OCTOBER 12, 2009 VOLUME 16, NUMBER 57
A reader writes:
Can a conservator get a waiver from the requirement of bonding, which costs my mother’s estate over $900 per year? This, along with the $300 court fee to evaluate accountings, is a tremendous amount of money. Can I get my sister to agree that this is not necessary?
[Editor's note: our weekly newsletter often deals with Arizona-specific information, and we try to remind our readers that we are providing general information that might not be applicable outside Arizona. This week's question deals with Arizona practice more narrowly than most -- no reader should assume that the rules in their own state are the same or even similar. This information is intended to be general and informative, but it is no substitute for getting specific legal advice for your own legal problems.]
Arizona requires that a “surety bond” must be posted in every conservatorship case. The Probate Court must set that bond at the estimated value of the estate plus approximately one years’ income. There are very few circumstances in which the bond can be reduced or waived.
What is a surety bond? It is essentially an insurance policy, designed to protect your mother. If you misuse her funds, or fail to meet your fiduciary duty to invest them prudently, the Probate Court could one day enter a judgment against you personally. The bond simply assures the Court that there will be funds available to pay your mother's estate back, even though you might not have any assets reachable by the Court.
One way to reduce the size (and therefore the cost) of the bond is to place conservatorship assets under court control. This is usually accomplished by putting some or all of the money in a court-controlled and federally-insured bank account. While this may save costs, it also makes the money unavailable for daily living expenses of the ward. It is most commonly used when the money belongs to a minor rather than an adult, but it might be one way of reducing the cost of the bond.
Another choice is to ask the Judge to reduce the bond by the value of “regular fixed expenses” paid for the ward’s benefit. (See Arizona Revised Statutes §14-5411(B)) This might, for example, mean that the Court might be willing to reduce the bond amount by the cost of regular monthly nursing home or assisted living bills. Note, however, that this decision is in the discretion of the Probate Judge; it is far from an automatic adjustment.
Trust companies (like those affiliated with most major banks) are not required to pay a bond premium. Of course, you would have to turn over management of your mother’s finances to such a company in order for that to make any difference. Even then, the fees charged by the bank would almost certainly be more than the bond premium.
Getting the consent of other siblings — or even the ward herself — simply will not help. The Court is more interested in protecting your mother’s assets than in making the family comfortable with the costs.
The $300 fee charged by the Court each year to review the accounting is a little more complex. Arizona permits each county Probate Court to decide whether it will charge such a fee. If it does, the money collected must be used to pay some of the court's probate-related expenses. Maricopa County (Phoenix, where your mother’s conservatorship is located) imposes the fee. Most counties do not levy such a fee, but it is usually not possible to change the county of administration of an existing conservatorship.
What can be done to minimize these conservatorship costs, at least in Arizona? Not much. This is one reason why durable powers of attorney are so important — and so popular.