERS ASSOCIATION OF LOS ANGELES (310) 849-8653 [email protected] Karen Natapoff Divorce Mortgage Specialist “It is a rare mortgage broker with the skill and ability to bring to the dissolution table the expertise of a mortgage broker in combination with an in-depth understanding of related family law matters.” -Nancy A. Kearson Certified Public Accountant “She has my highest endorsement, and I would recommend her, without reservation, as a professional in her field.” -Steven Knowles, Esq. Trope and Trope Metrocities Mortgage, LLC is a Delaware limited liability company licensed by the California Department of Corporations under CRMLA. Information is subject to change without notice. This is not an offer for extension of credit or a commitment to lend. 0706-150B 20 Years Blue Chip Experience Resolving the World’s Most Complex Disputes Reginald A. Holmes, ESQ. Mediator - Arbitrator - Private Judge Intellectual Property • Entertainment International • Employment T hey are among us. You can see them everywhere, with more appearing every day. Some of us have joined their ranks, while others of us are not far behind. As their numbers swell, so will our challenges and responsibilities as lawyers. They are elders, and increasingly we will be called upon to represent them and practice elder law. Whether or not we now practice in the area of elder law, we are likely to be touched by it. About one in every eight Americans is a person age 65 or older. The number of persons in the United States age 65 and over will rise from 35 million in 2000 to 40 million in 2010, a 15 percent increase, and then to 55 million in 2020. As the population ages, many of us will be affected in some way by the myriad of issues that arise in elder law. Many of us have already helped our parents or other family members face challenging decisions involving healthcare, structuring finances, estate planning, long-term care, illness, and, perhaps, even an unfortunate case of elder abuse. Now we will be doing the same for a growing number of clients. The elder law arena does not have a specific location. There is no universal point for all purposes at which elder law begins and other substantive law ends. Like some other general categories of law, such as entertainment law, elder law is not codified and instead draws from various areas of the law. There is no precise marker for all purposes at which a client becomes an elder. Even the identifying word sometimes changes from “elder” to “senior” to whatever other term that causes baby boomers to cringe. In California there are specific laws, such as those relating to various types of elder abuse, that apply at age 65 and older and use the specific term “elder.” Other legal issues often discussed as part of elder law apply to all types of representation, such as the capacity to retain a lawyer in the first place or to prepare estate planning documents such as a will, trust, and an Advance Health Care Directive; to participate in a mediation and enter into a settlement agreement; and to obtain public benefits. Issues involving elders are receiving much well deserved attention in the media. The Los Angeles Times, for example, in 2005 tackled the topic of professional fiduciaries in a series titled Guardians for Profit. The newspaper also recently addressed the financial abuse of elders in an article on “Con Artists’ Old Tricks.” Given that an aging American population will have a substantial impact on the legal profession, the Los Angeles Lawyer Editorial Board embraced a proposal to examine the field of elder law in a special issue. Although our readers practice in many areas of law, we thought all would benefit from gaining some familiarity regarding elder law. In the past, the future was often viewed as an extraordinary opportunity. Now, the future is frequently seen as threatening and perilous—and the prospect of aging is too often regarded through the same lens. But even as we grow older, with proper guidance and planning, the future can be a time of hope. As we increase our knowledge and broaden our practice experiences to help the enormous population of elders, we can strive to ensure that our shared future is one with more hope and fewer perils. In doing so we will be helping our clients and enhancing our profession. ■ THE HOLMES LAW FIRM 626-432-7222 (Phone) 626-432-7223 (Fax) 1-800-FAIR-ADR (324-7237) [email protected] www.TheHolmesLawFirm.com Also available through the Amercian Arbitration Association 213.362.1900 or www.adr.org 8 Los Angeles Lawyer October 2007 Steven Hecht practices transactional business law with offices in Los Angeles and Sherman Oaks. Jacqueline M. Real-Salas is a partner at Calleton, Merritt, De Francisco & Real-Salas, LLP, where she specializes in estate planning, trust administration, probate, and elder law. Gretchen D. Stockdale is an associate with Hill, Farrer & Burrill, LLP, where she practices civil litigation. Hecht, Real-Salas, and Stockdale are coordinating editors of this special issue. / Who’s on California’s most wanted list? Elizabeth Cabraser, Patrick Cathcart, Joseph Cotchett, Dana James Dunwoody, and Richard Seabolt to name a few. With an untold number of laws on the books, it helps to have California’s most knowledgeable legal authority as your second chair. At LexisNexis®, we’ve made it our top priority to recruit the experts that provide the superior analysis and commentary on the complexities of California law. We start with the best and share their insights so that you can feel comfortable with the sources you rely upon. The Matthew Bender® name has a long-standing tradition in California law. However, we’re not content to rely on the successes of the past. We are constantly at work developing new analysis and commentary to help you stay ahead of the topics that will drive your business in the months and years to come. A MEMBER BENEFIT OF With that in mind, we maintain a healthy mix of today’s principal authorities and tomorrow’s leading practitioners. So the content you rely on next year will be as fresh and as timely as the information you accessed last week. LexisNexis® To see the difference the right kind of research makes, visit www.lexisnexis.com/carightsolution. LexisNexis, lexis.com, and the Knowledge Burst logo are registered trademarks of Reed Elsevier Properties Inc., used under license. Matthew Bender is a registered trademark of Matthew Bender Properties Inc. Other products and services may be trademarks or registered trademarks of their respective companies. © 2007 LexisNexis, a division of Reed Elsevier Inc. All rights reserved. barristers tips BY ELIZABETH A. NIXON Default Judgment—Dying without a Will THE COBBLER’S CHILDREN WHO GO SHOELESS have something in 1) half the community property to her husband and the balance to common with the families of attorneys who forsake estate planning. her children, and 2) one-third of her separate property to her husband Younger attorneys with new families may think: “I don’t have enough and the balance equally to her children. Lack of planning may result money or assets to have an estate worth planning for.” While the value in a default judgment contrary to what she would have wanted. If her children are minors, the court will usually appoint their father of an estate is an important element of estate tax planning, with the estate tax exemption rate rising, critical tax planning is not always as the guardian over their inheritance. This may not be her desire if necessary. In 2007, individuals may have an estate of $2 million the couple is separated or divorced, because it puts an ex-spouse in control of finances. Another consideration arises if the children have without incurring any federal estate tax. A young lawyer may think he or she is a long way from having attained majority. If the children are over 18, their inheritance will a million dollars, let alone two, but it is important to remember sev- pass directly and outright to them. Even in a nontaxable estate, this eral elements that are often overlooked. First is the home. The value of homes in Southern California generally continues to rise. Second, If a single person with no children dies, the state will default life insurance payouts are included in the value of an estate. Third, retirement benefit packages, IRAs, and 401(k)s are all part of an estate. to the following people: 1) parents, 2) siblings, and 3) nieces and Even individuals who feel (perhaps understandably) that they are living paycheck to paycheck can often discover equity in their nephews. The law continues with additional alternate heirs, but home of $500,000 or more, that they have as much as $1 million in life insurance, and that their law firm is helping them build a sizeable even the beginning of the list can be enough to create problems. 401(k). Whether they feel rich or not, they may have a taxable estate. What is more, with an estate tax rate of nearly 50 percent, not plancould put large lump sums in the hands of 18-year-olds. For most parning can really hurt those left behind. Aside from estate tax, what is the importance of estate planning ents, that is a situation certainly worth avoiding. To prevent it, a will for young attorneys? Without a will or a trust, an individual permits or trust can establish a plan that distributes an inheritance in stages. Aside from establishing heirs, a will should also designate guardians the state to choose his or her heirs. An attorney’s job is to prevent default judgments against clients, and thus when an attorney dies with- for minor children. If a parent fails to make this designation, the court out a will or trust, he or she has done a poor job of self-representa- will. The court is required to make a determination based on the best interests of the child, but parents are much more qualified to exertion. The court steps in and enters a default judgment. If a single person with no children dies, the state will default to cise this judgment. The internal family struggles that can result as parthe following people: 1) parents, 2) siblings, and 3) nieces and ents, in-laws, grandparents, and siblings fight over who should be nephews. The law continues with additional alternate heirs, but even appointed, serve only to deprive the children of a cohesive family unit. the beginning of the list can be enough to create problems. Consider, Having already suffered the loss of parents, ensuring a safe family envifor example, a young, single, childless woman attorney who earns a ronment for minor children may be the most important element of high salary at a law firm, which also provides life insurance based on estate planning. A final pragmatic point is that without a will, the court her salary and contributes toward a 401(k). Like many, she has two can take two to three years to finalize a probate. With a trust, your fathers. One is her biological father, with whom she has had little con- personally selected representative can wrap it up much faster, with tact. Her second father is her stepfather, the man she calls her “real less expense and without exposing your personal affairs to the pubdad” because he raised her and will walk her down the aisle at her lic record. There are many other default judgments that lurk within the wedding. If this single attorney dies without either a will or trust, a default judgment will be entered to award half her estate to her bio- Probate Code. Whether an attorney feels like a multimillionaire or logical father and the other half to her mother. Therefore, even those not, the government may take an alternate view. The attorney who who do not have enough wealth to warrant an estate plan but do have wisely counsels clients to avoid default judgments should also take ■ stepparents would be prudent to avoid the state’s default estate plan. steps to avoid default judgments regarding his or her estate. Or take the example of a woman attorney who is married with two children. The Probate Code’s default succession plan might not Elizabeth A. Nixon is the founder of Nixon Law, a boutique estate planning firm prove contrary to her wishes. If she dies without a will, the code directs in Santa Monica and counsel to Pepperdine University. 10 Los Angeles Lawyer October 2007 unionbank.com/attorney Priority Banking makes you the priority. You give your clients the highest level of service. Why shouldn’t you expect the same from your bank? Priority Banking1 is a banking solution that delivers a higher level of attention, convenience and competitive pricing to successful attorneys like you. You’ll have a dedicated banker who will personally assist you in selecting the products and services that best fit your needs. You’ll also have access to a comprehensive range of fee-free and discounted banking services, including no-fee ATM access worldwide2. Welcome to the bank that makes you the priority. Enjoy the advantages of a personal banker, call 888-818-6060 or visit us online. Invest in you ® 1 Requires minimum combined balances of $100,000 or more, which can be maintained in a combination of qualifying accounts. Two business checking accounts are free of the regular monthly service charge. Other charges, such as overdraft fees, will still apply. Fee will apply for accounts closed within 90 days of opening. You may be assigned to another program or product if you no longer meet the minimum balance requirement of Priority Banking. See our All About Business Accounts & Services Disclosure and Agreement for details. 2 Union Bank will rebate any fee that an owner or operator may charge for use of their non-Union Bank ATM. ©2007 Union Bank of California, N.A. Member FDIC practice tips BY CAROLINE C. VINCENT The Challenges of Mediating Disputes Involving Elders ELDERS COME TO THE MEDIATION TABLE in a wide range of civil and probate disputes. In these cases, mediators and lawyers must keep several considerations in mind. While the term “elder” may be statutorily defined for some purposes as a person over 65 years of age,1 an elder in the mediation context is simply an older adult who may be demonstrating certain mental and physical debilities that naturally occur with advancing age. Elders have varying degrees of capacity to participate in the mediation process and make informed decisions affecting their financial affairs and physical well being. They may have no impairment whatsoever and be able to competently make binding decisions concerning their affairs. Or, they may participate with a court-appointed conservatorship or an appointed agent pursuant to a power of attorney. Elders may be capable of protecting their own interests but may need support persons—such as relatives, caretakers, or professional advisers—who can provide emotional support, serve as sounding boards, and assist with special needs. The mediator and counsel should be alert to the issue of whether an elder party requires some form of legal or court-supervised representation. For example, while many aging parents with serious physical or mental impairments are cared for by their children, without any form of legal representation an elder parent may lack the capacity, and children the requisite authority, to proceed on the elder’s behalf. Maximizing the ability of an impaired person to participate and helping the parties focus on the special needs of the elder is the special charge of the mediator in elder disputes. The Los Angeles Superior Court routinely orders cases to mediation under the court-supervised mediation program that was established pursuant to Code of Civil Procedure Section 1775.5 as an alternative to judicial arbitration.2 The court’s ADR office administers a pro bono panel of qualified mediators for civil cases through which a mediator serves for three hours without charge and charges agreedupon hourly rates thereafter. Parties are always free to select their own private mediator or one from the court’s party-pay panel.3 The court adopted a special set of probate mediation rules for ordering contested estate, trust, and conservatorship disputes to mediation, which include a special private-pay probate mediation panel administered by the court’s ADR office4 and the express power to order parties to mediation on a repeated basis.5 However, since the recent California appellate decision in Jeld-Wyn v. Superior Court, the probate court has reportedly refrained from ordering participants to mediation under its special rules, successfully encouraging the use of mediation on a voluntary basis or referring participants to the court’s regular pro bono mediation panel.6 California Rules of Court 3.850 et seq. set forth the minimum rules of conduct for mediators who serve on panels in court-connected mediation programs. The rules are intended to guide the conduct of mediators in these programs, to inform and protect participants, and to promote public confidence in the mediation process and the courts.7 The rules apply to attorney mediators on the court’s panels for either 12 Los Angeles Lawyer October 2007 general civil or probate cases.8 The rules are not applicable to retired judges, but retired judge mediators are encouraged to follow them.9 Private mediators not serving through the court panels are not subject to the Rules of Court but are guided by the widely used standards of practice for mediations upon which the Rules of Court are based.10 Counsel can expect good mediators to employ these rules and can insist upon their implementation in appropriate circumstances. Mediator conduct rules that are especially pertinent to elder cases include those that involve the principles of voluntary participation, selfdetermination, and a procedurally fair and balanced process. Capacity Determining whether an elder who appears at a mediation session has the legal capacity to enter into a settlement agreement raises several interesting issues for the mediator and counsel. For example, consider an action in which the elder is the intestate beneficiary of a son’s estate, but a friend of the son is the designated beneficiary in a contested holographic will offered for probate. The attorney for the elder takes the mediator aside and confidentially asks for help to assess whether the attorney’s elder client has the requisite capacity to settle the matter. Counsel is concerned because the client seems to be overly influenced by a live-in caretaker, and the elder’s mind sometimes wanders. Counsel questions whether the elder can make good decisions.11 What should the mediator do? California Rules of Court 3.853 provides that “a mediator must conduct the mediation in a manner that supports the principles of voluntary participation and self-determination by the parties.”12 The mediator thus has an obligation to make sure that the elder party is capable of participating. This obligation is bolstered by Rule 3.857(i)(2), which permits a mediator to terminate the mediation when he or she believes that a participant is unable to participate meaningfully in negotiations.13 It is quite possible that the mediator and a party’s counsel could determine that the elder party is capable of participating meaningfully in the mediation, yet lack certainty that the elder has the capacity to enter into a binding contract.14 Elders may freely and fluently participate, artfully articulating their wants and needs, all the while masking diminished mental functioning. Whether or not a person has capacity depends upon many facts and circumstances. An assessment by a geriatric psychiatrist or other medical professional may be required. The court has the power to determine the issue of legal mental capacity under Probate Code Sections 810 through 813. A finding of lack of capacity requires evidence of one of the deficits in mental functions set forth in Probate Code Section 811, and the particular deficit must correlate to the decision to be made.15 In particular, Probate Code Section 812 provides that: Caroline C. Vincent, an attorney mediator and arbitrator with ADR Services, Inc. in Los Angeles, specializes in probate, complex business, real estate, professional liability, employment, personal injury, and family business disputes. News & Current Developments Secondary Sources Forms & Checklists Cases, Statutes & Regulations Administrative Materials Westlaw® Environmental Law Practitioner. Everything you need. Every step of the way. All in one place. 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In step with your practice. © 2007 West, a Thomson business L-328439/4-07 [A] person lacks the capacity to make a decision unless the person has the ability to communicate verbally, or by any other means, the decision, and to understand and appreciate, to the extent relevant, all of the following: (a) The rights, duties, and responsibilities created by, or affected by the decision. (b) The probable consequences for the decision maker and, where appropriate, the persons affected by the decision. (c) The significant risks, benefits, and reasonable alternatives involved in the decision. The parties and their lawyers, not the mediator, should make the threshold determination that the elder has the requisite capacity to proceed. The mediator’s primary role is as a facilitator to assist the participants in jointly, or separately, determining that issue. Mediator standards of conduct suggest that the mediator refrain from giving legal advice or forming legal opinions.16 On the other hand, if the mediator strongly suspects or reasonably believes that the elder party cannot either meaningfully participate or make a binding decision, the court rules would suggest that the mediator terminate the mediation.17 To begin to address the capacity issue, the mediator may initiate a separate conversation with the elder client and the elder’s counsel to help the participants obtain a sense of the elder’s ability to comprehend the nature of the proceedings, discuss the issues, and make informed decisions about the subject matter of the dispute. This assessment may include a conversation with the elder’s livein caretaker and the elder about how they customarily interact. Many times, other support persons can assist in the decision-making process. If the mediator (or attorney and elder) feels that the elder is capable of meaningfully participating in the process, but there is still an issue of capacity, the next step is to consider whether the other party needs to be advised that there is an issue as to the elder’s ability to enter into a binding contract. The mediator should encourage disclosure to the other party because of Rule of Court 3.857(b), which requires that the mediation process be conducted in a procedurally fair manner. “Procedural fairness” means a balanced process in which each party is given an opportunity to participate and make uncoerced decisions.18 Proceeding without informing the other party could cause harm to the other party, who might later find out that the settlement agreement obtained through arduous negotiations was unenforceable. Rule 857(i)(3) provides that a mediator may ter14 Los Angeles Lawyer October 2007 minate the mediation when the mediator suspects that continuation of the process would cause significant harm to any participant or third party.19 Whether the mediator raises the issue of capacity in the presence of the elder or in a sidebar with both counsel is an issue of discretion. If either or both counsel agree that the elder party has the requisite capacity to make a binding decision, then a writing should be created to memorialize that fact. This could be as simple as a statement of agreement that all parties have assessed the elder’s capacity to enter into the settlement agreement. If this conclusion was based upon observations, counsel may record their observations in a separate memorandum that could be lodged in the file or presented to the court for a determination of capacity or for court approval of the settlement agreement. The documented assessment of capacity protects the interests of all parties, because it helps preclude a party from alleging that the elder party’s lack of capacity is a ground for nullification of the mediated agreement. It is important that the written capacity assessment contain an express agreement making it admissible. Evidence Code Section 1122(a)(1) provides that a written document (such as the capacity assessment) prepared during the course of a mediation is admissible if an express written agreement to admit it is signed by all mediation participants, including the mediator. Otherwise, the provisions of Evidence Code Sections 1115 et seq. make mediation communications, including writings made in the course of mediation, inadmissible. Alternatively, the capacity assessment could be contained in the settlement agreement itself and made admissible by Evidence Code Section 1123, if the settlement agreement is made expressly admissible by its terms or contains words to the effect that it is binding or enforceable. A lawyer who believes the elder client lacks the requisite capacity to enter into a settlement agreement should take measures that may include seeking appointment of a guardian ad litem20 or conservator or creation of a special needs trust.21 The lawyer should be mindful that the client’s consent to these steps may be needed, lest the lawyer violate the ethical rules prohibiting the divulgence of client secrets.22 Participants and Process Considerations When the representative, a conservator, or the agent under a power of attorney attends the mediation, the lawyers and the mediator should assess whether the represented party elder has sufficient knowledge, interests, or understanding of the situation that he or she should also attend. New Probate Code Section 2113 requires a conservator to “accommodate the desires of the conservatee, except to the extent that doing so would violate the conservator’s fiduciary duties to the conservatee or impose an unreasonable expense on the conservatorship estate.” This suggests that the conservatee, as well as the conservator, should be at the mediation when the conservatee is capable of providing input to the process. In these situations, the mediator should be aware of the inherent tension between the expressed wants of the conservatee elder and the conservatee’s needs or best interests, which the conservator must consider in making a decision on behalf of the conservatee. A mediator can often facilitate a dialogue between conservator and conservatee that provides meaningful participation by the elder. Other support persons—such as a relative, significant other, or financial advisor—may need to be present to assist the elder. And, prior to convening a joint session, the mediator should assess whether a joint session is desirable. In abuse cases, putting the alleged abuser into the same room with the alleged victim-elder can create or exacerbate feelings of discomfort and vulnerability. Lawyers who are overprotective of their clients present a challenge to the mediator when they make it difficult for the mediator to interact with the client. In the case of an elder who is claiming abuse under the Elder Abuse Act,23 the elder’s special vulnerability does not render the elder incapable of making good decisions or participating in a mediation. While the lawyer may use his or her legal judgment to assist the elder in making an informed choice, the attorney must respect the client’s right to make informed decisions; the final settlement terms are within the control of the client.24 Does the mediator have an obligation to insist on speaking with the client or abort the process if the mediator cannot speak with the client? The mediation conduct rules regarding voluntary participation and self-determination25 would so dictate. The mediator can ensure compliance with this rule of conduct by announcing at the beginning of the process that the mediator will be speaking with the parties as well as their counsel. The Elder Abuse Act provides that certain defined persons, or mandated reporters, must report instances of elder abuse to the appropriate authorities. A mandated reporter is “any person who has assumed full or intermittent responsibility for the care or custody of an elder or dependent adult, whether or not he or she receives compensation, including administrators, supervisors, and any licensed staff of a public or private facility that provides care or services for elder or dependent adults, or any elder or dependent adult care custodian, health practitioner, clergy member, VICE CHANCELLOR, LEGAL AFFAIRS, UCLA AND ASSOCIATE GENERAL COUNSEL The University of California, Los Angeles and the Office of the General Counsel of The Regents of the University of California invite inquiries, applications and nominations for the position of Vice Chancellor, Legal Affairs, UCLA and Associate General Counsel. This position reports jointly to the UCLA Chancellor and to the General Counsel of the University of California, and is a member of the University’s Office of General Counsel. The Vice Chancellor, Legal Affairs and Associate General Counsel is chief legal counsel at UCLA and heads UCLA’s Office of Legal Affairs. He/she provides legal counsel to the UCLA Chancellor, as well as legal services to academic and administrative units at UCLA. He/she also advises the General Counsel for the University on the legal trends and needs of the UCLA campus and assists the General Counsel in advocating and representing the interests of The Regents, the governing board of the University. The Vice Chancellor, Legal Affairs and Associate General Counsel also oversees the campus Sexual Harassment Prevention Office and the Ombuds Office at UCLA. In addition to his/her lawyering and management responsibilities, the Vice Chancellor serves as a member of the Chancellor’s senior management team, working collaboratively with – and serving as advisor and counselor to—the Chancellor and Executive Vice Chancellor/ Provost, other vice chancellors, deans and department chairs. The Vice Chancellor serves as a member of the Chancellor’s Executive Committee and Oversight Committee on Internal Audit and Internal Controls, among others, and works collaboratively with counsel on other campuses and in the central law office in Oakland. The successful candidate must possess demonstrated skills and experience necessary to provide sophisticated legal advice and counsel reflecting sound judgment, and offer substantive in-depth legal knowledge and expertise in areas such as contracts, labor and employment law, real estate development, land use, intellectual property and healthcare law. This individual must also possess the fiscal and human resources management skills necessary to lead UCLA’s Office of Legal Affairs. He/she must be energetic and possess excellent communication and management skills along with superior academic qualifications. Given the considerable number of significant matters that pertain to the business and administrative aspects of campus operations, extensive experience in these areas is desirable. The special setting of the higher education environment requires flexibility, creativity, judgment, integrity and comfort dealing with a broad array of legal matters; the successful candidate should also be prepared to learn the extensive policies and procedures of the University and demonstrate a commitment to the mission of the institution, with the capability and breadth to contribute beyond the core legal function. Minimum requirements include membership in the California Bar and at least twelve years of relevant experience. Salary will be commensurate with background and experience. Desired start date is on or before January 1, 2008. Please direct inquiries, nominations and expressions of interest to our search consultants: Korn/Ferry International c/o John F. Amer, Esq. Client Partner 1900 Avenue of the Stars Suite 2600 Los Angeles, CA 90067 or via e-mail: [email protected] All inquiries will be held in strict confidence. Prospective candidates should express interest prior to October 15, 2007 to be ensured full consideration. The search will continue until an appointment is made. UCLA is an affirmative action/equal opportunity employer with a strong institutional commitment to the development of a climate that supports equality of opportunity. There is no substitute for experience. ■ ■ ■ ■ Over 1,200 Successful Mediations 13 years as a full-time mediator 92% of Cases Resolved Director, Pepperdine Law School’s “Mediating the Litigated Case” program LEE JAY BERMAN, Mediator 213.383.0438 www.LeeJayBerman.com Services for both simple and complicated dispute resolution All types of disputes between individuals and companies Disputes between large corporations and small companies. Contract disputes of all kinds. Financial disputes of all types. Trade disputes. Homeowner Associations disputes and issues. Domestic and partnership relationship disputes including divorce. ALL REAL ESTATE, INCLUDING: Evaluations • Contracts • Zoning • Development • Construction • Secondary Marketing • Borrowers/Lenders • Residential Escrows • Residential • Commercial • Apartments • Lending • Contracts DAVID W. DRESNICK, PRESIDENT TEL (818) 790-1851 ARBITRATOR/MEDIATOR FAX (818) WEB SITE 790-7671 E-MAIL [email protected] www.mediationla.com ConfidenceAtThe Courthouse. Business litigation is increasingly complex. That is why we believe valuation issues must be addressed with the same meticulous care as legal issues. Analysis must be clear. Opinions must be defensible. Expert testimony must be thorough and articulate. HML has extensive trial experience and can provide legal counsel with a powerful resource for expert testimony and litigation support. For More Information Call 213-617-7775 Or visit us on the web at www.hmlinc.com BUSINESS VALUATION • LOSS OF GOODWILL • ECONOMIC DAMAGES • LOST PROFITS 16 Los Angeles Lawyer October 2007 or employee of a county adult protective services agency or a local law enforcement agency….”26 There is no indication that a mediator is required to report, but a party who is a mandated reporter would be required to report if he or she learns facts of abuse during the mediation. Even though mediation communications and writings prepared for mediations are inadmissible in a subsequent adversarial proceeding, facts that are discoverable independent of the mediation are not rendered inadmissible solely because of their introduction at the mediation.27 The mediator and counsel should be aware that confidentiality provisions in settlement agreements in which there is evidence of elder abuse under the Elder Abuse Act are generally not enforceable, except to the extent of prohibiting disclosure of the monetary amount of the settlement.28 The Needs and Interests of the Elder A common elder mediation dispute involves the proper care of an elder and management of the elder’s assets. This might arise under a trust or power of attorney, contested estate planning documents recently changed by an elder’s child, or a contest for appointment of conservator. For example, one sister may charge that an in-home care situation is insufficient for her mother who has declining mental functioning and mobility and that another sister who possesses the power of attorney over the mother’s assets is unnecessarily spending money on home improvements and expensive 24-hour individual nursing care. Communications break down as demands are made and responses stop coming. The mediation briefs are filled with incendiary allegations of improper care, breach of fiduciary duty, failure to account, and the like. The mediator has an opportunity to address the relationship between the sisters and refocus the discussion, reminding them that their mother is still alive with ample financial means for her care, as well as two daughters to look after her. Refocusing the dispute into a problem-solving session, the mediator can help the parties find common ground by agreeing that the care of the elder is their common goal, and identifying the underlying needs and interests of all concerned. This focuses the dialogue on what the sisters can accomplish collaboratively. A joint care and financial management plan might be arranged, with a method to ensure future communications. Often a family member, such as another sibling, a cousin, niece, or nephew is the natural peacemaker and can be appointed to serve as mediator. A powerful mediation technique in family disputes involves the use of acknowledgements and thank yous. In this sibling dispute, the mediator can coach each sister in a private caucus to tell the other that she appreciates the efforts and contributions made. The parties may balk at this, but coaching them is the right strategy, because the making of the statement to the other, whether heartfelt or not, almost always breaks the ice, if not melts it completely. The shift in energy in the room is usually palpable. The mediator uses the acknowledgement to build a series of agreements, keeping the parties focused on the interests of the elder and creating the opportunity for the sisters to rebuild their fractured relationship around their common cause. The repair of their relationship alone can be sold as a powerful dose of medicine for the elder, whether known by the elder or not. Another powerful technique in family squabbles is the nonadmission apology. The mediator coaches each party to say to the other, “I’m sorry if any of my actions in managing our mother’s monies caused you concern, but my intentions were good, and I am here at this mediation to help resolve our differences.” Said directly to each other, or conveyed by the mediator, statements such as this often soften the parties and break impasses. Mediators and lawyers will benefit from awareness of a variety of special issues applicable to elders. These include assuring maximum participation of the elder, addressing and documenting capacity issues, dealing with confidentiality and reporting issues for disputes under the Elder Abuse Act, and employing collaborative problem solving techniques to aid the parties in addressing the needs and interests of impaired elders. ■ Seeking an Experienced Arbitrator/Mediator? HONORABLE LAWRENCE W. CRISPO (RETIRED) STEVEN RICHARD SAUER, ESQ. COUNSELOR AT LAW • SINCE 1974 Resolving matters involving: Financial Elder Abuse, Wrongful Death, Nursing Home & Hospital Abuse. 323.933.6833 TELEPHONE Mediator Arbitrator [email protected] E-MAIL 4929 WILSHIRE BOULEVARD, SUITE 740 LOS ANGELES, CALIFORNIA 90010 Referee 213-926-6665 www.judgecrispo.com WE ARE A LAW FIRM. WE FORM AND MAINTAIN ENTITIES. THAT’S ALL. Incorporation Service Companies California Incorporation Determine Name Availability and Reserve Name Prepare and File Articles 1 For example, under the Elder Abuse and Dependent Adult Civil Protection Act, W EL . & I NST . C ODE §§15600 et seq., elders are defined as persons over 65 years of age. Id. at §15610.27. 2 CAL. R. OF CT. 3.871, 3871(a). 3 See ADR processes: How Much Does It Cost?, available at http://www.lasuperiorcourt.org/courtrules. 4 L.A. SUP. CT. R. 10.200 et seq. 5 L.A. SUP. CT. R. 10.205, 10.208. 6 Jeld-Wyn v. Superior Court, 146 Cal. App. 4th 536 (2007). In Jeld-Wyn, the court held that a case management order requiring parties in complex cases to attend and pay for mediation was not authorized because it was not encompassed by the statutory scheme set forth in CODE CIV. PROC. §§1775 et seq. and the accompanying Judicial Council rules. 7 CAL. R. OF CT. 3.850(a). 8 CAL. R. OF CT. 3.851(a); L.A. SUP. CT. R. 10.209(b). 9 CAL. R. OF CT. 3.851(d) and Advisory Committee comment thereto. 10 See Standards of Practice, available at http://www .cdrc.net (a set of guidelines published by the California Dispute Resolution Council (CDRC) based upon a collaborative effort of major California dispute resolution providers and mediators); Model Standards of Conduct for Mediators, available at http://www.aba.org (a set of guidelines jointly developed by the American Arbitration Association, the American Bar Association All Secretary of State Filing Fees Custom Bylaws Custom Organizational Minutes, authorizing the election of officers and directors, establishment of bank accounts, issuance of stock, and other matters Preparation and Issuance of Share Certificates Statement of Information and Filing Fees Preparation of 25102(f) Certificate and Filing Fees* Prepare IRS Form SS-4 and Obtain Tax Identification No. Prepare and File IRS Form 2553 to make “S” Election Ancillary Documents, including Promissory Notes, Medical Expense Reimbursement Plan, Employment Agreement Resident Agent Services for one year Follow up to ensure all documents are properly signed, filed, fees are paid, and formation is properly completed Experienced counsel handling every formation and available to consult on all aspects of the process Corporate Kit, Seal, and duplicate Set of Documents on CD Accountant Copy of All Documents Delivered on CD-ROM eMinutes Entity Management System (with online document library, real-time monitoring of corporate deadlines) via secure web-based interface Automatic Enrollment in Annual Minutes System Cost *For capitalization up to $100,000 $1,000 Los Angeles 310.772.7700 Toll-Free 866.JEFF UNGER Los Angeles Lawyer October 2007 17 U. 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EMPLOYMENT TRIAL ATTORNEYS We specialize in handling Employment & Labor Law Cases from attorney referrals in Los Angeles, Ventura, Santa Barbara, San Bernardino, Riverside and Orange County. www.expert4law.org NEED STORAGE??? A Full Service Employment Law Firm with extensive experience in the following specialties: • Wrongful Termination • Age Discrimination • Race Discrimination • Disability Discrimination • Pregnancy Discrimination • Sex Discrimination • Sexual Harassment • Violation of Whistling Blowing Laws • Employment Manual Preparation • Family Leave Act • Medical Leave Act • Labor Law Violations • Severance Package Agreements You will be paid a referral fee within the Guidelines of the California State Bar Tel 310.826.6300 www.employmentattorneyservices.com EMPLOYMENT TRIAL ATTORNEYS Representing Both Employees and Employers 18 Los Angeles Lawyer October 2007 1/2 OFF THE FIRST 3 MONTHS Some Restrictions May Apply ★ 7 DAYS A WEEK ACCESS ★ ★ ACCESS HOURS 6AM-7PM ★ Access Hours At Select Locations ★ BOXES & PACKING SUPPLIES ★ ★ 24 HOUR SURVEILLANCE ★ ★ MONTH TO MONTH LEASES ★ ★ INSURANCE AVAILABLE ★ ★ $50 REFERRAL PROGRAM ★ Three locations conveniently located at 213.784.4440 801 E. COMMERCIAL ST. 700 E. SLAUSON AVE. 3611 W. WASHINGTON BLVD. LOS ANGELES, CA Section of Dispute Resolution, and the Society of Professionals in Dispute Resolution). 11 Counsel for the elder may be breaching the ethical obligation to keep secrets of the client confidential. In practice counsel often confidentially seek the mediator’s assistance in helping resolve internal issues with the client. See discussion at n.22 infra. The capacity issue could be raised as well by opposing counsel or by the mediator during the course of the mediation. 12 CAL. R. OF CT 3.853(1) and (2) specifically provide that a mediator must inform the parties that any resolution will be by voluntary agreement of the parties and must respect the right of each participant to decide the extent of his or her participation in the mediation, including the right to withdraw. 13 See also CAL. R. OF CT. 3.852(3) and (4). A “participant” includes a party as well as a lawyer for a party. CAL. R. OF CT. 3.852(3). 14 See also PROB. CODE §2113 and discussion in text infra about including the wishes of conservatees in decisions affecting them. 15 PROB. CODE §811. 16 A mediator should refrain from giving legal advice or legal opinions, although weighing in and assisting the parties in determination would be part of the facilitation role. See CDRC Standard 3, available at www.cdrc.net. See also CAL. R. OF CT. 3.856(d) (“A mediator must decline to serve or withdraw from the mediation if the mediator determines that he or she does not have the level of skill, knowledge, or ability necessary to conduct the mediation effectively.”). 17 CAL. R. OF CT. 3.857(i)(2). 18 CAL. R. OF CT. 3.857(b). 19 See also CDRC Standard 3, available at www.cdrc.net (“If a Mediator believes that the continuation of the process would harm any participant or a third party (such as children in a marital dissolution matter), or that the integrity of the process has been compromised, then the Mediator shall inform the parties and shall discontinue the mediation, without violating the obligation of confidentiality.”) 20 PROB. CODE §1003(a)(2). 21 PROB. CODE §3604. Note that a lawyer does not have authority to act on behalf of someone who lacks capacity. Sullivan v. Dunne, 198 Cal. 183 (1926). 22 See State Bar Formal Opinion No. 1989-112 (1989) (providing that it is unethical for an attorney to institute conservatorship proceedings contrary to the wishes of the client because to do so would be to reveal client secrets, including observation of the behavior of the client leading to the lawyer’s conclusion of incapacity; withdrawal may be necessary). For a contrary result, see ABA MODEL RULES OF PROF’L CONDUCT R. 1.14 (providing that a lawyer may seek a guardian, conservator, or take protective action when the lawyer believes that the client cannot adequately act in his or her own interest, but the lawyer must be careful in divulging only the observation of the client’s incapacity). 23 Elder Abuse and Dependent Adult Civil Protection Act, WEL. & INST. CODE §§15600 et seq. 24 Decisions affecting client’s substantive rights must be made by the client. See Blanton v. Womancare, Inc., 38 Cal. 3d 396, 403-05 (1985); Steward v. Preston Pipeline, Inc., 134 Cal. App. 4th 1565, 1581-82 (2005). See also ABA MODEL RULES OF PROF’L CONDUCT R. 1.2(a). 25 CAL. R. OF CT. 853. 26 WEL. & INST. CODE §15630(a). 27 See EVID. CODE §1120(a); Rojas v. Superior Court, 33 Cal. 4th 407 (2004). 28 CODE CIV. PROC. 2017.310. If there is evidence of elder abuse under the Elder Abuse Act, a confidentiality provision could still be enforceable if the information is privileged or there is a showing of a substantial probability of prejudice. Id. practice tips BY JULIA L. BIRKEL, JOHN M. BYRNE, AND DR. SUSAN I. BERNATZ Litigating Financial Elder Abuse Claims UPON TURNING 65 YEARS OLD, a resident of California qualifies for the dubious honor of becoming one of the more than 200,000 victims of financial elder abuse each year,1 no matter whether that 65year-old is suffering from dementia or other mental or physical infirmities. Statistics indicate that people over 65 are more heavily targeted by would-be financial predators. In fact, over 70 percent of people over the age of 50 have been approached fraudulently, with no less than $3.8 billion lost by seniors to financial scams.2 As the California Legislature has recognized, “elder and dependent adult abuse is…indiscriminate…and factors such as one’s socioeconomic status, gender, race, ethnicity, educational background and geographic location do not provide an impregnable barrier against its broad, horrible reach.”3 Financial abuse is estimated to account for 40 percent of all forms of reported abuse against seniors.4 The statistics become more alarming when one considers estimates that as few as one in five elder abuse cases of any type is reported5 and only one in 25 incidents of financial elder abuse is reported.6 California’s elderly population is substantial and growing.7 In response to rising levels of crime against elderly persons and the underreporting of such crimes, the California Legislature has, over the last 17 years, repeatedly strengthened statutes to protect the elderly from self-serving relatives and cunning salespeople. One such law is California’s financial elder abuse statute, Welfare and Institutions Code Section 15610.30. The phrase “financial elder abuse” underscores its seriousness, yet the phrase remains misunderstood. To many people, the term “abuse” equates with physical abuse. Moreover, California’s financial elder abuse law does not raise the issue of mental or physical capacity. If you are 65 or older and incur financial loss due to fraud or other bad faith conduct, you are the victim of financial elder abuse. You or someone acting on your behalf may bring a claim under Section 15610.30. Jurors and even judges (particularly since these cases do not necessarily get tried in Probate Court, where judges are more familiar with elder law) may not recognize the abuse element and lose sight of the wrongfulness of the taking. To properly present a case, it is helpful to be knowledgeable about the background of California’s financial elder abuse statutes and to understand the procedures and issues common to litigating a financial elder abuse case, including the use of expert testimony. Financial elder abuse also interplays with issues of competence, capacity, and undue influence. By understanding the nature of a financial elder abuse claim, more attorneys will be able to properly identify cases of elder abuse when dealing with elderly clients and become empowered to advocate on their behalf. Definition Financial elder abuse occurs when a person or entity takes, secretes, appropriates, or retains (or assists in taking, secreting, appropriating, or retaining) “real or personal property of an elder or dependent adult to a wrongful use or with the intent to defraud, or both.”8 It covers any appropriation or retention of property made in bad faith.9 If the party knew or should have known that the elder had a right to possess the property, he or she will be deemed to have acted in bad faith.10 The financial elder abuse statute is relatively new. Unlike other statutory protections benefiting the elderly, such as provisions regarding capacity and undue influence in the creation of wills or the intervivos transfers that are found in the Probate and Civil Codes, the financial elder abuse statute was designed for the protection of the elderly regardless of capacity. In creating the statute, the legislature acknowledged the special vulnerability of elders to financial predators. In its inception in 1994, the financial elder abuse statute imposed liability only on those who stood in a fiduciary relationship to an elderly person. Labeling the violation “fiduciary abuse,” the original law made it a violation for anyone standing in a position of trust with an elder to take or appropriate money or property for any use outside the purpose for which the money or property had been entrusted.11 The legislative intent behind the statute was to improve the reporting and processing of elder abuse claims and to encourage attorneys to take elder abuse cases. According to the Assembly Floor Bill Analysis, statistics in 1994 indicated that only one in 14 incidents of elder abuse were reported, amounting to half a million instances of abuse going unreported each year. Three years later, the legislature expanded the statute to allow recovery of attorney’s fees in an effort to encourage more attorneys to take on financial elder abuse cases. It also expanded the definition of fiduciary abuse to include any person who takes advantage of the elderly and refuses without good faith to disgorge the property.12 The following year, the statute was broadened again and redefined as financial abuse. The legislature focused on financial crimes as a general category of harm faced by elders.13 The 1998 amendment made the first attempt to inject the intent required to constitute financial abuse, stating that financial abuse occurred wherever a person in a position of trust took the money or property of an elder with the intent to defraud. Additionally, mandatory reporting was expanded under the 1998 law to include instances of financial exploitation, and minimum standards of investigation were established. The legislature expressed a strong need for these revisions, identifying a sharp increase in incidents of elder abuse since the late 1980s.14 According to the legislature, financial abuse was a factor in roughly a third of cases of elder abuse and was more commonly experienced than either physical or mental abuse among the elderly population.15 The current version of the statute was adopted in 2000 as part of a bill sponsored by California Advocates for Nursing Home Reform, Julia L. Birkel is a partner with Hill, Farrer & Burrill, LLP, whose litigation practice includes probate disputes. John M. Byrne is also a partner with the firm and specializes in trusts and estates. Dr. Susan I. Bernatz is a forensic neuropsychologist and a member of the Los Angeles County Elder Abuse Forensic Center at County/USC Medical Center. Los Angeles Lawyer October 2007 19 which asserted that the then-existing and proposed laws did not “sufficiently address the daily financial abuse problems faced by the elderly.”16 The Assembly Floor Analysis heralded the bill as “a comprehensive approach to address the problems of financial abuse and misrepresentation directed against seniors.” The analysis continued: California seniors are losing millions of dollars by purchasing unnecessary financial products from [persons] who have a financial stake in the sale. Current statutes designed to protect seniors are weak and ambiguous and need to be strengthened. This bill’s multifaceted approach will combat elder abuse through strengthening protections and assisting in the prosecution of perpetrators.17 The 2000 amendment strengthened the definition of financial elder abuse by providing that financial abuse occurs wherever a perpetrator “takes, secretes, appropriates, or retains real or personal property of an elder” to a wrongful use or with intent to defraud or assists in the taking, secreting, appropriating, or retaining of such property.18 Again, a use is wrongful if conducted in bad faith—that is, if a person or entity knew or should have known that the elder had a right to have the property transferred or made readily available, and it is obvious to a reasonable person that the elder maintained that right.19 The amendment loosened the intent requirement. It is not necessary under the present statute that the taker maintain an intent to defraud; rather, a person is guilty of committing financial elder abuse so long as it would be obvious to a reasonable person that the taker is not entitled to the elder’s assets.20 Capacity Not an Issue The legislature has recognized the special vulnerability of elders regardless of capacity and has created a statute that applies to any affected elder, while acknowledging that elders with developmental disabilities, mental or verbal limitations, or in poor health are more at risk.21 The statute is still evolving. For example, one bill will provide a right of attachment in cases involving financial elder abuse.22 Recently passed by both houses and signed by the governor, this modification will incentivize attorneys to handle financial abuse cases. Presently, one of the difficulties facing an attorney deciding whether to take a case is collecting from the perpetrators, who are often wasteful or irresponsible with the assets they take. Allowing for attachment would provide a more promising outlet for recovery and encourage efforts to recoup funds wrongfully taken from the elderly. In addition to still being in evolution, the 20 Los Angeles Lawyer October 2007 statutory scheme is of recent creation, and there is a lack of case law interpreting what constitutes financial elder abuse. Most elder abuse cases have not reached an appellate level and are therefore usually not reported.23 The dearth of case law is also explained by the fact that most financial elder abuse cases never make it to court. The elderly are not often in a financial position to pay for litigation or may not want to disrupt their relationships with their caretakers. Often, an elder simply does not know that he or she has a case.24 In dealing with elderly clients, it is important to have a good understanding of the relevant documents and donative intentions. Moreover, to properly investigate a financial elder abuse claim, it is important to meet the elder separately from other family members to ascertain whether the elder truly consents to the intervivos transfer, modifications to testamentary documents, or other affairs affecting the estate. For example, two different elderly women may seek to transfer ownership of their houses to their adult children. One sees this as a potential tax break for herself or her family, while the other has been led to believe by her daughter that she would be better off living in a small apartment and selling the house at a below-market rate. The transfers may be the same, but in the latter case undue influence may have a role. Some incidents will be clear-cut cases of abuse (a son changes the locks on a house while his aged father is hospitalized, or a daughter trustee of her mother’s life estate does not provide enough money for her mother’s monthly upkeep). An attorney with elderly clients must be alert to the distinctions that turn simple transactions into situations of abuse. Under Section 15610.30, financial abuse of an elder occurs when someone obtains property of an elder for a wrongful use or with intent to defraud. The legislature recognized that old age by itself renders people vulnerable to financial abuse, irrespective of whether they are legally mentally sound.25 In addition, Probate Code Section 850 allows a personal representative to bring a case on behalf of a decedent holding a claim to real or personal property that is possessed or held in title by another. By utilizing Section 850, a personal representative may make a claim of undue influence on behalf of a decedent under Civil Code Section 1575, which defines undue influencing as: 1) the use, by one in whom a confidence is reposed by another, or who holds a real or apparent authority over him or her, of such confidence or authority for the purpose of obtaining an unfair advantage, 2) taking an unfair advantage of another’s weakness of mind—i.e., the elder lacked the mental vigor to protect against impositions,26 or 3) taking a grossly oppressive and unfair advantage of another’s necessities or distress.27 Undue influence occurs when people use their role and power to exploit the trust, dependency, or fear of others. They use this power to gain control over the weaker decision-making abilities of another person.28 Case law is more developed in the area of undue influence than with elder abuse. Like Section 15610.30, undue influence under Section 1575 does not require a showing of mental incapacity. A grantor can be of sound mind and considered legally mentally competent yet still be subject to undue influence.29 Indeed, the concept of sound mind, typical to an inquiry regarding testamentary instruments, is not essential in determining whether an intervivos transfer is invalid.30 Because of the similarity of rights under the undue influence and financial elder abuse statutes, there will often be an overlap in factual circumstance leading to two separate claims. This presents interesting procedural challenges. The undue influence claim under Civil Code Section 1575 is asserted as part of a petition brought under Probate Code Section 850, typically accompanied by an effort to seek damages under Probate Code Section 859. This cause of action is equitable and will be tried by the court. On the other hand, the financial elder abuse cause of action, which is outside the Probate Code, is triable by a jury. There will likely be two simultaneous trials if the facts significantly overlap—one before the court and the other before the jury. Generally, the court first resolves the equitable issues.31 Procedurally, the trial court may try the equitable issues first, without a jury. The court may, in this phase, dispose of the legal issues so that nothing further remains to be tried by a jury.32 Or, alternatively, the court may choose to have an advisory jury.33 The court is also within its discretion to wait to rule on the equitable issues until after the jury’s decision, either guided by special verdict findings or not. The trial court has great discretion to set the procedures. One significant difference between pursuing financial elder abuse claims and causes of action for undue influence is that in financial elder abuse litigation, the burden of proof rests on the petitioner. In undue influence cases, however, if the respondent is in a “confidential relationship” with the victim, the burden of proof shifts. The respondent who holds a confidential relationship will be presumed to have taken undue advantage of the victim’s trust, unless the victim had independent advice and acted of his or her own volition and with full comprehension of the results of his or her action.34 This shows the importance of conducting pretrial discovery directed to what the elder knew, what other advisers he or she had, and whether the per- petrator sought or suggested independent advice for the elder. This more easily met burden makes undue influence a significant factor for an attorney to consider. A confidential relationship can be established with or without a technical fiduciary relationship, although a fiduciary is most certainly considered to be in a confidential relationship. Both exist whenever trust and confidence is reposed by one person in the integrity and fidelity of another.35 A confidential relationship is found when one party gains the confidence of the other and purports to act or advise with the other’s interest in mind.36 Typically, when a stranger abuses a confidential relationship with an elder, he or she does so in a deliberate, predatory fashion. In contrast, a family member tends to be more opportunistic, for example taking funds “just once,” discovering no one is watching, and then taking more. This family member may argue that he or she “would have been there” for the elderly person if need arose. However, the spending patterns of the person committing financial abuse generally belie that argument. Elder Law & Nursing Home Abuse & Neglect Law Offices of Steven Peck is seeking association or referrals for: 1) Nursing Home Abuse & Neglect (Dehydration, Bedsores, Falls, Death) 2) Financial Abuse (Real Estate, Theft, Undue Influence) 3) Trust & Probate Litigation (Will Contests, Trusts, Beneficiaries) 4) Catastrophic Injury (Brain, Spinal Cord, Aviation, Auto, etc.) 26 years experience TOLL FREE 866.999.9085 LOCAL 818.908.0509 www.californiaeldercarelaw.com • www.premierlegal.org • [email protected] WE PAY REFERRAL FEES PURSUANT TO THE RULES OF THE STATE BAR OF CALIFORNIA Presumptive Disqualification Recent case law has made a caretaker a prima facie suspect if he or she becomes the beneficiary of a testamentary instrument, and the scope of who is considered a caretaker is being expanded. Care custodians are presumptively disqualified from receiving testamentary transfers,37 and this includes longtime friends who assume a healthcare role.38 Under these conditions, in which courts and juries may be sympathetic to a wrongdoer for having performed at least some minimal care, expert testimony can substantiate a financial elder abuse claim. The requirements for expert testimony are that it relate to a subject sufficiently beyond common experience so as to assist the trier of fact, and that it be based on matter that is reasonably relied upon by an expert in forming an opinion on the subject to which his or her testimony relates.39 An expert can explain the particular vulnerabilities of the victim with a depth outside the normal experience of a lay person.40 For example, while everyone is influenced and persuaded in various ways, vulnerability to influence varies. The elderly are, under the financial elder abuse statutes, presumed to fall into a vulnerable category. Some of the factors that contribute to their vulnerabilities include mental and physical infirmities, dependence on others for help with finances and daily needs, loss of a spouse, lack of financial sophistication, and isolation. These factors underscore why, typically, the person who takes advantage is a family member or caretaker. An expert witness is critical to explaining how a seemingly competent and self-suf- The Los Angeles County Bar Association Lawyer Referral and Information Service is Celebrating 70 Years of Service! Bringing Lawyers and Clients Together Since 1937. For more information about joining the Lawyer Referral and Information Service, visit www. smartlaw.org or call (213) 896-6440. Los Angeles Lawyer October 2007 21 ficient elder can nonetheless get fleeced by a son or daughter, salesperson, or neighbor. California courts have deemed such an opinion “virtually indispensable” to understanding the relationship between the facts and the results.41 As the population of elderly Californians continues to grow, financial elder abuse is an increasing concern. Knowing how to recognize financial elder abuse requires an understanding that anyone over the age of 65 can be the target of abuse. Situations of abuse may not always be readily apparent, and a good attorney will investigate any transaction affecting the financial affairs of an elderly client. Moreover, as the legislature continues to improve upon the recovery avenues available in financial elder abuse cases, such as through attachment or reimbursement of attorney’s fees, the likelihood of a positive outcome in any financial abuse case should improve dramatically and encourage more attorneys to come to the aid of elderly clients. ■ 1 See Elder Financial Abuse Task Team Report to the California Commission on Aging, available at http://ccoa.ca.gov/pdf/Elder_Financial_Abuse.pdf (last accessed June 26, 2007) [hereinafter Task Team Report]. 2 See id. 3 2005 CA A.C.R. 8. 4 See Task Team Report, supra note 1. National Center on Elder Abuse, National Elder Abuse Incidence Study (1998), available at http://www.aoa.gov/eldfam/Elder_Rights/Elder_Abuse /ABuseReport_Full.pdf [hereinafter NCEA Study]. 6 See John F. Wasik, The Fleecing of America’s Elderly, CONSUMERS DIG., Mar./Apr. 2000. 7 The 2000 census reported nearly 3.6 million Californians over age 65, and it is estimated that by 2010 the number of Californians over 65 will approximate 4.5 million. See Census Tables 83 and 121, available at http://www.aging.ca.gov/html/stats /2000Census_aging_data.html (last accessed June 26, 2007). 8 WELF. & INST. CODE §15610.30(a). 9 See id. §15610.30(b). 10 Id. §15610(b)(1)-(2). 11 WELF. & INST. CODE §15610.30, added by 1994 Cal. Stat. ch. 594 (S.B. 1681). 12 See WELF. & INST. CODE §15610.30, amended by 1997 Cal. Stat. ch. 724 (A.B. 1172). 13 WELF. & INST. CODE §15610.30, amended by 1998 Cal. Stat. ch. 946 (S.B. 2199). 14 See WELF. & INST. CODE §15610.30(1)(a), amended by 1998 Cal. Stat. ch. 946 (S.B. 2199). 15 See id. 16 Senate Judiciary Committee Bill Analysis of A.B. 2107, 2-3 (Aug. 9, 2000). 17 Assembly Floor Analysis of A.B. 2107, 2 (Aug. 29, 2000). 18 WELF. & INST. CODE §15610.30, as amended by 2000 Cal. Stat. ch. 442 (A.B. 2107). 19 See id. 20 See id. 21 See WELF. & INST. CODE §15610.30, added by 1994 Cal. Stat. ch. 594 (S.B. 1681). 5 See 22 See 2007 Cal. S.B. 611 (Steinberg). See Brisk & Flynn, No Bad Deed Should Go Unpunished: Evaluation and Discovery of Cases of Financial Elder Abuse of Elders, 16 Fall NAELA Q. 8, 9 (2003). 24 See id. 25 See WELF. & INST. CODE §15600. 26 See O’Neill v. Spillane, 45 Cal. App. 3d 147, 155 (1975). 27 CIV. CODE §1575. 28 See Margaret Thaler Singer, Ph.D., Undue Influence and Written Documents: Psychological Aspects, 10 THE CULTIC STUDIES J. 1, 19-32 (1993). 29 See Balassi v. Balassi (Estate of Gelonese), 36 Cal. App. 3d 854 (1974); see also Potter v. Coleman (Estate of Baker), 131 Cal. App. 3d 471 (1982); Jamison v. Johnson, 41 Cal. 2d 1 (1953). 30 See O’Neill, 45 Cal. App. 3d at 155. 31 See Connell v. Bowes, 19 Cal. 2d 870 (1942). 32 See Raedeke v. Gibraltar Savs. & Loan Ass’n, 10 Cal. 3d 665, 671 (1974). 33 See id. 34 See Sparks v. Sparks, 101 Cal. App. 2d 129, 135-36 (1950). 35 See Sime v. Malouf, 95 Cal. App. 2d 82, 98 (1949). 36 See Kudokas v. Balkus, 26 Cal. App. 3d 744, 750 (1972). 37 See PROB. CODE §21350. 38 See Bernard v. Foley, 39 Cal. 4th 794 (2006). 39 See People v. Olguin, 31 Cal. App. 4th 1355, 1371 (1994); EVID. CODE §801. 40 See Estate of Duhaney, 246 Cal. App. 2d 653, 657 (1966). 41 Natural Soda Prod. Co. v. City of L.A., 109 Cal. App. 2d 440 (1952). 23 UCLA EXTENSION PRESENTS THE UCLA EXTENSION AND THE RICHARD ZIMAN CENTER FOR REAL ESTATE PRESENT THE 2007 Annual Tax Controversy Institute 2007 UCLA Real Estate Conference Wednesday, October 31, 2007 The Beverly Hills Hotel, Beverly Hills, California Tuesday, November 6, 2007 Skirball Cultural Center, Los Angeles, California FEATURED SPEAKERS: ENROLL EARLY AND SAVE! Donald Korb, Chief Counsel, Internal Revenue Service, Washington, D.C. $325 Reg# T5189C (enrollment by October 5) $350 Reg# T5189C (fee after October 5) $395 (At the door enrollment fee—space permitting) Stephen J. Swift, United States Tax Court Sarah Hall Ingram, Chief of Appeals, Internal Revenue Service, Washington, D.C. Kathy K. Petronchak, Commissioner, Small Business/Self Employed, Internal Revenue Service, Washington, D.C. ENROLL EARLY AND SAVE! $325 Reg# T5188C (enrollment by September 25) $350 Reg# T5188C (fee after September 25) $395 (At the door enrollment fee—space permitting) Business, Management, and Legal Programs For a detailed brochure on these conferences call (310) 206-1409. TO ENROLL WITH AMERICAN EXPRESS, DISCOVER, MASTERCARD, OR VISA, CALL (310) 825-9971 OR (818) 784-7006. 22 Los Angeles Lawyer October 2007 practice tips BY JAMES P. BESSOLO RICHARD EWING Mandatory Reporting Requirements for Financial Elder Abuse FINANCIAL ELDER ABUSE may be the crime of the twenty-first century, which should not be shocking news, given America’s aging population. It is estimated that 40 million Americans will be 65 and over in 2010, increasing to 55 million in 2020.1 In California, the state with the largest population of older Americans, the U.S. Census Bureau projects that the elderly population will increase from 3.7 million to more than 6.4 million within the next 20 years. These projections, coupled with the baby boomers’ wealth concentration, lay the groundwork for significant potential financial elder abuse. In an effort to combat financial abuse, California law requires individuals in certain positions, who are known as mandated reporters, to report incidents that reasonably appear to constitute elder or dependent adult abuse. The reports are generally made to the local Adult Protective Services (APS) agency or to local law enforcement. Effective January 1, 2007, officers and employees of financial institutions became mandated reporters of suspected financial abuse of an elder or dependent adult.2 The Elder Abuse and Dependent Adult Civil Protection Act defines “financial abuse” as occurring when a person or entity takes, hides, appropriates, or retains real or personal property of an elder or dependent adult for wrongful use and/or with the intent to defraud, or assists in doing so.3 Abuse of elders can take many forms, such as physical abuse, financial abuse, emotional abuse, neglect, isolation, abandonment, and abduction.4 The California Department of Justice estimates that approximately one of every 20 elders is a victim of abuse every year. The number of incidents of elder abuse is difficult to determine because it is often unreported. According to one source, only 1 in 14 cases of elder abuse is reported to authorities.5 Reasons for nonreporting can include a victim’s fear, embarrassment, or lack of capacity. Sadly, a majority of the perpetrators of elder abuse are adult children or other family members. An “elder” is a California resident age 65 or older.6 A “dependent adult” is a California resident between the ages of 18 and 64 who has physical or mental limitations that restrict his or her ability to carry out normal activities or to protect his or her rights.7 Under California law, certain individuals who, in their professional capacity or within the scope of their employment, observe or have knowledge of an incident that reasonably appears to constitute the abuse of an elder or dependent adult are legally required to report the incident.8 These individuals include persons who assume responsibility for the care or custody of an elder or dependent adult, whether or not compensated; administrators, supervisors, and licensed staff of a public or private facility that provides care or services for elders or dependent adults; physicians and medical professionals; clergy; and employees of APS agencies and local law enforcement. The report must be made by telephone immediately or as soon as practicably possible, followed by a written report sent within two working days. Subject to certain exceptions, the report is made to either the local APS agency or local law enforcement.9 One exception is that if the purported abuse occurred in a long-term care facility other than a state mental health hospital or a state developmental center, the report is made either to the local ombudsman or to local law enforcement.10 The report is confidential and may generally be disclosed only to certain persons and government entities. Violation of the confidentiality requirement constitutes a misdemeanor.11 Failure of a mandated reporter to comply with his or her reporting obligations under the act is also a misdemeanor.12 A mandated reporter who reports a known or suspected instance of abuse of an elder or dependent adult as required or authorized by the act is protected from civil and criminal liability with respect to the report. A person who is not a mandated reporter who knows or reasonably suspects that an elder or dependent adult has been the victim of abuse may report the abuse in the same manner as a mandated reporter.13 The act protects nonmandated reporters from civil and criminal liability for making reports unless it can be proven that the report was false and that the nonmandated reporter knew the report was false.14 Advocates for elder abuse victims have advanced the position that employees of financial institutions can help prevent financial elder abuse by reporting known or reasonably suspected financial abuse to government authorities. Advocates have noted the devastating James P. Bessolo is a senior attorney with Northern Trust, N.A., in Los Angeles. The author wishes to thank Raymond M. Lynch, associate general counsel, Greater Bay Bank N.A., for his permission to use the warning signs checklists that appear in this article. Los Angeles Lawyer October 2007 23 harm that financial abuse can cause an elderly victim. By the time the abuse is discovered, the abuser often will have dissipated the victim’s assets and elderly victims are often unable to financially recover from their losses, which can lead to increased reliance on public welfare programs, greater physical problems, and a higher mortality rate. Advocates believe that financial institutions have the potential to be the first line of defense against financial elder abuse. Nonetheless, while supporting efforts to prevent financial elder abuse on a voluntary basis, many in the financial industry opposed efforts to impose mandatory reporting obligations on financial institutions or their employees. For example, the California Bankers Association opposed previous legislative attempts to impose mandatory reporting obligations because of concerns about such issues as whether a financial institution could be liable for a false report and whether criminal penalties could be imposed on an employee or financial institution for failing to report. However, these concerns have now been substantially addressed. Employee Reporting Obligations Employees of financial institutions became mandated reporters effective January 1, 2007, but only of suspected financial abuse of an elder or dependent adult.15 For reporting purposes, “suspected financial abuse of an elder or dependent adult” occurs when an employee observes or has knowledge of behavior or unusual circumstances or transactions, or a pattern of behavior or unusual circumstances or transactions, that would lead an individual with like training or experience, based on the same facts, to form a reasonable belief that an elder or dependent adult is the victim of financial abuse.16 The act defines “financial institution” to include national banks, savings and loans, state banks and trust companies whose deposits are not limited solely to funds held in a fiduciary capacity, and federal or state credit unions.17 A financial institution does not include a subsidiary or affiliate of a financial institution that does not itself come within the definition of a financial institution. The definition does include an “institution-affiliated party,” which encompasses directors of and agents for an insured depository institution; certain shareholders or other persons who participate in the conduct of the affairs of an insured depository institution; and attorneys, accountants, and other persons who knowingly or recklessly participate in certain conduct that caused or is likely to cause more than a minimal financial loss to, or a significant adverse effect on, an insured depository institution.18 The inclusion of an institution-affiliated party in the definition of 24 Los Angeles Lawyer October 2007 financial institution is somewhat confusing. For example, since mandated reporter status is imposed on employees of financial institutions, would employees of a bank director, if any, be mandated reporters of suspected financial elder abuse, or is the intent that the director be the mandated reporter? The obligation of an employee of a financial institution to report arises in two situations. 19 The first situation involves an employee who observes or knows of an incident through direct contact with the elder or dependent adult that reasonably appears, or that the employee reasonably suspects, to be financial abuse. The act does not expressly limit the direct contact to in-person contact, and therefore the term presumably includes contact by oral or written communication. The second situation involves an employee who reviews or approves the elder or dependent adult’s financial documents, records, or transactions, and by doing so the employee concludes that there reasonably appears to be, or reasonably suspects, financial abuse. The employee may rely solely on the information before him or her at the time of reviewing or approving the documents, records, or transactions; there is no duty to further investigate. In both situations, an obligation to report may apply only if the employee’s knowledge or observation arises “in connection with providing financial services with respect to an elder or dependent adult” within the scope of the employee’s “employment or professional practice” and the incident is “directly related to the transaction or matter that is within that scope of employment or professional practice.” Therefore, if an employee of a financial institution observes an incident outside the confines of his or her employment that could reasonably constitute financial abuse of an elder or dependent adult, the employee is not a mandated reporter and has no duty to report the incident. Also, the act does not distinguish between customers and noncustomers, so if the reporting requirements are otherwise satisfied a report must be filed whether or not the elder or dependent adult is a customer of the financial institution. For example, if in connection with an application for a loan that is ultimately denied an employee reasonably suspects financial elder abuse, the employee is required to report. An allegation by an elder, dependent adult, or other person that financial abuse has occurred is not sufficient to trigger the reporting requirement if two conditions are met: 1) The employee is not aware of any other corroborating or independent evidence of the alleged financial abuse (without any duty to investigate any accusations), and 2) in the exercise of the employee’s professional judgment, the employee reasonably believes that financial abuse did not occur.20 A required report must be made by telephone immediately, or as soon as practicably possible, with a written report sent to the agency that received the oral report within two working days thereafter. When two or more employees jointly have knowledge or reasonably suspect that financial abuse of an elder or dependent adult has occurred, with the mutual consent of the employees the report may be made by a designated member of a reporting team.21 The California Department of Social Services has issued a form for use by employees of financial institutions to make a written report. This is different from the form used by other mandated reporters.22 The form requests personal information about the elder or dependent adult, the location of the incident, the reporter’s observations, information relating to the targeted account (although only the last four digits of the account number are disclosed on the form, the form’s instructions provide that the full account number will be requested in the oral report), information about the alleged abuser, and whether any other persons are believed to have knowledge of abuse against the alleged victim. The original and one copy of the form must be submitted to the appropriate agency. The oral and written report must be made to either the APS agency in the county where the apparent victim resides or to a law enforcement agency in the county where the incident occurred. If the mandated reporter knows that the apparent victim resides in a long-term care facility, the report must be submitted to either the local ombudsman or the local law enforcement agency. The identity of all persons reporting suspected financial abuse is confidential and may generally be disclosed only to certain persons and government agencies. Since the government agency’s investigation is confidential, a financial institution will not be able to obtain further information on the reported matter unless the elder or dependent adult consents to the disclosure. A question arises whether copies of documentation referenced in the report may be disclosed as part of the report without violating federal and state financial privacy laws. For example, if a suspected abuser attempts to transact business under a power of attorney purportedly executed by an elder, could a copy of the power of attorney be submitted to APS with the report? The act does not expressly authorize the disclosure of documentation as part of a report. Nonetheless, there appears to be support under California law for disclosure of documentation, at the time the report is filed, that is directly related to the incident and referenced in the report.23 A report of suspected financial abuse of an elder or dependent adult made by an employee of a financial institution is a privileged communication under Civil Code Section 47(b).24 The Section 47(b) privilege immunizes the reporter against all tort actions except for malicious prosecution.25 In addition, the act protects a mandated reporter from civil and criminal liability for any report required or authorized by the act.26 Although the liability protections afforded to employees of financial institutions under the act do not expressly reference the financial institution itself, presumably financial institutions are also protected by the absolute privilege under Section 47(b) with respect to an employee’s report of suspected financial abuse of an elder or dependent adult.27 If an employee of a financial institution fails to report an incident that should have been reported, the financial institution, and not the employee, is subject to a civil penalty of up to $1,000, or up to $5,000 for a willful failure. The penalty can be recovered only in a civil action brought against the financial institution by the attorney general, district attorney, or county counsel.28 When a report of suspected financial abuse is made by an employee of a financial institution, the financial institution must consider whether to file a Suspicious Activity Report (SAR) with the federal government. The filing of a SAR may be required if there are one or more financial transactions conducted through the financial institution involving known or reasonably suspected financial abuse of an elder or dependent adult that aggregate at least $5,000. A SAR must usually be filed within 30 days from the date of the initial detection of the suspicious activity. Federal law provides complete protection from civil liability for the filing of a SAR.29 In anticipation of the January 1, 2007, effective date, training programs were implemented to educate employees of financial institutions on their reporting responsibilities, and financial institutions established procedures for determining whether and how to report incidents of suspected financial elder and dependent adult abuse. Some financial institutions, particularly the larger institutions, have established a centralized group to assist employees with the reporting process. Warning Signs A common factor in financial abuse cases is the presence of a third party during transactions. This individual may be a relative, friend, caregiver, or even an apparent casual acquaintance. This third party is often someone in whom the elder or dependent adult has placed trust and confidence. The following are some possible warning signs of financial abuse in a financial institution setting. Unusual account activity can indicate that Los Angeles Lawyer October 2007 25 Shared Decision MakingSelf-Determination, Respect and Solutions MARCIA H. HABER, ESQ. ELDERCARE MEDIATION & FACILITATION (310) 377-7624 [email protected] 46-E Peninsula Center #118 Rolling Hills Estates, CA 90274 TRUST DEED FORECLOSURES “Industry Specialists For Over 18 Years” Witkin & Eisinger we specialize in the Non-Judicial of obligations secured by real property Aor trealForeclosure and personal property (mixed collateral). When your client needs a foreclosure done professionally and at the lowest possible cost, please call us at: 1-800-950-6522 We have always offered free advice to all attorneys. & WITKIN EISINGER, LLC RICHARD G. WITKIN, ESQ. ◆ CAROLE EISINGER – EXPERT WITNESS – CONSTRUCTION 40 YEARS CONSTRUCTION EXPERIENCE SPECIALTIES: Law Suit Preparation/Residential Construction, Single and Multifamily, Hillsides, Foundations, Concrete Floors, Retaining Walls, Waterproofing, Water Damages, Roofing, Carpentry/ Rough Framing, Tile, Stone, Materials/Costs, Building Codes. CIVIL EXPERIENCE: Construction defect cases for insurance companies and attorneys since 1992 COOK CONSTRUCTION COMPANY STEPHEN M. COOK General Contractors License B431852 Graduate study in Construction L.A. Business College, 1972 Tel: 818-438-4535 Fax: 818-595-0028 Email: [email protected] 7131 Owensmouth Ave., Canoga Park, CA 91303 26 Los Angeles Lawyer October 2007 an elder or dependent adult is being financially abused. Common examples include: • Large cash withdrawals. • Activity inconsistent with the person’s physical ability, such as ATM use by a physically impaired person. • Activity inconsistent with a person’s normal banking habits, such as ATM use by an elder or dependent adult with an established pattern of client service representative transactions. • Frequent new withdrawals, usually in round numbers. • Increased activity on credit/debit cards. • Withdrawals made from savings or certificates of deposit despite penalty assessments or loss of interest. Account changes may also indicate that an elder or dependent adult is a victim of financial abuse. Examples may include: • New use of power of attorney to gain access to financial accounts. • Change in account beneficiaries. • New authorized signers on accounts. • Change in receipt of account statements. • Recent change of physician, attorney, or accountant. • Change in property title, or new or refinanced loan. • Recent change in power of attorney. • Recent change in a will or trust, when the elder or dependent adult seems incapable of managing his or her affairs. • Recent change in a will or trust to favor a new or much younger “friend.” Elders and dependent adults who are being financially abused may also display significant changes in their behavior as customers. Examples may include: • Withdrawn, tired, confused, or depressed. • Confusion about recent financial arrangements. • Reluctance to discuss matters that were previously routine. • More apprehensive of the outside world. An elder or dependent adult who is being financially abused may also demonstrate that he or she is being influenced or directed by someone in a position of trust (e.g., caregiver, relative, adviser, or friend). Examples may include: • Comes to the financial institution accompanied by a third party, whereas he or she previously came alone. • Appears to depend on the input or direction of another to conduct a transaction. • Stops coming to the financial institution. • Employee is told that elder or dependent adult is not willing or able to accept visits or telephone calls. • Another person is overly concerned about the elder’s or dependent adult’s finances. • Another person speaks for the elder or dependent adult, even when the elder or dependent adult is present. • Another person appears dependent on the elder or dependent adult for financial support. • An individual accompanies the elder or dependent adult and encourages him or her to withdraw money. • An individual accompanies the elder or dependent adult and pressures or coerces him or her into a transaction. The above behaviors are all signs of possible financial abuse. However, these behaviors may have legitimate explanations, and therefore it is important for an employee of a financial institution not to jump to conclusions but to make a reasoned determination, after receipt of appropriate internal assistance, about whether a report should be filed. Preliminary indications are that the new reporting obligations imposed on employees of financial institutions will result in a significant increase in the number of financial abuse reports filed. According to information provided by a representative of Los Angeles County APS, financial abuse reports filed with APS in Los Angeles County during the first four months of 2006 numbered 1,062, with most reports submitted by financial institutions voluntarily. For the first four months of 2007, the filings increased to 1,485, with most reports derived from financial institutions. This represents a 40 percent increase in financial abuse reporting. Hopefully, the increased reporting will result in a reduction of actual losses incurred by elders and dependent adults and an increase in assistance to those who have been victimized. ■ 1 ADMINISTRATION ON AGING, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, A PROFILE OF OLDER AMERICANS: 2005. 2 Elder Abuse and Dependent Adult Civil Protection Act, WELF. & INST. CODE §§15600 et seq., as amended by the Financial Elder Abuse Reporting Act of 2005 (SB 1018). 3 WELF. & INST. CODE §15610.30. 4 WELF. & INST. CODE §15610.07. 5 House Select Committee on Aging (1994). 6 WELF. & INST. CODE §15610.27. 7 WELF. & INST. CODE §15610.23. 8 WELF. & INST. CODE §15630. See also WELF. & INST. CODE §15610.65 (defining “reasonable suspicion”). 9 APS is a state-mandated program that assists elders and dependent adults who are unable to meet their own needs or are victims of abuse. Each county in California has an APS agency. Upon receipt of a report, an APS social worker will typically meet with the alleged victim to investigate and assess the situation and, when appropriate, work with local law enforcement agencies in an attempt to eliminate any apparent abuse. For more information on APS and a contact list of APS agencies for each county, see www.dss.cahwnet.gov/cdssweb /AdultProte_175.htm. 10 See WELF. & INST. CODE §15610.47 for the meaning of “long-term care facility.” Ombudsmen are persons who advocate for the protection and rights of residents in long-term care facilities. See WELF. & INST. C O D E §15610.50. For more information, see www.la4seniors.com/ombudsman.htm. & INST. CODE §15633. 12 WELF. & INST. CODE §15630(h). 13 WELF. & INST. CODE §15631. 14 WELF. & INST. CODE §15634. 15 WELF. & INST. CODE §15630.1. 16 WELF. & INST. CODE §15630.1(h). 17 WELF. & INST. CODE §15630.1(b). 18 See 12 U.S.C. §1813(u) for a definition of “institution-affiliated party.” 19 WELF. & INST. CODE §15630.1(d)(1). 20 WELF. & INST. CODE §15630.1(e). 21 WELF. & INST. CODE §15630.1(d)(2). 22 The financial institution form, SOC 342, as well as the form for other mandated reporters, SOC 341, may be obtained from the California Health & Human Services Agency Web site. 23 The California Right to Financial Privacy Act §7471(c) (codified at GOV’T. CODE §§7460 et seq.) authorizes a financial institution to disclose a customer’s financial records to a state or local agency concerning suspected violation of any law. Also, the California Financial Information Privacy Act §4056(b)(8) (codified at FIN. CODE §§4050 et seq.), also known as SB1, authorizes the disclosure of a customer’s nonpublic personal information (as defined in FIN. CODE §4052) when reporting a known or suspected instance of elder or dependent adult financial abuse. 24 WELF. & INST. CODE §15630.1(i). 25 See Silberg v. Anderson, 50 Cal. 3d 205 (1990). 26 WELF. & INST. CODE §15634. 27 See Hagberg v. California Fed. Bank FSB, 32 Cal. 4th 350 (2004). See also PENAL CODE §368, which makes financial abuse against an elder or dependent adult a crime, and WELF. & INST. CODE §15656. 28 WELF. & INST. CODE §15630.1(f), (g)(1). 29 31 U.S.C. §5318(g)(3). 11 WELF. Lowest Cost Personal Injury Advances • Cash for Personal Injury victims. • Money for emergencies & general living expenses. • Keep your clients happy. • Have more time to litigate your case. • Get the settlement you and your client deserve! • Simple process, forms can be completed by paralegal. Only 10% for each 6 Months* No compounding * or portion thereof | $250 processing fee. 866-476-2029 www.presettlementfunds.com Los Angeles Lawyer October 2007 27 SPECIAL ISSUE ELDER LAW by Sherrill Y. Tanibata Mind over Matters Determinations and decisions regarding capacity, diminished capacity, and incapacity are at the heart of elder law, which addresses the ramifications of mental and physical impairment due to age. However, while elder law has recently been viewed as a separate substantive area of law, a variety of lawyers have grappled with the issues at its core for years. For example, trust and estates practitioners have always dealt with questions of capacity in numerous circumstances, including when they assess a client’s ability to make a trust, will, or gift; plan for a client’s future disability; or litigate in probate conservatorship proceedings or in evidentiary hearings on the validity of documents and transactions. These practitioners have done so without the help of special legislation for their elderly clients. So why is elder law now nec28 Los Angeles Lawyer October 2007 essary to address capacity issues that have traditionally been resolved by applying time-tested principles familiar to many lawyers, especially trust and estates practitioners? A possible answer to this question lies in the California Legislature’s 1996 findings as presented in Welfare and Institutions Code Section 9001. In 1996, persons over 60 represented 14 percent of California’s population, but by 2020 older individuals will represent 21 percent of California’s population. In 2010, the first wave of baby boomers will constitute 29.2 percent of California’s over-60 population—and Sherrill Y. Tanibata is a senior associate at Sullivan, Workman & Dee, LLP, where she is responsible for the firm’s probate and estate planning department. JONATHAN BARKAT The question of an elder’s legal capacity nearly always involves issues of fraud and undue influence in 2020, baby boomers will comprise 70.2 percent of California’s over-60 population. While dementia affects only 1 percent of 60year-olds, that percentage jumps to 30 percent to 45 percent for 85-year-olds.1 The aging of the baby boom generation in the coming years will put all traditional methods of dealing with diminished capacity and incapacity to the test by the sheer numbers in that group. All lawyers, no matter what their area of specialization, increasingly will be asked to resolve issues of capacity and will find themselves, like it or not, becoming elder law practitioners in two basic ways: 1) determining the capacity of their elder clients, or 2) determining whether a specific document or transaction is tainted by the possible incapacity of an elder or is the product of possible undue influence exerted upon an elder. While these capacity determinations have in the past arisen nearly exclusively in the province of trusts and estates law, due to the increasing numbers of aging clients, attorneys in every area of the law will find themselves grappling with these issues. In determining an elder client’s capacity, attorneys are required, practically and ethically, to resolve a series of critical questions: • Is my client competent, or does my client suffer from diminished capacity? • How does my client’s diminished capacity affect his or her ability to execute a will or trust? A durable power of attorney? A deed? A pay on death contract with a bank? Any other document or transaction? • Is my client susceptible to undue influence? Is my client being unduly influenced? In determining whether a specific document or transaction is invalid because it was executed or entered into by a principal who lacked capacity or who was subject to undue influence, an attorney is required to make an analysis based upon the following criteria: • Statutory provisions on capacity. • Presumptions and burdens of proof. • Decisional law. • The facts particular to a case. • The availability of evidence to prove or disprove capacity or undue influence. Basic Guidelines and Definitions The capacity of elders is addressed in the Probate Code and in Welfare and Institutions Code sections on special treatment of elders and on elder abuse. Testamentary capacity and contractual capacity are addressed in the Civil Code as well as in Probate Code sections enacted pursuant to the Due Process in Competence Determinations Act. 2 Fundamental to any discussion of capacity within the elder law context are a few key statutory guidelines: 1) An elder is anyone age 65 or older.3 2) All persons are presumed to have the legal 30 Los Angeles Lawyer October 2007 capacity to take action and make decisions on their own account. The presumption of capacity is a rebuttable presumption affecting the burden of proof.4 3) A determination that a person is of unsound mind or lacks the capacity to do an act or make a decision must be supported by evidence of the existence of at least one of the deficits listed at Probate Code Section 811 as well as evidence that the deficit correlates with the act or decision in question. 4) A person lacks capacity to make a decision if he or she cannot communicate the decision verbally or by any other means and cannot appreciate the rights, duties, consequences, risks, benefits, and alternatives involved with the decision.5 5) Persons lack testamentary capacity if they are unable to understand the nature of the testamentary act, unable to understand and recollect the nature and extent of their assets, or unable to remember and understand their relationship to their living relations and those whose interests would be affected by their will. Testamentary capacity is also lacking if a person suffers from a mental disorder that causes the person to make a disposition of property that he or she would not have made were it not for the mental disorder.6 6) A conservator may be appointed for persons who are unable to properly provide for their personal needs or are substantially unable to manage their financial resources or resist fraud or undue influence. The standard for the showing required for the appointment of a conservator is clear and convincing evidence.7 7) A spouse’s capacity to deal with community property is measured by the same standards of capacity applicable to noncommunity property transactions. The spouse with legal capacity has exclusive management and control of community property, including the power to dispose of the property.8 Against the backdrop of these fundamental principles, practitioners must be cognizant that each act or decision by an elder may have a different legal standard for capacity. The applicability and meaning of terms used in statutory and decisional law—such as “unsound mind,” “lack of capacity” or “understand and recollect”—will depend on the nature and complexity of the act or decision in question and on the elder’s mental and physical condition at the time of the act. Similarly, the term “ability to resist fraud or undue influence” may have different meanings in different fact situations: “In one case it takes but little to unduly influence a person; in another case much more….”9 Threshold Assessment Prior to determining whether a client has the capacity to engage in the transaction for which the client has consulted the attorney, the attorney must make the important threshold evaluation regarding the client’s competence to retain an attorney. The ease or difficulty with which an attorney makes this initial evaluation will depend to a large extent on whether there is a preexisting relationship with the client. If the attorney has, for example, prepared estate planning documents for the client in the past, the capacity assessment will be easier because the attorney will be able to gauge whether the client’s behavior and cognitive skills seem the same as they were or have changed. If the attorney has no history with the client, greater reliance must be placed on the client interview and possibly on conversations with the client’s family and friends. With new, unfamiliar clients, the attorney must be alert not only regarding the potential client’s capacity but also the identity and relationship of the person or persons bringing the elder to the attorney’s office. Perhaps the elder was brought to the attorney’s office by a “disqualified” person as defined in Probate Code Section 21350.10 If so, the attorney must ascertain whether the elder is planning a testamentary devise to the disqualified person and whether a Certificate of Independent Review pursuant to Probate Code Section 2135111 is required. Someone besides the elder may be paying for the legal services. In that circumstance, the attorney must obtain the informed written consent of the elder prior to accepting that payment arrangement.12 Furthermore, present California Rules of Professional Conduct and state ethics opinions strictly construe an attorney’s duties of loyalty and confidentiality to a client without making any special provision for a client with diminished capacity. The duty of loyalty strictly prohibits an attorney from initiating conservatorship proceedings regarding a client with diminished capacity without the client’s consent. The duty of confidentiality constrains an attorney from disclosing confidential information to individuals, institutions, agencies, and even family members who might help a client with diminished capacity. The American Bar Association directly addresses an attorney’s duty to a client with diminished capacity in its Model Rules of Professional Conduct. Model Rule 1.14 provides three general guidelines for attorneys dealing with these clients: 1) An attorney shall maintain a normal lawyer-client relationship insofar as is reasonably possible. 2) If an attorney believes that a client with diminished capacity is at risk of substantial physical, financial, or other harm, an attorney may take reasonably necessary protective action. This includes consulting with individuals and entities that have the ability to take action to protect the client, such as seeking the appointment of a conservator. 3) An attorney taking protective action for a client with diminished capacity may reveal otherwise confidential information about the client, to the extent necessary to protect the client’s interest. to the caveat that an attorney may not initiate conservatorship proceedings without the client’s consent.14 It is important to note that even though the probable issuance of a new ethics rule and the possibility of upcoming statutory enactments seemingly offer guidance to attorneys in their future dealings with a client whose capacity is questionable, attorneys must always pro- Supporting evidence of the client’s capacity is particularly critical when acts or documents are challenged after the client can no longer speak on his or her behalf because the client’s condition has drastically deteriorated or the client has died. The most common forms of supporting evidence are videotapes and a clinical capacity assessment report prepared by a doctor, psychologist, or other profes- Even when an attorney makes a determination that the client clearly knows what he or she is doing, the practitioner would do well to take precautionary steps to document an elder client’s present physical and mental state. The ABA model rule was adopted by a majority of states, but not by California. In fact, the State Bar of California’s Formal Opinion No. 89-112 specifically rejected the model rule provision allowing an attorney to seek a conservatorship. However, beginning in 2004 the State Bar proposed the adoption of a rule similar to the model rule. This effort was paired with a proposal for a new Business and Professions Code Section 6068.5 that would not only codify the new rule but also thereby create exceptions to Business and Professions Code Section 6068(e)’s duty for attorneys to “maintain inviolate the confidence and preserve the secrets of [the] client.” Section 6068.5 has not yet become law, but the new California Rule of Professional Conduct is scheduled to be published this year—and it will be substantially the same as ABA Model Rule 1.14, with the exception that an attorney in California may not seek appointment of a conservator. The new rule, and proposed legislation if enacted, will relieve the attorney to some extent from the conflict that naturally arises from the duties of loyalty and confidentiality to the client and the duty to question and assess the capacity of a client. Until—or whether—these proposed changes in the law become official, practitioners confronted with a client whose capacity is questionable or whose capacity could be subject to question in the future must assume that they will be held to the strictest duty to represent the client’s interest even when that interest diverges from what practitioners believe to be the client’s best interest.13 Thus, if an attorney makes an initial determination that the client lacks capacity to engage in the transaction for which the client consulted with the attorney, then the attorney must decline to act and permit the client to seek other representation. The attorney may make a recommendation to the client for a conservatorship, always subject ceed with caution in taking action or violating a confidence to protect a client. Language in the proposed legislation refers to clients that are “significantly impaired” and also states that the new law would be applied to cases in which a client is “completely unable to make decisions.”15 Capacity for Specific Acts and Decisions In addition to making a determination that a client has the capacity to retain counsel, a determination regarding the client’s capacity to engage in the transaction for which the client is consulting the attorney must be made. In the end an attorney is usually left to make his or her own determination of capacity using common sense, the Probate Code Section 811 “unsound mind” deficit criteria, the Probate Code Section 812 “capacity to make a decision” criteria, the Probate Code Section 6100.5 “testamentary capacity” criteria, and a general knowledge of existing case law. Even when an attorney makes a determination that the client clearly knows what he or she is doing, the practitioner would do well to take precautionary steps to document an elder client’s present physical and mental state. Keeping meticulous notes regarding the client’s demeanor and verbal communications during the client interview and, if there is a past history of dealings with the client, preparing a memorandum to file outlining how the present action differs from or conforms to the client’s past actions, will be effective means for maintaining the integrity of an elderly but competent client’s actions and documents in the face of subsequent attack during litigation. If an attorney suspects that an elder client’s actions might be subject to question because of advanced age; diagnosis of a debilitating illness; or simply because the elder’s actions are eccentric, whimsical, arbitrary, or cruel, additional documentary evidence might be desirable to preempt future litigation. sional expert in assessing capacity. These tools should be used deliberately and with caution, because tapes and clinical assessment reports are double-edged swords. Sometimes, in cases involving a client of advanced age or marginal competence, a videotaped interview of the client or the client’s execution of documents can backfire and make the client appear to be less competent then he or she actually is. It is not uncommon, for example, for an elderly client to quickly and accurately name all of his or her children and their birth dates off camera and then, when asked to name the children on camera, forget to mention one or two. This captured performance may demonstrate nothing more than nerves or stage fright or a momentary mistake, memory lapse, or lack of concentration. But none of these explanations will overcome the deleterious impact of the videotape in subsequent litigation over the client’s capacity. The videotape will provide opposing counsel with a classic “gotcha” moment. If a decision is made to use videotape, the attorney should follow a general script or outline. Counsel should avoid even the appearance of asking excessively leading questions. Also, practitioners should not try to ask the kind of yes-or-no questions that not only reveal nothing about the client’s competence but also invite accusations that the attorney is acting in the interest of someone other than the client. For example, consider this question and answer: “Is it true that you have disinherited Child A because he has not visited or called for 10 years?” “Yes.” This is an example of an exchange to be avoided. It reveals little or nothing about the client’s capacity to understand the nature and consequences of the act involved and gives the impression that the attorney might favor another child or beneficiary. However, asking clients to state the reasons for their actions might result in a rambling, disconnected narrative that could undermine an Los Angeles Lawyer October 2007 31 argument for their capacity. Similarly, a clinical capacity assessment report can result in formal documentation of a client’s shortcomings rather than his or her strengths. Moreover, these reports are discoverable if the clinician is designated an expert in future proceedings. There are two methods of using clinical opinions: 1) An informal consultation between the clinician and attorney, in which the client’s name is not disclosed and the attorney obtains the clinician’s opinion on capacity based upon information provided by the attorney. 2) A referral for a formal assessment, in which the client consents to an examination by a clinician for a formal assessment of capacity to perform a certain act.16 Even when a formal assessment is used, it is important to remember that a clinical assessment of capacity is merely one factor in establishing a legal determination regarding capacity. Indeed, the clinician’s assessment is not the final determination of legal capacity. The attorney and the trier of fact, not the clinician, must arrive at a conclusion on legal capacity. In most cases, attorneys will find that their client’s capacity is good and proceed with the transaction. In close cases, or in cases that might be litigated when the client is no longer competent or alive, attorneys must be mindful when they create and execute legal documents with their client of the varying standards of capacity and undue influence by which the legal documents will be evaluated and scrutinized. While attorneys owe no duty to third parties to document an assessment of client capacity,17 California law requires attorneys to be satisfied that their client is competent to sign a document or participate in a transaction and is not acting as a result of fraud or undue influence.18 Also, attorneys owe duties of competence and loyalty to their client to assist in the accomplishment of the client’s objectives. In cases of borderline capacity, an inherent conflict exists between the prohibition against an attorney’s preparation of a will or other dispositive instrument if the attorney believes the client lacks capacity and an attorney’s duty to assist a client whose testamentary capacity appears to be borderline. The court in Moore v. Anderson Zeigler Disharoon Gallagher & Gray, P.C. articulated this conflict in dicta: Because of the importance of testamentary freedom a lawyer may properly assist clients whose capacity appears to be borderline…. It may be that prudent counsel should refrain from drafting a will for a client the attorney reasonably believes lacks testamentary capacity or should take steps to preserve evidence regard32 Los Angeles Lawyer October 2007 ing the client’s capacity in a borderline case.19 Attacking or Defending Acts and Documents Determinations regarding the validity or invalidity of a document or transaction due to lack of capacity are made after the fact of their creation and execution, with a few exceptions— such as at evidentiary hearings on a conservatee’s ability to enter into a transaction or make a decision. These determinations are frequently accompanied by questions of fraud and undue influence. Most often issues concerning capacity come under scrutiny by courts in the context of litigation over wills, trusts, and other testamentary documents. The Probate Code Section 6100.5 criteria provide that an individual is not mentally competent to make a will if he or she is unable to understand the nature of the testamentary act, understand and recollect the nature of his or her assets, or remember and understand his or her relationship to family members, friends, and those whose interests are affected by the will. Further, the individual lacks mental competence if he or she suffers from a mental disorder with symptoms such as delusions or hallucinations that cause an individual to devise property in ways that the individual would not otherwise have done. Notwithstanding the seemingly straightforward provisions of Section 6100.5, however, endless litigation has resulted in case law interpretations that create a standard for testamentary capacity that is extremely low. One of the most oft-cited cases regarding the standard for testamentary capacity is Estate of Selb.20 This 1948 case is still good law and ably encapsulates California case law regarding testamentary capacity: It has been held over and over in this state that old age, feebleness, forgetfulness, filthy personal habits, personal eccentricities, failure to recognize old friends or relatives, physical disability, absent-mindedness and mental confusion do not furnish grounds for holding that a testator lacked testamentary capacity. The Selb court lists and cites no less than 18 cases in which courts validated wills under attack because of the testator’s alleged lack of capacity.21 Each case adds to Selb’s litany of facts that are insufficient to establish lack of testamentary capacity, including delusions and hallucinations not related to the provisions of the will or act,22 the testator being subject to a conservatorship,23 continual drunkenness,24 and a medical diagnosis of mental derangement and insanity.25 So what constitutes sufficient evidence to rebut the presumption of testamentary capac- ity? One criteria consistently referred to in case law is evidence of the testator’s incapacity, delusion, confusion, insanity, or drunkenness coupled with evidence of the Probate Code Section 6100.5 criteria for lack of testamentary capacity at the time of the execution of the will. Successful attacks based on lack of testamentary capacity are also often accompanied by allegations of fraud or undue influence. For example, in Estate of Martin,26 the decedent’s will left his estate to an attorney who had probated the decedent’s predeceased wife’s will and a bank official at the decedent’s bank. The will omitted the decedent’s nephew, who was the primary beneficiary in the prior will. Evidence showed that at the time the will was executed, the decedent—who died in a mental hospital—suffered from unsoundness of mind and insanity sufficient to establish mental incapacity and was also the victim of delusions that directly affected the testamentary act. Testimony established that the beneficiaries of the will had told the decedent that his nephew was attempting to put him in an asylum and take all of his money and that the beneficiaries would protect the decedent from these actions.27 The court invalidated the decedent’s will based on his lack of testamentary capacity. The standard for the capacity to contract—which is the same as the standard for the capacity to convey, to create a trust, to make gifts, and to grant powers to an attorney—is higher than the standard for testamentary capacity. This is to be expected. Bluntly stated, a decedent will not suffer the havoc wreaked by capricious or pernicious testamentary documents. However, a living individual will be affected by the negative consequences of an inappropriate inter vivos conveyance, an inadvisable lifetime gift, or a foolish grant of a power of attorney. In addition to the criteria in Probate Code Sections 811 and 812 for unsound mind and the legal capacity to make a decision, the Civil Code also contains guidelines for determining the capacity to contract. Civil Code Section 39(b) provides that if a person is “substantially unable to manage his or her own financial resources or resist fraud or undue influence,” a rebuttable presumption of unsound mind exists. The standard is the same as that in Probate Code Section 1801 regarding the showing required for establishment of a conservatorship. Once the Civil Code Section 39(b) presumption arises, the burden is placed on the party claiming capacity to contract to prove that while he or she may be unable to manage his or her financial resources or resist fraud or undue influence, the party is nevertheless still of sound mind pursuant to Probate Code Section 811 and therefore capable of contracting. Additionally, under Civil Code Section 38, a person “entirely without understanding” cannot contract. According to Probate Code Section 810(c), “[a] judicial determination that a person is totally without understanding” should be based on evidence of a deficit in one or more of the mental functions listed in Probate Code Section 811. Thus, a determination of capacity to contract appears to depend upon an analysis of the facts pursuant to Probate Code Section 811. If an individual had the capacity to contract at the time of the act, then that individual also had the requisite capacity to create a trust, to execute a deed, or to make conveyances, including those intended as gifts. Civil Code Section 2296—which governs the appointment of agents—and Probate Code Section 4120—which governs the appointment of an attorney in fact—both use identical language to state simply that any person with the capacity to contract may appoint an agent or attorney in fact. As with testamentary capacity, however, the clear statutory language can be obscured by the complex facts of cases. In spite of statutory provisions and guidelines, California cases have held that the rules governing capacity to execute and deliver deeds are generally the same as those governing testamentary capacity.28 In the 1947 case of Hughes v. Grandy,29 which was decided prior to the enactment of Probate Code Section 811, the court struggled to define capacity to execute a valid deed:30 It is difficult to formulate any rule determining the degree of mental weakness which will destroy a person’s capacity to convey property….Old age alone does not render a person incompetent to execute a deed. Nor will sickness, extreme distress or debility of body affect the capacity of the grantor to make a conveyance if sufficient intelligence remains. Therefore, the issue of competency must be determined from all of the circumstances surrounding the transfer. The standards for capacity that are required for the valid execution of deeds, contracts, and powers of attorney are not, according to statutes and codes, as low as those for testamentary capacity. Nevertheless, the courts often analyze the validity of deeds and transactions along the same lines as the analysis used for testamentary capacity, because a party’s acts in the last stage of his or her life are being questioned, and all the disputed acts thus take on a type of testamentary significance. In Allen v. Samuels,31 a grantor executed a deed with a mark that was made with the assistance of another holding and guiding the grantor’s hand. The grantor had suffered a stroke that paralyzed him and made him incapable of speech. The court voided the deed based on the grantor’s lack of capacity. Similarly, in Reiger v. Rich,32 the grantor executed a deed the day before the grantor’s death, while the grantor was under heavy medication for extreme pain. The court held that the deed was invalid because of the grantor’s lack of capacity. The court also found invalidity based on undue influence, because it found that the grantees were in a confidential relationship with the grantor and unduly profited from the procurement of the deed at a time when the grantor was incapacitated. Undue Influence Cases in which the validity of deeds, contracts, powers of attorney, and the making of gifts are disputed on the basis of lack of capacity nearly always involve allegations of fraud and undue influence. The Civil Code, Probate Code, and Welfare and Institutions Code are replete with use of the phrase “substantially unable to manage his or her own financial resources or resist fraud or undue influence”—language that links the issue of capacity with undue influence.33 Civil Code Section 1575 provides that undue influence can be found: 1. In the use, by one in whom a confidence is reposed by another, or who holds a real or apparent authority over him, of such confidence or authority for the purpose of obtaining an unfair advantage over him; 2. In taking an unfair advantage of another’s weakness of mind; or, 3. In taking a grossly oppressive and unfair advantage of another’s necessities or distress. This section is drafted to include all manner of undue influence, not only undue influence of an incapacitated elder. Individuals with substance abuse problems or physical handicaps that make them dependent on others come within the scope of Section 1575. There is a large body of California probate case law that addresses issues arising out of an elderly person’s susceptibility to undue influence. In Campbell v. Genshlea34 and a subsequent long line of cases, California courts have held that the burden to show that there was no undue influence in a transaction falls on the person who will benefit from the transaction being declared valid, if a set of conditions exist: • The parties to the transaction are in a confidential relationship. • There is a transfer for no consideration. • There is an opportunity to exert undue influence. • One party to the transaction is susceptible to having his or her will overcome by the will of another for an undue benefit. • One party receives an undue benefit and was an active participant in the procurement of the deed, contract, or gift. The law of undue influence involves the operation of a presumption or its lack. Once the basic facts of a confidential relationship, opportunity, participation, and undue or unnatural profit are established, a presumption of undue influence arises, and the burden then is on the proponent of the deed or gift to establish that the questioned document or transaction was an act of an individual with capacity: In every transaction of this kind, one who holds such confidential relation will be presumed to have taken undue advantage…unless it shall appear that such person had independent advice and acted not only of his own volition but with full comprehension of the results of his action.35 In the absence of a presumption of undue influence, the burden rests on the individual disputing the validity of a document or transaction to establish the elements of undue influence: • The grantor has a propensity to have his or her free will usurped. • The disputed action was inconsistent with the grantor’s voluntary actions. • The person exerting influence on the grantor gained something that he or she ordinarily would not have received.36 The influence exercised must effectively destroy the grantor’s free agency and substitute another’s will for the will of the grantor.37 It is not enough that a person profits as a result of a confidential relationship; there must also be a showing that the person has unduly or unnaturally profited because the grantor’s execution of a deed or other document was not an expression of the grantor’s wishes. For example, if a child—who is presumptively in a confidential relationship with a parent—is deeded the family home to the exclusion of other children, it must be proved that the gift was contrary to, or not an expression of, the parent’s wishes. A parent may favor one child over another without being subject to undue influence. Affection by a parent for one of his or her children or a wish to please that child does not amount to undue influence, and so a gift to one child would not be rendered void.38 Attorneys must be aware of their duty to a client with diminished capacity. An understanding of California case law on capacity and undue influence is essential to the practice of elder law. There is perhaps no other area of law in which an attorney’s documents are so often subject to the unforgiving scrutiny of a client’s friends and family and by triers Los Angeles Lawyer October 2007 33 Daniel A. Plotkin, M.D. Diplomate, Psychiatry and Geriatric Psychiatry American Board of Psychiatry & Neurology Clinical Professor of Psychiatry UCL A Distinguished Fellow American Psychiatric Association Past President Southern California Psychiatric Society Geriatric psychiatrist with over 20 years experience providing expert services: conservatorships, diminished capacity, undue influence, elder abuse. West Los Angeles 310 477 7855 1823 Sawtelle Blvd. Los Angeles, CA 90025 THE LAW OFFICES OF Sherman Oaks 818 986 8824 15300 Ventura Blvd. Suite 525 Sherman Oaks, CA 91403 STUART D. ZIMRING Helping to promote the means and methods for our clients to age in place and to provide maximum guidance and assistance to persons with special needs. (818) 755-4848 • www.elderlawla.com 12650 RIVERSIDE DRIVE, SUITE 100, NORTH HOLLYWOOD, CA 91607 34 Los Angeles Lawyer October 2007 of fact. Knowledge of the standards promulgated by decisional law and statutes can enable attorneys to prophylactically prepare an effective defense against attacks on intended documents and gifts and to assist rightful beneficiaries and heirs in voiding unintended documents and gifts. ■ 1 AMERICAN BAR ASSOCIATION COMMISSION ON AGING, A SSESSMENT OF O LDER A DULTS WITH D IMINISHED CAPACITY: A HANDBOOK FOR LAWYERS [hereinafter ABA HANDBOOK) (citing National Institute on Aging, National Institute of Health, U.S. Department of Health and Human Services) (1999). 2 Due Process in Competence Determinations Act, PROB. CODE §§810-813, 1801, 1881, 3201, 3204. 3 W ELF . & I NST . C ODE §15610.27; P ROB . C ODE §2951(b). 4 PROB. CODE §810(a). 5 PROB. CODE §812. 6 PROB. CODE §6100.5. 7 PROB. CODE §1801. 8 PROB. CODE §§3012, 3051, 3071. 9 Estate of Sarabia, 221 Cal. App. 3d 599, 607 (1990). 10 Probate Code §21350 provides that provisions in an instrument for donative transfers to seven categories of individuals—including, among others, care custodians, the drafter of the instrument, and the drafter’s relatives by blood or marriage—are invalid. However, Probate Code §21351(b) establishes the requirements for review by an independent attorney of an instrument making a donative transfer to a care custodian or the instrument’s drafter. Meeting these requirements validates the instrument and the transfer. 11 See PROB. CODE §21351(b). 12 CAL. RULES OF PROF’L CONDUCT R. 3-310(F). 13 Linsk v. Linsk, 70 Cal. 2d 272, 278 (1969). 14 Moore v. Anderson Zeigler Disharoon Gallagher & Gray, P.C., 109 Cal. App. 4th 1287, 1306 (2003). 15 Sept. 9, 2005, Report on the Board Referral of Trust and Estates Section Legislative Proposal 2005-02 (re: Impaired Clients) and Proposed Section 6068.5, Legislative Proposal (T&E-2006-07): Mentally Impaired Clients: Attorney Authority to Protect & Confidentiality Exception. 16 See ABA HANDBOOK, supra note 1, for a detailed and helpful exposition of the use of capacity assessment reports by attorneys. 17 Disharoon, 109 Cal. App. 4th at 1303. 18 San Diego County Bar Ass’n Op. 1990-3 (1990). 19 Disharoon, 109 Cal. App. 4th at 1307. 20 Estate of Selb, 84 Cal. App. 2d 46, 49 (1948). 21 Id. at 50-53. 22 Estate of Chevallier, 159 Cal. 161, 169 (1911). 23 Estate of Mann, 184 Cal. App. 3d 593, 605 (1986); see also Estate of Swetmann, 85 Cal. App. 4th 807 (2000). 24 Estate of Arnold, 16 Cal. 2d 573 (1940). 25 Estate of Shay, 196 Cal. 355, 359 (1925). 26 Estate of Martin, 270 Cal. App. 2d 506 (1969). 27 Id. at 509. 28 Hemenway v. Abbott, 8 Cal. App. 450, 461 (1908). 29 Hughes v. Grandy, 78 Cal. App. 2d 555, 564 (1947). 30 9 CAL. JUR. 117, §21. 31 Allen v. Samuels, 204 Cal. App. 2d 710 (1962). 32 Reiger v. Rich, 163 Cal. App. 2d 651 (1958). 33 PROB. CODE §§259, 1801, 2952; CIV. CODE §§38, 39. 34 Campbell v. Genshlea, 180 Cal. 213 (1919). 35 Ross v. Conway, 92 Cal. 632, 635 (1892). 36 Estate of Mann, 184 Cal. App. 3d 593, 606-14 (1986); Estate of Sarabia, 221 Cal. App. 3d 599, 60709 (1990). 37 Goldman v. Goldman, 116 Cal. App. 2d 227, 234 (1953). 38 Id. at 235. MCLE ARTICLE AND SELF-ASSESSMENT TEST By reading this article and answering the accompanying test questions, you can earn one MCLE credit. To apply for credit, please follow the instructions on the test answer sheet on page 37. SPECIAL ISSUE ELDER LAW by James A. Busse Jr. Care Package The Deficit Reduction Act makes estate planning for the needs of an ill spouse and a well spouse more difficult Arrangements for uncovered medical costs is an often overlooked aspect of estate planning. Many clients find out, too late, that their medical costs, especially those involving nursing home care, can quickly consume even a sizeable estate. Estate planning attorneys have been able to preserve a significant portion of a client’s estate by seizing opportunities within the Medicaid program (MediCal in California) to make the client eligible for state benefits. These benefits have been used in various ways: to pay the $5,000 to $6,000 monthly cost for institutionalized nursing home care, to pay for a client’s disability care before he or she becomes eligible for Medicare, or as a supplement to Medicare payments. The federal government took notice of the success achieved by estate planners in preserving the assets of individuals with large estates whose medical costs are uncovered. Congress enacted the Deficit Reduction Act of 2005,1 a comprehensive law designed to not only reduce benefits heretofore available but also to increase taxes. The DRA— signed by President George Bush on February 8, 2006—will have a profound impact on Medicaid and Medi-Cal by: • Implementing stricter requirements for those seeking benefits and claiming to be U.S. citizens. • Instituting the Income First Rule, which may reduce a stay-at-home spouse’s income forever. • Changing the treatment of annuities. • Limiting the home equity exclusion amount for eligibility James A. Busse Jr. is a probate and estate planning attorney with offices in Long Beach, California, and Gardnerville, Nevada. Los Angeles Lawyer October 2007 35 purposes to $750,000. • Extending the look back period. Prior law was 30 months from the date of a gift. The DRA designates the look back period as 60 months from the date the applicant is otherwise qualified. The DRA will make it more difficult for an individual to qualify for state aid to pay disability or nursing home costs, may disqualify some already receiving benefits, will increase the cost a recipient of state aid will pay (the share-the-cost fraction), and will eliminate many methods currently used to reduce the amount a recipient’s estate will have to repay the state for benefits received. Clearly, the enactment of the DRA makes careful and thoughtful estate planning more important than ever. Moreover, any planning strategies for the possibility of a disability—a task that all too often was done, if at all, late in a client’s life—will now have to become an early priority in the estate planning process. The implementation of the DRA in California is complex and piecemeal. Some of the provisions of the DRA are effective nationwide as of the date of the legislation’s enactment, which was February 8, 2006; others have later effective dates. The DRA provisions that have an impact on Medi-Cal rules require conforming state legislation and the promulgation of state administrative rules. Current law in California—the rules implemented by the state Department of Health Services (DHS)—is derived from historic Medicaid law that has been slightly modified by the mandates of the Omnibus Budget Reconciliation Act of 1993. These rules include share-the-cost rules, in which the state seeks ways to lower its cost by, for example, requiring an individual receiving Social Security to apply those funds to medical care before Medi-Cal picks up the rest of the bill. Some post-DRA rules have already been promulgated, most notably the DHS’s All County Welfare Directors Letter (ACWDL) 06-12, the Administrative Procedure for Increase in Spousal Allowance; and ACWDL 07-12, the Proof of Citizenship Requirement. However, full implementation of the DRA in California is not expected until after January 1, 2009.2 Income First Rule under the DRA When a married person applies for and receives Medi-Cal benefits for nursing home care, he or she moves into an institution that provides food, clothing, sundries, and most living expenses. The institutionalized spouse is allowed to keep a small amount of his or her own spending money for various items. This amount is currently $30 per month. The spouse who lives at the married couple’s home is known as the well spouse or the 36 Los Angeles Lawyer October 2007 community spouse. He or she is allowed to keep a Minimum Monthly Maintenance Needs Allowance (MMMNA)—which is currently $2,571 per month—and a Community Spouse Resource Allowance (CSRA) of $101,640 in cash and other nonexempt assets. The CSRA may be increased to generate the allowable MMMNA. This can be accomplished by one of two methods: a “fair hearing” by the DHS or a superior court Probate Code Section 3100 proceeding. For example, a retired husband receives a pension of $2,000 per month and will do so for the rest of his life. After his death, his surviving spouse will receive only $750 per month. His wife has not worked outside the home throughout their 45-year marriage and thus has no pension of her own. The couple’s investment portfolio contains $400,000, with a return of 5 percent ($1,666 per month). To qualify for Medi-Cal, the husband and wife will have to disperse $298,360 to reach the CSRA so that the husband can qualify for Medi-Cal payments for the nursing home care he needs. This leaves the wife with only $423.50 per month ($101,640 at 5 percent per year). The wife’s income is below the allowable MMMNA of $2,541.50. In order to generate the additional $2,147.50 per month to reach the MMMNA, the husband and wife will have to invest $515,400 at 5 percent. At present, the couple may argue that $515,400 is needed so that the wife will receive the MMMNA. Under current law, using a Probate Code Section 3100 hearing, the court will allow the wife to keep the $400,000 because it is necessary to generate her MMMNA. This will result in $1,095 of the husband’s retirement income being paid to the nursing home as his share-the-cost portion of the $6,000 per month nursing home cost. When the husband dies, his wife is left with the $400,000 in the investment account. That amount is required to generate her monthly income plus the surviving spouse retirement income of $750 per month—that is, the return from the portfolio ($1,666) plus $750 per month, for a total monthly amount of $2,416—and she still has the $400,000. Under the DRA’s new Income First rule, at a fair administrative hearing, states are required to allocate to the community spouse any available income from the institutionalized spouse before any additional assets are allocated. This means that the husband’s entire retirement income of $2,000 per month is first allocated to his wife. After a fair hearing, she can only keep $137,040 in investments. Thus, the couple will have to “spend down” $262,960 for the husband to qualify for benefits. When the husband dies, the wife is left with a $750 survivor’s benefit and $137,040 in investments that generate $571 per month. To summarize the differences between the new Income First rule as applied by ACWDL 06-12 at a fair hearing and a Probate Code Section 3100 petition: Under the current law, in a 3100 proceeding, the husband qualifies immediately for Medi-Cal, the husband and wife can keep $400,000, pay $1,095 per month toward the husband’s healthcare, and give the wife $2,541 per month as the MMMNA. When the husband dies, the wife will be left with $400,000 and $2,416 per month ($400,000 invested at 5 percent fixed) income for life. Under the DRA and the new rule, after a fair hearing, the husband will not qualify for Medi-Cal, and the couple must spend down $262,960, leaving $137,040. They pay nothing toward the husband’s healthcare when he does qualify for nursing home care, because his retirement income of $2,000 added to the investment income of $541 makes up the MMMNA amount. The wife receives the full MMMNA of $2,541 per month during the husband’s life, but when he dies, the wife is left with only $137,040 in investments and $1,321 per month in income. The new Income First rule is designed to deplete the Medi-Cal applicant’s cash and to delay acceptance into the program. Once the applicant is in the program, the government cost is increased, because the income that used to go to the share-the-cost fraction (the money used to offset government costs) goes instead to the spouse. The Income First requirement—now implemented under ACWDL 06-12 for applications effective on or after March 1, 2006— only has an impact when the applicant appears at a fair hearing by an administrative law judge. It does not modify or change 42 USC Section 1396r-5(d)(5) or (f)(3) pertaining to court-ordered increases in the community spouse monthly allocation or transfers. Therefore, the rule does not apply to a hearing regarding a Probate Code Section 3100 petition. The estate planning attorney should weigh carefully such factors as the anticipated life spans of a couple and the extended support system available before choosing which method to use. Other Eligibility Issues The major DRA changes to eligibility under Medi-Cal involve the look back period, accumulation of gifts, computation of the start date for benefits, and excludable home equity. Also, with few exceptions, the DRA requires proof of citizenship for an individual declaring to be a U.S. citizen to receive Medicaid benefits. ACWDL 07-12—released on June 4, 2007—contains the requirements,3 including the applicable documentation. In the past, MCLE Test No. 163 The Los Angeles County Bar Association certifies that this activity has been approved for Minimum Continuing Legal Education credit by the State Bar of California in the amount of 1 hour. MCLE Answer Sheet #163 CARE PACKAGE Name Law Firm/Organization 1. Only U.S. citizens are eligible for Medi-Cal. True. False. 2. The current look back period for eligibility is 60 months. True. False. 3. Annuities purchased after September 1, 2004, are subject to Medi-Cal recovery when the beneficiary dies. True. False. 4. Annuities purchased after March 1, 2006, treat deferred and balloon payments as exempt assets. True. False. 5. The current Average Private Pay Rate is $5,101. True. False. 6. A Probate Code Section 3100 petition guarantees the well spouse will be able to keep more than the Community Spouse Resource Allowance. True. False. 7. George transfers his home to his brother, retaining a life estate. George is receiving Medi-Cal benefits. When he dies, the state can lay claim to the entire value of his home to recover the cost of his care. True. False. 8. Wanda checked the box on her Medi-Cal application for nursing home benefits that showed her intention to return to her residence when she was able to do so. She proceeds to give her home to her niece as a gift with a note stating her intention not to return to the residence and her desire that the state will be prevented from taking the home after she dies. A nurse copies the note. With this evidence, the state may consider the home a nonexempt asset and refuse Medi-Cal payments. True. False. 9. Harriet is admitted to a nursing home. She owns a fourunit apartment building and occupies one unit. The case worker correctly states that the apartment building does not qualify as a home and is therefore nonexempt. True. False. 10. John has a living trust, and his home is titled to the trust. He is admitted to a nursing home after a stroke and receives Medi-Cal benefits because his only real asset is his home. John resides in the nursing home for about a year before his death. Medi-Cal paid $75,000 in benefits. Since John’s home was exempt, it is not subject to recovery. True. False. 11. The Deficit Reduction Act of 2005 is not yet fully implemented in California. True. False. 12. A reverse mortgage is the best method to conserve the estate of a person who will be in a Medi-Cal nursing home for at least two years. True. False. 13. A client says that he is starting to have bouts of disorientation. He adds, “This happened to my dad, and he ended up with full-blown Alzheimer’s in six years.” He would like to fund a living trust with his $600,000 in mutual funds. Will this plan avoid the look back period? Yes. No. 14. The state may seek reimbursement from the estate or transferee of property from the estate for disability payments or for nursing home costs paid for by the state for services rendered to an individual at any age. True. False. 15. The state may not deny benefits if a hardship waiver is granted. True. False. 16. Placing all of a client’s assets into an irrevocable trust so that the client has no access to the principal and only $5,000 per year of income will create a hardship and qualify the client for Medi-Cal. True. False. 17. The state can recover its costs from a trust established and funded by a Medi-Cal recipient’s cousin to pay for the recipient’s special needs. True. False. 18. Transferring a disability recipient spouse’s funds to an irrevocable trust created by the recipient’s spouse will trigger a look back period. True. False. 19. Payback language in special needs trusts documents should be excised prior to the trust being used to pay for the special needs of a Medi-Cal recipient. True. False. 20. The California Department of Health Services has already promulgated some post-DRA rules. True. False. Address City State/Zip E-mail Phone State Bar # INSTRUCTIONS FOR OBTAINING MCLE CREDITS 1. Study the MCLE article in this issue. 2. Answer the test questions opposite by marking the appropriate boxes below. Each question has only one answer. Photocopies of this answer sheet may be submitted; however, this form should not be enlarged or reduced. 3. Mail the answer sheet and the $15 testing fee ($20 for non-LACBA members) to: Los Angeles Lawyer MCLE Test P.O. Box 55020 Los Angeles, CA 90055 Make checks payable to Los Angeles Lawyer. 4. Within six weeks, Los Angeles Lawyer will return your test with the correct answers, a rationale for the correct answers, and a certificate verifying the MCLE credit you earned through this self-assessment activity. 5. For future reference, please retain the MCLE test materials returned to you. ANSWERS Mark your answers to the test by checking the appropriate boxes below. Each question has only one answer. 1. ■ True ■ False 2. ■ True ■ False 3. ■ True ■ False 4. ■ True ■ False 5. ■ True ■ False 6. ■ True ■ False 7. ■ True ■ False 8. ■ True ■ False 9. ■ True ■ False 10. ■ True ■ False 11. ■ True ■ False 12. ■ True ■ False 13. ■ Yes ■ No 14. ■ True ■ False 15. ■ True ■ False 16. ■ True ■ False 17. ■ True ■ False 18. ■ True ■ False 19. ■ True ■ False 20. ■ True ■ False Los Angeles Lawyer October 2007 37 a claimant needed only to affirm his or her U.S. citizenship to collect Medi-Cal benefits. Now claimants must provide proof. Specified categories of applicants are exempt from the proof-of-citizenship requirements. The DRA increases the maximum look back period from 30 months after a disqualifying transfer of assets to 60 months after the applicant is otherwise qualified. Currently, if the applicant gives available resources away within 30 months of the date of application for benefits, that person is disqualified from the date the money was given away for a period calculated by dividing the amount gifted by the Average Private Pay Rate (roughly the average cost per month for nursing homes that accept Medi-Cal). This amount is currently $5,101 per month. For example, under the current rules, if an applicant gave $40,000 away, the applicant is disqualified from receiving Medi-Cal for nursing home care for $40,000 divided by $5,101, or almost 8 months. If the applicant gave away $40,000 in September 2006 and applied for Medi-Cal in February 2007, the period of disqualification would only be 1 to 3 months (depending on what day in each month the triggering event occurred). When the DRA is fully implemented, the period of disqualification will start from the date the applicant was otherwise eligible for Medi-Cal benefits and run for a period of 7 months and 25 days from that date. The DHS has acknowledged that it does not plan to implement the 60-month look back rule retroactively.4 The DRA eliminates the current law’s unlimited home equity exclusion.5 Applicants are disqualified from receiving nursing home and other long-term care assistance when their home equity exceeds $500,000, unless the applicant’s spouse, or the applicant’s minor child, or a blind or disabled child is residing in the home. Questions remain regarding how home equity will be determined. Also, there is a clear trend for raising the amount of excludable home equity. State Senator Sheila Kuehl has introduced SB 483 to increase the home exclusion cap to $750,000. The bill has cleared the Senate and awaits action in the Assembly. Currently, to qualify for nursing home care, a single person is allowed to have $2,000 in cash or securities, up to $1,500 cash or securities set aside for burial expenses, a life insurance policy with a face value of $1,500 or less, jewelry valued at less than $100, a home, a car of any value, household goods, personal clothing, and possibly a business if it is the sole method of the individual’s support or if there are business partners who will not agree to divest the property or business. When implemented, the DRA will classify money used to purchase a life estate interest 38 Los Angeles Lawyer October 2007 in the home of another individual as a transfer that causes a period of ineligibility unless the purchaser lives in the home for one year after the date of purchase.6 Annuities The impact of the DRA on annuities, particularly regarding eligibility, is substantial and comprehensive. The new annuity rules, which affect annuities purchased after March 2006: 1) Mandate the state to require applicants to disclose any interest they or the community spouse has in any annuity. 2) Require the application or recertification form to include a statement that the state becomes a remainder beneficiary under the annuity. If a regular payment annuity is established for the expected life of the patient and the patient dies early, the state takes possession of the remainder. 3) Treat the purchase of a deferred or balloon payment annuity as a transfer of assets. 4) Exempt work-related pension funds, annuities, and qualified IRAs. Under the DRA, if the applicant spends $100,000 to establish an annuity that makes regular periodic payments over his or her expected life, the annuity payments are considered income and taken for the share-thecost reimbursement. Additionally, the applicant will experience a period of ineligibility equal to the amount spent on the annuity divided by the Private Pay Rate. This is converted to months of ineligibility from the date the applicant otherwise qualified for care—unless the state is the remainder beneficiary of the annuity. Under the current rule, the remainder does not revert to the state. Annuities purchased before March 2006 pose a different set of Medi-Cal eligibility issues. • For annuities purchased prior to August 11, 1993, the balance is considered unavailable if the applicant is receiving periodic payments— in any amount—of interest and principal. • Annuities purchased between August 11, 1993, and March 1, 1996, will continue to be treated under the pre-August 11, 1993, rules if the annuities cannot be restructured to meet the post-March 2006 requirements. • If the annuities were purchased on or after March 1, 1996, the applicant or the applicant’s spouse must distribute periodic payments of interest and principal to exhaust the balance of the annuity at or before the end of the annuitant’s life expectancy. Annuities purchased by the applicant on or after September 1, 2004, are subject to Medi-Cal recovery when the beneficiary dies.7 After the DRA is fully implemented, an effective planning technique will involve purchasing the annuity early in life for care later in life. This approach may increase the sharethe-cost fraction, but the state will not have to be the beneficiary, nor will the look back period interfere with eligibility and qualification. An individual could buy a delayed benefit annuity for another that commences payments to a nonrelated beneficiary if the purchaser is ever institutionalized. The third party may be able to use the money to benefit the institutionalized person. The money would be drawn from the institutionalized person’s estate and would not be available for the share-the-cost reimbursement. The only requirement is that the payments must be dispersed more than 60 months before the institutionalized person would be otherwise qualified for Medi-Cal. The somewhat predictable path of dementia and Alzheimer’s disease allows a party to do some planning. It is important to consider and calculate the time span from the onset of symptoms to the inability of a family to care on their own for the person who is ill. Often this path takes more than five years. So for a person with a family history of these diseases, if there is enough money available, the delayed annuity method might be a good way to reduce the estate, prevent disqualification, and lower the share-the-cost fraction. Home Equity Rules California defines home equity two ways. The California Code of Regulations and the Welfare and Institutions Code define the owner’s equity in the property as “the net market value which is determined by subtracting the encumbrances of record from the market value.”8 But another section of the Welfare and Institutions Code states that “[i]f the holdings are in the form of real property, the value shall be the assessed value, determined under the most recent county property tax assessment, less the unpaid amount of any encumbrance of record.”9 It is obvious some reconciliation is required, given the difference between the assessed value of many homes under Proposition 13 and their current market value. Probably in deference to the banking sector, Congress mentions in the DRA that home equity loans and reverse mortgages may be used to reduce home equity. Care must be taken regarding these vehicles. The borrower may use the cash from a home equity loan to reduce the value of the home, but the cash disqualifies the borrower for Medi-Cal benefits. If the borrower uses the cash from the loan to improve the home with permitted work or to improve another asset, the borrower’s assets and home value are increased, which may disqualify the borrower. The equity exclusion amount will most likely be based on the lower of the appraised or assessed value, so a home previously assessed under the lower range scheme of Proposition 13 may find its equity disproportionately increased by an improvement that increases the assessed value of the home. This is especially true if, in the past, the owner exercised the Proposition 8 assessment reduction option. Therefore, the cash generated from a home equity loan should be used to purchase an exempt asset, such as a car, furniture, or burial plot. Reverse mortgages provide funds to either without a writing reserving the right to live in the home for the remainder of the applicant’s life, and this occurs before the applicant is accepted into the Medi-Cal system, the home is no longer the applicant’s home and is not exempt. One tactic for an applicant is to check Item 51, get accepted into the system, and then gift the home for the love and affection of the person receiving it. That series of steps will prevent recovery. spouse, an Intentionally Defective Grantor Trust (IDGT) (sometimes referred to as an Intentionally Defective Irrevocable Trust (IDIT)) may be used. An IDGT is a trust for the benefit of another, in which the settlor pays the income and property tax. An IDGT can remove assets from the institutionalized person’s estate so that at death, there is nothing left for the state to collect. Under the current rules, share-the-cost Spending money for a house takes advantage of the rule that makes the applicant’s home an exempt asset if the applicant states it is his or her desire to return to that home when his or her stay in the nursing home is over. improve the home or use as regular income. Thus reverse mortgages by nature are counterproductive, because they increase the sharethe-cost fraction. They also consume an estate at an alarming rate because the borrower is now paying compound interest on the original amount borrowed. Some reverse mortgages even share the equity buildup but do not share equity loss. The owner is in effect selling the house and paying a compound interest premium to do so. Moreover, most if not all reverse mortgages require the borrower to live in the home. If the borrower does not, the loan is called. The net result may be loss of equity, loss of the home, and loss of Medi-Cal benefits when the home is foreclosed upon and the borrower/Medi-Cal recipient receives a cash settlement from the sale of the home. Planning Techniques Traditionally, planning techniques revolve around the applicant’s qualifying for benefits; minimizing share-the-cost charges; and delaying, minimizing, or eliminating the state recovery of money dispersed to the MediCal recipient. Under the current rules, a customary approach for Medi-Cal estate planners involves turning nonexempt assets into exempt assets. For example, an applicant may spend money for a home to which he or she intends to return as a residence after the nursing home care is no longer needed. Money may be spent for an addition to the home. The applicant may also purchase a car for transport to and from the nursing home. Spending money for a house takes advantage of the rule that makes the applicant’s home an exempt asset if the applicant states it is his or her desire to return to that home when his or her stay in the nursing home is over. The applicant declares this desire on the Medi-Cal application by checking Item 51. If Item 51 is not checked, the home is not exempt. If the applicant’s home is gifted to another Transfers for value do not trigger the look back period and can be used to reduce the size of an individual’s estate. One example is a contract for care in which the institutionalized spouse contracts with a family member for services. For example, the institutionalized person pays a set amount to the family member for the performance of specified services for the rest of the institutionalized person’s life. If the amount paid is equal to the market value of the services to be provided over the institutionalized person’s expected life, the transfer will reduce assets without triggering the look back period. The estate planner often devises approaches in anticipation of the institutionalized spouse’s death. Under the current rules, qualifying the institutionalized spouse for Medi-Cal may require all of that spouse’s assets to be transferred to the well spouse as his or her separate property. If this occurs, the assets are considered unavailable after the look back period. If the well spouse dies first and his or her will transfers property to the institutionalized spouse, the institutionalized spouse may be disqualified from receiving benefits. Once Medi-Cal eligibility has been established for the ill person, the well spouse will often want to create a living or revocable trust to hold his or her property. It is essential that this trust not make the ill spouse a beneficiary, since that would terminate the ill spouse’s eligibility. Many well spouses understandably want to provide for the ill spouse in the event the well spouse passes away first. One way to accomplish this is to have the well spouse’s living trust “pour back” the assets into the well spouse’s probate estate if the well spouse dies first, coupled with a will by the well spouse that creates a testamentary trust for the ill spouse. Since current Medi-Cal rules do not cover testamentary trusts, there is no ineligibility risk for the ill spouse. For institutionalized persons without a planning techniques may involve purchasing annuities that do not make fixed payments. The recurring payments are low, but there is a remainder or balloon payment at the end of the annuity that is paid to another person after the patient dies. These payments technically are not allowed, but existing policy is not to recover them due to the high cost and marginal benefit of doing so. These approaches have allowed families to keep some of their assets when one family member requires placement in a nursing home or becomes disabled. Further, special needs trusts may be used to fund certain comforts for the institutionalized person without the value of the gift being included in the sharethe-cost fraction. When the Medi-Cal recipient dies, the state recovers the money spent on the institutionalized person under Welfare and Institutions Code Section 14006. This section allows the state to seek reimbursement for disability services rendered when the decedent was over age 55 and for nursing home care received at any age. The state cannot claim reimbursement during the lifetime of a surviving spouse, when there is a surviving child under the age of 21 or when the surviving child is blind or is permanently and totally disabled within the meaning of the federal Social Security Act. Under the Welfare and Institutions and Probate Codes, the personal representative, successor trustee, or surviving spouse of a person who may have received Medi-Cal benefits must inform the DHS within 90 days of the date of the recipient’s death.10 The DHS may then place a lien on the decedent’s property—and if the property has been given away, the fiduciary is personally liable. MediCal recovery funds are recycled back into the benefits system, so the recovery concept is an important component of the total MediCal program. Recovery, under current rules, may be Los Angeles Lawyer October 2007 39 minimized or avoided by reducing the assets of the institutionalized person at his or her death. An irrevocable life estate is a method of doing this. Life estates without the right to revoke leave so little in the estate that the DHS has stated that the cost to collect these funds exceeds their value. Therefore, the agency will not pursue collection against an irrevocable life estate.11 California currently only penalizes transfers to purchase life estates when the transfer is for an item of lesser fair market value—except when the life estate method remains an option. It will still be possible to transfer funds to others by contracting for care over the expected life of the institutionalized person. Planners must ensure that the contract uses cost information that is reasonable for the services provided and the actuarial life expectancy of the institutionalized person. Otherwise, the contract is at risk of being deemed a transfer of assets invoking the look back provisions. A delayed annuity to a trusted third party or parties will reduce assets and might pro- court. These trusts require the trustee to notify the state upon the death of the beneficiary and pay any claims made by the state. These trusts are subject to the control and reporting requirements enumerated in Rule 7903 of the California Rules of Court, unless the value of the trust is less than $20,000.15 An IDGT may be still be an appropriate choice after the DRA is fully implemented. With an IDGT, the applicant transfers an exempt asset, such as a home, irrevocably to the trust, reserving the right to live in and The CSRA cap may be increased—allowing assets to be transferred without qualification or recovery penalty—to provide the necessary principal for the well spouse. involves the institutionalized person’s home, an exempt item. A Probate Code Section 3100 petition may be used in Medi-Cal planning. The petitioner uses this method for a court-ordered transaction transmuting the separate and nonexempt community property of the institutionalized spouse to the separate property of the well spouse to satisfy the specific needs of the well spouse. The order increases the CSRA and MMMNA limits. The MMMNA cap may be reasonably increased to meet the recurring needs of the well spouse, including high prescription drug costs, home loan payments, and the like. The CSRA cap may be increased—allowing assets to be transferred without qualification or recovery penalty— to provide the necessary principal for the well spouse. Remaining Options Once the DRA is fully implemented, the estate planner must focus on the techniques that will remain available. One involves the transfer of the institutionalized person’s residence to his or her spouse or to an IDGT or IDIT to reduce recovery. A transfer will only be valid if it was not made for the purpose of qualifying for Medi-Cal. A donative transfer of the home does not invoke a period of ineligibility under the Medi-Cal regulations if the donor retains or is given a legal right to return to the home.12 The homeowner receiving Medi-Cal benefits may decide to give away the house during his or her lifetime so that the house is protected from a Medi-Cal estate recovery claim at the homeowner’s death. Placing a home in an IDGT in which the owner retains the right to live in or return home and the owner pays the tax on the property allows the owner to remain in or return to the home and removes the property from the owner’s estate upon death, thereby reducing recovery. The acquisition-of-services-for-value 40 Los Angeles Lawyer October 2007 vide funds to that third party or parties so that they can provide some comforts to the institutionalized person. One method to transfer assets would be to gift the annual exclusion amount, now $12,000 per person, earlier in life to another person who is not a spouse. That person then establishes a third party special needs trust for the benefit of the potential Medi-Cal recipient. A third party special needs trust is exempt from recovery and may provide funds for items that improve the quality of life of the institutionalized person. This method thus offers an opportunity to reduce the estate and provide care. Probate Code Section 3100 petitions are not affected by the DRA. So a court action is still available to protect the well spouse’s future and the cash and securities left in the well spouse’s estate. An irrevocable life estate remains a viable alternative to avoid recovery. The caveat for planners is to be sure the transfer is irrevocable and that the applicant has lived in the home for at least one year before applying for Medi-Cal. Special needs trusts are available but require careful consideration. A special needs trust established by a third person with the third person’s funds is not subject to recovery. The most popular form of special needs trust, a D4A trust, is sometimes called a payback trust.13 It is a trust funded with assets belonging to the beneficiary. The D4A trust is established for a disabled beneficiary under 65 by a court, parent, grandparent, or legal guardian. A D4A trust must pay back the state for all medical assistance received at any time up to the full amount of the principal in the trust on the date of the beneficiary’s death. Another form of special needs trust is the first-party trust established under Probate Code Sections 3600 et seq.14 This type of trust is usually funded with judgment money owed the beneficiary and is subject to review by the DHS before approval by the return to the home and retaining the obligation to pay the property and income taxes on the property in the trust. This transfer is excluded from the look back period and removes the property from the applicant’s estate for recovery purposes. Estate planners should consider whether a hardship waiver of the recovery is viable for a client. The state will not be able to deny benefits to a person who has applied for and received a hardship waiver in accordance with DRA Section 1917(c)(2)(D). According to the DRA, an undue hardship exists when the application of a penalty for a transfer of assets would deprive the individual of 1) medical care, without which the individual’s health or life would be endangered, or 2) food, clothing, shelter, or other necessities of life. California has not yet codified specific criteria for eligibility for this waiver. A commentator to a draft rule stated that a hardship should not qualify for waiver if the hardship is created by estate planning methods.16 Finally, one method that does not save the estate but may bring comfort to a person requiring care would be for that person to borrow on his or her own property to generate funds for in-home care—which is not covered in any way by Medi-Cal. If the person has children, they could provide the house payments as a gift to their parent, knowing that when the parent dies they will receive the property and can repay themselves. All parties would have to strike a balance between the expected duration of inhome care and the amount of money borrowed. This family-funded care would keep the ill person at home, which is usually a far better place to be than even the best nursing home. This approach reduces the estate but is more cost-effective than a reverse mortgage. The result is that the children receive more for their inheritance than they would if the ill parent chose a reverse mortgage, and the ill parent will be able to remain in famil- iar surroundings. Among the purposes of the DRA is the reduction or elimination of the estate planning methods that have been widely used to conserve taxpayers’ estates for their families. Although the DRA rules in California have not yet been fully devised or promulgated, the estate planner must keep in mind the potential for future changes when working with clients. California rarely implements laws retroactively, but the DRA’s enactment date of February 8, 2006, does trigger some mandatory transfer rules involving real property and transfer of assets to purchase annuities. ■ 1 Deficit Reduction Act of 2005, Pub. L. No. 109-171 (Feb. 8, 2006), 42 U.S.C. §1396. 2 Estate planners must carefully watch legislation and rule proposals for their effect on individual clients. Numerous advocacy organizations provide updates on proposed changes and platforms for comments. See, e.g., the California Advocates for Nursing Home Reform (CANHR) Web site, at http://www.canhr.org /medical/medical_changes092006.html. 3 See http://www.dhs.ca.gov/mcs/mcpd/MEB/ACLs. 4 See CANHR, Legal Network News, vol. 18, no. 2, Summer 2007, at http://www.canhr.org. 5 DRA §6014 adds new subsection (f) to 42 U.S.C. §1396p. 6 42 U.S.C. §1396p(c)(1)(J). 7 WELF. & INST. CODE §§14006.41, 14009.6. 8 22 CAL. CODE REGS. §50415; WELF. & INST. CODE §14006. 9 WELF. & INST. CODE 14006(e)(1). 10 WELF. & INST. CODE §14009; PROB. CODE §§215, 9202, 19202. 11 See CANHR Web site, at http://www.canhr.org /medical/medical_changes092006.html. On June 12, 2006, the state Department of Health Services released a statement regarding recovery against life estates and enforcement of the May 10, 2006, regulations: After the filing of R-32-00 with the Office of Administrative Law, the Department of Health Services (Department) continued to review and analyze the numerous public comments that had been received during the second public comment period for the package. As a result of that analysis, a policy decision was made to amend a portion of R-32-00 through regulations package R-14-04. The amendment will result in the removal of recovery efforts against the value of life estate only interests. The Department has now determined that during the short period of time in which R-32-00 as currently enacted will be in effect, it will not be cost effective for the Department to initiate or pursue recovery against life estate only interests. This decision is based on balancing the anticipated small dollar value associated with recovery for the few months R-32-00 would be in effect prior to the filing of R-14-04, against information obtained from advocates that the legality of life estate only interest recoveries would be challenged in the courts. 12 DHS, All County Welfare Directors Letter (ACWDL) No. 90-01, Jan. 5, 1990, at 5, Questions and Answers Nos. 7 and 8, available at http://www.dhs.ca.gov /mcs/mcpd/MEB/ACLs. 13 See 22 CAL. CODE REGS. §50489.9. 14 See CAL. R. CT. 7-903 for trust requirements. 15 CAL. R. CT. 7-903(D). 16 Proposed changes to CAL. CODE REGS. §50961, 11/1/06 Draft Rule R-14-04. MEDI-CAL PLANNING FOR LONG TERM CARE LAW OFFICE OF SEAN D. 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SALVO • Structural, Civil, Environmental, Industrial Engineering & Issues for All Types of Structures and Buildings • Regulatory Compliances & Building Codes This Corporation can also provide expert witness in the areas of Malpractice Litigation or Real Estate transactions. MASSIE MUNROE, M.S., P.E. PRESIDENT & CEO • EXPERT WITNESS • • • • • • • SPECIAL NEEDS TRUST WILLS & TRUSTS ESTATE PLANING ELDER LAW PROBATE CONSERVATORSHIPS MEDI-CAL PLANNING Tel: 213-632-1310 Fax: 213-632-5299 E-mail: [email protected] salvolaw.com FREE INITIAL CONSULTATION www.ConstructionDefect.us Los Angeles Lawyer October 2007 41 SPECIAL ISSUE ELDER LAW by Bryan Carney Crossing the Line Struggling to define obscenity, Justice Potter Stewart stated famously, “I know it when I see it.”1 Today, an equally uncertain definition exists in the area of elder law: What is elder abuse, and what separates it from professional negligence? In 2005, the California Court of Appeal published a previously unpublished opinion on that question, acknowledging that numerous requests for publication were “well taken because attorneys and trial courts in elder and dependent abuse cases have struggled with the distinction between neglect and professional negligence.”2 The distinction carries profound implications for elders, their attorneys, and the healthcare facilities that serve the elderly. If the lawsuit is for professional negligence, the panoply of restrictions and conditions on causes of actions and remedies directed at healthcare providers under the Medical Injury 42 Los Angeles Lawyer October 2007 Compensation Reform Act apply. On the other hand, if the law suit is for elder abuse, MICRA is not in play,3 and an elder abuse plaintiff may recover unlimited noneconomic damages. Furthermore, his or her estate may recover up to $250,000 in noneconomic damages, and the attorneys prosecuting (but not defending) the elder abuse case may recover their fees.4 With so much at stake turning on the difference between professional negligence and elder abuse, one would assume that the line between the two is clear. It is not. Sixteen years after the California Legislature shifted the focus of the elder abuse statutes from merely reporting abuse and neglect to private enforcement stimulated by enhanced civil remedies, courts and practitioners still struggle with basic Bryan Carney is with Morris Polich & Purdy LLP. HADI FARAHANI Litigation of elder abuse claims hinges on the distinction between professional negligence and actual abuse Los Angeles Lawyer October 2007 43 definitions in this highly emotional area of the law. Not even the 1999 landmark opinion of the California Supreme Court in Delaney v. Baker put the question to rest.5 Some argue that judgments won under the Elder Abuse and Dependent Adult Civil Protection Act over the years have improved the care that elders are receiving in healthcare facilities.6 Others argue that the Elder Abuse subdivision (b) of Section 3333.2 of the Civil Code [limiting recovery] of non-economic damages to $250,000.” Physical abuse and neglect each have detailed statutory definitions.8 Although the majority of case law refers to a claim made under the Elder Abuse Act as a cause of action, some decisions view the act as an enhanced remedy provision that litigated) species of elder abuse. More importantly, courts are using nonstatutory markers to draw the line between elder abuse and professional negligence—namely, the length of time that the elder is exposed to abuse or neglect and what the healthcare provider knew about the elder’s condition during that time. No opinion expressly claims these two factors are dispositive, but a fair reading of published and unpublished cases strongly suggests that these two factors decide the difference between statutory elder abuse and simple, common law negligence. Begin with Delaney Act has created unforeseen consequences for the healthcare industry that ultimately undermine the legislature’s goal in ensuring that the state’s growing elder population is protected. Notably, insurance premiums for healthcare providers have skyrocketed in California, forcing many healthcare facilities into bankruptcy.7 More immediate consequences stem from the triggering language of the Elder Abuse Act that sets forth its enhanced remedies. Section 15657 provides, in pertinent part: “Where it is proven by clear and convincing evidence that a defendant is liable for physical abuse…or neglect [of an elderly or dependent adult], and that the defendant has been guilty of recklessness, oppression, fraud or malice in the commission of this abuse, the following shall apply, in addition to all other remedies otherwise provided by law.…(a) The court shall award to the plaintiff reasonable attorney’s fees and costs…[and] (b) The limitations imposed by section 377.34 of the Code of Civil Procedure [forbidding a decedent’s estate from obtaining pain and suffering damages] shall not apply. However, the damages recovered shall not exceed the damages permitted to be recovered pursuant to 44 Los Angeles Lawyer October 2007 comes into play if the plaintiff can prove the statutory elements of the act in addition to the elements of an underlying tort. Most recently, for example, the court of appeal in Berkley v. Dowds stated, “The Act does not create a cause of action as such, but provides for attorneys fees, costs and punitive damages under certain conditions.”9 The uncertainty of whether a claim made under the Elder Abuse Act is a separate tort is surpassed by the uncertainty of what constitutes elder abuse under the act. In the shadow of the act’s enhanced remedies provision, the legislature added a clause exempting professional negligence actions against healthcare providers.10 Predictably, the first order of judicial business was to discern the difference between professional negligence, which is exempt, and elder abuse, which is not. In Delaney the California Supreme Court tried to define that line. It still vexes courts and practitioners. A series of published and nonpublished opinions since Delaney have begun to give a judicial gloss to the term “elder abuse.” After 16 years of experience with enhanced remedies for elder abuse, “reckless neglect” has become the favorite (and the most frequently The facts of Delaney were clear. The facility left the elder lying in her own urine and feces for what the court described as “extended periods of time.”11 The elder developed stage III and stage IV decubitus ulcers, leading to her death. The plaintiff repeatedly complained of the elder’s deteriorating condition, yet the defendants failed to timely respond to these complaints.12 Not surprisingly, the plaintiff prevailed at trial. Legally, Delaney turned on the exemption clause for “professional negligence” contained in Section 15657.2 of the act. The defendants argued that the language “based on…professional negligence” as used in Section 15657.2 of the Elder Abuse Act covers all conduct directly related to the rendition of professional services.13 A reading of the act in this way would have broadly exempted healthcare providers from the enhanced remedies of Section 15657. The supreme court disagreed with the interpretation of the defendants and held that “reckless neglect” under Section 15657 is distinct from causes of action “based on professional negligence.” Delaney’s lesson is that “[r]recklessness, unlike negligence, involves more than inadvertence, incompetence, unskillfulness or a failure to take precautions but rather rises to the level of a ‘conscious choice of action…with knowledge of the serious danger to others involved in it.’”14 On the facts before it, the supreme court in Delaney had little difficulty affirming the jury’s finding of reckless neglect. Delaney’s articulation of recklessness is a helpful but not definitive yardstick for distinguishing between elder abuse and professional negligence. Its facts are deplorable, but not many cases lie at that end of the spectrum. Most cases fall somewhere in the middle, and Delaney does not indicate what facts are needed, either at the pleading or summary judgment stage, for a case to cross the line separating elder abuse from professional negligence. That middle ground is being defined by the courts of appeal. With increasing frequency, inquiries concerning “What did they know?” and “When did they know it?” are being used to draw the line between professional negligence and elder abuse. Time The elder in Delaney was neglected for “extended periods of time.” According to an unpublished opinion, five days may be enough. In Trujillo v. Superior Court, the court of appeal reinstated an elder abuse claim that had been dismissed on demurrer. Relying almost exclusively on Delaney, the court in Trujillo found that even though the allegations before it were not as egregious as those of Delaney, they were sufficient to state a cause of action for elder abuse.15 The Trujillo complaint alleged that the elder had developed decubitus ulcers on her hips and feet and that the defendant, a home health agency, was retained to provide home care. According to the complaint, the defendant’s nurse missed a visit and, when called two days later, claimed the agency was shortstaffed. After several more days passed without a visit, the plaintiff’s mother developed a fever. The plaintiff took her mother to a hospital, where she died of sepsis.16 Two justices saw this as a pattern of indifference manifested over a period of approximately five days. One justice disagreed. In her dissenting opinion, Justice Grignon wrote: “[The] patient was under the care of Home Health Agency for five days only. These are allegations of professional negligence not elder abuse.”17 Like the majority, Justice Grignon focused on the issue of time. She found that the facts alleged did not show that the plaintiff’s mother had been left to deteriorate over an extended time but rather that the defendant missed a single at-home visit.18 The split decision in Trujillo underscores how, on the same record, reasonable minds can reach different conclusions as to whether the case is one for professional negligence or elder abuse. In contrast to Trujillo, a different court of appeal unanimously saw elder abuse but, like the Delaney court, used the imprecise phrasing of “extended period of time” to describe the temporal window through which the allegations would be viewed. In Klinkner v. Alta Vista Health Care Center, the elder was admitted to the skilled nursing facility with “significant problems” and stayed there for three months.19 Toward the end of her stay, the elder’s family noticed a number of problems with the elder’s care. The elder became dehydrated, was immediately taken to a hospital for emergency treatment, and returned to the facility the same day, apparently with instructions not to be taken out of bed. The next day, the elder was lifted out of bed and fell, dislocating her hip. The dislocated hip was diagnosed and appropriate care provided within 24 hours of the fall.20 The court in Klinkner held that the allegations in the plaintiff’s complaint were insufficient to plead elder abuse. In language reminiscent of Delaney, the court wrote: “There is no indication that any of Alta Vista’s alleged failures to provide Isabelle with timely or appropriate care occurred over an extended period of time.”21 As in Delaney, an “extended period of time” is left undefined. In many cases, the plaintiff attempts to portray a lengthy period of time by citing prior administrative citations. This type of evidence, however, typically falls short of showing elder abuse. In Klinkner, for example, the facility had been cited 38 times by the Department of Health Services (DHS) in the two-year period preceding the elder’s admission to the facility, and the facility never told the elder’s family about this two-year citation history. But this was legally irrelevant to the court’s analysis because no facts were alleged relating the administrative citations to the care of the elder or other residents.22 Other cases hold that while the administrative regulations governing healthcare providers define the duty of care, regulatory violations show only a breach of that duty, i.e., neglect. On the additional element of culpable knowledge— recklessness, malice, oppression, or fraud— the administrative citations are irrelevant.23 Klinkner and Trujillo are unpublished, but they offer some insight into how the courts look at the period of alleged mistreatment to determine whether the lawsuit is one for elder abuse or negligence. Introducing ... Our Newest Los Angeles Location 333 S. 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Two published cases illustrate how concealing or ignoring an elder’s condition may constitute elder abuse. But no published case defines the goalpost at the opposite end of the field—namely, when will a defendant’s knowledge (or lack of knowledge) of an elder’s condition not be sufficient to support a claim of elder abuse? On that side of the question, little guidance exists. The cases are unpublished. Much like Delaney, Mack v. Soung has facts so egregious that a finding of elder abuse is not surprising. In Mack, the complaint against a treating physician alleged that the elder had resided at a nursing and rehabilitation center and that, despite the center’s assurances to the elder that steps were being taken to prevent her from getting bedsores, the elder developed an untreatable stage III bedsore after being left in a bedpan Los Angeles Lawyer October 2007 45 Is this your client.... In the entertainment or related industry? Prefers a solution to a dispute rather than litigation? Is willing to mediate the dispute but wants a mediator who knows the industry and understands his/her positions? If so, call me. I have been arbitrating and mediating entertainment industry and other disputes for over 20 years and have been in the business for much longer than that! Dixon Q. Dern 310.557.2244 www.dixlaw.com Experience + Knowledge = "Dern" good results! 46 Los Angeles Lawyer October 2007 for 13 consecutive hours.24 According to the plaintiff, the center and the elder’s treating physician concealed the existence of the bedsore until the following month. The physician affirmatively opposed hospitalization during the next two months, representing that the center’s care was “appropriate.”25 After the plaintiffs complained to the DHS, the physician abandoned the elder without notice and refused to respond to staff requests to permit her hospitalization. At the end of those two months, the elder died.26 Relying on Delaney, the Mack court wrote, “We have no trouble concluding that a doctor who conceals the existence of a serious bedsore on a nursing home patient under his care, opposes her hospitalization where circumstances indicate it is medically necessary, and then abandons the patient in her dying hour of need commits neglect within the meaning of the Act.”27 Sababin v. Superior Court involved a skilled nursing facility resident who was suffering from Huntington’s chorea, a terminal condition that subjects the sufferer to skin deterioration.28 At the facility, the elder’s care plan called for daily monitoring of skin condition. Over the course of three years, the skin checks were sporadic. Predictably, the elder’s condition deteriorated, and she was transferred from the skilled nursing facility to a hospital. The hospital observed that the elder had lacerations on her toes and feet and had poor skin condition on both buttocks, which were dark red and squishy. The skilled nursing facility had no documentation of these conditions, nor had a physician been notified.29 Sababin held that “a trier of fact could find that when a care facility’s employees ignore a care plan and fail to check the skin condition of a resident with Huntington’s chorea, such conduct shows deliberate disregard of the high degree of probability that she will suffer injury.”30 The defendant in Sababin argued that elder abuse differs from professional negligence because elder abuse is a complete deprivation of care and not merely insufficient care. The Sababin court disagreed, holding that elder abuse can be found when a care facility knows it must provide certain care on a daily basis and yet only provides this care sporadically, or when multiple types of care must be provided and the care facility only provides some types of care.31 But what if the defendant’s awareness of the elder’s condition is not as obvious as in Delaney, Mack, or Sababin? In other words, what state of mind by the defendant will not rise to the level of recklessness, malice, oppression, or fraud? Three decisions offer some answers, but they are unpublished. Renko v. Northridge Care Center, Inc., faced the question of whether recklessness can be established by the defendant’s constructive knowledge. The plaintiffs alleged that the healthcare defendants failed to provide treatment to the elder and failed to promptly transfer the elder to a hospital, which resulted in the development of pressure sores, infection, and, ultimately, death.32 The elder abuse theory was the defendants knew or should have known that the elder required hospitalization to avoid further injuries. Neither the trial court nor the court of appeal agreed. It was not at all clear when the facility should have known that emergency treatment was required. Rejecting a constructive knowledge theory of recklessness, the court in Renko declared that there is “no indication in the elder abuse statutes that constructive knowledge suffices to establish recklessness.”33 If constructive knowledge of an elder’s needs cannot support an elder abuse claim, what about a complete lack of knowledge of the elder’s needs? Furlong v. Catholic Healthcare West is illustrative.34 In Furlong, the elder abuse claim against the hospital was that it had wrongfully resuscitated the elder in violation of her advanced healthcare directive. Hospital staff was unaware of the directive, which expressly contained “Do Not Resuscitate” and “Withhold CPR” orders. The hospital, according to the complaint, had failed to determine and document the elder’s healthcare wishes and participated in her wrongful resuscitation, all in violation of federal and state law. But those allegations rose only to the level of negligence, not elder abuse, the Furlong court concluded. While hospital staff had no knowledge of the elder’s advanced healthcare directive, this lack of knowledge stemmed from the failure of emergency room personnel to ascertain that information in the first instance. The “hospital’s alleged failure to take any steps to ascertain her wishes does not show a conscious or deliberate course of action, undertaken with knowledge of the dire consequences.”35 In Reyome v. Sunrise Senior Living Services, Inc., the facility faced an unpredictable situation. Confronted with a combative resident, nurse assistants decided to use a wheelchair-to-bed transfer method that differed from the facility’s policies and procedures.36 As a result, the elder fell forward and hit her head on the side rail of the bed. Paramedics arrived and took the elder to the hospital, where she died the next morning.37 The facility’s written policy and procedure for wheelchair-to-bed transfers was key to the plaintiff’s opposition to the facility’s motion for summary judgment. The plaintiff argued that it was undisputed that the policy was ignored.38 The trial court and the court of appeal agreed but concluded that it was not enough to show elder abuse. Even though there was sufficient evidence that the defen- Does LACBA have your current e-mail address? The Los Angeles County Bar Association is your resource for information delivered via e-mail on a number of subjects that impact your practice. Update your records online at www.lacba.org/myaccount or call Member Services at 213.896.6560. Los Angeles Lawyer October 2007 47 dant’s staff did not comply with policies and procedures, there was no evidence to establish that the deviation constituted a deliberate disregard for the elder’s safety resulting in a high degree of probability that an injury would result.39 The modified transfer technique had been successfully and safely used on prior occasions when the elder was combative. In addition, unlike Delaney and Trujillo, the elder’s family made no prior complaints to the facility about the transfer technique. Thus, the state of the defendant’s knowledge could not fairly be characterized as showing a conscious choice of a course of action that would seriously endanger the elder. From these cases, the distinction between elder abuse and professional negligence appears to turn on whether or not the case has certain telltale signs. If the elder was subject to abuse or neglect for an extended period of time, courts are likely to find elder abuse, at least at the pleading stage. If the defendant conceals or ignores the elder’s deteriorating condition, or fails to follow a treatment plan, a finding of elder abuse is equally likely. But perfect care is not the standard. Not knowing an elder’s wishes, not following procedures when circumstances dictate a deviation, and not taking emergency steps when it is not at all clear that emergency steps are needed will not likely rise to the level of elder abuse. An understanding of the supreme court’s rationale in Delaney is the first step in finding a distinction between elder abuse and professional negligence, but Delaney is only a starting place. ■ 1 Jacobellis v. Ohio, 378 U.S. 184, 197 (1964). v. Superior Court, 144 Cal. App. 4th 81, 83, n.4 (2005). 3 In 1975, citing serious problems that had arisen throughout the state as a result of a rapid increase in medical malpractice insurance premiums, the legislature enacted the Medical Injury Compensation Reform Act of 1975. MICRA comprises several statutes that limit damages for lawsuits against a healthcare provider based on professional negligence. See Young v. Haines, 41 Cal. 3d 883 (1986). 4 WELF. & INST. CODE §15657. 5 Delaney v. Baker, 20 Cal. 4th 23 (1999). 6 Darmiento, Nursing Homes Facing Limits on Insurance for Elder Abuse, LOS ANGELES BUS. J. (July 5, 2004). 7 Id. 8 WELF. & INST. CODE §§15610-15610.65. 9 Berkley v. Dowds, 152 Cal. App. 4th 518, 529 (2007), petition for rev. filed Aug. 1, 2007; see also ARA Living Ctrs. Pac., Inc. v. Superior Court, 18 Cal. App. 4th 1556, 1563-64 (1993); Smith v. Ben Bennett, 133 Cal. App. 4th 1507, 1524 (2005). 10 WELF. & INST. CODE §15657.2. 11 Delaney v. Baker, 20 Cal. 4th 23, 26 (1999). 12 Id. 13 Id. at 30-31. 14 Id. at 31 (quoting RESTATEMENT (SECOND) OF TORTS §500, com.(g) ¶550 (1995)). 15 Trujillo v. Superior Court, No. B155860, 2002 WL 2 Sababin 1558830 (Cal. App. 2d Dist. July 16, 2002) (unpublished). 16 Id. 17 Id. at *7. 18 Id. at *8. 19 Klinkner v. Alta Vista Health Care Ctr., No. E037164, 2005 WL 3344801 (Cal. App. 4th Dist. Dec. 9, 2005) (unpublished). 20 Id. at *6. 21 Id. at *7. 22 Id. 23 Reyome v. Sunrise Senior Living Servs., Inc., No. B174986, 2004 WL 2749811, at *8 (Cal. App. 2d Dist. Dec. 2, 2004) (unpublished). 24 Mack v. Soung, 80 Cal. App. 4th 966, 969 (2000). 25 Id. 26 Id. 27 Id. at 973. 28 Sababin v. Superior Court, 144 Cal. App. 4th 81, 85 (2005). 29 Id. 30 Id. at 90. 31 Id. 32 Renko v. Northridge Care Ctr., Inc., Nos. B173512, B175474, 2005 WL 2045352, at *1 (Cal. App. 2d Dist. Aug. 25, 2005) (unpublished). 33 Id. at *22. 34 Furlong v. Catholic Healthcare West, No. B172067, 2004 WL 2958274 (Cal. App. 2d Dist. Dec. 22, 2004) (unpublished). 35 Id. at *10. 36 Reyome v. Sunrise Senior Living Servs., Inc., No. B174986, 2004 WL 2749811, at *2 (Cal. App. 2d Dist. Dec. 2, 2004) (unpublished). 37 Id. at *3. 38 Id. at *3-*4. 39 Id. WHY PAY MORE FOR LAWYER’S LIABILITY INSURANCE? FILL OUT ONE APPLICATION AND YOU COULD SAVE UP TO 30% OFF YOUR CURRENT INSURANCE. WHY PAY MORE? Lawyer’s Liability Insurance is a necessary cost of doing business and you should not pay any more than you have to. GO DIRECTLY TO THE SOURCE First Indemnity is the DIRECT underwriter for State National and First Mercury Insurance Companies. This insurance is not available through your local broker. 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Telephone: (310) 402-3083, fax: (877) 556-6322. Web site: www.arabicinterpreting .com. Lawyer Referral NEED AN EXPERT WITNESS, legal consultant, arbitrator, mediator, private judge, attorney who outsources, investigator, or evidence specialist? Make your job easier by visiting www.expert4law.org. Sponsored by the Los Angeles County Bar Association, expert4law—the Legal Marketplace is a comprehensive online service for you to find exactly the experts you need. CERTIFIED CRIMINAL LAW SPECIALIST IN BEVERLY HILLS. Jay Jaffe is an AV rated attorney who has been practicing criminal law for 34 years and is recognized by his peers as one of the truly outstanding attorneys in Southern California. He handles all criminal cases, misdemeanors and felonies, including DUI. (310) 275-2333, [email protected], http://www.attorneyjayjaffe.com. Interpreting Services Vacation Rentals ARABIC INTERPRETING CERTIFIED SERVICE. 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Los Angeles Lawyer October 2007 49 50 Los Angeles Lawyer October 2007 American Immigration Lawyers Association, p. 2 Tel. 202-216-400 www.aila.org Lexis Publishing, p. 1, 9 www.lexis.com Aon Direct Administrators/LACBA Prof. Liability, Inside Front Cvr Tel. 800-634-9177 www.attorneys-advantage.com MCLE4LAWYERS.COM, p. 41 Tel. 310-552-4907 www.MCLEforlawyers.com Arbitration and Mediation Group, p. 16 Tel. 818-790-1851 www.mediationla.com Mesriani Law Group, p. 18, 34, 45 Tel. 310-826-6300 e-mail:[email protected] Ballenger, Cleveland & Issa LLC, p. 26 Tel. 310-873-1717 Metrocities Mortgage Inc., p. 8 Tel. 800-464-2484 www.metrociti.com Lee Jay Berman, p. 16 Tel. 213-383-0438 www.leejayberman.com Noriega Clinics, p. 49 Tel. 323-728-8268 Coldwell Banker p. 4 Tel. 310-442-1398 www.mickeykessler.com Charles Pereyra-Suarez, p. 6 Tel. 213-623-5923 www.cpslawfirm.com Commerce Escrow Company, p. 47 Tel. 213-484-0855 www.comescrow.com Peachtree Pre-Settlement Funding, p. 27 Tel. 866-476-2029 www.presettlementfunds.com Cook Construction, p. 26 Tel. 818-438-4535 e-mail: [email protected] Personal Performance Group, Inc., Inside Back Cover Tel. 866-968-6711 www.commandingpresence.com Devon Self Storage Holding, LLC, p. 18 Tel. 213-784-4440 Daniel A. Plotkin, M.D, p. 34 Tel. 310-477-7855 e-mail: [email protected] Dixon Q. Dern, P.C., p. 46 Tel. 310-557-2244 e-mail: [email protected] Premier Business Centers, p. 45 Tel. 1-877-MYSUITE (1-877-697-8483) www.pbcenters.com Law Office of Sean Ethington, p.41 Tel. 800-852-1239 www.sean.elderlawsite.com Law Office of Alice A. Salvo, p. 41 Tel. 818-887-3333 e-mail: [email protected] First Indemnity Insurance Services, Inc., p. 48 Tel. 800-982-1151 www.firstindemnity.net Steven R. Sauer APC, p. 17 Tel. 323-933-6833 e-mail: [email protected] Forensic Construction Defect & Engr., Inc./Exp. Witness, p. 41 Tel. 213-632-1310 e-mail: [email protected] Stephen Sears, CPA-Attorney at Law, p. 25 www.searsatty.com G. L. Howard CPA, p. 46 Tel. 562-431-9844 e-mail: [email protected] Anita Rae Shapiro, p. 46 Tel. 714-529-0415 www.adr-shapiro.com Steven L. Gleitman, Esq., p. 4 Tel. 310-553-5080 Steven Peck’s Premier Legal, p. 21 Tel. 866-999-9085 www.premierlegal.org, Greg David Derin, p. 46 Tel. 310-552-1062 www.derin.com Stonefield Josephson, Inc., p. 5 Tel. 866-225-4511 www.sjaccounting.com Marcia H. Harber, p. 26 Tel. 310-377-7624 e-mail: [email protected] Tenrec, Inc., p. 26 Tel. 415-543-6600 x101 e-mail: [email protected] Higgins, Marcus & Lovett, Inc., p. 16 Tel. 213-617-7775 www.hmlinc.com UCLA Extension Conferences, p. 22 www.uclaextension.edu/taxcon, www.uclaextension.edu/realestate The Holmes Law Firm, p. 8 Tel. 626-432-7222 www.theholmeslawfirm.com UngerLaw, P.C., p. 17 Tel. 310-772-7700 www.ungerlaw.com ImmigrationHouseCall.com, p. 18 Tel. 214-329-1265 e-mail: [email protected] Union Bank of California, p. 11 Tel. 310-550-6400 (B.H.), 213-236-7736 (L.A.) www.uboc.com Jack Trimarco & Associates Polygraph, Inc., p. 6 Tel. 310-247-2637 www.jacktrimarco.com Vision Sciences Research Corporation, p. 34 Tel. 925-837-2083 www.contrastsensitivity.net Lawrence W. Crispo, p. 17 Tel. 213-926-6665 e-mail: [email protected] Walker Advertising Inc., p. 25 Tel. 800-409-0909 e-mail: [email protected] Law Offices of Rock O. Kendall, p. 6 Tel. 949-388-0524 www.dmv-law.com West Group, p. 13, Back Cover Tel. 800-762-5272 www.westgroup.com Jeffrey Kichaven, p. 4 Tel. 213-996-8465 www.jeffkichaven.com Witkin & Eisinger, LLC, p. 26 Tel. 310-670-1500 LACBA LRIS, p. 21 Tel. 213-896-6440 www.smartlaw.org Wolfsdorf Immigration Law Group, p. 47 Tel. 310-570-4088 www.wolfsdorf.com Lawyers’ Mutual Insurance Co., p. 7 Tel. 800-252-2045 www.lawyersmutual.com Law Office of Stuart Zimring, p. 34 Tel. 818-755-4848 www.elderlawla.com Avoiding Electronic Discovery Mistakes ON TUESDAY, OCTOBER 9, from noon to 1 P.M., the Los Angeles County Bar Association will host an online program addressing the most common errors made by attorneys, corporate IT staff, paralegals, record managers, and even law firm litigation support technology staffs and vendors when dealing with electronic discovery. Learn how to avoid sanctions and adverse inference rulings by not spoiling metadata, running afoul of reasonable retention policies, causing client data to be deemed inadmissible, failing to file appropriate motions in support of or in opposition to e-discovery techniques, going over budget, and breaking the all-important chain of custody. Alex Lubarsky, a practicing attorney and electronic discovery consultant, will share the top 10 errors that result in a weakening (or destruction) of the case in chief of those who err. Learn from others’ mistakes before you make them yourself. Registration for this program closes on October 5, 2007. Early registration and an e-mail address are required for this webinar. The registration code number is 009737. $45—CLE+PLUS members $85—LACBA members $125—all others 1 CLE hour International Arbitration and Litigation Strategies On Tuesday, October 30, the International Law Section will present a program on disputes involving multinational parties and the laws, procedural rules, and judicial systems of different nations. An everincreasing number of international arbitration tribunals are also available to resolve disputes, many with their own procedural rules and fee structures. This symposium will provide useful strategies and insights for any lawyer, novice or experienced, representing clients involved in disputes, actual or potential, arising from cross-border commercial transactions. The program will include a luncheon with a keynote speaker, Dean A. Peroff, international defense counsel for Mikhail Khodorkovsky in the ongoing criminal prosecutions regarding Yukos Oil. Peroff will speak on the challenges of representing clients in countries with varying degrees of judicial and/or political corruption. The TAP: Expert Witness Workshop ON MONDAY, OCTOBER 8, Trial Advocacy and the Litigation Section will host an expert witness workshop providing introductory and advanced instruction on how to use expert witnesses, with special emphasis on expert testimony. Topics covered in the lecture portion of the program include evidentiary rules regarding expert opinions, taking and defending expert depositions, how experts can help and hurt a case, direct and cross-examination of expert witnesses, establishing and challenging expert qualifications, and advanced expert testimony techniques. In the workshop portion, participants conduct direct and cross-examination of an expert witness. The workshop will take place at the LACBA/Executive Presentations Mock Courtroom, 281 South Figueroa Street, Downtown. Reduced parking with LACBA parking validation at the Figueroa Courtyard parking garage costs $10. On-site registration will begin at 8:30 A.M., with the program continuing from 9 A.M. to 1 P.M. The registration code number is 009776. $350—LACBA members $500—all others 3.75 CLE hours program will take place at the Omni Los Angeles Hotel, 251 South Olive Street, Downtown. Hotel valet parking costs $10. On-site registration and the meal begin at 8 A.M., with the program continuing from 9 A.M. to 4:30 P.M. The registration code number is 009733. The prices below include the meal. $125—CLE+PLUS members $230—LACBA members (price includes a free half-year section membership) $175—International Law Section members (among others) $260—all others (price includes a free halfyear LACBA membership and a free half-year section membership) $270—all at-the-door registrants 7.25 CLE hours The Los Angeles County Bar Association is a State Bar of California MCLE approved provider. To register for the programs listed on this page, please call the Member Service Department at (213) 896-6560 or visit the Association Web site at http://calendar.lacba.org/. For a full listing of this month’s Association programs, please consult the County Bar Update. Los Angeles Lawyer October 2007 51 closing argument BY ALEX YUFIK The Science of Eyewitness Testimony One possible explanation is the firm belief held by many judges ON NOVEMBER 10, 2000, POLICE ARRESTED Rachel Jernigan for allegedly robbing three banks in Arizona. Jernigan became a suspect that because the information about eyewitness fallibility is so ubiqin the case after an FBI agent investigating the robberies had a chance uitous, nothing an expert can say can benefit the jurors in deciding conversation with a postal inspector who had been investigating a case. On the contrary, recent studies have documented that lawyers unrelated shoplifting incidents at a local post office. The postal agent and judges continue to remain ignorant about the empirical psynoted that Jernigan fit the description of the previously unidentified chological findings that explain human memory and behavior as bank robber. After the conversation, the FBI agent created a photo- they relate to legal proceedings. As the Jernigan case shows, jurors graphic lineup that included Jernigan and showed the pictures to one often underestimate the frequency of errors present in testimony of the victim bank tellers. The teller identified Jernigan as the woman based on memory, and they remain unaware of the degree to which who robbed her. Five or six months later, the pictures were shown to recall of past events is often subject to distortion. other eyewitnesses who also identified Jernigan as the robber. At trial, the government relied entirely on the accounts of five eyewitnesses As the Jernigan case shows, jurors underestimate the frequency and an unclear bank surveillance video. No physical evidence tied Jernigan to the robbery, and throughout her trial Jernigan of errors present in testimony based on memory. asserted her innocence. Unbeknown to the jury, the government knew that other nearby banks were being robbed by another woman—fitting The result has been that judges may feel that the scientific evidence the same description as Jernigan—while Jernigan was in custody but failed to provide this information to her counsel. The jury con- is unnecessary because the information is within common knowledge victed Jernigan, and the court sentenced her to 168 months in jail. of the jurors. In addition, attorneys may not know how or when to While in jail, Jernigan learned from her fellow inmates of the other employ experts in these situations. Science has clearly and definitively woman with similar features who was arrested for robbing the same identified that the intuitive notions about memory, cognition, and eyebank on a different day. She then petitioned the court for a new trial. witness identification that are often held by judges and juries are On July 9, 2007, the Ninth Circuit overturned her conviction in United wrong. For example, a study published in the Journal of Applied Cognitive Psychology2 found that judges have very limited underStates v. Rachel Jernigan.1 Psychologists have long questioned the seemingly blind faith standing of eyewitness factors. In the study, more than half the courts place in eyewitness testimony. Over the last 30 years researchers judges surveyed mistakenly believed that an eyewitness’s ability to recall have documented extensively the many factors that affect the accu- peripheral details about a crime indicates that the witness has a betracy of eyewitness identification. The research information has been ter memory than a witness who cannot recall peripheral details. As a result of these discoveries, California has made a landmark used to make recommendations to change the manner in which eyewitness evidence is used in court as well as to make practical rec- effort to institute change in our legal system. In 2004, the legislature ommendations for law enforcement officials to change the manner created the California Commission on the Fair Administration of Justice with the task of reviewing the state’s criminal justice system in which they conduct eyewitness lineups. Forensic psychologists have also made significant contributions in and to make recommendations to ensure the fair and accurate adminclearly and dispassionately educating fact finders about eyewitness istration of justice. As part of its work, the commission has suggested memory, recall, and other factors that are relevant in properly eval- a number of empirically supported changes to the rules guiding eyeuating eyewitness testimony. For example, one such recommended witness identification. As members of the legal system we can ensure change is the use of experts in preventing false convictions based on the fair administration of justice by supporting and encouraging unreliable eyewitness testimony. Many studies have shown that using such change, especially when it is based on sound, scientific, psyexpert testimony is the only legal safeguard that is effective in alert- chological principles. Only by continuing to question and examine ing jurors to the perils of eyewitness identification, and that neither our system of justice and its methods can we prevent a case like Jernigan’s from occurring in California. ■ jury instructions nor cross-examination is sufficient. Despite the available studies, courts continue to preclude expert testimony, and the police refuse to change their procedures. As the 1 United States v. Jernigan, No. 05-10086 (9th Cir. July 9, 2007). Jernigan case illustrates, and as other cases continue to surface in the 2 18 J. APPLIED COGNITIVE PSYCHOL. 427-43 (2004). press, the need to change the system is strong. Despite the available data there is still a great deal of resistance to implementing changes. Alex Yufik is a licensed forensics psychologist and an attorney in private pracWhy? tice in West Hollywood. 52 Los Angeles Lawyer October 2007 THE INTERNATIONALLY ACCLAIMED COMMANDING PRESENCE SEMINAR A SPECIAL EVENT PRESENTED BY THE LACBA: 6.5 CLE CREDITS AVAILABLE IS SPEAKING ONE OF YOUR MOST VALUABLE ASSETS? Does your speaking ability consistently match your expertise and knowledge in important meetings and presentations? Would you like to immediately improve your ability to deliver precise, informative and persuasive presentations? YOU CAN! In this highly effective and rewarding seminar, you will achieve a substantial and permanent improvement in your confidence and speaking ability. Present and Speak with Confidence Overcome Your Fear of Speaking Learn To Think On Your Feet Learn simple and powerful techniques to quickly organize your thoughts and communicate concisely and effectively. John Plank is one of the most highly qualified and respected communications coaches in North America. “I recommend this program for any advocate who cares about the quality of his or her presentations.” “ Really wonderful presentation. John was insightful, knowledgeable, and energetic. This was the most worthwhile seminar I have attended in years!” “Having practiced law for more than 20 years, and appeared in hundreds of proceedings, you amazed me how much I could and did improve. Thank you for a great workshop.” LACBA One Day Seminar Advanced Communication and Presentation Skills For Lawyers What is Unique about Commanding Presence™? You will be working with the most experienced speaking coach in North America. John has been coaching lawyers in the U.S., Canada, and the U.K. for the past 15 years and is the performance coach for CBC Television. Limited number of seats available: Location: LACBA Conference Center, 281 S. Figueroa Street , Los Angeles Date: November 30th, 2007 Time: Prices: CLE+Plus Members with meal LACBA Members with meal: All others with meal: 9:00am – 5:00pm $350 $475 $600 6.5 hrs CLE credit — Registration Code: 009813 Register now, - reserve your seat today. Call: LACBA Member Services at 213-896-6560 Or register online at www.lacba.org under calendar In House Workshops are available: Customized, Convenient and Cost-effective Bring Commanding Presence™ to your organization! Call toll free: 1 866.968.6771 Fax: 1 866.968.6770 [email protected] www.commandingpresence.com © 2006 West, a Thomson business L-319502/2-06 Going places with West. west.thomson.com