Picking Your Fiduciary – the Conservator

By his own admission Colonel “Ace” Azimov was not the world’s greatest fighter pilot (this is so you’ll know this is a fictional character).  Flew Jugs during WW II, F-51s in Korea.  Married his childhood sweetheart, Melba, when he came back from the war. Raised four kids and retired here in the Springs.  A superb bridge player, back in the day he could tell you every card in dummy’s hand from three rubbers ago.

Until recently, that is. When Melba died in 2005 Ace seemed to fail, a little bit at first, then more rapidly.  His kids are concerned.  Ace can’t play even a hand of bridge anymore, doesn’t remember the last bid, hasn’t been able to keep score for over a year.  Mail piles up at the house. Bills aren’t getting paid; they’re not even getting opened.  Worse still, Ace seems to be falling for every fly-by-night get rich scam in the books. He’s become an unwittingly generous sponsor of Nigerian “widows” and has had his bank-account nearly emptied by scammers.  He writes checks, but there’s been no entry in the register since July of 2009.

Still.  He is well able to care for himself.  He’s able to keep track of his medications with the help of the weekly pill sorter.  Takes great pride in the appearance of the house, his lawn and his garden and keeps them up.  Still eats well, preparing many of his own meals. It’s just those darn finances.  There’s reason for concern.  Ace probably has (had) close to $1million in savings, investments, and equity in the house. But unpaid bills are racking up interest and penalties.  Foolish investments follow hard on one another.  It’s time to do something.  But what, and who?  None of the kids live in Colorado Springs, and none is in a position for the kind of day-to-day monitoring Ace needs.  Plus, there is the issue of trust.  Not only do the kids not necessarily trust each other, Ace can’t bring himself to put his financial fate in the hands of his children, or to pick one of them over the others.  Finally, Ace was persuaded to go to get a cognitive evaluation.  While the neuropsychologist agreed he did not need a guardian, he thought that Ace did qualify legally for a conservatorship.

A conservator is a fiduciary who is appointed a guardian of the estate (finances) of the “protected person.”  It is the conservator’s job to step in and look after

the protected person’s money — including investments, maintenance, bills, and budgeting.  The conservator must be appointed through a court process, which can be an adversarial hearing where Ace will likely have an attorney whose job it will be, if Ace desires, to resist the imposition on personal liberty that the appointment of a conservator represents. Ace will have a voice in those proceedings, and will be heard (although not always deferred to) as to his preferences on who, if anyone, should be appointed. As in guardianships, the court may order a visitor to look into Ace’s situation, interviewing him, family, friends, and the prospective conservator, and then preparing a written report to be considered by the judge.

Of course, family members can serve as conservators, but that may not always be desirable because, at least in Ace’s case, there’s nobody local.  It should also be recalled that conservators have strict reporting requirements.   After their appointment they must file a financial plan with the court which sets forth and inventories Ace’s estate, his income, his bills and obligations, and establishes how the conservator intends to protect the estate and ensure that Ace’s estate is used for what it is intended–his benefit.  They then have to file annually with the probate court a report on Ace’s progress.  They are responsible for the prudent investment of Ace’s estate consistent with his needs and, to the extent possible, his desires.  While a conservatorship does have the effect of withdrawing a degree of financial independence, the courts are admonished by the law to select the least restrictive option possible and to maximize self-determination.  Unlike a guardianship, a conservatorship can be established without a finding of incapacity, meaning that Ace can maintain most of his legal rights and self-direction.

For veterans who may suffer from traumatic brain injury or other service-related cognitive impairment covered by the VA, there is a proceeding called the Uniform Veterans Guardianship Act.  If the VA thinks that a veteran is no longer able to care for him or herself, they can simply appoint somebody to take over the VA benefits account.  The proceeding for appointment is much more streamlined, but the VA has very strict accounting provisions, and it’s often very difficult for a family member who is not also an accountant and/or an attorney (and sometimes not even then!) to get the accountings to the VA’s satisfaction.  Once the VA account gets to a certain size, the VA may go to court and get an actual judicial appointment, usually of a professional bank-fiduciary. The veteran’s preferences in these matters, while to be considered, are not necessarily determinative.

There are professional or institutional conservators available.  Most will charge a percentage fee for what they will do.  Some will hand-off the investment/portfolio management piece to a professional financial advisor, but then attend personally to the personal care aspects–paying bills and taxes, making long term care/assisted-living arrangements, monitoring medical costs, obligations, and financial maintenance of the protected person.

None of us, least of all Ace, likes the idea of surrendering a portion of our lives to anybody else, still less to a stranger.  That’s why many powers of attorney may specify that the nominated attorney-in-fact is to serve as the guardian and/or conservator if one must be appointed.  None of us plans to be incapacitated, and that’s why all of us should plan for incapacity.