Conservator Not Required to Unwind Protected Person’s Estate Plan

JUNE 8, 2015 VOLUME 22 NUMBER 21

When an aging parent begins to fail, and a scheming caretaker appears to take advantage, what should concerned children do to respond? Should they consider a report to Adult Protective Services (in Arizona, 1-877-SOS-ADULT, or 1-877-767-2385), or file a court proceeding, or take some other action?

The short answer is “yes.” That is, the children of a vulnerable adult victim of abuse, neglect or exploitation should make a report to Adult Protective Services (the above phone numbers or APS’s online site give more details), and consider stepping in to protect the parent with court proceedings, judicious use of existing powers of attorney and family support.

Sometimes court involvement will be necessary, and family members may be ill-equipped, or uncomfortable, about acting. In Arizona and in a number of other states, there is an industry of private, professional fiduciaries who can act to help protect the vulnerable senior. [In the interest of fair disclosure, Fleming & Curti, PLC, and several of the individual lawyers frequently act as conservator, trustee, agent under a power of attorney or personal representative of an estate — though we had no connection with the case we describe in this week’s Elder Law Issues.]

Mark Simpson (not his real name) was just the kind of aging parent described above. In the course of about a year, he had given his car title to a new caretaker, named her as joint owner on his bank accounts, included her as a beneficiary on his annuities and gave her a general, durable power of attorney. When the caretaker tried to use the power of attorney to change the “payable on death” designation on Mark’s remaining accounts from his sons to the caretaker, someone at the bank called one son (let’s call him Scott) to let him know something was amiss. Scott contacted Entrust Fiduciary Services, Inc., an Arizona company which acts as fiduciary in similar cases, and they began an investigation.

Entrust Fiduciary asked the court to be appointed as temporary conservator a few days later. Once appointed, they fired the caretaker and filed a report alleging that she had been exploiting Mark. They also gave formal notice of the proceedings to Scott and to Mark’s other son, Louis — who had not, up to that point, responded to their requests.

Louis objected to Entrust Fiduciary’s petition to be appointed as Mark’s permanent conservator, and so the temporary appointment was continued long enough for a hearing on the permanent petition to be scheduled and conducted. Six months later, and before that permanent hearing, Mark died.

Louis opened a probate on Mark’s estate, and objected to Entrust Fiduciary’s final report in the conservatorship. According to Louis, a conservator has a duty to protect heirs from the loss that might occur if estate planning decisions are not unraveled. Entrust Fiduciary argued that their only duty was to Mark, and that they protected his assets from loss during his life. The probate judge agreed with Louis, and ruled that a conservator has “a duty to protect the estate assets and the estate plan … includ[ing] not only the protected person but the beneficiaries of the estate plan.”

The Arizona Court of Appeals disagreed. While it is true that a conservator is required to consider the protected person’s estate plan, it does not follow that a conservator must protect the interests of ultimate inheritors. The conservator’s duty is to manage the protected person’s assets to help prevent waste and dissipation, and to use the property for the benefit of the protected person. It is not to protect heirs.

Louis had also argued that Entrust Fiduciary had not timely recorded its conservatorship documents, apparently believing that such a recording would have voided the beneficiary deed signed by Mark in favor of the caretaker. The court correctly notes that even if Entrust Fiduciary had recorded the proper documents before Mark’s death, it would have taken more actions to invalidate the existing deeds, and a conservator is not obligated to initiate those proceedings (though they are permitted to do so).

After Mark’s death, his son Louis had filed an action against the caretaker to undo the transactions she had initiated before being fired. That action resulted in a settlement, and an unspecified portion of the assets she had gotten were returned. That, notes the appellate court, is the proper way to determine the validity of questioned documents — not to have a court-appointed conservator favor one possible beneficiary (or group of beneficiaries) over another. Entrust v. Snyder, May 28, 2015.

©2017 Fleming & Curti, PLC