In a conservatorship, the court appoints an individual or entity (such as a private fiduciary) to manage the financial affairs of an incapacitated adult who is unable to manage their own property or finances. Conservatorships can also be appointed to handle the financial affairs of minors, though that’s beyond the scope of this conversation. In either case, the subject of the conservatorship is referred to as the protected person.
What are a conservator’s responsibilities?
The conservator of a protected person has the powers and responsibilities of a fiduciary and is held to the same standard of care as a trustee. The fiduciary duty of care requires the conservator to wisely manage the assets in question as a prudent investor would handle his or her own assets. That means the conservator must consider the protected person’s income needs, risk tolerance, and expected returns, and they’ll be expected to keep copious records of the protected person’s financial information and transactions.
Once a conservator has been appointed, they’ll be given 90 days to file an inventory of the protected person’s estate with the court. Going forward, the conservator will be asked to file an annual accounting of the estate’s administration on the anniversary of the date of appointment. The annual accounting report should accurately reflect every financial transaction that occurred during the preceding year.
A conservator is authorized to invest and sell estate assets, and to distribute funds that are reasonably necessary for the benefit, care, support, and education of the protected person. The conservator is also obligated to pay from the estate any valid claims that are properly presented against the estate or the protected person. As such, the conservator will be responsible for paying bills, debts, and taxes.
As the conservator may only use estate assets for the benefit of the protected person, the conservator isn’t allowed to gift estate assets without express permission from the court. The conservator is also prohibited from using estate assets to pay for his or her own personal bills, though the conservator can submit conservatorship-related expenses to the court for reimbursement, and the conservator is allowed to receive a reasonable salary for their services.
In rare situations where a conservator is acting improperly, any interested party may file a complaint with the court. Depending on the nature of the complaint, the interested party may request that the court investigate the accusations by assigning a court investigator, speaking with the protected person’s attorney, or demanding an accounting from the conservator, and he or she may petition to replace the current conservator. If the court’s investigation determines that the conservator has failed in their fiduciary duty, the court will dismiss the conservator and appoint a new one. If the conservator’s negligence or intentional illegal activity resulted in damages to the estate, the conservator may be held personally liable for the damages.
Who may serve as a conservator?
Any qualified individual or entity may serve as the conservator for a protected person. Most of the time the conservator is a family member, but it’s not uncommon to see friends and trusted advisors appointed to the position when there aren’t any qualified or willing family members. When it comes to having an entity serve as conservator, this typically takes place when the protected person’s family hires a private fiduciary to manage the estate, or the court appoints the public fiduciary for the county to act as conservator and guardian.
Regardless of who is appointed, the individual or entity will first need to provide the court with relevant background information such as a criminal history, previous conservatorship experience, and their relationship and history with the protected person. Many states also impose mandatory training and certification for fiduciaries that may apply to conservators.
How is a conservator appointed?
The conservatorship process begins when an interested party files a petition for appointment with the county probate court. While the petition is typically filed by the party who wishes to be the conservator, any interested party—including the proposed protected person—can submit the petition.
The court will schedule a conservatorship hearing, and the petitioner will be required to serve notice of the hearing to all interested parties, including the protected person, his or her attorney, and the protected person’s family. The petitioner must serve notice by mail or personal delivery at least 30 days prior to the hearing, and he or she will need to file proof of notice with the court. Failure to serve notice and file proof of notice with the court will result in the hearing being rescheduled.
If the protected person doesn’t already have an attorney, he or she will need to hire one or the court will appoint one to represent them. The court will appoint a court investigator to interview the protected person and submit a report before the hearing, and the court will need a certificate of incapacitation from a physician or psychologist. If the protected person doesn’t have a preferred physician or psychologist, the court can appoint one to complete the evaluation.
When the date of the hearing arrives, the protected person is entitled to attend the hearing. If he or she cannot attend the hearing, the court may set up a video conference. At the hearing, all interested parties will have the opportunity to present their case for or against the proposed conservatorship, including the protected person, the protected person’s attorney, the petitioner, family members, friends, and expert witnesses (physicians, advisors, etc.).
General vs limited conservatorships
Most conservatorships are established as a general conservatorship, where the conservator has full authority over all of the protected person’s assets and financial affairs. However, there are circumstances where such sweeping authority isn’t necessary, so the court has the ability to order limited conservatorships, too. In a limited conservatorship, the conservator’s authority is often restricted to certain assets (e.g. only financial accounts, only retirement funds, etc.) or certain purposes (using estate assets to pay bills, maintaining retirement investments, etc.). In some cases, the court can appoint a limited conservatorship for a single transaction, such as to sell a house or vehicle.
When does a conservatorship end?
Excluding limited conservatorships with a defined period, conservatorships are designed to remain in effect until the protected person no longer needs assistance with their financial affairs. Most of the time, that means until the protected person passes away. If the protected person is temporarily incapacitated and regains their mental faculties (e.g. they emerge from a coma), the protected person can petition to end the conservatorship. If the conservator passes away or resigns before the conservatorship ends, the court will appoint a new conservator in their place.
Alternatives to conservatorship
The primary downside to a conservatorship is that it forcefully takes away an adult’s ability to manage their own affairs and make important decisions. In contrast, a power of attorney allows an adult to willingly appoint an agent to handle their affairs. Power of attorney contracts are incredibly easy to draft, and they retain the testator’s ability to handle their affairs until they lose their mental capacity. While a conservatorship can take months to complete, most attorneys should be able to draft a power of attorney in less than an hour for a fraction of the cost. The only requirement for a power of attorney is that the adult in question must possess a sound mind. Unfortunately, that means a power of attorney is no longer an option once an adult becomes incapacitated.