Estate Planning Newsletter
A “conservator” is a court-appointed individual assigned to handle the daily affairs of those who cannot care for themselves due to physical or mental limitations (the “conservatee”). Conservatorships are governed by state law, and depending on the type of conservatorship, may provide the legal authority to manage an impaired person’s finances, estate, personal affairs, assets and medical care. Generally, conservators can be “of the person” and/or “of the estate,” depending on the individual case and judicial determination of the conservatee’s needs.
Conservatorships in General
Conservatorships are governed by state law and states vary in the legal terminology used (some states use the term “guardianship” when referring to a conservatorship of the person and/or the estate). States also vary with respect to the legal procedures required to establish and administer a conservatorship.Generally, however, conservatorships are established for individuals who are unable to make financial or medical decisions for themselves, due to a severe illness or injuries. For example, a conservatee may be in a coma, suffering from advanced Alzheimer’s disease, or have been injured in an auto accident. A relative, friend or public official may petition the court to appoint a conservator for an incompetent individual. The petitioner must present evidence to the court to show that the individual is mentally or physically incompetent to manage their affairs.
A court investigator will be appointed to interview the proposed conservatee. If the court is satisfied with all of the evidence, a conservator will be appointed to manage the affairs of the conservatee. A conservator is often the spouse or adult child of the incapacitated individual, but may be a non-relative or a professional conservator selected from a panel approved by the court. Conservators are reimbursed for expenses and paid a reasonable fee for their services from the conservatee’s estate. Anyone, including the alleged conservatee, may object to the petition for a conservatorship or to the specific conservator appointed by the court.
Types of Conservatorships
There are generally two types of conservatorships depending upon the needs of the conservatee:
- A conservator of the person
- A conservator of the estate
A “conservator of the person” is typically responsible for making decisions for the conservatee regarding their medical care, food, clothing and residence. A “conservator of the estate” is responsible for the conservatee’s financial affairs including collecting their assets, paying their bills and investing the conservatee’s assets. Depending on the degree and nature of their incompetence, a conservatee may need the assistance of only one type of conservator or of both types (in which case the same individual may be appointed to serve both functions).
Fiduciary Duties of a Conservator
Court-appointed conservators serve as “fiduciaries” of the conservatee. A fiduciary relationship is one of utmost trust and confidence. As such, a conservator is required to act honestly and in good faith at all times. In general, conservators are obligated to fulfill several fiduciary duties including:
- A duty to protect the rights and act in the best interest of the conservatee;
- A duty to make regular accountings to the court;
- A duty to keep the conservatee’s finances separate from their own;
- A duty not to engage in self-dealing;
- A duty to properly manage the conservatee’s property; and
- A duty to avoid conflicts of interest.
In most cases, a conservator must get court approval before they can sell or mortgage a conservatee’s property real property. Conservators are supervised and held accountable to the court by which they were appointed. Failure to adequately and reasonably perform their assigned duties could subject conservators to liability.
Advantages of Conservatorships
One advantage of a conservatorship is that the conservator is bound by the court and must keep detailed records and submit periodic reports and accountings to the court. As such, the court’s oversight offers a high degree of protection against the mishandling of the conservatee’s property. Further, conservators are often required to post a bond to protect the conservatee’s estate. Although the bond premiums are paid with the conservatee’s assets, it is a potentially good investment in the event that the conservator mismanages and/or loses the conservatee’s assets.
Disadvantages of Conservatorships
A primary disadvantage of a conservatorship is that the conservator could potentially mismanage the conservatee’s assets. Although infrequent, such abuse can be caused by the conservator’s recklessness in handling the assets or could be the result of blatant theft. Another disadvantage is that conservatorships are both expensive and time-consuming as they require several court procedures and continuous attorney assistance. Finally, conservatorships are matters of public record which could offend the privacy of the incompetent party and/or their family since information regarding the conservatee’s assets, income and expenses is made public.
Termination of a Conservatorship
A conservator is required by law to continue managing the affairs of the conservatee until the court orders otherwise. Typically, the court will issue an order to terminate the conservatorship under the following circumstances:
- The conservatee dies;
- The conservatee’s assets are used up, eliminating the need for a conservator of the estate; or
- The conservatee no longer requires this level of assistance.
If the conservator resigns or can no longer handle the responsibilities of acting as conservator, the conservatorship does not terminate. Rather, someone else will be appointed as conservator by the court.