Louise’s adult daughter was a wreck. Indeed, Louise’s daughter had been in a wreck, a terrible motor-vehicle accident that broke so many bones and left her with such a serious closed-head injury that she was in a special home for the brain injured, at least for the time being. Fortunately, motor-vehicle insurance was paying for the medical and institutional care. Moreover, Louise’s daughter would soon receive a substantial liability-insurance settlement. Unfortunately, Louise’s daughter wasn’t presently mentally competent to manage her financial and legal affairs. Louise had thus worked closely with her daughter’s attorney, preparing to undertake a conservatorship to handle the settlement and manage her daughter’s finances, at least for now. What would happen later, would happen later.

Definition

A conservatorship appoints a competent and trustworthy adult to manage the financial and legal affairs of a minor child or incompetent adult. Parents usually handle the few and modest financial and legal transactions that minor children may require or from which they may benefit. A parent, for instance, may open a small savings account in joint name with a minor child, for the child to deposit allowances, gifts, and modest earnings, to learn financial management. A parent might also sign a contract and note for the minor child to acquire a first motor vehicle before age eighteen. No conservatorship would be necessary for those transactions in the parent’s own name on the child’s behalf. Yet minor children sometimes require more-significant legal or financial transactions, such as when a child suffers an injury for which another person owes the child a liability settlement. In those cases, the probate court may appoint the parent as a conservator to approve the settlement and handle the proceeds. Incompetent adults may also need a conservator in similar and other situations.

Distinction

A conservatorship is not a guardianship. A conservatorship manages financial and legal affairs. A guardianship manages care and supervision. A conservator is often an accountant, financial advisor, lawyer, or other professional with financial and legal knowledge. A guardian is often a family member or, if instead a professional, then a social worker, nurse, or geriatric or life care manager who knows personal care and medical needs. As the prior chapter indicates, probate courts in some states may authorize a guardian not only to manage the ward’s medical and other care decisions but also to manage the ward’s legal and financial affairs. But just as commonly, a probate court may divide responsibilities for legal and financial affairs on the one hand, and medical and other personal care on the other hand, between a conservator and guardian. 

Purpose

The purpose of a conservatorship is not to ensure the ward’s mental and physical health. A conservatorship is not to ensure personal and medical care, schooling, and supervision. A conservatorship is instead to ensure that the ward’s financial and legal affairs remain in order. Incompetent adults can have relatively substantial financial interests. Government programs and private insurance may, for instance, provide substantial monthly stipends or other support for housing, institutionalization, food, and medical care, supplies, and equipment. Incompetent adults may need to obtain those benefits, accumulate them in savings and checking accounts, and expend them to pay for necessary goods and services. Incompetent adults may also need to enter into or revoke and escape contract obligations, acquire and transfer real or personal property by executing deeds and titles, assert legal claims and defenses, and initiate and resolve litigation, among other legal matters. An incompetent adult is, by definition, incapable of making those decisions soundly and completing those transactions properly. That’s the role of a conservator and the purpose of a conservatorship. Act as a conservator for your incompetent family member, and you’ll burnish your legacy.

Qualifications

When helping an incompetent family member, distinguish between personal needs on the one hand and financial or legal affairs on the other hand. Determine who best should assume each role. If your skill and compassion are for your incompetent relative’s personal and medical care, then consider serving as guardian. If, instead, your skill and concern are for your incompetent relative’s financial and legal affairs, then consider serving as conservator. If you are monitoring your incompetent family member’s affairs generally, while others serve as guardian and conservator, then ensure that those others have the different skills they need for each role. Medical knowledge and social judgment are one set of concerns, while financial knowledge and legal judgment are another set of concerns. Keep guardians and conservators in their lanes, and everything should work out well.

Reasons

The above discussion already suggests some of the reasons why a conservator may be necessary or appropriate. An adult may become incompetent through a motor-vehicle accident or other traumatic injury, or through the onset or progression of mental illness or other disease. Drug and alcohol abuse or other similar addictions and lifestyle issues can also lead to incompetence, especially in managing financial and legal affairs that the lifestyle issues may implicate. Do you really want to hand a drug addict a pile of cash meant to provide for the addict’s housing and food, when you know that’s not where the cash would soon head? The elderly are particularly at risk of incompetence in financial and legal affairs, through diseases and processes of aging, especially dementia. Seeing your elderly and increasingly less mentally capable parents fall prey to financial frauds and swindles that rob them of their hard-earned retirement savings can be devastating. Prepare to help your struggling family members with their financial and legal affairs, including through a conservatorship if necessary.

Process

Although state laws and procedures vary somewhat, a probate court in the county of the ward’s residence is the typical place to initiate conservatorship proceedings. The ward seeking financial and legal assistance may nominate any trusted adult competent person to serve as the ward’s conservator. The nominated person typically has priority in any dispute over who should serve as conservator. Otherwise, in the absence of the ward’s nomination of a conservator, state laws generally provide for priority beginning with the ward’s spouse and proceeding to the ward’s adult children, parents, and other relatives with whom the ward has resided for at least six months. If no family member is available and willing, a professional such as an attorney, financial advisor, accountant, or social worker may serve, with probate court approval. The probate court will hold a hearing to determine the appropriateness or necessity of a conservator and who should serve. The ward has a right to counsel to contest the appointment. If the probate judge needs more information, the judge may appoint a guardian ad litem (a temporary guardian for litigation) to investigate the facts and circumstances and recommend as to whether the court should appoint a conservator and, if so, then whom. The conservator, once appointed, signs an acknowledgment and acceptance of the role. Help your struggling family member through the conservatorship process.

Supervision

The probate court continues to supervise a conservator once appointed. The primary means for supervision is through the conservator’s annual report, also called an annual accounting. The conservator’s annual report documents the financial transactions in which the conservator engaged on the ward’s behalf over the prior year. The accounting includes the ward’s income, expenses or disbursements, and changes in the ward’s assets and liabilities. The conservator must provide the annual report not only to the probate court but also to the ward and any other interested person whom the probate court directs. The ward or interested persons may object to the annual accounting or to other actions of the conservator, in which case the court will hold a hearing to determine the conservator’s compliance and hold the conservator accountable. The court on its own may summon the conservator to a hearing on any grounds indicating violations of law or orders, including failing to file an annual report. The court may hold conservators accountable with fines and other penalties, and may remove and replace a conservator.  

Activities

Conservators may perform all the usual activities one associates with managing one’s finances and legal affairs. A conservator may collect the ward’s mail or direct the ward’s mail to the conservator’s address to receive payments and invoices. The conservator may open checking and savings accounts, endorse checks made out to the ward, deposit those checks in accounts, and pay the ward’s expenses out of those accounts. The conservator may sign leases and contracts for housing, schooling, training, transportation, and medical care and equipment, as a guardian determines are necessary. The conservator may also apply on the ward’s behalf for government benefits, insurance coverage or reimbursement, and other financial support and benefits. The conservator may also initiate, defend, and settle litigation involving the ward’s legal rights and obligations. If these activities are the sort in which you have skill, experience, and judgment, then consider serving as your struggling family member’s conservator. 

You

You, too, may at some point need a conservator to preserve your legacy. In your later years, or earlier as the result of injury or illness, your mental health may decline to the point that you are unable to make sound decisions about your own finances, property, and legal affairs. Your poor decisions could burden, diminish, or destroy financial, property, and business interests that you took a lifetime to earn and accumulate. Don’t let your declining mental health destroy your legacy. Instead, make arrangements for a trustworthy conservator to assist you before you reach the point of risking your legacy through incompetent financial and legal management.

Alternatives

Many of us reach a point in life where, although we may be competent to manage our own financial and legal affairs, we may lack the energy, attention, or commitment to do so with the consistency and care those affairs deserve. In that case, you may not need a full and formal conservatorship. You may be able to give your spouse or your most-trusted adult child a power of attorney to manage certain financial or legal affairs for you. You may alternatively have financial advisors, accountants, and attorneys who already perform services for you and may be willing to take on additional responsibilities as your fiduciaries. 

Reflection

Do you have a family member struggling with financial decisions in a way that threatens the family member’s finances? If so, are you in a position to help your struggling family member make sound financial decisions? Would your struggling family member accept your help or the help of another trusted family member or advisor, without the necessity of a probate court hearing and appointment? Would a power of attorney be enough to help your struggling family member, or does your family member need a formal conservatorship? What is the cause of your family member’s struggles, and how long do you expect that cause to last? If you are assisting a family member with their finances, are you able to account for your help with a clear record of the transactions? 

Key Points

• A conservatorship protects an incompetent person’s financial affairs.

• The probate court appoints a conservator to manage the ward’s affairs.

• A conservator manages money, while a guardian manages ward care.

• Conservators should have financial skill and sound judgment.

• Conservatorships arise around mental illness, injury, and disability.

• A probate court appoints a conservator on nomination after a hearing.

• The probate court supervises conservators through annual reporting.

• A conservator makes deposits, pays expenses, and does similar tasks.

• Powers of attorney and trusted relationships may be alternatives.

Read Chapter 18.