Sunrise, Sunset: What To Do About a Trustee With Diminishing Capacity

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SUNRISE, SUNSET: WHAT TO DO ABOUT A TRUSTEE WITH DIMINISHING CAPACITY

By John A. Hartog, Esq.1*

I. INTRODUCTION

America is aging. In 2011, about one in eight Americans was over age sixty-five.2 As the Baby Boom generation ages, the percentage of elders will increase. Over the next fifteen years, more than a thousand Californians will turn sixty-five every day.3 This segment of California’s population is expected to grow by more than 20% over the next five years. Some commentators assert that the oncoming decades will witness a transfer of about $12 trillion in wealth from those born in the 1920s and 1930s to the Baby Boomers, and that the Boomers are expected to transfer some $30 trillion in assets to their beneficiaries over the next thirty to forty years in the U.S.4

The aging population brings new challenges, including planning for, and dealing with, gradual decline in physical and mental abilities. Many individuals wish to serve as trustee of their assets for as long as possible, even when they begin to lose their faculties. The inability or refusal to recognize and respond to these impairments can create thorny legal and practical issues for the individual and concerned family. These issues are heightened when the individual is serving as the trustee of a trust with fiduciary obligations. The challenges in representing the "fading trustee" can be acute for all advisors, especially that trustee’s attorney.

As Justice Cardozo observed more than eighty years ago, "[n]ot honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior" for a trustee.5 A fading trustee is often reluctant to surrender control or unable to recognize his or her loss of ability. This inability can have the awkward consequence of adversely affecting the trust administration, thereby exposing a less than competent person (as well as the trust beneficiaries) to economic injury. Encouraging a trustee with diminished capacity to resign can also place the attorney in the unenviable position of infuriating the client to the point of discharge.

In a Panglossian6 world the well-drafted instrument would contain the necessary procedures for addressing the fading capacity of a trustee. Even Voltaire’s eternal optimist, however, could not resolve the practical problems of human beings confronting unpleasant truths about themselves or their loved ones. The plain fact is that most documents practitioners draft or administer do not contain sophisticated mechanisms for dealing with incapacity. In consequence, the practical problems in handling recalcitrant or reluctant individuals are aggravated by gaps in the applicable language. The result can be unacceptable: either a continued disregard of the awkward circumstance, merely aggravating the problem, or a resort to the judicial process, with its attendant stress, expense, delay, and uncertainty.

These problems are compounded for the attorney representing the fading trustee. The lawyer’s duty to the client may prevent that lawyer from undertaking the actions necessary to protect the (unwilling or incapable) client from liability and damages. Attorneys—who are not generally skilled in evaluating mental capacity—may be reluctant and feel unqualified to determine that a client is, or is about to become, unable to perform his or her fiduciary duties.

In the forty-six states that have adopted the ABA Model Rules of Professional Conduct (California is not an ABA Model Rules state), the attorney may have a duty to the trust beneficiaries as well as the trustee.7 That duty may require that the attorney disclose facts and communications adverse to the fiduciary continuing to serve.8 The attorney may even have a duty to take action to prevent potential loss to the trust beneficiaries, including petitioning the court to remove a trustee-client.9

An attorney in these jurisdictions may face the unpleasant situation of trying to understand a client’s capacity and disclose personal information under a belief that such disclosure is required, only to discover the client is not only fully functional but incensed. That attorney also has to decide what to disclose and to whom to disclose it. Unhappy beneficiaries may use disclosed information (even when erroneous) to complicate trust administration or force a resignation as a result.

The California Rules of Professional Conduct forbid the attorney from disclosing such information.10 The attorney representing a fiduciary is considered to have a duty only to the fiduciary, and disclosure would expose the attorney to claims by the fiduciary and possible disciplinary action.

Viewing the problem from an even more dark perspective, one can anticipate the circumstance when the injured beneficiaries (or successor fiduciary) seek restitution from the trustee’s attorney for failing to have prevented the underlying harm.11 The attorney then finds himself or herself in the dilemma of having to comply with clear ethical duties to the client while risking civil liability to third parties.

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Another challenge confronting planners is the absence of legal guidance in this area. Neither the statutes nor the case law has yet been required to confront this problem directly. As a result, practitioners are compelled to pull threads from other areas to answer these new questions. Inevitably, stresses will arise from the application of principles developed from other policy considerations and fact patterns. This tension will remain until the law catches up to the facts.

Developing the law affecting fading trustees may encourage implementing a different standard of capacity. The law already acknowledges a sliding scale for marital capacity, testamentary capacity and contractual capacity. The future may bring a higher standard for fiduciary capacity.

Many of the challenges highlighted by this article can be managed by including anticipatory procedures in the applicable instrument. Attentive drafting of incapacity provisions can facilitate transfer of the trusteeship when the trustee suffers from diminishing capacity.

II. GENERAL CAPACITY ISSUES

The Probate Code generally presumes that adults possess the capacity to undertake any legal task unless they have been adjudicated as incapacitated in a protective proceeding.12 A party challenging an individual’s capacity must present sufficient evidence of incapacity to meet the requisite burden of proof.13 The definition of "diminished capacity" in everyday legal practice depends largely on the type of transaction or decision under consideration.14 Depending on the specific transaction or decision at issue, as well as the jurisdiction in which one is located, legal capacity may have multiple definitions.15 Examples of common transaction-specific legal standards include testamentary capacity, donative capacity, contractual capacity, capacity to convey real property, capacity to execute a Durable Power of Attorney, decisional capacity in health care, capacity to litigate, mediate and settle, and the capacities to drive, to marry, to stand trial, or to vote. The capacity to serve as a fiduciary is rarely articulated as independent of other capacities. This oversight contributes to the current lack of guidance in this area. As the law develops, the author hopes that this oversight will be addressed.

The basic starting point for any mental capacity determination in California is the Due Process in Competence Determinations Act ("DPCDA").16 The literature contains little material directly on point that describes the facts and circumstances in which a person will be deemed incapacitated pursuant to DPCDA. Marc B. Hankin, one of the drafters of DPCDA, summarized the legislative history and operative terms of the statute by stating that it "engrafts onto the law of legal mental competence the terminology used by today’s science of the mind" and "largely codifies existing case law as it should be applied using state of the art forensic psychiatric assessment techniques regarding incapacity."17

DPCDA codifies standards for a court to use in determining whether a person has the capacity to perform particular acts in a variety of contexts. The statutory presumption continues common law that an individual is "competent" until proven otherwise. Probate Code sections 810 through 813 contain special rules governing the evidence that must be adduced whenever one seeks to prove that a person lacks the capacity to make a decision or do a particular act.

DPCDA does not authorize a mere diagnosis of a physical or mental disorder as the sole basis to establish lack of capacity. A judicial determination of incapacity must be based on evidence "of a deficit in one or more of the person’s mental functions."18 The code requires a finding of significant impairment with respect to "the type of act or decision in question,"19 and the court may take into consideration "the frequency, severity, and duration of periods of impairment."20

Those rules provide, inter alia, that a "judicial determination that a person is totally without understanding, or of unsound mind, or suffers from one or more mental deficits so substantial that, under the circumstances, the person should be deemed to lack the legal capacity to perform a specific act, should be based on evidence of a deficit in one or more of the person’s mental functions rather than on a diagnosis of a mental or physical disorder."21

Probate Code section 812 provides that a person lacks the capacity to make a decision unless the person has the ability to communicate the decision (verbally or by any other means) and to understand and appreciate, to the extent relevant, all of the following:

  1. The rights and responsibilities created by or affected by the decision;
  2. The probable consequences for the decision-maker and, when appropriate, the persons affected by the decision; and
  3. The significant risks, benefits, and reasonable alternatives involved in the decision.

The requirements specified in Probate Code section 812 do not apply when otherwise provided by law, including the statutory and decisional law of testamentary capacity.

Probate Code section 811 is the most likely statute to be applied when litigating a trustee’s incapacity. That section addresses the evidence that must support a determination that a person is of unsound mind or lacks the capacity to make a decision or do an act, and evidence of a correlation between the deficit and the decision or act in question. Probate Code section 811 requires that a determination that a person is of unsound mind or lacks the capacity to make a decision or do a certain act, including the incapacity to execute a will, must be supported by evidence of a deficit in at least one of the articulated mental functions. These functions can be applied directly to a trustee’s capacity to serve in the fiduciary role. The Probate Code section 811 functions are the following:

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A. Alertness and attention includes, but is not limited to, the level of arousal or consciousness, orientation to time, place, person, and situation, and the ability to attend and concentrate. Mental health professionals describe four levels of alertness (or consciousness): alert, drowsy, stuporous, or comatose. Stupor is defined as an inability to remain conscious unless repeatedly aroused. If an individual is less than alert, the ability to pay attention and other types of mental functioning will likely be compromised.22

Orientation to time (e.g., date, year) is generally the most sensitive to organic brain dysfunction. Disorientation to person, place, and situation often occur together. Thus, a client who does not understand that he or she is in an attorney’s office (place) may well not grasp being with an attorney (person) or the nature of the work to be done with the attorney (situation).

B. Information processing encompasses a host of everyday activities and routines. The elements of information processing include short- and long-term memory, including immediate recall and the ability to understand or communicate with others, either verbally or otherwise. It extends to the recognition of familiar objects and familiar persons, the ability to understand and appreciate quantities, and the ability to reason using abstract concepts. Fundamental to the faculty of information processing is the ability to plan, organize, and carry out actions in one’s own rational self-interest.23

Memory is a mental function listed in the domain of information processing. An attorney should be concerned when a client has a memory deficit in the following instances: (1) a report of forgetfulness by the client, family, or friends, (2) forgetfulness that becomes apparent during the consultation, and (3) over-reliance by the client on others to answer questions. Impaired memory is a cardinal feature of a dementing disorder such as Alzheimer’s disease.

The Probate Code refers to "short- and long-term memory, including immediate recall."24 Immediate recall refers to an individual’s ability to register information and repeat it back at once. If new information does not register, it will not be stored for recall. Short-term memory ("STM") refers to a person’s ability to remember relatively new information—e.g., data presented ten minutes prior. In the realm of health care for example, the patient who cannot assimilate new information about a proposed medical treatment will be hard-pressed to give informed consent. In the course of dementia, STM is usually affected before long-term memory ("LTM").

LTM refers to the ability to recall old information, such as one’s birth date, names of relatives, and widely known historical facts. An example of an LTM deficit interfering with decision-making is the client who wishes to bequeath assets but does not remember either the assets or the potential beneficiaries.

C. Deficits in thought processes may be demonstrated by the presence of severely disorganized thinking, hallucinations, delusions, or uncontrollable, repetitive, or intrusive thoughts.25 A hallucination may be described as a perceptual distortion for which there is no external stimulus.26 Hallucinations may occur in various disorders, including schizophrenia and dementia, and they may occur in any one of the five senses. In schizophrenia, for example, a person may hear a voice commanding that personal belongings be given away to strangers. Such an individual would most likely be incapacitated on the basis of the hallucinations.

A delusion is defined as a fixed, false belief that is not amenable to reality testing. There are various kinds of delusions, including grandiose, persecutory, and jealous delusions. A demented person may have a jealous delusion that interferes with capacity, as in the following hypothetical: An elderly gentleman with severe Alzheimer’s disease resides in a nursing home. He sees his wife of many years speak once to a male nursing attendant. On this basis, he develops the totally unfounded and irrational belief that she is having an affair with the attendant, and he decides to divorce her.

D. Deficits in the ability to modulate mood and affect may be demonstrated by the presence of a pervasive and persistent or recurrent emotional state.27 These states include euphoria, anger, anxiety, fear, panic, depression, hopelessness or despair, helplessness, apathy, or indifference.28 The deficit arises because the individual’s expression of the emotion is inappropriate in degree to the individual’s circumstances.29

According to the American Psychiatric Glossary, mood refers to "a pervasive and sustained emotion."30 A mood disturbance can adversely impact a person’s judgment. For example, someone with clinical depression may refuse medical treatment due to feelings of worthlessness, helplessness, or guilt.

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The psychiatric term "affect" (with the accent on the first syllable) refers to how emotion is expressed. Affect may be disturbed in various ways, such as being blunted, inappropriate, or unstable. In dementia, for example, there may be an overall blunting of emotional expression. Indifference in someone with dementia in the face of a life-threatening medical condition is an example of a disturbance of affect interfering with competence.

The frontal region of the cortex controls how an individual solves problems; this area applies to planning as well as organizing information. The frontal lobes help the individual keep things in order, moving forward in one direction toward completion of a task or goal. The frontal lobes, when functioning normally, help avoid confusion and redundancy of actions. Individuals with frontal lobe deficits can say what steps need to be taken in order to complete tasks, but may not be able to accomplish those steps. Individuals with significant frontal impairments lack the capacity to prioritize or organize to keep ideas in order, and have difficulty weighing consequences because the factors requiring consideration are too numerous for them to process. The areas of daily living most affected by these deficits are managing financial affairs, managing multiple medications, and driving.31

A lawyer who is counseling a trustee-client exhibiting these deficits should be on notice that an evaluation might be required. If the lawyer is unwilling to suggest an evaluation, the lawyer may suggest resignation as trustee to the client.

The court may consider a deficit under Probate Code section 811, subdivision (a), only if the deficit, by itself or in combination with one or more other mental function deficits, significantly impairs the person’s ability to understand and appreciate the consequences of his or her actions with regard to the type of act or decision in question.32 The mere diagnosis of a mental or physical disorder will not be sufficient in and of itself to support a determination that a person is of unsound mind or lacks the capacity to do a certain act.33 When determining whether a person suffers from a deficit in mental function so substantial that the person lacks the capacity to do a certain act, the court may take into consideration the frequency, severity and duration of periods of impairment.34 The standard is whether a person suffers from a deficit in mental function so substantial that the person lacks the capacity to do a certain act. The court may consider the frequency, severity, and duration of periods of impairment when assessing the deficit.35 The court may also consider deficits in alertness and attention or in the ability to understand or communicate with others under Probate Code section 811, subdivision (a). These deficits may indicate that the person lacks the ability to communicate the decision and understand and appreciate the rights, duties, and responsibilities created or affected by the decision and the risks, benefits, and reasonable alternatives involved in the decision, as required by Probate Code section 812.

The lawyer advising the trustee who is exhibiting one or more of these mental function deficits should anticipate this standard of evaluation. The lawyer may find it useful to educate a fading trustee on these points if trustee resignation appears the most prudent method to limit the client’s liability.

The capacity of a person under DPCDA is dependent on circumstances and the action in question. Even if a mental function deficit is present, there must be evidence of a correlation between the deficit(s) and the capacity required for the specific act or decision in question.36

In re Marriage of Greenway37 applied DPCDA in a marital dissolution. The Court of Appeal engaged in a thoughtful and useful analysis of DPCDA that will provide guidance to practitioners when applying the DPCDA standards in dealing with a fading trustee who may be sliding along the slope of incapacity.38

Joann Greenway appealed from the lower court’s ruling that her husband, Lyle Greenway, was mentally competent to obtain a divorce from her after forty-eight years of marriage. Joann objected to dissolving the marriage or dividing the estate, which was valued at several million dollars.39 Lyle argued that irreconcilable differences necessitated such dissolution.40 Joann countered that seventy-six-year-old Lyle was mentally incompetent to maintain a dissolution action.41 Based on extensive testimony and written arguments from all parties the trial court concluded that Lyle was mentally capable of making a reasoned decision to end his marriage.42

On appeal the trial court’s determination was affirmed notwithstanding the fact that the testifying experts agreed that Lyle had dementia.43 The proper question was whether his impairment was such that he no longer had the capacity to make a reasoned decision to end his marriage.44 In analyzing conflicting arguments, the Greenway court determined that a person’s mental capacity is fact-specific, and the level of required mental capacity changes depending on the issue at hand.45 The court referred to "multiple and overlapping" statutes found in the Probate Code, Welfare and Institutions Code, Civil Code, and Family Code, and stated: "After reviewing the relevant case law, we conclude mental capacity can be measured on a sliding scale, with marital capacity requiring the least amount of capacity, followed by testamentary capacity, and on the high end of the scale is the mental capacity required to enter contracts."46

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The Greenway opinion made clear that the level of dementia was not the factual issue being decided by the trial court. It was not a conservatorship proceeding. The sole issue before the court was whether or not Lyle had the required level of mental capacity, despite his diagnoses of dementia, to end the marriage.47

III. DUTY TO DISCOVER LACK OF CAPACITY

California case law historically has distinguished between testamentary capacity and contractual capacity. This distinction remains useful for discussion of trusts because both tests apply.48 What these historical cases ignore, however, is how fiduciary responsibilities may impose a higher requirement for capacity.

An attorney who prepares a will for a testator who lacks capacity does so at his or her own risk. Although no California case or ethical opinion has been found in which an attorney has been condemned for preparing a will for an incapacitated testator, the courts have commented approvingly when attorneys have refused to do so.49 The ethical committee of one local bar association has expressed the opinion that an attorney should not represent a client when the representation can be of little or no value to the client.50 The attorney, however, has no duty to beneficiaries under a will to determine and document evidence regarding the testamentary capacity of a client.51

In contrast, an attorney who has reason to suspect that a fiduciary-client’s capacity may be questioned should make some inquiries in the matter. The extent of these inquiries will depend on various factors, including the fiduciary’s apparent condition. If the circumstances of the representation raise doubts as to capacity and satisfactory medical evidence is otherwise unavailable, the attorney should make appropriate inquiries. The attorney may, for example, ask the fiduciary to describe the trust assets, to identify the beneficiaries, and to name and describe his or her relationship to the beneficiaries or related professionals. The attorney may also determine whether the fiduciary attends to his or her personal affairs and is capable of discussing business matters in a coherent fashion.52

If the attorney harbors doubts on the question of capacity, it may be appropriate to direct inquiries to other persons, including the fiduciary’s physicians, friends, and relatives. The attorney may also encourage the trustee to undergo an evaluation by a qualified professional. All of these steps, however, are subject to the attorney’s duty to the trustee-client to maintain confidentiality. This tension is the crux of the difficulty in representing a fading trustee. In short, the attorney may have a duty to the client to make some kind of inquiry and determination regarding that client’s capacity in order to provide the client with effective services. Not the least of these effective services would be protecting the trustee-client from liability claims resulting from the client’s fading capacity.

The Global Deterioration Scale ("GDS"), developed by Dr. Barry Reisberg, provides an overview of the stages of cognitive function for those suffering from a primary degenerative dementia such as Alzheimer’s disease.53 It is broken down into seven different stages.54 Stages 1-3 are the pre-dementia stages.55 Stages 4-7 are the dementia stages.56 Beginning in stage 5, an individual can no longer survive without assistance.57 Medical practitioners obtain guidance regarding an individual’s progress within the disease by observing that individual’s behavioral characteristics and comparing them to the GDS.58 Knowledge of the GDS might also be useful to lawyers with aging trustee clients.

The Functional Assessment Staging Test ("FAST") is a well-regarded measure of the course of Alzheimer’s disease in the scientific literature.59 FAST defines seven stages of Alzheimer’s disease, beginning with "normal aging" and progressing to "severe dementia."60 The FAST tool is used by mental health professionals to determine if changes in a patient’s condition are due to Alzheimer’s disease or another condition. A passing knowledge of this test may assist practitioners dealing with a fading trustee.61

The presence of mental deficits may be indicated by other telltale signs. For example, someone with dementia may demonstrate the following: a look of befuddlement, trouble grasping explanations, lack of spontaneity, reduced amount of speech, word-finding difficulty (e.g., calling a chair a "thing"), and vagueness.62 Nevertheless, an individual may be able to disguise a mental deficit. For example, someone with mild-to-moderate Alzheimer’s disease may hide intellectual impairments well, and there may be supportive friends or family who respond for the individual, thus obscuring deficits. In addition, many people with dementia retain an appearance of physical well-being and are quite sociable, thereby belying cognitive dysfunction.

There are commentators who assert that the attorney can effectively counsel the elderly client, whether as a fiduciary or otherwise, through an approach is known as "gradual counseling." These commentators believe that if the attorney is vigilant in following a careful process with a client of uncertain capacity, that client may nevertheless reach an informed decision.63

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The attorney for the limited client should engage the client in a process of gradual decision-making, which will involve clarification, reflection, feedback, and further investigation….Gradual counseling requires the attorney to repeatedly refer to the client’s goals and values in assessing each alternative and in discussing the pros and cons of an alternative. This will involve a great deal of clarifying and reflecting of the clients’ [sic] thoughts and feelings….The attorney should proceed to explain each relevant option and elicit the client’s reactions.64

"Gradual counseling" may be a compassionate and imaginative approach for advising an elderly client regarding the client’s personal affairs. This approach may not benefit the trustee with diminishing capacity whose duty to make timely decisions may prevent this leisurely method. The very fact that a trustee requires extra time to make a decision may serve as evidence that he or she is unable to comply with his or her fiduciary obligations.

A settlor-trustee’s capacity arises in the context of Probate Code section 15800’s requirement that "the person holding the power to revoke the trust is competent." Section 15800 uses the term "competent," which implies not only the physical ability to complete the necessary steps to revoke but also the mental capacity to understand the impact of doing so. This mental capacity involves "decisional capacity" (e.g., to execute a trust, enter into a contract, transfer property, sign a directive) at the time the decision is made or action taken. This faculty is distinct from "functional capacity" (e.g., to take care of personal needs, resist fraud or undue influence), which is sustained over a period of time. Unlike susceptibility to undue influence, which can have varying degrees, both decisional and functional capacity are threshold concepts: either the person is or is not "competent."65

Recent cases have begun to test the implications and reach of the statutory definitions. They have further eroded the notion that trustee owes a duty only to the settlor of a revocable trust.66 These cases have also impliedly laid the groundwork for permitting a pre-death will contest. When that case arrives, a sea change in California jurisprudence will have occurred. For the fading trustee, however, these cases demonstrate a present risk to challenge the trustee’s retention of office even when the trustee, as settlor, retains a power to revoke.

"[A]fter the settlor [of a revocable trust] dies, the beneficiaries have standing to sue the trustee for breach of the fiduciary duty committed while the settlor was alive and the trust was still revocable."67 The trust in Estate of Giraldin provided that the settlor was the only beneficiary during his lifetime, and in the event of the settlor’s incapacity, the trustee was to make liberal distributions for the settlor’s needs, and that the rights of remainder beneficiaries were to be of no importance.68 The trust also contained a provision that during the settlor’s lifetime, "the trustee shall have no duty to provide any information regarding the trust to anyone other than [settlor]."69 These provisions became important because the trustee was not the settlor, even though the settlor had retained the power to revoke.70

The court held that a while the trust was revocable, the trustee owed no fiduciary duties to the remainder beneficiaries, but solely to the settlor.71 The fact that the trustee owed no duty to the remainder beneficiaries while the trust remained revocable does not change after the settlor dies.72 Had the beneficiaries brought the action only for breach of duty owed to them, the court would have dismissed the case for lack of standing.73 Nevertheless, the court noted that a substantial thrust of the action and the trial court’s order concerned an alleged breach of the trustee’s fiduciary duty toward the settlor during his lifetime.74 The court held that the remainder beneficiaries did have standing to claim a violation of the trustee’s duty to the settlor.75 This standing was limited to situations in which the violation of fiduciary duty to the settlor harmed the beneficiaries.76

The Giraldin court made clear that—under Probate Code section 15800—while contingent remainder beneficiaries cannot request an account or pursue an action for breach of trust during the period the settlor is alive and competent, they can pursue such an action when their interests vest. Such vesting usually occurs on the settlor’s death. The action for breach of trust, however, cannot be for any alleged duty the trustee owed to the contingent beneficiaries during the settlor’s lifetime and competency, but rather "to assert a breach of fiduciary duty the trustee owed to the settlor to the extent that breach harmed the beneficiaries’ interests."77

If Probate Code section 15800 prevents a beneficiary from contesting a revocable trust when the settlor is competent, does that mean that a settlor must be judged "incompetent" before a beneficiary can bring a contest during a settlor’s lifetime? In addition, what happens if a beneficiary, believing a settlor to be incompetent, waits until after the settlor’s death to bring a contest? These issues can become relevant when a nominated successor seeks to replace the acting settlor-trustee.

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In Drake v. Pinkham, the settlor amended her revocable trust to remove Daughter Two as a co-trustee with Daughter One.78 Settlor then further amended her trust to disinherit Daughter Two.79 Daughter Two then petitioned the court (in 2005) to be appointed a successor co-trustee under the original trust, alleging that the settlor was "incompetent" at the time of the last two amendments and therefore Daughter Two could not be removed as a successor co-trustee.80 No finding of incompetency was made because the litigation was settled.81 The settlement agreement was adopted as an order of the court in August 2006.82

Settlor died in October 2009.83 Daughter Two then contested the trust amendment disinheriting her.84 The proponent (Daughter One) moved for summary judgment on the basis of expiration of the statute of limitations, collateral estoppel, and laches.85 The trial court granted summary judgment on the basis of the statute of limitations and collateral estoppel, but not laches.86 It found that Daughter Two was aware of the existence and terms of the trust amendments at the time of the earlier litigation and, because the settlor was allegedly incompetent at the time of the earlier litigation, Daughter Two would not have been prevented by Probate Code section 15800 from contesting the amendments at that time.87

On appeal the Court of Appeal upheld the trial court’s ruling, but not its legal basis.88 The appellate court held that by waiting until after the settlor’s death to bring a contest, the beneficiary had forfeited her right to contest the amendments under the doctrine of laches.89 The court acknowledged that Probate Code sections 17200 and 15800 limit the rights of beneficiaries to challenge a trust so long as the person holding the power to revoke the trust is competent.90 The Drake court determined it was not necessary that incompetence be established before a beneficiary challenges a trust; the mere allegation of incompetency takes the matter outside of the terms of section 15800.91 The prior allegation by Daughter Two of the settlor’s incompetency apparently gave her standing to challenge the amendments of which she was fully aware. That she had the burden of proving incompetency to maintain standing to pursue the present claims was not a valid excuse for her delay.92 The fact that there were merely allegations of incompetency, as opposed to a formal finding of incompetency, did not prevent the Drake court from finding Daughter Two’s claims were barred by the equitable doctrine.93

Drake is a troubling decision for several reasons. It impliedly burdens an adversely affected beneficiary with a duty to contest testamentary documents during the settlor’s life if that beneficiary acts in any way with regard to the settlor’s estate plan. The Drake court justified its rationale with the remarkable statement that Daughter Two’s "failure to bring the action until after [settlor] had passed away was necessarily prejudicial where…each and every cause of action set forth…centered on her [settlor’s] mental capacity, defendant’s influence over her, and her understanding of the [Trust] Amendments and her estate (citations)."94 This reasoning about the settlor applies to any will or trust contest; time will tell whether this misguided reasoning will fall into deserved obscurity or become the basis for a new approach to contests. Drake burdens an interested person who alleges "incompetence" of a settlor with the affirmative obligation to obtain a finding on that issue or find herself contesting a trust or will at a later time with a considerable disadvantage.

This theory has particular consequence when confronting a fading trustee. The essence of the concern is lack of capacity. If the fading trustee’s obstinacy requires the successor to resort to the judicial process for removal, the very fact of the proceeding may serve as collateral estoppel in a future action, even if the removal action is abandoned or settled. The risk is heightened when the successor trustee is also a beneficiary, as is often the case. In short, the successor fiduciary who is a beneficiary may have little choice but to pursue the action to obtain a finding of a (settlor) trustee’s "incompetence." So much for encouraging nonjudicial resolution of disputes.

Compare Drake with Johnson v. Greenelsh.95 In the latter case the no contest clause was at issue.96 The trustee served a notice of arbitration on the co-trustee, alleging that the settlor lacked the capacity to appoint the co-trustee and to withdraw assets from the family trust.97 The no contest clause did not contain any provisions indicating that it might apply to proceedings to determine a settlor’s mental capacity to exercise rights conferred by the trust document.98 The court held that the challenge to the settlor’s mental capacity was not a contest under the terms of the no contest clause because the trustee did not propose to void, nullify, or set aside the trust or any of its provisions, or to change provisions that were clearly and unambiguously expressed.99 In Johnson, the Supreme Court delineated between allegations of incapacity and the operative language of the governing instrument.

A. Toward a Fiduciary Capacity Standard

A threshold issue that will confront the court determining whether a trustee’s lack of capacity merits removal will be application of the appropriate standard under DPCDA’s sliding scale. Greenway,100 Anderson101 and Lintz102 all refer to the sliding scale. All three cases agree that testamentary capacity is a lower standard than contractual capacity. Where on this scale does a trustee’s fiduciary duty "to administer a trust in accordance with its terms"103 fall? The obligations to administer a trust require greater capacity than to execute a will; is that capacity less than that required to execute a contract? How can a trustee fulfill "the honor of a punctilio the most sensitive"104 with anything less than the highest level of capacity? Indeed, does not the sliding scale of DPCDA extend above contractual capacity to reach the greater capacity to serve as a fiduciary?

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The statutes and case law impose substantial obligations on a trustee. Failure to comply with those standards creates substantial liability exposure for the breaching fiduciary. These standards make no allowance for a trustee’s diminishing capacity. An aggrieved beneficiary may argue that a trustee who continues to serve despite his or her diminishing capacity has prima facie breached his or her fiduciary duty.

The assumption underlying the recent cases mentioned above (dealing with capacity to marry, testamentary capacity, and contractual capacity) has been that contractual capacity is the strictest of the standards on the sliding scale. However, the three enunciated categories differ starkly from a trusteeship: none involves a fiduciary relationship. Until persons marry, no fiduciary relationship exists between them. A testator or settlor has no fiduciary duty to the objects of his or her bounty. The essence of executing a contract is the arm’s-length transaction, and protecting one’s own self-interest, the antithesis of a fiduciary relationship.

A fiduciary is responsible for the best interest of another. Excusing a fiduciary’s breach due only to a level of diminished capacity ignores the entire jurisprudence applicable to trustees. A rational analysis leads to the conclusion that acting for another imposes a duty of greater awareness and responsibility, and therefore the necessary capacity must be higher than that required when acting in one’s own self-interest. The imaginative lawyer who argues this first case before the Court of Appeal may well be arguing that the contractual standard is not the final stop on DPCDA’s sliding scale.

IV. REMOVING A FADING TRUSTEE BY RESIGNATION, THE TRUST INSTRUMENT, OR COURT ORDER

Removal of a fading trustee by resignation is the best approach. The paradox arises when a person possessing sufficient capacity to acknowledge the need to resign may not be suffering from deficits of such severity as to qualify as incapacitated. (This reason is to be distinguished from a trustee who resigns due to ill health, lack of interest, or other reason unrelated to incapacity). Persuading a fading trustee to resign, however, is usually a challenging task. Other avenues will often need to be utilized.

A trustee may be removed according to the terms of a trust instrument.105 A thoughtfully-drafted trust instrument should anticipate and grant one or more persons the power to remove an incumbent trustee, for specified reasons or on specified contingencies. This power to remove is enforceable if exercise of the power conforms to the limitations in the instrument.106 Illustrative of this power is Rands v. Rands.107

The trust instrument in Rands provided that it was "irrevocable and unamendable" when settlor was unable "to act rationally and prudently in his or her own best interests financially" as determined by court order or certificates executed by two licensed physicians.108 Two such physicians declared that the settlor was "incompetent" and the court upheld the provisions in the trust that prevented the settlor from revoking the trust.109

The peculiar fact pattern in Rands was that one year following the certification of incapacity two different physicians certified that the settlor had capacity.110 The issue that was litigated was whether the second set of certifications revoked the first set. The trial court and Court of Appeal held that it did not.111 The opinions turned on the factual issue that the second set of physicians had no knowledge of the finding of the first set of certifications. Since the second set of doctors were unaware of the previous finding of incapacity, their findings could not revoke the prior certification.112

Nevertheless, the important implication of Rands is that the instrument’s mechanism for defining incapacity will be honored by the court. Absent an egregious set of facts, the court will defer to the settlors if they have gone to the effort of defining incapacity for purposes of the instrument.

A trustee may be removed by a settlor, co-trustee, or beneficiary by a petition filed pursuant to Probate Code, section 17200.113 A trustee may be removed under Probate Code, section 15642, if as determined under DPCDA the trustee is substantially unable to manage the trust’s financial resources or is otherwise substantially unable to properly execute the duties of office,114 or the trustee is substantially unable to resist fraud or undue influence.115 The court can remove a trustee as a preventative measure, not to inflict a penalty for past action, but to preserve trust assets.116 The court also can, in its discretion, appoint a "trustee ad litem" for the sole purpose of handling certain litigation, rather than removing the trustee.117

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V. ETHICAL ISSUES WHEN REPRESENTING A FADING TRUSTEE

An obvious tension can exist for an attorney between wanting to do what is best for a fading settlor-trustee and the professional and ethical duties that are owed to that client. If the fading trustee in question is the client, resignation is the most palatable solution. If the fading trustee is not the client, then the attorney may need to resort to the solutions of removal pursuant to the trust instrument or judicial process.

The attorney is a fiduciary and agent of the client. Accordingly, the attorney is subject to the general laws that apply to agents,118 as well as the ethical rules and fiduciary duties applicable to attorneys in their relationship with clients.

In many states, courts hold that the lawyer for a fiduciary has a duty to non-client beneficiaries.119 The duty is described as derivative of the fiduciary’s duties to the beneficiaries. These courts often point out in support of this duty that the lawyer is being paid from assets of the estate.

The American College of Trust and Estate Counsel ("ACTEC") Commentaries to ABA Model Rule 1.4120 explain that if a lawyer is retained to represent a fiduciary generally with respect to the fiduciary estate, the lawyer represents the fiduciary in a representative and not an individual capacity—the ultimate objective of which is to administer the fiduciary estate for the benefit of the beneficiaries. Giving recognition to the representative capacity in which the lawyer represents the fiduciary is appropriate because in such cases the lawyer is retained to perform services that benefit the fiduciary estate and, derivatively, the beneficiaries—not to perform services that benefit the fiduciary individually. The nature of the relationship is also suggested by the fact that the fiduciary and the lawyer for the fiduciary are both compensated from the fiduciary estate. Under some circumstances it is appropriate for the lawyer also to represent one or more of the beneficiaries of the fiduciary estate.

In California, however, the rule has been to the contrary. The potential exceptions represented by Moeller, Borisoff, and Stine121 create ambiguity to this rule. California courts hold that when an attorney represents a fiduciary, such as an executor or trustee, the attorney’s client is the fiduciary, in her capacity as a fiduciary.122 Neither a trust nor an estate can be the client, because neither is a legal person, but rather the terminology is merely descriptive of a fiduciary relationship with property.123

The beneficiary is not the client either, because the beneficiary and the fiduciary are distinct legal persons with distinct legal interests.124 The Supreme Court has held that beneficiaries are not entitled to communications between the fiduciary and her attorney.125 The principle that no duty exists between the fiduciary’s attorney and the beneficiaries has been approved in later cases.126 Although many states consider that the attorney for the fiduciary has a duty to the beneficiaries that is derivative of the fiduciary’s duty to beneficiaries, California imposes no such duty.

An absence of civil liability does not imply an absence of responsibility, however. After a trustee’s resignation or removal, the successor trustee generally becomes the holder of the attorney-client privilege with respect to "confidential communications that occurred when the predecessor, in its fiduciary capacity, sought the attorney’s advice for guidance in administering the trust."127 The successor trustee is entitled to discover the predecessor’s attorney-client communications on matters of trust administration and is free to waive the privilege to permit disclosure to others, including beneficiaries. Nevertheless, the successor trustee cannot discover all the predecessor’s attorney-client communications. The previous trustee retains the privilege regarding advice sought for its own protection.128 The prudent previous trustee would pay for such advice from its own assets, rather than the trust estate. Paying for personal advice from personal funds will solidify the protected nature of the advice received.

VI. DRAFTING REMEDIES TO ANTICIPATE THE CIRCUMSTANCE OF THE FADING TRUSTEE

Thoughtful drafting of incapacity provisions can ease the succession process when the trustee suffers from diminishing capacity. The instrument can provide for multiple methods of determining incapacity, rather than only one. It can also prioritize those methods; if the first is unavailable or unworkable or unsatisfactory, then the second can be used, then the third, and so on, until all articulated methods are exhausted, compelling resort to the judicial process.

The traditional drafting approach has been to authorize two physicians to certify to the settlor’s or trustee’s incapacity. This method appears to have become the preferred choice from inertia, rather than thoughtful consideration. A difficulty with this approach can be the unreliability of the determination, as occurred in Rands. That case also highlights a defect in the traditional language: at the very least the certifying physician should be an attending physician to the affected individual; allowing physicians unfamiliar with the settlor or trustee to make such determinations seems careless at best. Another difficulty is locating two willing physicians. The author’s prime criticism with this approach, however, is that such language insists that medical professionals render legal opinions. The legal determination of capacity, whether limited to functional decisions or pertaining to a person’s full range of abilities, is the province of the courtroom. A trust administration will indeed approach the bizarre when lawyers look to doctors for legal determinations.

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An approach that the author has found works well across a spectrum of families is the "committee" method. This committee is comprised of an agreed number of persons, and can consist of the spouse of the settlor/trustee (if living and with capacity), the nominated successor trustee (other than the spouse), a trusted business relation or family friend, and the attending physician. Other persons familiar with the individuals involved can also participate. The required vote can be a majority or unanimous. The language should include the incapacity standard that the committee is expected to apply. The standard can be as straightforward as "an inability to administer the trust in a diligent, conscientious and timely manner." The particular definition to be used in the trust instrument at hand should be discussed and agreed upon with the client. An example of such language can be found in the "Sample Provisions" at the end of this article.

Another approach is the mental evaluation approach. This approach is a variation on the "two physician" approach discussed above. The examining physicians are specified, however, to be two licensed physicians who conduct mental capacity evaluations of individuals as a regular part of their practice. The trust language can further refine the definition of examining physicians to limit the category to gerontologists, whether licensed physicians or clinical psychologists, specializing in capacity evaluations of persons over the age of sixty. The trust instrument can require further that the certification of incapacity be in writing.

As a corollary to the mental evaluation approach, the trust instrument should contain language addressing privacy concerns, both statutory and personal. That language would specify that a settlor, or a trustee, whose capacity is in question would waive the protections of the Health Insurance Portability and Accountability Act of 1996,129 ("HIPAA") and the regulations thereunder, including 45 C.F.R. sections 160 through 164. To avoid any dispute concerning these disclosures, the suggested language could also be made specifically enforceable. The trust instrument should also make clear that the results of the examination would not be privileged from disclosure for the purpose of determining the affected person’s capacity. To anticipate the uncooperativeness of a recalcitrant settlor-trustee, the trust instrument should provide that the settlor, by executing the trust instrument, agrees in advance to cooperate in any examination reasonably appropriate to determine that settlor’s capacity.

Similar advance consent can be imposed on any non-settlor trustee who accepts trusteeship. In short, a trustee who agrees to administer the trust in question agrees in advance to submit to the mental examination, with all of its waivers, if that trustee’s capacity becomes an issue.

VII. CONCLUSION

The legal, psychological, and interpersonal consequences of dealing with a fading trustee are the new frontier confronting lawyers in trust administration. The law’s bias will be to require the person or persons seeking removal of a trustee to submit evidence that the deficits bear directly on and adversely influence the fiduciary’s ability to administer the trust. When the inevitable case arrives at the Court of Appeal, the author hopes that the Court will apply DPCDA’s "sliding scale" to impose a requirement of capacity greater than that necessary to contract.

A lawyer whose client-trustee is exhibiting symptoms of diminishing capacity will find himself or herself in an awkward ethical quandary. The lawyer’s ability to communicate his or her concern about the client is severely circumscribed by the California rules of professional responsibility. The best defense for these lawyers is to encourage the active participation of close friends and family members with the trustee. Having concerned (but nonprofessional) individuals paying attention to the mental condition of the fading trustee may also ameliorate these ethical limitations.

Anticipating the possibility of a fading trustee with flexible and responsive trust provisions appears to be the preferred solution. A variety of methods is available, some of which have been highlighted in this article. The author is confident that as practitioners far more imaginative then he consider this problem, even more creative solutions will be devised.

SAMPLE PROVISIONS

A. Definition of Incapacity

As used in this instrument, "incapacity" or "incapacitated" means a person operating under a legal disability such as a duly established conservatorship, or a person who is determined to be incapacitated under the further provisions of this section:

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(1) A person may be determined to be "incapacitated" or suffer from "incapacity" if any of the following circumstances applies:

(a) The person is unable to provide properly for that person’s own needs for physical health, food, clothing, or shelter; or
(b) If the person whose capacity is in question is a trustee or cotrustee, the judgment of a majority of the persons identified in subsection "(2)" below regarding the capacity of the trustee or cotrustee is another method by which that person may be deemed "incapacitated" or deemed to suffer from "incapacity" for the purposes of this instrument; or
(c) The person is unable to manage substantially that person’s own financial resources, or resist fraud or undue influence; or
(d) The court makes a finding that the person is either temporarily or permanently incapacitated under the criteria set forth in Probate Code section 810, et seq.

(2) The certification of incapacity may be made by a committee acting unanimously determining that the person is incapacitated under the standard set forth in this section; the committee shall be composed of the following individuals:

(a) One attending physician licensed to practice under the laws of the state where the settlors are domiciled at the time of the certification; and
(b) A settlor other than a settlor whose capacity is at issue, or if no settlor is able to make a timely determination, by the successor trustee named in this instrument; and
(c) Any of the settlors’ adult children who is not otherwise serving on the committee; and
(d) [Add appropriate others]

The certification must be made by each committee member in a written declaration under penalty of perjury.
(3) In case of temporary incapacity of a sole trustee, the successor trustee designated under this instrument will serve during the period of temporary incapacity as though he or she were the only trustee. In case of temporary incapacity of a cotrustee, the other cotrustee will make any and all decisions during the period of temporary incapacity as though that cotrustee were the only trustee.
(4) Any trustee deemed to be temporarily incapacitated is permanently incapacitated 90 days after the determination of temporary incapacity unless a determination of capacity is made within that 90-day period. If a determination of capacity is made, the trustee may resume serving as trustee. If there is a subsequent determination of incapacity, the trustee has another 90-day period to obtain a determination of capacity.
(5) Any successor trustee or cotrustee serving in place of a temporarily incapacitated trustee is not relieved of liability until that trustee’s account has been settled or an account has been waived by all current beneficiaries of the trust.
(6) Each individual trustee agrees to cooperate in any examination reasonably necessary for the purpose of determining capacity, agrees to waive the doctor-patient privilege in respect to the results of such examination, and agrees to provide written authorization in compliance with the privacy regulations under the Health Insurance Portability and Accountability Act of 1996 (42 USC section 1320(d)) and the provisions of California Civil Code section 56.10 for the disclosure and use of that trustee’s health information and medical records to the extent that such disclosure and use are necessary to make a determination of the trustee’s capacity. Refusal to submit to the examination, to provide the waiver, or to provide the written authorization when requested by the successor trustee and the current beneficiaries of the trust shall be deemed a resignation by that trustee.
(7) If any trustee or any beneficiary whose capacity is in question disputes the determination of incapacity under any of the standards listed above, such person may petition the court for a finding regarding that person’s capacity. The court’s finding shall be conclusive. If the court determines that the trustee or other person whose capacity is in question has capacity, the trust property bears all expenses associated with the examination or court proceeding. If the court sustains the determination of incapacity, the individual challenging the determination of incapacity bears all expenses of the examination or court proceeding.

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B. Removal of Individual Due to Incapacity

Any individual who is deemed incapacitated, as defined in Paragraph ___, shall cease to serve as a trustee of all trusts administered under this document. Each individual who agrees to serve as a trustee of any trust administered under this document (A) shall cooperate in any examination reasonably appropriate to carry out the provisions of this Paragraph ___, (B) waives the doctor-patient and/or psychiatrist-patient privilege with respect to the results of such examination, and (C) shall allow a co-trustee or the current beneficiaries of the trust to review the individual’s individually identifiable health information or other medical records, waiving any privacy rights governed by the Health Insurance Portability and Accountability Act of 1996, 42 USC section 1320(d) (HIPAA), and the regulations thereunder, including 45 CFR sections 160-164, to the extent required to implement this Paragraph ___. An individual’s obligation to comply with the provisions of this Paragraph ___ is specifically enforceable.

C. Removal of Trustee for Cause

1. Majority Beneficiaries May Remove Trustee For Cause

The majority beneficiaries of any trust may remove any trustee thereof for reasonable cause by delivering written notice of the removal that specifies the reasonable cause for the removal to all persons then serving as trustee, to the replacement trustee and to all other current beneficiaries of the trust.

2. Causes for Removal

As used in this Paragraph ___, the term "reasonable cause" includes (A) the incapacity of the trustee as provided in Paragraph ___, (B) the willful or negligent mismanagement of the trust assets by the trustee, (C) the abuse or abandonment of, or inattention to, the trust by the trustee, (D) a federal or state charge against the trustee involving the commission of a felony or serious misdemeanor, (D) an act of stealing, dishonesty, fraud, embezzlement, moral turpitude, or moral degeneration by the trustee, (F) substance abuse by the trustee, (G) the trustee’s poor physical, mental, or emotional health which causes the trustee to be unable to devote sufficient time to administer the trust, (H) the trustee’s failure to comply with a written agreement regarding compensation or any other legally enforceable written agreement affecting the trust’s operation, (I) a demand for at least five (5) years of experience in administering trusts to handle the account, (K) unreasonably high turnover of account officers assigned to the trust (unless requested by the majority beneficiaries), (L) unreasonably poor investment performance, (M) the removal of all current beneficiaries from the state in which the corporate trustee is licensed to conduct business as a corporate trustee, (N) the relocation of the trustee away from the location where the trust operates so as to interfere with the administration of the trust, (O) unreasonable lack of communication between the trustee and the current beneficiaries, (P) unreasonably inaccurate or unclear transaction statements or statements of account, (Q) unreasonable conflicts between the trustee and the current beneficiaries caused by the trustee, (R) merger, acquisition, or a deteriorating financial condition of a corporate trustee, or (S) any other reason for which a court of competent jurisdiction would remove a trustee.

D. Incapacity

"Incapacity" and derivations thereof mean incapable of managing an individual’s affairs under the criteria set forth in California Probate Code, section 810, et seq. An individual shall be deemed to be incapacitated if any of the following conditions exist: (a) the individual’s regular attending physician (provided such physician is not related by blood or marriage to any trustee or beneficiary) examines the individual and certifies in writing that the individual is incapacitated, (b) two licensed physicians who, as a regular part of their practice are called upon to determine the capacity of others, and neither of whom is related by blood or marriage to any trustee or beneficiary, examine the individual and certify in writing that the individual is incapacitated, or (c) an order of the court having jurisdiction over the trust as to which the individual is service as a trustee or as to which the individual is a beneficiary, as the case may be, finds that the individual is incapacitated. The expenses of any examination or court proceeding to determine if any individual is incapacitated shall be paid (i) if the individual is a settlor, from all trusts established under this document revocable by him or her, and (ii) if the individual is a trustee but not a current beneficiary other than a settlor, from all trusts established under this document with respect to which he or she is a current beneficiary, and (iii) if the individual is a trustee but not a current beneficiary under this document, from all trusts administered under this document as to which the individual is serving as a trustee, in each case in proportion to the relative values of the trusts from which payment is to be made.

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*Hartog & Baer, Orinda, California

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——–

Notes:

1. The author thanks Dan Leahy, of Orinda, California for his assistance in the preparation of this article. The author is grateful to Albert Handelman of Santa Rosa, California, and Margaret Roisman of Oakland, California, for their review and comments on the draft of this article.

2. Administration on Aging, U.S. Dept. of Health and Human Services Report, A Profile of Older Americans: 2011 (2011) < http://www.aoa.gov/Aging_Statistics/Profile/2011/docs/2011profile.pdf > (as of Feb. 25, 2015).

3. California Governor’s Budget Summary 2014-15 to Sen. and Assem. (Jan. 20, 2014) < http://www.dof.ca.gov/documents/FullBudgetSummary_2014.pdf > (as of Feb. 25, 2015).

4. Badkar, We’re On The Verge Of The Greatest Transfer Of Wealth In The History Of The World (June 12, 2014) Business Insider < http://www.businessinsider.com/biggest-transfer-of-wealth-in-history-2014-6 > (as of Feb. 26, 2015).

5. Meinhard v. Salmon (1928) 249 N.Y. 458, 464 [164 N.E. 545, 546].

6. Voltaire, Candide (1759).

7. Am. College of Trust and Estate Counsel, ACTEC Commentaries on the Model Rules of Professional Conduct < http://www.actec.org/public/CommentariesPublic.asp > (as of Feb. 26, 2015); ABA Model Rules Prof. Conduct, rule 1.2.

8. Ibid.

9. ABA Model Rules Prof. Conduct, rule 1.14.

10. See Moore v. Anderson Zeigler Disharoon Gallagher & Gray (2003) 109 Cal.App.4th 1287; Cal. Rules of Prof. Conduct, rule 2-100, 3-100.

11. See Borissoff v. Taylor & Faust (2004) 33 Cal.4th 523; Stine v. Dell’Osso (2014) 230 Cal.App.4th 834.

12. Prob. Code, section 810, subd. (a).

13. Prob. Code, section 810, subd. (c).

14. See Walsh et al., Mental Capacity: Legal and Medical Aspects of Assessment and Treatment (2d ed. 1994) section 2.02.

15. See, e.g., 38 C.F.R. section 3.353, subd. (a) (stating that "A mentally incompetent person is one who because of injury or disease lacks the mental capacity to contract or to manage his or her own affairs, including disbursement of funds without limitation").

16. Prob. Code, sections 810, 811, 812, 813, 1801, 1881, 3201, and 3204.

17. Hankin, A Brief Introduction to the Due Process in Competence Determinations Act: A Statement of Legislative Intent (Winter 1995) Vol. 1, No. 4, Cal. Trusts and Estates Quarterly 36.

18. Prob. Code, section 810, subd. (c).

19. Prob. Code, section 811, subd. (b).

20. Prob. Code, section 811, subd. (c).

21. Prob. Code, sections 810, subd. (c), 811.

22. Fitzsimmons, Legal Mental Capacity – A Psychiatrist’s Perspective (Winter 2009) San Francisco Atty., 34.

23. Prob. Code, section 811, subd. (a)(2)(F).

24. Prob. Code, section 811, subd. (a)(2)(A).

25. Prob. Code, section 811, subd. (a)(3).

26. http://en.wikipedia.org/wiki/Hallucination (as of Mar. 11, 2015).

27. Prob. Code, section 811, subd. (a)(4).

28. Ibid.

29. Ibid.

30. American Psychiatric Association, Diagnostic and Statistical Manual of Mental Disorders (5th ed. 2013) at p. 411.

31. Clayton et al., Representing Clients with Diminishing Capacity, Assessing the Susceptibility to Undue Influence: Evaluation Tools and Interview Techniques (Oct. 2014) 34th Southern California Tax and Estate Planning Forum.

32. Prob. Code, section 811, subd. (b).

33. Prob. Code, section 811, subd. (d).

34. Prob. Code, section 811, subd. (c).

35. Prob. Code, section 811, subd. (c).

36. See Prob. Code, section 811, subd. (a).

37. In re Marriage of Greenway (2013) 217 Cal.App.4th 628.

38. Ibid.

39. In re Marriage of Greenway, supra, 217 Cal.App.4th at 631.

40. Ibid.

41. Ibid.

42. Ibid.

43. In re Marriage of Greenway, supra, 217 Cal.App.4th at 636.

44. Id. at pp. 637-638.

45. Id. at p. 639.

46. Ibid.

47. In re Marriage of Greenway, supra, 217 Cal.App.4th at 639.

48. See Lintz v. Lintz (2014) 222 Cal.App.4th 1346; Andersen v. Hunt (2011) 196 Cal.App.4th 722, 729; Walton v. Bank of California (1963) 218 Cal.App.2d 527, 541.

49. See Estate of Morgan (1964) 225 Cal.App.2d 156, 160-161, 169; Estate of Halbert (1947) 80 Cal.App.2d 666, 671.

50. Los Angeles County Bar Assn., formal opn. No. 448 (1987).

51. See, e.g., Moore v. Anderson Zeigler Disharoon Gallagher & Gray (2003) 109 Cal.App.4th 1287.

52. See Estate of Doty (1949) 89 Cal.App.2d 747, 751.

53. Reisberg, et al., The Global Deterioration Scale for Assessment of Primary Degenerative Dementia (1982) 139 Am. J. of Psychiatry at pp. 1136-1139.

54. Ibid.

55. Ibid.

56. Ibid.

57. Ibid.

58. Ibid.

59. Reisberg, Functional Assessment Staging (1988) 24 Psychopharmacology Bulletin 653, 653-659 (hereafter "FAST").

60. Ibid.

61. Ibid.

62. Plassman, et al., Prevalence of Dementia in the United States: The Aging, Demographics, and Memory Study, (2007) 29 Neuroepidemiology at pp. 125-132.5.

63. Smith, Representing the Elderly Client and Addressing the Question of Competence (1988) 14 J. of Contemporary L. 61, 90, 92.

64. Id. at pp. 92-96.

65. See Streisand and Spar, A Lawyer’s Guide to Diminishing Capacity and Effective Use of Medical Experts in Contemporaneous and Retrospective Evaluations (Winter 2008) 33 ACTEC J. 180.

66. See. e.g., Estate of Giraldin (2012) 55 Cal.4th 1058; Drake v. Pinkham (2013) 217 Cal.App.4th 400.

67. Estate of Giraldin, supra, 55 Cal.4th at p. 1062.

68. Ibid.

69. Id. at p. 1063.

70. Id. at p. 1065.

71. Estate of Giraldin, supra, 55 Cal.4th at p. 1066-67.

72. Id. at p. 1068.

73. Id. at p. 1066.

74. Id. at p. 1076.

75. Ibid.

76. Ibid.

77. Estate of Giraldin, supra, 55 Cal.4th at p. 1076.

78. Drake v. Pinkham (2013) 217 Cal.App.4th 400.

79. Ibid.

80. Ibid.

81. Ibid.

82. Id. at p. 404.

83. Drake v. Pinkham, supra, 217 Cal.App.4th at p. 404.

84. Ibid.

85. Ibid.

86. Ibid.

87. Ibid.

88. Drake v. Pinkham, supra, 217 Cal.App.4th at p. 404.

89. Id. at pp. 406-409.

90. Id. at p. 408.

91. Ibid.

92. Ibid.

93. Ibid.

94. Drake v. Pinkham, supra, 217 Cal.App.4th at p. 409.

95. Johnson v. Greenelsh (2009) 47 Cal.4th 598.

96. Ibid.

97. Ibid.

98. Ibid.

99. Ibid.

100. In re Marriage of Greenway, supra, 217 Cal.App.4th 628.

101. Anderson v. Hunt, supra, 196 Cal.App.4th 722.

102. Lintz v. Lintz, supra, 222 Cal.App.4th 1346.

103. Prob. Code, section 16000.

104. Meinhard v. Salmon, supra, 249 N.Y. at p. 464.

105. Prob. Code, section 15642.

106. Rest.3d Trusts, section 37.

107. Rands v. Rands (2009) 178 Cal.App.4th 907.

108. Rands v. Rands, supra, 178 Cal.App.4th at p. 909.

109. Ibid.

110. Rands v. Rands, supra, 178 Cal.App.4th at p. 911.

111. Id. at pp. 913-914.

112. Ibid.

113. Prob. Code, section 15642, subd. (a).

114. Prob. Code, section 15642, subd. (b)(7).

115. Prob. Code, section 15642, subd. (b)(8).

116. Getty v. Getty (1988) 205 Cal.App.3d 134, 139.

117. Id. at p. 141.

118. Civ. Code, section 2296, et seq. (Law of Agency).

119. Am. College of Trust and Estate Counsel, ACTEC Commentaries on the Model Rules of Professional Conduct < http://www.actec.org/public/CommentariesPublic.asp > (as of Feb. 26, 2015); Model Rule 1.14.

120. Am. College of Trust and Estate Counsel, ACTEC Commentaries on the Model Rules of Professional Conduct < http://www.actec.org/public/Commentaries1.4.asp > (as of Feb. 26, 2015).

121. Moeller v. Superior Court (1997) 16 Cal.4th 1124; Borissoff v. Taylor & Faust, supra, 33 Cal.4th 523; Stine v. Dell’Osso, supra, 230 Cal.App.4th 834.

122. Moeller v. Superior Court, supra, 16 Cal.4th at p. 1130; Fletcher v. Superior Court (1996) 44 Cal.App.4th 773, 777.

123. Rest.2d Trusts, section 2.

124. Wells Fargo Bank v. Superior Court (2000) 22 Cal.4th 201, 212; Lasky, Haas, Cohler & Munter v. Superior Court (1985) 172 Cal. App.3d 264, 282.

125. Wells Fargo Bank v. Superior Court, supra, 22 Cal.4th at p. 212.

126. Johnson v. Superior Court (1995) 38 Cal.App.4th 463; Lasky, Haas, Cohler & Munter v. Superior Court, supra, at p. 282 (court denied beneficiaries access to work product of attorney for trustee, explaining beneficiaries are not clients of trustee’s attorney); Saks v. Daimon Raike & Co. (1992) 7 Cal.App.4th 419 (rejecting negligence claim by beneficiary against trustee’s attorney); Sullivan v. Dorsa (2005) 128 Cal.App.4th 947.

127. Moeller v. Superior Court, supra, 16 Cal.4th 1124 at p. 1134.

128. Wells Fargo Bank v. Superior Court, supra, 22 Cal.4th at p. 209.

129. 42 U.S.C. section 1320(d).