Sleepless Nights for Estate Planning Attorneys: What to Do About the Care Custodian Statute

• Publication year: 2007
• Author: By Neil F. Horton

SLEEPLESS NIGHTS FOR ESTATE PLANNING ATTORNEYS: WHAT TO DO ABOUT THE CARE CUSTODIAN STATUTE

By Neil F. Horton^*

I. INTRODUCTION

Estate planning attorneys should worry about naming non-family members as beneficiaries under their clients' revocable trusts and wills. A gift to a non-family member may be an invalid gift to a "disqualified person" under Probate Code section 21350. That section invalidates any provision in an instrument making a donative transfer from a "dependent adult" to a "care custodian."¹ The terms "dependent adult" and "care custodian" are so broad as to threaten the validity of most gifts from clients over age 64 to non-family members.

This article will (a) analyze the broad statutory definitions of "dependent adult" and "care custodian," (b) list the exceptions that apply to validate certain gifts from dependent adults to care custodians, (c) examine the exception relating to a certificate of independent review,² (d) look at the meager alternative methods for carrying out the wishes of a client who wants to make a testamentary gift to one who arguably is a care custodian, and (e) mention the prospects for legislative relief.

II. WHO IS A "DEPENDENT ADULT"?

The term "dependent adult" for purposes of the statutory invalidation of donative transfers to a "care custodian" is defined by incorporating provisions from the Welfare and Institutions Code.³ There, the purpose of those provisions is to protect dependent adults by requiring persons to report known or suspected cases of elder abuse.⁴ A "dependent adult" is any adult, over age 64, residing in California, "who has physical or mental limitations that restrict his or her ability to carry out normal activities or to protect his or her rights, including, but not limited to, persons who have physical or developmental disabilities, or whose physical or mental abilities have diminished because of age."⁵

Many estate planning clients over age 64 likely will have some "physical or mental limitations." Normally, these limitations are not significant so long as the client has the mental capacity needed for the particular act that the client wishes to take.⁶ But now, all estate planning clients who wish to make gifts to non-family members are in a suspect category and their attorneys will need to inquire about the health of such clients. Even a client over age 64 who appears relatively young and healthy may function normally only as long as the client continues to take medication.

The statute disqualifying gifts from "dependent adults" to "care custodians" in effect creates a new and more restrictive test for testamentary capacity for clients over age 64. In order to ensure that the client who is over 64 may make a specific bequest in a will or revocable trust to a non-family beneficiary, the conscientious estate planning attorney will need to inquire about how the client's physical and mental limitations affect the client's abilities to carry out normal activities or to protect the client's rights. Did the client arrive at the appointment without assistance? Does the client still actively manage the client's investments? Does the client still pay the client's bills? Does the client still balance the client's checkbook? Does the client still cook? Does the client live alone? Does the client have short term memory loss? How severe? What activities does the client engage in? What is the client's occupation? What are the client's retirement activities? During conversation, does the client appear confused? Does the client insist on the presence of a family member or other person during the interview?

The issue regarding whether the client was a dependent adult at the time that the client signed the donative instrument may not arise until years later, long after the client stopped carrying out normal activities or long after the client was able protect his or her rights. The attorney's notes should reflect the attorney's conclusion regarding whether or not the client is a dependent adult, the effect of the client's limitations on the client's ability to function normally and on the client's ability to protect the client's rights, and the reasons for the conclusion.

Estate planning attorneys engage their clients in conversation partly in order to assess capacity and to detect the potential of undue influence. When the client's capacity is impaired or the potential for undue influence exists, the attorney should question the client more closely. But the prohibition on gifts from "dependent adults" to "care custodians" requires lawyers to question all clients over age 64 more carefully, with a resulting increase in cost.

Defining a protected class in an overly-broad way as "dependent adults" may be beneficial for purposes of reporting abuse. The additional public cost of investigations by Adult Protective Services is outweighed by the benefit of protecting elders from actual abuse. And, even where no abuse exists, the additional costs of the investigation may well be justified by the investigation's deterrent effect on potential abuse.

Here the overly-broad definition of "dependent adults" applies in a different context: estate planning clients over age 64 who wish to make both inter vivos and testamentary gifts. This broad definition may well be worth the restriction on individual autonomy for purposes of limiting inter vivos gifts. Inter vivos gifts directly impact on the protected class members. Limiting inter vivos gifts by an overly-inclusive definition of a protected class at least will protect the financial interests of "dependent adults."

But using the same broad definition of "dependent adult" to restrict the right to make testamentary gifts strikes the wrong balance between public benefit and public cost. Laws that restrict testamentary dispositions do not protect the donor—here, a dependent adult—but rather those who would receive the gift if the testamentary disposition fails. All that the overly-inclusive

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definition of "dependent adult" protects, then, is a mere expectancy, that is, "the interest of a person who merely foresees that he might receive a future beneficence. . . ."⁷ The public cost of protecting this expectancy is a limitation on the rights of persons over age 64 to make testamentary dispositions.

Our society usually places a high value on individual autonomy, including the right of testamentary disposition. Normally, our laws reflect the public policy favoring the ability of persons to leave property at death to whomever they wish, so long as the person was competent to do so;⁸ the will was not the product of duress, menace, fraud, or undue influence;⁹ the will was executed with the required formalities;¹⁰ and the will does not otherwise violate public policy.¹¹ Even the appointment of a conservator does not automatically deprive the right of the conservatee to make a will.¹² Yet now, until the legislature remedies the overly-inclusive definition of "dependent adult," all clients over age 64 will incur additional estate planning expense if they wish to make testamentary gifts to non-family members.

A second reason for this unwanted expense is the statute's equally vague and all-encompassing definition of "care custodian."

III. WHO IS A "CARE CUSTODIAN"?

The first paragraph of the statutory definition of "care custodian"¹³ states that the term "means an administrator or an employee of any of the following public or private facilities or agencies, or persons providing care or services for elders or dependent adults, including members of the support or maintenance staff:. . . ." Twenty-four subparagraphs then list various public and private facilities and agencies providing care or services for elders and dependent adults. The final subparagraph, (y), adds to the list the following: "Any other protective, public, sectarian, mental health, or private assistance or advocacy agency or person providing health services or social services to elders or dependent adults."¹⁴

Initially, the courts of appeal, in Estate of Davidson¹⁵ and Estate of McDowell,¹⁶ held that persons who were not professional providers of health or social services but who provided those services "as a direct result of a preexisting genuinely personal relationship" were not care custodians under the statute. But, in Bernard v. Foley, a closely-divided California Supreme Court overruled those decisions, holding that the statutory definition of "care custodian" in Welfare and Institutions Code section 15610.17(y) contains no exception based on a preexisting personal friendship.¹⁷

Now, the breadth of the class of persons who are disqualified care custodians is staggering. In Estate of Odian, the court held that a person employed to cook, clean, and drive the elder to appointments, meetings and shopping provided "social services" within the meaning of Welfare and Institutions Code section 15610(y), and thus was a disqualified care custodian.¹⁸ Under Bernard v. Foley, whether or not a beneficiary is employed or provides social services because the elder and the beneficiary have been friends for many years is insignificant. Because most friendships are based on reciprocal "social services," such as providing rides or meals, most friends of an elder are likely to be...