Who can file an exploitation complaint, alleging financial abuse of a vulnerable adult? In Arizona, a court-appointed conservator can file with the courts. So can the personal representative of the victim’s estate. But what about family members who feel that their loved one has been victimized?
Financial exploitation of vulnerable seniors is a huge, and growing, problem. Arizona law provides at least one possible approach to recovering damages for such abuse. The state Attorney General can bring an action against a financial exploiter. And so can family members — even after the death of the victim.
But not every family member or concerned person has authority to file a court action. First, the proposed plaintiff must be an “interested person” as defined by Arizona probate law. That includes an heir — someone who would receive a share if there was no will or trust in place. But that’s not enough; there’s a mechanism for deciding who gets to file the lawsuit.
Of course, the vulnerable victim could file a lawsuit to recover property or cash. But if they are not able to do so, their court-appointed conservator has authority. If they have died, the court-appointed personal representative of their estate can file. If neither the conservator nor the personal representative files, other interested persons might be able to start the court proceeding. First, though, the interested person must get the court’s approval to file, according to Arizona Revised Statutes section 46-456(G).
Keith Stephens’ story
That brings us to a recent Arizona Court of Appeals decision. It started in probate court, and involved Keith Stephens, his wife Frances, and his daughter Sona Heguy. We’re going to use their first names here, just to keep it clear; we mean no disrespect.
Keith and Frances were married in 1983. They created a revocable living trust in 1994. After the death of the first spouse, the trust permitted the survivor to change the ultimate beneficiaries of the trust — what lawyers call a “power of appointment.”
Both Keith and Frances had children from earlier marriages. Keith’s daughter Sona was his only child; the couple had no children together.
One day in 2011, while on vacation outside the country, Keith had a stroke. He came back to Tucson, but he never fully recovered. His mental condition deteriorated. He moved to a memory care unit at a senior living facility and, ultimately, required assistance with all of the activities of daily living.
In the years after Keith’s stroke, Frances managed the couple’s finances, and their revocable trust. At some point she used trust funds to purchase a home for each of her children, and sent them on vacations to Europe and Japan. She also used some of the couple’s money to pay off debts for Sona’s daughter.
In 2017, Sona filed a guardianship action. She alleged that her father was incapacitated, and that his assets had been spent improperly. The court agreed that a guardian was appropriate, and also appointed a temporary conservator to investigate the trust’s administration. Keith died in 2017, before the accounting could be completed.
Shortly after Keith’s death, Frances exercised her power of appointment to change the ultimate beneficiaries of the trust. She effectively disinherited Sona from receiving any share of her (and Keith’s) trust estate.
Sona was not appointed as personal representative of Keith’s estate — that role would have fallen to Frances. She could not compel Frances to bring a lawsuit against herself. But she was one of Keith’s heirs; if he did not have a will or trust, she would be entitled to a share of his estate.
Arizona does permit family members like Sona to file an exploitation action on behalf of a parent. First, though, they have to get approval of the probate court to file an exploitation complaint.
Sona asked the probate judge to allow her to file a lawsuit against her stepmother. Frances objected, arguing that Sona had no longer had any interest in her father’s estate. She pointed out that no one had challenged her right to disinherit Sona, and so even if she was successful she would not benefit from her own exploitation complaint.
The probate judge agreed, and denied Sona permission to sue Frances. Sona appealed.
Court of Appeals: Sona can file an exploitation complaint. But….
Last week the Arizona Court of Appeals reversed the probate judge and ordered him to allow Sona to file her exploitation complaint. At this stage of the proceedings, the judge should not have focused on whether Sona could ultimately succeed, said the appellate court.
The appellate judges made clear that they were not ruling that Sona should prevail against her stepmother. Their ruling just gave her a chance to make her case. The probate court might later rule against her and dismiss her exploitation complaint, based on her disinheritance. In the meantime, though, she should be given a chance to litigate the actual legal issues. In Re The Stephens Revocable Trust, July 31, 2020.
So why would Sona want to proceed, if she is effectively disinherited from receiving any share of her father’s estate anyway? Because Arizona law gives the judge wide authority to remediate financial exploitation of vulnerable adults. If she is successful, the probate court could determine that Frances should be disinherited based on her use of the couple’s money for her children’s benefit. Of course, she likely would have an argument that the trust assets were community property under Arizona law anyway, and so available for her use as she wished. And it’s also possible that the probate court could ultimately dismiss Sona’s claim and even assess legal fees and costs against her. But those legal fights are for another day.