CONSERVATORSHIPS: THE GOOD, THE BAD AND THE UGLY

by
Christopher Manes

Imagine waking up one morning to find you no longer have any control over your finances or property. All your bank accounts are blocked; your broker refuses to buy or sell stock in your name; lending institutions deny your loan application, despite your good credit and collateral; you can't even sell your car or home. There's a knock at the door; it's a court official who has come to interview you. He wants to ask about your mental capacity.

Is this an episode from the Twilight Zone? Unfortunately, no. It's a scene from a conservatorship proceeding, or rather it's one nightmarish scenario when conservatorships go awry.

The legislature provides for establishing conservatorships, under court supervision, to protect the property and health of persons who, due to mental or physical deficiencies, cannot take care of their own affairs. The person who comes under the protection of a conservatorship is called the conservatee. The person appointed by the court to administer the conservatorship is the conservator. Most often the conservator is a spouse, an adult child, a sibling, a close family advisor, or a professional conservator. Essentially, the conservator "steps into the shoes" of the conservatee in making important decisions about the conservatee's finances and, under certain circumstances, health and living conditions. This includes the power to buy and sell property, write checks, choose medical care, even give gifts of significant value.

If you think conservatorships are exotic legal entities that have nothing to do with you, think again. A good portion of the persons reading this article will very likely have some contact with a conservatorship sooner or later. Generally, conservatorships are established for elderly people who suffer from dementia or other mental disabilities that have deprived them of the capacity to handle their financial matters and day-to-day personal needs. This could mean your parents, your spouse, and indeed, with advancing age, you. If your business involves transfers of property or financial services, you will also probably find yourself dealing with a conservatorship at some point -- or worse, caught in the middle of a lawsuit between an elderly person and family members attempting to put his affairs under a conservatorship. As people live longer, the prevalence of dementia or other mental diseases is on the increase, and so are conservatorships cases. And with more and more blended families causing increased tensions between spouses and between parents and children, conservatorships are more likely to lead to conflict and court battles.

There are several types of conservatorships. Two kinds in particular have important applications: conservatorships of the estate and conservatorships of the person. A court will appoint a conservator of the person when clear and convincing evidence exists that a person is unable to provide properly for his personal needs for physical health, food, clothing, or shelter. Often this means an elderly person who has become too frail or mentally disoriented to carry out basic functions like bathing and cooking.

A conservator of the person can be a life-saver, preventing abuse and preserving the dignity of those who have lost control of their lives. In one case I handled, a man who was terribly injured in an industrial accident was mistreated by his own family. They misappropriated his assets and neglected to provide proper medical care for him, no doubt hoping he would die and leave them his inheritance. Fortunately, the court appointed a professional conservator, who rescued the man's assets, got him the medical treatment he needed, and literally saved his life. Like many professional conservators, the compensation he received from the court for his efforts did not even begin to cover the amount of work he did to recovery the conservatee's health and livelihood.

Conservatorships of the person usually raise little controversy, since a person more often than not knows when he cannot care for his physical needs. Not so with a conservatorship of the estate. A court appoints a conservatorship of the estate when a person is substantially unable to manage his own financial resources or resist fraud or undue influence. The paradigm case of this is the millionaire octogenarian widow, who flies off to Las Vegas one day to marry her 35-year-old male nurse, disinherits her children, and names her new "husband" the sole beneficiary of her will. To the children (and all sensible people), this is a case of a gigolo taking advantage of an elderly women in a weakened state of mind to get at her money. But try to convince the widow of that. And try to pry the widow's money away for her new so-called spouse.

What may ensue is a conservatorship proceeding in which the widow will feel betrayed by her children (no doubt urged on to a state of paranoia by the gigolo) and put upon by the court system. After a bitter court hearing (which would hopefully end in the widow's original estate plan being reinstated, her property under the protection of the conservator, and the gigolo taking a hike), the relationship between her and her children will probably end in tatters. It's easy to pick sides in the widow's case. Conservatorship laws were set up for just this worthwhile purpose. But, as with any good law, conservatorships can be abused. In some cases, adult children use the threat of a conservatorship to bully an elderly parent to do what they want. And the standard for deciding that a person is "substantially unable" to handle his financial affairs strikes many people as too subjective, especially when such a fundamental right as the control of property is at issue.

Moreover, the procedure for establishing a conservatorship can appear intimidating to a lay person caught in the process. A proposed conservatee does not have a right to a jury trial. A temporary conservatorship of the estate can, under some circumstances, be established by a judge without the conservatee attending the hearing, or even being given notice. Thus, the Kafkaesque scene described at the beginning of this article is not so far-fetched.

Perhaps the worse part of the conservatorship process for the conservatee is the mandatory psychological evaluations. After a petition for a conservatorship is filed (usually by an adult child), the conservatee must undergo an interview by a court investigator (who is ordinarilynot a mental health professional), as well as testing by psychologists and psychiatrists. Usually, the results of this psychological testing will determine the outcome of a court case. In the conservatorships I have represented, these required mental evaluations more than anything else overwhelm the conservatee with a sense that they no longer have control over their own lives. To alleviate some of the subjectivity of the law, the state legislature passed The Due Process in Competence Determinations Act in 1995. DPCDA (pronounced dip-see-duh) establishes clearer guidelines for determining legal capacity. Under DPCDA, to show that a person is "substantially unable" to manage his finances requires proof of a deficiency in at least one identifiable mental function, such as ability to reason logically, memory, orientation to time and place, ability to recognize familiar persons. DPCDA has probably helped prevent some of the more frivolous petitions for conservatorships. But conservatorships of the estate remain a legal procedure that, while often necessary, inevitably leads to conflict and disaffection between family members.

While none of us can prevent the sad effects of age and mental disease, there are ways -- in consultation with an attorney -- to make a conservatorship less likely, or at least less traumatic. The best way to avoid the likelihood of a conservatorship is to place your assets in a revocable living trust while you are still relatively young and no one can seriously challenge your mental capacity (you should probably do this regardless, for estate planning purposes). If you become mentally incapacitated thereafter, your successor trustee can manage your assets for your benefit, as set forth in the trust, without the need to have a conservator appointed. Of course, a revocable living trust will not prevent someone using undue influence to trick you into taking your assets out of trust; but assets in trust are easier to trace and account for, and their removal is more likely to send up red flags to professionals, such as CPAs and financial advisers, who then can notify family or friends what is happening.

Another alternative is to grant a durable power of attorney to a trusted person, usually a spouse or family member. While this means sacrificing some personal authority over your assets (and increases the risk of abuse by the person holding the power of attorney), again it assures someone will look after your affairs in case of incapacity, and it increases the likelihood that undue influence against you will come to light.

Finally, people should consider making a prior nomination of a conservator in case a conservatorship is established in the future. Although courts do not have to follow the conservatee's nominee, the wishes of a conservatee, expressed while no issue of mental capacity exists, carries a great deal of weight with judges. Therefore, if you have a particularly trusted member of your family, or a professional advisor, whom you might wish to act as conservator if you are unable in the future to manage your financial affairs, you can nominate him in writing.

Conservatorships are serious legal medicine for a bad state of affairs that none of us can plan for. What you can do is, understand the process and do your best to find alternatives before the need of a conservatorship arises.