Often in estate planning, attorneys present the idea of conservatorship as a bad thing, something to be avoided. In a perfect world, we could move through our lives from cradle to grave without such things as conservatorships. But in order to achieve this perfect world, we have to do advance planning to provide for our own care if we become impaired or incapacitated, and we need trustworthy, responsible, and financially astute family members who are willing and able to assist us. For some people, these “perfect world” conditions do exist. However, for many others, they do not.
Increasingly, attorneys run into the following situations:
- Seniors come to us, often brought by their children or children-in-law, when mental incapacity has set in, and although they appear to have willing and able family members who can take care of them, assist with making personal care and living decisions, or manage their finances, the seniors do not have the necessary delegation documents in place to empower these helpers as their agents.
- Seniors have documents in place, but the people named are dead or no longer available, willing, or appropriate to serve.
- The people to whom the senior legally entrusted his or her care have become exploitive and abusive to him or her.
- Seniors have been conned into paying for, or agreeing to pay for, fraudulent products and/or services.
Elder abuse in its many forms – including fraud by unscrupulous “vendors,” financial exploitation, and physical or emotional abuse by so-called friends and relatives – is a huge problem in the United States. The topic is being exposed in the 21st century much like child abuse and spousal abuse came into public view and began to receive legislative solutions during the late 20th century.
Another increasingly common situation is where seniors do not have agent-delegation planning in place and end up in a medical or living condition crisis where they are putting themselves or others at risk. Loyal family members and friends are very concerned, but nobody has the power to assist once they learn what needs to be done.
Alternatively, seniors may have excellent voluntary delegation planning in place, but the seniors are noncompliant about what they now need to do for their own safety and care. For example, they may need to live in an assisted living community or nursing home, but they voluntarily check themselves out and depart. They are free to make their own decisions, so they can walk right out and put themselves in danger. If they have access to an automobile, they put the general public at risk as well.
Adult Protective Services
In emergencies where the seniors are unwilling to cooperate and their stubbornness is putting themselves or others at risk, often the first call should be to Adult Protective Services (APS). In Tennessee, APS is a state agency within the Department of Human Services. APS will typically appoint a social worker and perhaps work with local police in order to gain access to the senior and entry into the home.
Seeking Court Protection
Whether or not Adult Protective Services gets involved, and whether or not the case is an emergency or just a situation where the senior needs help and is not willing or able to sign voluntary agent-delegation documents, the solution is often a conservatorship over the senior, if he or she meets the applicable standards of incapacity. Less commonly, where mental illness other than dementia is the apparent cause, “involuntary commitment” may be necessary to place the senior is a hospital psychiatric ward for analysis.
Conservatorship of the Person
In general, Conservatorship of the Person applies to court appointment of a fiduciary (conservator) to make decisions in regard to the protected person’s personal care. The protected person may be called a “ward” or a “respondent,” but that term is being phased out as unfavorable. A Conservator of the Person does not have control of the protected person’s finances.
Conservatorship of the Estate
Conservatorship of the Estate applies to court appointment of a fiduciary (conservator) to administer the finances and assets of the protected person. Conservatorship of the Estate is much like trusteeship, although the powers of and restrictions on the conservator are defined by statute and regulation rather than a voluntary trust agreement or trust declaration, and they are typically much less flexible than the powers authorized for trustees. Conservatorship of the Estate is also similar but not identical to a Durable Power of Attorney. However, one of the key differences between Conservatorships of the Estate and Trusts or Durable Powers of Attorney is that Conservatorships of the Estate are court-supervised. The Conservator of the Estate is a representative of the court and is held directly accountable to the court. It is common for Conservators of the Estate to be required by state law and regulations to account annually to the court. Such accounting needs to be accurate to the penny. Receipts and canceled checks must be supplied.
Conservatorship is also similar to a decedent’s probate estate administration. Like a probate Personal Representative or Executor (except where a decedent’s will waives bond), a Conservator of the Estate may be required by law to obtain a bond through an insurance company to insure his or her fidelity to proper administration of the protected person’s assets and income. The costs of the bond and of the administration come out of the assets of the protected person. The amount of coverage of the bond is set by the court to cover the assets under the conservator’s administration, and may cost anywhere from just under $1,000 per year to considerably more. The judge may have the authority to waive the bond requirement under certain circumstances, such as where assets are limited or the only asset is monthly income, or perhaps where the spouse is the conservator and is the primary devisee under the protected person’s will.
A Conservator of the Estate does not have plenary power to do whatever financial transactions he or she feels are warranted. For example, a conservator needs specific court authorization to sell real estate or property of the protected person valued at over $1,000.00 except for automobiles.
Compensation of Fiduciaries
In most circumstances, the fiduciary is entitled to “reasonable compensation.” Reasonable compensation often is based on a list of criteria such as the time spent, lost opportunities to do other work that the fiduciary normally does, difficulty of the work, etc. Fees for a conservator are not related to a percentage of the value of the protected person’s assets that the fiduciary manages, except in some circumstances with corporate fiduciaries.
Imposing Minimum Restrictions
For a conservator of an adult, Tennessee law requires that the removal of rights from the protected person be the least restrictive alternative that is necessary to protect him or her. The removal of personal rights and liberty by the court is analogous to a civil form of imprisonment. Where a protected person is capable of making some kinds of decisions safely and prudently in regard to his or her living conditions, care, or finances, the theory is that his or her rights to make such decisions should be preserved as long as possible. On a practical level, keeping seniors involved in their care and financial decisions also helps to keep them engaged with life, reality, and higher mental functions, so this legal construct is very consistent with practical experience in caregiving for seniors who are in a process of deteriorating mental capacity. There is a growing movement nationwide to maximize decision-making by adults who are under conservatorship.
Maximizing the decision-making by protected persons can make it more difficult for the fiduciary, since he or she is not able to make unilateral decisions where the protected person retains decision-making power. How this works out in practice depends very much on the personalities and relationship of the protected person and fiduciary. When circumstances are such that retained decision-making by the protected person unduly hampers the process of making or implementing needed decisions, the fiduciary can file to obtain guidance or an order of the court.
Although attorneys correctly advise clients to plan to avoid unnecessary conservatorship, there are many situations where conservatorship is appropriate and very beneficial. Court supervision in difficult cases can be beneficial to impose financial accountability and to bring about sound decisions for the care of a protected person. Examples are where the protected person is unwilling to comply with doctor’s orders or other considerations that are important for the safety of the protected person and others. Under modern conservatorship theory, courts impose on protected persons the minimum restrictions that are needed to accomplish the personal safety and prudent financial management that are the goals of these court-supervised protective measures.
If you have any questions or would like to discuss issues raised in this newsletter in more detail, please feel free to contact our office.