Posts Tagged ‘conservatorship of a minor’

State Court Does Not Control Social Security Payments

MAY 12, 2014 VOLUME 21 NUMBER 17

At Fleming & Curti, PLC, we do not handle divorce cases. From time to time, though, a divorce case raises the same kinds of issues that we see in the guardianship, conservatorship and probate cases we do handle.

A recent Arizona Court of Appeals decision is a case in point. It involves the divorce of a Navajo County, Arizona, couple, Donna and Edward. When the couple divorced in 2009, Donna was awarded custody of their four children. Edward was ordered to pay child support.

When Edward began collecting Social Security benefits on his own account, the children were entitled to receive $362 each per month. Social Security named Edward as “representative payee,” which meant that the children’s checks were made payable to him and he was required to account to the Social Security Administration each year.

Donna filed a petition with the divorce court to modify the support and visitation orders. She also alleged that Edward had been taking the children’s Social Security money and spending it as he saw fit — and that she should be the representative payee since she had sole custody of the children. At some point she apparently applied to Social Security to become the payee, and the payments were switched to her name. Still, she wanted Edward to account for — and return — the payments received for a nine month period starting right after the divorce.

The judge in the divorce court agreed, and entered a judgment against Edward (and in favor of Donna) for the amount of the payments he found to have been “misappropriated.” The judge also held Edward in contempt for failing or refusing to turn over the Social Security.

Edward appealed, and the Arizona Court of Appeals briefly reviewed the interrelationship of Social Security, state law and state courts. According to the appellate judges, Arizona state courts do not have any jurisdiction to review the management of Social Security payments made to a representative payee. The proper place to challenge Edward’s use (or possible misuse) of those funds was before the Social Security Administration itself. Peace v. Peace, May 8, 2014.

The Arizona appellate court, incidentally, was very candid in its assessment of the legal principles. It noted that some state courts (not in Arizona) have decided that they do have jurisdiction over Social Security representative payees, and others have held that state courts are preempted by federal law from intervening. The Arizona opinion specifically mentions a minority opinion in a 2013 Vermont case, LaMothe v. LeBlanc, which reviewed the holdings in several states — including Alaska, Maine, North Carolina, Ohio, Iowa and Tennessee.

What is the significance of the recent Arizona holding in probate court? An analogous situation arises frequently. Suppose that a parent with a disability receives Social Security benefits, and that his or her minor child is entitled to Social Security benefits. Now suppose that a grandparent or other family member has become guardian for the child, or that a professional fiduciary has become conservator to handle a personal injury settlement. Can the Arizona probate court order the parent to turn over Social Security payments, or to prove that they were expended for the child’s benefit, or even to relinquish authority as representative payee? The Peace decision would seem to say that none of those decisions are within the purview of the probate court — the guardian’s, conservator’s or custodial parent’s dispute is with Social Security, not the state courts.

Lawyer Ordered to Return Funds Taken by Conservator


Michigan Attorney William R. Ford represented Preshus Graves, who had been appointed as conservator of her son Calvin Graves. Calvin Graves, then not quite three years old, had been injured in an automobile accident, and his mother had pursued a personal injury action against the driver of the other vehicle. When the case settled (for a total of $9,300, or $6,122.70 after payment of costs and attorneys fees) the probate judge appointed Ms. Graves as conservator for her son, approved the settlement and ordered her to deposit the proceeds into a court-controlled account. Instead she took the money.

The order appointing Ms. Graves as her son’s conservator was clear. To further reduce the possibility of error, the court also issued a “Notice to Attorney of Duties Under Conservatorship of a Minor.” That document, addressed to lawyer Ford, directed him to accompany his client to the bank, to make sure the account was titled as a conservatorship account, and to see to it that the account was clearly marked as unavailable to the Ms. Graves or anyone else unless they could present a court order allowing distribution of some or all of the funds.

Instead of following the instructions given to him by the probate court, Mr. Ford simply wrote two checks to Ms. Graves for the net settlement proceeds. Nothing on the checks indicated that they really belonged to her son, and nothing alerted the bank to the need to block any account set up with the money. Mr. Ford handed the checks to his client in his office, and did not accompany her to the bank.

A few months later, when the appropriate bank restrictions had not been filed with the court, Ms. Graves was removed and a new conservator was appointed. The new conservator filed a petition to surcharge both Ms. Graves and her lawyer. Mr. Ford responded by blaming the entire matter on his client; he had instructed her on what to do, he said, and her failure to follow the court’s order was her own fault.

After some legal maneuvering (and Ms. Graves’ failure to sign a promissory note for the missing money, as she had promised she would do), the court ordered Mr. Ford to return the missing money. He appealed the surcharge order.

The Michigan Court of Appeals agreed that, on these facts, at least, the attorney is liable for the loss of conservatorship money. Although they upheld the finding, the appellate judges disagreed with the trial court’s reasoning. The “Notice to Attorney” was not a court order, and so Mr. Ford could not be held liable for violation of any court order for not taking Ms. Graves to the bank himself. But by issuing the checks to her in her individual capacity, he effectively gave away the assets of Calvin Graves to an unauthorized person. Matter of Estate of Graves, October 27, 2009.

The difference between a court “notice” and an “order” may be the sort of hair-splitting that appeals primarily to lawyers, but the problem is a real one. Out of ignorance, need or avarice, family members may sometimes be unable to resist the temptation to use a minor’s (or incapacitated adult family member’s) assets improperly. If the probate court wants to make sure that the money is properly placed, how better than to instruct the family member’s lawyer to follow specific rules?

Arizona probate courts (and those in most other jurisdictions) recognize a similar “blocked account” arrangement for protecting funds belonging to minors. As in Michigan, Arizona courts rely on the attorneys involved to see to it that the accounts are properly set up in the first instance.

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