Mcle Self-study Article Better Late Than Never, but Never Late Is Better: Analyzing the Timing of Certificates of Review for Gifts to Care Custodians

• Jurisdiction: United States,Federal
• Citation: Vol. 29 No. 2
• Publication year: 2023
• Author: Written by Jarom B. Phipps, Esq.*
• topic: Trust Law

MCLE SELF-STUDY ARTICLE BETTER LATE THAN NEVER, BUT NEVER LATE IS BETTER: ANALYZING THE TIMING OF CERTIFICATES OF REVIEW FOR GIFTS TO CARE CUSTODIANS

Written by Jarom B. Phipps, Esq.*

I. INTRODUCTION

Does it matter when an attorney completes the certificate of independent review for a gift to a care custodian in relation to when the dependent adult executes the transfer document? Getting the answer correct is important because a certificate that fails to comply with Probate Code section 21384 makes the donative transfer to the care custodian presumptively invalid.⁰¹ That statute is silent on the certificate's timing, although its language implies that the attorney is to complete the certificate before the dependent adult executes the transfer document.⁰² Still, it is not uncommon for such certificates to be finished after the dependent adult has already put pen to paper, even if only by a few days. Severe consequences may occur if the timing of the certificate is such that it fails to remove the presumption of undue influence. Not only could the intended gift fail, but the drafting and reviewing attorneys could face professional negligence claims regardless of whether the would-be-beneficiary is able prove that no undue influence occurred.⁰³ Provided below is a statutory analysis of Probate Code section 21384 and procedures that attorneys can implement to keep both clients and malpractice carriers satisfied.

II. OVERVIEW OF PROBATE CODE SECTIONS 21380 AND 21384

Probate Code section 21380 makes a "donative transfer" from a "dependent adult" to their "care custodian" presumptively invalid as the product of undue influence unless there is a certificate of independent review that complies with Probate Code section 21384. A donative transfer has been interpreted to mean not only a gift for zero consideration, but also a transfer for unfair or inadequate consideration.⁰⁴ A dependent adult is statutorily defined as a person who, at the time the instrument was signed, was at least age 65 and was either (1) unable to provide properly for his or her personal needs for physical health, food, clothing, or shelter; or (2) due to one or more deficits in the mental functions listed in Probate Code section 811, had difficulty managing his or her own financial resources or resisting fraud or undue influence.⁰⁵Dependent adults also include any person over age 18 who either (1) is unable to provide properly for his or her personal needs for physical health, food, clothing, or shelter; or (2) due to one or more deficits in the mental functions listed in Probate Code section 811, has substantial difficulty managing his or her own financial resources or resisting fraud or undue influence.⁰⁶ Thus, dependent adults are those who are more vulnerable to undue influence because of either physical or mental limitations.

A care custodian is a person who provides "health and social services" to a dependent adult, but excludes persons who provided services without remuneration if the person had a personal relationship with the dependent adult (1) at least ninety days before providing services, (2) at least six months before the dependent adult's death, and (3) before the dependent adult was admitted to hospice care.⁰⁷

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"Health and social services" means services provided to a dependent adult because of the person's condition, including, but not limited to, the administration of medicine, medical testing, wound care, assistance with hygiene, companionship, housekeeping, shopping, cooking, and assistance with finances.⁰⁸ As such, care custodians are commonly persons who come to know the dependent adult in the context of being hired to provide caregiving services. The gift to the care custodian is presumptively invalid if the instrument making the gift was executed during the period in which the care custodian provided services to the dependent adult, or within ninety days before or after that period.⁰⁹

However, the gift to the care custodian is not presumptively invalid if the dependent adult obtains a certificate of review that complies with Probate Code section 21384.¹⁰ To be compliant, an attorney must review the transfer document, properly counsel the dependent adult about the transfer, attempts to determine whether the intended transfer is the result of fraud or undue influence and, if the intended transfer is not the result of fraud or undue influence, sign a "Certificate of Independent Review" in compliance with the following:

(a) A donative transfer is not subject to Section 21380 if the instrument is reviewed by an independent attorney who counsels the transferor, out of the presence of any heir or proposed beneficiary, about the nature and consequences of the intended transfer, including the effect of the intended transfer on the transferor's heirs and on any beneficiary of a prior donative instrument, attempts to determine if the intended transfer is the result of fraud or undue influence, and signs and delivers to the transferor an original certificate in substantially the following form:
"CERTIFICATE OF INDEPENDENT REVIEW I, __________(attorney's name), have reviewed __________(name of instrument) and have counseled the transferor, __________(name of transferor), on the nature and consequences of any transfers of property to __________(name of person described in Section 21380 of the Probate Code) that would be made by the instrument.
I am an "independent attorney" as defined in Section 21370 of the Probate Code and am in a position to advise the transferor independently, impartially, and confidentially as to the consequences of the transfer.
On the basis of this counsel, I conclude that the transfers to __________(name of person described in Section 21380 of the Probate Code) that would be made by the instrument are not the product of fraud or undue influence.
__________
(Name of Attorney)"
__________
(Date)

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(b) An attorney whose written engagement, signed by the transferor, is expressly limited solely to compliance with the requirements of this section, shall not be considered to otherwise represent the transferor as a client.
(c) An attorney who drafts an instrument can review and certify the same instrument pursuant to this section, but only as to a donative transfer to a care custodian. In all other circumstances, an attorney who drafts an instrument may not review and certify the instrument.
(d) If the certificate is prepared by an attorney other than the attorney who drafted the instrument that is under review, a copy of the signed certification shall be provided to the drafting attorney.¹¹

Thus, a transfer between a dependent adult and a care custodian is presumed invalid unless there is a certificate of independent review signed by either an independent attorney or the drafting attorney that complies with section 21384.

If there is no qualifying certificate of review or other statutory exception (e.g., certain gifts of less than $5,000 or a care custodian who is closely related by blood to the dependent adult),¹² the gift—but not necessarily the entire estate planning document—is invalid, unless the care custodian can rebut the presumption of undue influence.¹³To rebut the presumed invalidity of the gift, the care custodian must prove by clear and convincing evidence that the donative transfer was not the result of undue influence.¹⁴ Proving a negative—that one did not unduly influence another—is extremely difficult, especially when the dependent adult or other key witnesses may by then be deceased.

III. THE TIMING ISSUE

Probate Code section 21384 does not expressly state when the review must be completed or when the certificate must be executed to remove the presumption of undue influence for a gift from a dependent adult to their care custodian. Many factors may lead to a certificate being accomplished after the dependent adult signs the transfer document. For example, the dependent adult may desire to conclude their estate plan as quickly as possible, especially if they are on hospice care. In some situations, the drafting attorney may not discover until after the transfer document is signed that the recipient of the gift qualifies as a care custodian. A certificate of independent review may also require coordination with a separate attorney. Consequently, there could be a miscommunication between attorneys, or the reviewing attorney may become delayed and require additional time to read the documents and meet with the dependent adult.

Another possible reason for after-the-fact certificates may stem from a nuance with the certificate process related to care custodians acting as trustees. Probate Code section 15642 authorizes removal when a care custodian is serving as the sole trustee of a trust for a dependent adult, unless an attorney signs a certificate of independent review that complies with Probate Code section 15642.¹⁵ The certificate of independent review process in section 15642 is very similar to the certificate process for gifts to care custodians in Probate Code section 21384. Both sections have template forms embodied in the statute, and require the reviewing attorney to counsel the dependent adult about the nature of the intended action.¹⁶ One important difference is that section 15642 states that, for certificates relating to trustee nominations, "This independent review and certification may occur either before or after the instrument has been executed, and if it occurs after the date of execution, the named trustee shall not be subject to removal under this paragraph."¹⁷ No such timing language is provided in section 21384 concerning certificates for gifts to care custodians. As such, attorneys who have completed certificates of review for trustee nominations may be completing after-the-fact certificates for gifts to care custodians based on their understanding of section 15642's flexible timing rules.

Whatever the reason, certificates of independent review are sometimes signed after the...