The following article was published in the Grand Ledge Independent on Sunday, August 21, 2005

HOW TO HELP PROTECT A LOVED ONE’S FINANCIAL FUTURE
By Marlaine C. Teahan, Attorney and Counselor at Law

Best case – Avoid Court Intervention.  As the saying goes, “The best defense is a good offense.”  That adage holds true in financial and estate planning.  The best way to protect your financial future is to plan it while you are still able.  If you want your own plan to be put into effect by the people of your own choosing, you should develop an estate plan rather than wait for a Court to step in and appoint a Guardian and/or Conservator.

An Estate-Planning Attorney, often in concert with your Certified Financial Planner and Certified Public Accountant, can help you develop your estate plan.  An “estate plan” is a fancy term for the plan and documents that provide instructions for managing your assets now, in the event of incapacity and after death.  Estate plans should be reviewed, and updated as needed, every 3-5 years, or sooner if there is a significant change in your assets, your life, or the law.

If you do not make a plan for your financial future, a Court may do that for you.  If you end up being a “legally incapacitated individual,” unable to manage your finances due to a mental or physical limitation, a Court could appoint a Conservator to handle your financial affairs.  If you do not have a Will or Trust indicating where you wish your assets to go upon your death, the State of Michigan has laws that will dictate who will receive your assets.  Many people prefer to avoid such Court intervention in their affairs and choose to order their own financial affairs with an estate plan.

A person with an estate plan that includes a Revocable Grantor Trust (“Living Trust”) will not need a Court-appointed Conservator because their Trust names a Successor Trustee to handle their finances in the event of their incapacity.  Even without a Living Trust, a person with an Agent named in a Durable Power of Attorney for Finances can usually avoid a Court-appointed Conservator.  If you ultimately need a Court-appointed Conservator, and you’ve planned for that emergency, the Court will give the person named in your Durable Power of Attorney for Finances priority over your family members or the County Guardian.

Before Considering a Conservator.  What if it is too late to develop an estate plan because a person has lost mental capacity?  If you have a loved one without the mental capacity to develop an estate plan, they may need a Conservator.  Anyone who is interested in a loved one’s estate, affairs, or welfare, including a parent, guardian, or custodian, or anyone who would be adversely affected by lack of effective management of the individual's property and business affairs, may petition a Court asking that a Conservator be appointed.  However, before seeking appointment of a Conservator, ask these questions:  Does your loved one have assets that need protecting?  Is there a plan already in place such as joint bank accounts, a durable power of attorney, or a Living Trust?  Can a Court, by a Protective Order, rearrange the assets in such a way that a Conservatorship is not needed?

If there are no suitable alternatives to Conservatorship, the best option is usually for a family member or friend to step forward, file a Petition, and ask that they be appointed as the Conservator.  Keep in mind, however, that the law gives priority to who may serve as Conservator.  The person with first priority is a Conservator who already has been appointed in another jurisdiction.  The next person with priority is the person that your loved one names either in open Court or in their Durable Power of Attorney for Finances.  Next, Michigan law states that the following people have priority to serve as Conservator:  the person’s spouse, an adult child, a parent (or a person nominated by the Will of the deceased parent), a relative with whom the person has resided for more than 6 months prior to the Petition’s filing, and then a person nominated by the person who is caring for or paying benefits to your loved one.  If no other person is available or willing to serve, the Court may appoint any person the court determines is suitable and willing to serve.  This last category would include a close friend; however, if there is no one volunteering to serve, the Court may have to appoint a willing Conservator that doesn’t even know your loved one. 

As a family member or friend, you should not avoid serving as a Conservator for fear that you do not know what to do or can’t handle all of the responsibilities.  There is a wealth of information available both at the Probate Court and online that describes the duties of a Conservator and the various tasks that a Conservator must perform.  (http://www.teahan.com/conservatorships.html, and http://courts.co.calhoun.mi.us/book041.htm)   In addition to printed information, as Conservator, you can hire an attorney to educate yourself on the required tasks and to help perform those tasks.  Those hired by the Conservator are paid from the assets of your loved one’s estate, not with the Conservator’s personal resources.

If a Conservator Has Been Appointed.  If a Conservator is already appointed by the Court, what should an interested person do to assist the protected individual?

1. Acquaint yourself with the standard of care owed to your loved one by the Conservator.  A Conservator is a fiduciary and must “act as would a prudent person in dealing with the property of another.”
    

2. Learn the duties and limitations of a Conservator:

a.       A Conservator must file an Inventory of assets within 56 days after appointment with the Court and provide a copy to your loved one and the interested persons (which by Court Rule includes the heirs).

b.       A Conservator must keep suitable records of administration and exhibit those on request of an interested person.  If, for example, an interested person has questions about the propriety of an action taken by a Conservator, they can ask to see the Conservator’s records.  If those records are not supplied, the interested person may petition the Court for an accounting. 

c.       The Conservator must account to the Court not less than annually and upon resignation or removal.  The accounting must be provided to your loved one and the interested persons.  The Court must review and approve the accountings at least every 3 years.

d.       The Conservator must invest your loved one’s assets as would a prudent investor.  In this regard, the Conservator must exercise reasonable care, skill, and caution. 

e.       A Conservator may not dispose of real property without approval of the Court.  The Court may approve a sale only after a hearing.  Notice of the hearing must be given to the interested persons.  If you are an interested person, you have a right to attend the hearing and may ask to speak to the Court about the wisdom of the sale.  After hearing the evidence, the Court will determine whether a sale of the real property would be in the best interests of your loved one.

3. Take steps to protect your loved one.  If there are questions about the actions taken by a Conservator, an interested person should:

a.       Review the Inventory, prior Accountings, and request to see the records of administration;

b.       If further steps appear needed, Petition the Court to:

(1)  Require the Conservator to post a bond to provide financial security to the estate, if it is not already in place.  (In many counties, whenever the protected individual owns real estate, a Conservator is initially required to obtain a bond.);

(2)  Require an accounting for the administration of the estate

(3)  Direct appropriate distribution of assets;

(4)  Remove the Conservator and appoint a temporary or successor Conservator; and/or;

(5)  Grant other appropriate relief.

To protect your loved one, you may wish to consult with and obtain the assistance of an attorney.  If your actions are shown to have benefited your loved one’s estate, you can petition the Court to have your legal fees paid by the estate.

To ensure a person of your own choosing manages your assets, have an estate plan drafted now.  Seek out the advice of an Estate-Planning Attorney, Certified Financial Planner, and Certified Public Accountant.  Together with these professionals, you can create a plan that will protect you now, in the event of incapacity and after death.

© Marlaine C. Teahan, Marlaine C. Teahan, PLC 2005.