Conservatorship

There will be certain forms required to set up conservatorship; those forms are as follows:

Petition for Appointment of Conservator

$175.00 filing fee

Notice of Hearing;

Order Appointing Conservator

Letters of Conservatorship; and

Acceptance of Appointment

You will also need the same medical documentation, substantiating the need for the ward to have the protection of a guardian, to use in support of the conservatorship petition. The Court will not grant the petition, unless you have evidence to support it. Usually, a 1-2 page letter from a doctor of appropriate specialty, who is familiar with the ward’s condition.

MCLA §700.5417 of the Probate Code (actually, the technical name is the “Estates & Protected Individuals Code”, aka EPIC)

requires the conservator to file the initial Inventory, within 56 days of being appointed as the Conservator. Here is the form.

The inventory should list all of the ward’s property (personal property and real estate), at the time of the appointment. The value of this property is listed at “fair market value” (which is the price a willing buyer is willing to buy at a price that a willing seller is willing to sell, with neither under duress or pressure to transact). Liens, mortgages and encumbrances are subtracted from the fair market valuations.

Typically, the inventory lists real estate, investments such as stocks/bonds/securities/commodities, cash accounts, and personal property (other than personal property of insignificant value). You may want to consider making a video of the contents of the ward’s home, not just to protect them, but to protect yourself against any claim that might be made by the ward, or by the Court, that you have willfully misstated something on the inventory.

On the subject of real estate, you may want to consult a tax bill on the property, to determine its gross value, before deducting loans/mortgages. Normally, in Michigan, a property is worth 2x the “State Equalized Value”, or SEV.

As with annual accounts in decedents’ estate situations, the annual account is due within 56 days after the anniversary date of your appointment as conservator.

There is both a long form and a short form. The long form is used to report capital gains and losses, while the short form is for simple estates with standard receipts and disbursements.

Accurate records are a must, and you should know that the probate court analyst will be looking for the following:

An account that starts with either the initial inventory (in the case of a 1^st annual account), or with 2^nd and later accountings, that starts with “the balance of assets remaining.

*List out items of income, receipts, refunds etc (Schedule A)

*List out items of expense, taxes, etc (Schedule B)

*List out items of capital gain/loss ((Schedule C)

*List out itemized assets, at the end of the accounting period (Schedule D)

To be accepted, your accounting must satisfy the following formula:

Last year’s figures (or figure from inventory)

+ PLUS Schedule A income figures

– LESS Schedule B expense figures

+ PLUS Schedule C capital gain figures

(or – LESS Schedule C capital loss figures)

= EQUALS

The total of the Schedule D balances, as documented by bank and/or other statements, which the probate analyst will want to see.

Each year’s account must be approved by the judge; courts will vary in their procedures for providing that approval. Some will require a formal hearing some will not. Either way, you must serve all “interested persons” with the accounting, and copies of the Petition to Approve Accounts, with any Notice of Hearing that might be required. You will then be required to file a Proof of Service, swearing under penalty of perjury, that you served all “interested persons”.

In some situations, the parties may prefer, or it may be prudent, to have two Conservators, working together. This is done, either where trust is lacking, or simply because family or personal relationships are such that it is sought by the client.

These are not arrangements preferred by courts, because in essence, everything will require consent by both conservators. In turn, that may simply bring existing trust issues into court. At the very least, it will make conservator decision-making more cumbersome.

Public Administrators (PA) are fiduciaries of last resort. Let’s explain first what a “fiduciary” is. Generally speaking, the dictionary definition of a “fiduciary” is one who is entrust with property and/or power, for the benefit of another person.

In a probate court context, the word “fiduciary” is one word, that can stand in for the various types of representatives probate courts appoint. Probate courts appoint Estate PR’s/executors, in the context of decedents’ estates; they appoint guardians to protect other persons’ persons, and they appoint conservators, to protect other persons’ property. This term also applies to fiduciaries not appointed by probate courts, such as trustees.

(There are still other types of people who are fiduciaries, such as lawyers, bankers, investment advisors, and others, but they are beyond the scope of this website).

PA’s are people who are effectively appointed by local county probate courts to serve as fiduciaries, when nobody else is available, and also, in situations of intractable conflict between interested persons, where nobody can be agreed-upon by all persons to serve as fiduciary.

I say “effectively appointed”, because technically, they are appointed by a “State Public Administrator”, who is in turn, appointed by the Governor. Because neither the Governor nor the State Public Administrator will know all the appropriate candidates in Michigan’s 83 counties, there will be a certain influence by partisan politics on the process, as well as an influence of local courts, who know the local practitioners, and therefore, they know who would be qualified to serve.

Most often, PA’s handle local estates consisting of little or no money whatsoever; these are effectively unprofitable drains on their money and time. However, there will be the occasional matter in which their time and effort will be fully compensated, i.e., where the ward, or the decedent’s family, has assets that can be used to pay the PA’s bill. While I have never seen evidence that any PA charged inappropriately, whenever “there was money in the estate”, the frequency of their assignment to unprofitable cases suggest that they will bill every dime they legitimately can, where money is available to pay them.

In cases where a PA is appointed due to toxic relations among family members, the prospective cost of a PA might well provide some bargaining leverage, when it comes to trying to resolve matters.

Courts are more inclined to limit the powers of a conservator, and to supervise the manner in which the conservator operates; this is meant to protect the ward’s assets.

The conservator may be required to post a bond, in an amount set by the probate judge. A bond is simply an insurance policy by which the ward is effectively insured against malfeasance by the conservator.

There are numerous limitations a probate court may put on a conservator, and some courts have standard limitations they put on conservators. For example, in St. Clair County, conservators are empowered to pay bills, pay for necessary upkeep of the ward, payments for the ward’s housing and medical care, taxes etc.

Unusual expenditures, or those exceeding amounts set forth in any dollar limitations ordered by the court, or any deviation sought from the delineated authorities, must be the subject of a petition, asking in advance, for permission to make the expenditure.

You may be required to place the ward’s funds in a restricted account. You likely will be severely restricted in terms of enabling you to invest the ward’s money.

There are also record-keeping responsibilities, which we effectively discussed elsewhere. You will obviously need good records, in order to file accurate accountings.

Final Accounts

These are put on the court’s schedule, just as any other accounting would be (service on interested persons, substantiated by the filing of a Proof of Service).

The conservatorship may end in a number of ways, because it is terminated by the court, the ward dies, or because the conservator is removed by the court. In any of these situations, the conservator must file a final accounting.

If the conservator is removed, they must turn over all conservatorship assets to the new conservator, who would file an inventory (and yes, the final account, and the new conservator’s inventory better match up). If the ward dies, then the assets are turned over to the ward’s Estate PR/executor, who then files an initial inventory (which again should match)

The rule for anyone in a fiduciary position, with respect to someone else is “avoid conflicts of interest, and avoid even the appearance of such a conflict”.

The ward’s money/property must be kept separate from money/property belonging to the conservator. These assets must NEVER be co-mingled.

The ward’s money should never be used by the conservator to pay himself; the ward’s money should never be used as a source of money for the conservator to borrow from; the conservator must never purchase items for the conservator’s use, nor should the conservator’s friends or family be hired as investment advisors (i.e., to invest funds belonging to the ward).

There are numerous other potential conflicts that may arise, that are not covered here. When in doubt, ask for court permission to take whatever step you might be thinking of taking on behalf of the ward.

Typically, a guardian is not liable, unless negligent in their supervision of the ward. Additionally, the guardian is liable to the ward for any breaches of fiduciary duty (which refers to the guardian’s underlying duties of care, and loyalty to the ward)

As with a guardianship, you should notify medical & housing providers, and all funds custodians, of your status as the ward’s conservator. It is a good practice to include a copy of your Letters of Conservatorship, when you notify them of this.

This is particularly important with the ward’s doctors, landlord, and other persons whom your job as the ward’s conservator requires you to deal with. You cannot expect these people to communicate with you about the ward’s confidential financial/business matters, unless you notify them of your status as conservator.

“Representative Payee”

To become the ward’s “rep payee”, you must apply to the Social Security Administration, for this status.

Here is a link to the Social Security Administration’s FAQ’s about this program.

Applications for Medicaid in Michigan are handled either online, or by traditional paper application.

The online methods is through what Michigan’s Department of Health & Human Services calls its “MI Bridges” program; the link is here.

A link to the paper application is found here. You will need the following information:

*Social Security Number

*Proof of Michigan residency (driver’s license, utility bill)

*Proof of income

*Bank & asset statements

*Existing health insurance information

The State of Michigan indicates that applications usually take around 45 days to process.

In order to terminate a conservatorship, the process is essentially the same as the one establishing the guardianship. However, instead of a petition to appoint a guardian, you will file a Petition to Terminate/Modify Conservatorship, after completing it fully. You will have to “notice up” a hearing, and serve the “interested persons”, of course, as well.