AUGUST 16, 2010 VOLUME 17 NUMBER 26
Let’s say you have created a revocable living trust, and you have named yourself as trustee. You also name your two children as successor trustees, to act together upon your death or incapacity. Two years later you become incapacitated; because of a dispute between your two children about who should handle assets outside the trust, the probate court names a local bank as your conservator. Now who handles your trust — the bank, or your children?
Before we answer that question, let us complicate it. You are also the beneficiary of a trust set up by your late husband — and you are trustee of that trust, as well. About half of the assets the two of you owned are included in each of the two trusts. Your husband’s trust names you as trustee (now that he is deceased) and names the two children as successor trustees if anything should happen to you. Does your conservator have any authority over that trust?
Those were precisely the questions faced by a probate judge in South Dakota when Evelyn Didier became incapacitated. The bank appointed as her conservator asked the court to clarify that it had control over both trusts as well as Ms. Didier’s non-trust assets. The judge agreed, and Ms. Didier’s daughter Barbara Didier-Stager appealed.
Court appointment of a conservator does not amount to appointment of a successor trustee, argued Ms. Didier’s daughter. In fact, appointment of a conservator proves the incapacity that triggers a change in trustees — resulting in the son and daughter taking over as successor trustee of their mother’s trust. As to their father’s trust, the successor trustee provisions are triggered by the conservatorship in the same way — though our simplified version of the facts described above fails to clarify that the successor trustees of that trust were actually Ms. Didier-Stager and another local bank — different from the bank acting as Ms. Didier’s conservator.
South Dakota, like Arizona, has adopted the Uniform Probate Code — though South Dakota’s version has been updated more recently and is more current. The Code includes provisions about guardianship and conservatorship (though now those sections have been set aside as a separate uniform law, the Uniform Guardianship and Protective Proceedings Act). Those uniform laws permit the judge in a conservatorship proceeding to enter orders related to the protected person’s estate plan.
So, reasoned the South Dakota court, the probate court could permit Ms. Didier’s conservator to do anything that Ms. Didier herself could have done before becoming incapacitated. Her own trust was revocable and amendable — if she had wanted to do so, she could have changed the successor trustee at any time. She could have named the bank that was ultimately appointed as her conservator. Consequently, the court could allow her conservator to assume the powers of successor trustee over that trust.
The late Mr. Didiers trust was a different matter, however. Ms. Didier herself did not have the power to change the trustee, and so her conservator could not exercise that power on her behalf. That trust would have to be dealt with separately, and the Supreme Court ordered the case remanded to the probate judge to determine what to do about Mr. Didier’s trust. Conservatorship of Didier, June 30, 2010.
Does this mean that Mr. Didier’s successor trustees automatically take over, instead of Mrs. Didier’s conservator? Probably not. Other provisions of the Probate Code give the probate judge authority over trust administration, and if it appears that there is some reason not to allow the named successors to become trustee there will presumably be an order to that effect. But it does change the discussion from a choice between blindly following the document or giving Mrs. Didier’s conservator power to do anything she could do. Instead, the probate court will have to determine which approach is most consistent with the trust, with proper administration, and with the best interests of the trust’s beneficiaries.
The Uniform law actually goes quite a bit further today than the 1974 version originally adopted in Arizona (though Arizona has updated portions of the law several times). Reviewing the statute in the context of the Didier case highlights some of the changes. Among the powers given to conservators by the “new” Code (as adopted in South Dakota, for instance) is the power to “make, amend, or revoke the protected person’s will.” (See Section 411(a)(7) of the Uniform Guardianship and Protective Proceedings Act.) Court approval is required, but the very notion of a conservator changing the protected person’s estate plan might strike some as dangerous.
JULY 12, 2010 VOLUME 17, NUMBER 22
Among the less-controversial steps taken by the Arizona Legislature in 2010 was the adoption of the Uniform Adult Guardianship and Protective Proceedings Jurisdiction Act, which is usually referred to by its unpronounceable acronym UAGPPJA. The new law, which becomes effective on July 29, should make it easier for families to handle interstate guardianship and conservatorship issues. At the same time it should make it harder for warring families to move an ailing or demented family member across state lines for personal advantage.
Problems with interstate application of guardianship and conservatorship laws have been all too common. Imagine a typical scenario: father and stepmother, married for 25 years, live in Pennsylvania. Three children from father’s first marriage live in Florida, Arizona and Illinois. After stepmother checks father into a Pennsylvania adult care home, the children meet in Pennsylvania and decide they are better equipped to make decisions about their father’s care. Without telling their stepmother of their intentions they check father out of his adult care home, put him on an airplane, fly to Tucson and check him in to a nursing home here. Then they file a guardianship and conservatorship action in Arizona, giving notice to his wife in Pennsylvania.
Under existing law such a proceeding would be permissible, and could result in the Arizona courts making decisions about not only the Pennsylvania man’s living arrangements and medical care, but also over his (and his wife’s) Pennsylvania property. The cost and trouble of traveling to Arizona, hiring a local attorney and objecting to the Arizona court proceedings might well deter his wife from protecting herself or asserting her views on the proper care for her husband.
After the UAGPPJA goes into effect, however, such interstate moves to secure legal advantage should become ineffective. The Arizona courts will be instructed to defer to the courts of the home state of any proposed ward.
There are other frequent — and much more benign — interstate problems in guardianship and conservatorship proceedings that are addressed by the UAGPPJA, too. One arises when the subject of an Arizona guardianship legitimately moves out of state. Imagine, for example, that a working couple have become guardian for their 22-year-old son who is developmentally disabled. Now they want to move to another state, and they will take their son with them. Will their Arizona guardianship be valid in the new state? Will they have to initiate an entirely new proceeding in the new state? If they do not, will they have to report to the Arizona courts for the rest of their son’s life — even though Arizona no longer has any direct involvement in his life?
If the new state has also adopted the UAGPPJA (and so far 19 other states and the District of Columbia have) the process of transferring a guardianship or conservatorship is vastly simplified. A filing needs to be made with the Arizona court, then with the courts of the new state. Once both courts have agreed that the guardianship can be transferred, the Arizona proceeding is terminated and the new state takes over. The process is much simpler than a second proceeding in the new state, and it ensures approval from the Arizona courts before any action is taken. The same process can work in reverse for people moving into Arizona.
One other interstate problem arises when, for example, an Arizona conservatorship involves property in another state. Under the existing patchwork of laws, each state is different — and many of them require an entirely new conservatorship (a “protective proceeding” in the language of the interstate jurisdiction law) with court-appointed attorneys, bond premiums and separate accountings filed in the state with the property. The new law makes the process much simpler: once the Arizona conservator has filed appropriate documents with the courts of the other state, he or she can proceed as if appointed in that state. No separate court proceedings required, no additional legal fees incurred, and no potential conflicts between two courts overseeing the same conservatorship.
JUNE 28, 2010 VOLUME 17, NUMBER 21 Mesa, Arizona, lawyer Donald C. Galbasini first began representing members of the Tremble family in 1998. That was when he filed a notice that he would be the attorney for Vernice Tremble, who was serving as conservator for Edward Tremble, Jr., her grandson.
Nine years later Vernice Tremble was removed by the probate judge as conservator — and also as trustee of a special needs trust that had been set up for Edward Tremble. A professional trustee was appointed to take over management of the special needs trust. A year and a half after that, Edward Tremble died and another family member was appointed to finalize the trust administration and distribution. Mr. Galbasini filed a notice that he would be representing the new trustee in connection with wrapping up the trust.
A month after stepping in as the new trustee’s lawyer, Mr. Galbasini filed a request for approval of a $46,736.65 fee — for his representation dating back to 1998. The state Medicaid agency (which would receive most of the balance of Edward Tremble’s trust under the rules governing self-settled special needs trusts) objected, arguing that it was too late for Mr. Galbasini to be filing his bill for approval and payment.
The trustee who had been handling the trust in the interim joined in the state’s objection, adding other arguments. Because of Mr. Galbasini’s long involvement and representation of a conservator who had been removed, argued the trustee, it would be impossible at this late date to figure out whether his representation had benefited Edward Tremble or other family members. The trustee pointed out that Mr. Galbasini had billed at his regular attorney rate for ministerial actions like writing checks out of his client trust account. Furthermore, the trustee was concerned that none of Mr. Galbasini’s reported time was for contact with Vernice Tremble, his client — all of his contacts had been with Edward Tremble’s parents, Mr. Galbasini’s client’s son and daughter-in-law.
The probate judge agreed, and denied Mr. Galbasini’s fee request as untimely. The Arizona Court of Appeals, however, disagreed — it reversed the fee denial and sent the matter back to the trial judge for further hearings. The question wasn’t whether the fee request was late, ruled the appellate court — instead, the important question was whether the fees were reasonable and for the benefit of Edward Tremble’s trust and conservatorship estates.
The appellate court did not rule that Mr. Galbasini’s fees were reasonable, but only that he needed to be given a chance to explain and defend them. If the court finds that the fees were incurred during times when he did not actually represent the conservator or trustee, for instance, the Court of Appeals agreed that those fees should be denied. The mere lateness of the application, however, was not enough to justify a complete denial of Mr. Galbasini’s fees. Conservatorship of Tremble, June 10, 2010.
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.
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.
Tranquilino Ventura was a child when his father died, and just fourteen years old when a lawsuit arising from his father’s death was settled. The total settlement, after costs and fees, exceeded $500,000. When Mr. Ventura turned eighteen he found out that the money was all gone.
Mr. Ventura’s mother, Patricia Dutton, had been appointed conservator by an Alabama probate judge. The judge had ordered that she post a $620,000 bond to secure her proper management of the money, and then given her authority to handle her son’s lawsuit proceeds. Over the next four years she apparently managed to lose much of it in poor stock investments.
There were other questionable uses of the money. Ms. Dutton bought her son a BMW automobile for his sixteenth birthday, and paid for polo lessons and a polo pony. She also loaned $120,000 of her son’s money to her parents, who lost those funds in several schemes involving auto and mobile home sales.
After Mr. Ventura discovered that his money was gone, he brought suit against a number of individuals and organizations. He sued Hartford Insurance, who had issued the bond assuring that his mother would manage the money properly. He also sued the lawyer who had represented his mother, Billie B. Line, Jr., and two brokerage houses that had each handled a portion of the conservatorship money.
Mr. Ventura’s case has made its way to the Alabama Supreme Court twice in the seven years since he reached his majority. The first case, Edward D. Jones & Co. v. Ventura, was decided in 2005. It stands for the proposition that the mandatory arbitration agreements contained in almost all brokerage new account forms can bind the ward even though signed by a conservator. But the more interesting case was decided just last month.
Mr. Ventura secured a $500,000 judgment, plus interest, against his mother, and sought to collect the money from Hartford Insurance, which had (after all) promised to pay off on any claims against the conservator. Hartford, however, wanted to raise another argument. It had gotten Ms. Dutton’s lawyer (Mr. Line) to sign a “joint control agreement,” in which Mr. Line agreed to personally oversee Ms. Dutton’s management of the money — and to sign every conservatorship check that might be issued.
Joint control agreements are popular among bonding companies, and less so among lawyers. The idea is that, since the attorney has some responsibility to monitor the estate anyway, the bonding company can leverage that responsibility into more protection on its bond. It may be hard to see how this works to the lawyer’s benefit, but some insurance agents even hold the joint control agreement out as a boon to lawyers.
Whether or not it was a smart decision for Mr. Line to agree to the joint responsibility, he did. By his signature he actually became an agent of Hartford Insurance. So what did he do next? Mr. Line then signed a number (somewhere between 50 and 150 — the testimony was unclear) blank checks for Ms. Dutton, and let her take over management of the money.
Mr. Line’s failure to monitor the conservatorship went further than that, however. He borrowed $5,000 from Mr. Ventura’s assets himself — to make a down payment on a house in Reno, Nevada. Later he and Ms. Dutton would agree that could be a part of his fees, along with another $4,000 he received from the estate.
Although the probate judge had ordered Ms. Dutton to post an additional $120,000 bond, Mr. Line never saw to it that the extra bond was posted. When the judge scheduled an accounting two years into the conservatorship, Mr. Line failed to get it filed — and instead asked for dismissal of the guardian ad litem, the attorney who had been appointed to represent Mr. Ventura’s interests. The probate judge declined to grant his request, but Mr. Line later testified that he did not get the judge’s order, and he never prepared an accounting or appeared for the hearing scheduled in the probate court.
Before trial Mr. Ventura settled with Hartford Insurance on the claim against the bond issued to Ms. Dutton, and that meant the trial proceeded with Hartford moved from the “defendant” category to “plaintiff.” Testimony at the trial indicated that Mr. Ventura’s estate should have been worth in excess of $920,000, even if some of Ms. Dutton’s expenditures had been approved.
The jury awarded $200,000 in actual damages against Mr. Line, and another $550,000 in punitive damages. The Alabama Supreme Court ruled that Mr. Line had undertaken a fiduciary relationship not only with his client, Ms. Dutton, but also with Hartford Insurance and with Mr. Ventura. In these facts, and given the magnitude of Mr. Ventura’s loss, the court had no trouble upholding the judgment. Line v. Ventura, May 22, 2009.
Footnote: on February 8, 2008, Mr. Line filed a Chapter 7 bankruptcy petition. It is not yet clear whether Mr. Ventura or Hartford Insurance will receive all or any significant portion of their judgment.
What can we glean from the story of Mr. Ventura, Ms. Dutton, Mr. Line and Hartford Insurance? Several points:
If a lawyer is willing to sign a “joint control agreement,” he or she should do so with eyes wide open — and the lawyer needs to treat the agreement seriously and actually monitor his or her client’s actions
In any case, agreement or no agreement, a lawyer who ignores his client’s failure to handle conservatorship funds subjects himself or herself to personal liability for that failure
If there is any question about the ability of a family member — even a trusted and loved family member — to handle fiduciary responsibility, it is better for the ward, for the bonding company, for the court and ultimately for the lawyer if a professional fiduciary is selected instead.
We apologize. We like to think that we bring you the most interesting, useful and thought-provoking elder law cases, news stories and trends each week. Somehow we completely missed a great case last year. With thanks to our friend Prof. Rebecca Morgan for calling it to our attention, we will now attempt to remedy the oversight.
The actual holding of the Oklahoma Supreme Court in Matter of the Guardianship of Holly (June 26, 2007) may not be that powerful, but the language is. The issue was fairly simple: Danny Holly, a 58-year-old head-injured man whose daughter had been appointed as his limited guardian, wanted to hire his own attorney. He already had a firm representing him, and in fact he had chosen them four years earlier. But now he wanted to change lawyers.
The problem was that Mr. Holly’s guardianship (of his estate — what in Arizona would be called a conservatorship) was worth several million dollars, and everyone seems to have been concerned that he not be allowed to interrupt its administration by changing attorneys. They also expressed concern that he might be subject to undue influence by his new lawyers or others. His daughter and her lawyers agreed.
Mr. Holly’s judge scheduled a hearing on his request for new counsel. At that hearing the lawyers all argued about what should happen, but neither Mr. Holly nor anyone else gave sworn testimony. At one point the Judge said “I see no reason to swear in all of the attorneys. You are all officers of the Court.” Then he ruled that Mr. Holly could not change lawyers.
The Oklahoma Supreme Court eloquently and forcefully disagreed. The statements of counsel did not amount to evidence, ruled the Justices. “Unsworn, in-court statements by attorneys acting as advocates are not evidence,” the Justices noted.
Oklahoma law gives a ward the power to select his or her own attorney. Failure to allow Mr. Holly that right was reversible error, according to the state’s high court. Could that lead, as the guardian and the existing attorneys claimed, to a messy court proceeding? Perhaps, but “messiness has never been a valid reason for dispensing with one’s fundamental rights,” wrote the Justices. “Indeed, it is often a hallmark of the assertion of those rights.”
The Oklahoma court places its judicial finger squarely on the issue. Citing what it called the “massive curtailment of liberty” inherent in guardianship proceedings, the court opined that even after the appointment of a guardian “the proceedings must continue to be conducted with the utmost care to ensure that the ward subject to that curtailment receives due process.”
We feel better now, having shared this powerful appellate decision with you, our readers. We hope you forgive us the delay in getting it to you, and that you appreciate it as much as we do. We even hope many of our readers will have an opportunity to cite its language one day in a guardianship or conservatorship proceeding.
Would the same result (perhaps even the same strong language) obtain in Arizona proceedings? Likely. Arizona law is not quite as explicit about the right to select counsel, but in practice guardianship judges — and especially appellate judges — should be expected to fiercely protect the ward’s right to select counsel. If, on the other hand, there is actual evidence of undue influence, improper self-dealing or conflicts of interest, or other strong reasons to overcome the presumption in favor of the ward’s ability to select his or her own attorney, the result in individual cases might be different. Participants should start, however, with the assumption that the ward’s selection of his or her own attorney will be given effect.
Alaskan Lillie M. Rahm was in her early nineties when she first met handyman Robert Riddell, then in his mid-sixties. Their friendship grew quickly, and Mr. Riddell moved in with Ms. Rahm within a few months. Two years later friends and relatives instituted legal proceedings that lasted well past Ms. Rahm’s death.
When Ms. Rahm revoked a power of attorney naming her daughter as agent and transferred some of her money into a joint bank account with Mr. Riddell, her daughter began to ask questions about her mother’s finances. Ms. Rahm seemed to be confused and Mr. Riddell refused to allow her access to any information, so Ms. Rahm’s daughter filed a conservatorship petition. Four days later Mr. Riddell and Ms. Rahm were married.
That did not stop the legal proceedings, however. After a hearing the public guardian was appointed as Ms. Rahm-Riddell’s conservator. Shortly after that a domestic violence complaint was filed, alleging that Mr. Riddell physically attacked and verbally abused his wife. The public guardian moved her to an assisted living home in Washington; Mr. Riddell found her, removed her from the facility and took her to Oregon to live with him. He refused to reveal her whereabouts despite court orders; Ms. Rahm-Riddell died in Oregon in 1997.
It turned out that Ms. Rahm-Riddell had signed two wills after meeting Mr. Riddell. The first, signed shortly after their meeting, left her home, its contents and one-fourth of the rest of her estate to Mr. Riddell. The second, signed in Oregon just a few months before her death, left her entire estate to Mr. Riddell.
Ms. Rahm-Riddell’s family asked the Alaska courts to admit an earlier will to probate and Mr. Riddell objected. He insisted that the last will she signed was valid, and he demanded a jury trial as to her competence to make the will. Her daughter and brother argued that she was not competent at the time, that Mr. Riddell had unduly influenced her, and that the matter should be tried without a jury.
The Alaska court refused to grant a jury trial and ultimately ruled that only the will signed before Mr. Riddell’s appearance on the scene was valid. Mr. Riddell appealed to the Alaska Supreme Court.
The general rule in Alaska (as it is in Arizona) is that civil matters are decided by the judge unless there is a specific statute or the common law (the rules predating statehood) authorizes a jury. Since will contests were unknown to the common law and no statute permits it, Mr. Riddell’s demand for a jury trial was properly denied. Furthermore, said the Court, the evidence was clear that Ms. Rahm-Riddell could not correctly identify the individual involved in her life at the time the will was executed. Mr. Riddell’s wills were struck down. Riddell v. Edwards, October 5, 2001.
When J. Michael Cantore, Jr., was appointed as conservator of the person and estate of Diana Kosminer, he was required to post a bond to help ensure that he would handle her finances properly. The purpose of a “surety” bond (the type usually required of conservators) is to protect the ward; if the conservator misspends money, or invests imprudently, or even steals from the ward, the bonding company will reimburse the ward for any loss and then pursue the conservator for recovery. That way the ward does not bear the loss for the conservator’s mistakes.
In 1989 (two years after the conservatorship was established) Ms. Kosminer moved into a nursing home. She would live in the home for the remaining six years of her life and, as it turned out, the $160,000 in her estate when she entered the facility would not be enough to pay for her care for the entire time.
From the very start Mr. Cantore tried to avoid using Ms. Kosminer’s money for her care. He made no payments to the nursing home, but instead made an application (eight months after her admission to the home) to have the state Medicaid agency pay for her care. That application was denied because Mr. Cantore did not provide the information the state required; if he had completed the application Ms. Kosminer would presumably have been denied because she had too much money to qualify for assistance.
Mr. Cantore tried twice more, unsuccessfully, to get Ms. Kosminer qualified for Medicaid benefits. In 1992, after the nursing home had cared for Ms. Kosminer for almost three years without payment, Mr. Cantore liquidated Ms. Kosminer’s assets and successfully qualified her for Medicaid.
Although Ms. Kosminer was not actually injured by Mr. Cantore’s failure to act properly, the nursing home filed a lawsuit against the conservatorship bond. The facility argued that Mr. Cantore had a duty to use Ms. Kosminer’s money for her care and then, when it ran out, to make a timely and complete Medicaid application. Had that been done, said the nursing home, they would not have lost $63,000 on her care.
The Connecticut courts initially threw the nursing home’s claim out of court because, the court ruled, a third party can not make a claim against the surety bond. The bond, according to that argument, is intended to protect the ward and not the ward’s creditors.
The Connecticut Supreme Court disagreed. It reinstated the lawsuit against the bonding company and ruled that Mr. Cantore had a duty to handle Ms. Kosminer’s finances in a timely and appropriate manner. If the nursing home can show that Mr. Kosminer failed in that duty, it can collect on the conservator’s bond. Jewish Home for the Elderly of Fairfield County v. Cantore, August 14, 2001.
Like many seniors, Robert Anderson signed a financial power of attorney, giving his daughter and son-in-law power to manage his financial affairs. He may have understood that the power of attorney would avoid the necessity of court proceedings to appoint a conservator if he became incapacitated. Having a power of attorney, as it turned out, was not an effective way to avoid court involvement.
At first Mr. Anderson appointed his son Sam as his agent. Mr. Anderson’s estate was large, and so for two years Sam used the power of attorney to make gifts of his father’s property to himself, his sister Barbara, and both his and his sister’s children.
When Sam died unexpectedly, Mr. Anderson signed a new power of attorney. This time he named his daughter Barbara Lasen and her husband Paul as agents. Barbara and Paul continued to make gifts from Mr. Anderson’s property for the next two years—but now Sam’s children were excluded. In addition Barbara and Paul used Mr. Anderson’s residence and vacation home without paying any rent. Nothing in Mr. Anderson’s power of attorney permitted gifts, but Barbara and Paul insisted that they had discussed the gifts with Mr. Anderson and he had agreed.
Sam’s two daughters finally decided that enough was enough, and they filed a conservatorship petition. They asked the court to appoint a local bank to act as Mr. Anderson’s conservator. Barbara and Paul objected, arguing that no conservator was necessary because Mr. Anderson had given them the power of attorney. They also argued that they had priority to act as conservator if the court decided appointment of a conservator was appropriate.
The trial judge decided that Barbara and Paul had overstepped their authority as agents, and appointed a local bank as conservator. Barbara and Paul appealed.
The Nebraska Supreme Court agreed with the lower court. Barbara and Paul did not have the authority to make gifts because there was no specific language in the power of attorney. Once they violated their duties as agents under the power of attorney it was entirely appropriate to appoint an independent conservator to consider what steps to take—including possible action against Barbara and Paul for return of the money they had wrongfully taken from Mr. Anderson. Besides, Barbara and Paul had already shown that they were not trustworthy protectors of Mr. Anderson’s assets. Conservatorship of Anderson, June 22, 2001.
The result would likely have been the same under Arizona law. As in Nebraska, an Arizona agent may not make gifts using a power of attorney unless the authority to do so is clearly spelled out in the document (and, in fact, separately initialed by the principal). Mr. Anderson would almost certainly have had a conservator appointed if he lived in Arizona.
