Posts Tagged ‘surety bond’

How Much Does It Cost to Get a Guardian and/or Conservator Appointed?

OCTOBER 22, 2012 VOLUME 19 NUMBER 39
We are frequently asked how much it will cost to get a guardian and/or conservator appointed for a parent or other relative. It is hard to answer with precision, but it is a fair question. Let us see if we can give you some guidance.

First, a few important assumptions. We need to be clear about this: we can’t tell you very much about what it will cost in Ohio, or California, or … you get the point. In fact, we can’t tell you with too much precision how much it will cost in Phoenix, Arizona. We practice in Tucson, and we frequently file proceedings in most of the other counties in Arizona. We do not do much in Maricopa County (Phoenix), partly because the costs and procedures are so difficult to predict there, and partly because there are plenty of lawyers who know how to do this kind of work in the big city.

Second important assumption: this is 2012. Like all our newsletters, this information will remain available on our website indefinitely. We don’t know how things might change next year, much less in a decade.

Third important assumption: that there is no wild peculiarity. If you file a guardianship petition as to your mother and she responds by filing a federal court action alleging that you are part of a conspiracy to violate her civil rights, the cost is going to go higher. Things like that don’t happen very often, but we can’t tell you that everyone will agree, that the evidence will be clear, or that the process will be smooth. So we are assuming here that there are not significant bumps in the road toward guardianship or conservatorship.

And our last assumption: we are only talking about the cost of getting you (or someone) appointed as guardian and/or conservator. You may need legal assistance after the appointment, as well (in fact, you probably will). That will depend on the complexity of your family member’s guardianship and conservatorship — and that can increase for a variety of reasons.

Enough disclaimers. How much will it cost to get a guardianship and conservatorship established?

The costs and fees are broken into several pieces. The breakdown is important, because some will be paid out of your family member’s estate, some can be waived if there is little or no money, and some will be your responsibility even if there are no assets or income from they can be paid. Here is a quick rundown:

  1. Court filing fees, certified copies and service of process (the petition and notice have to be handed to your family member by an authorized process server). Assume about $300-40o here. Most of that is the filing fee itself, which has to be paid before things get underway. It can be waived, but based on your inability to pay (in addition to your family member’s lack of resources or income).
  2. Your lawyer’s fees. If you hire a firm like us to represent you, your legal fees are likely to be $1500-2000 for an uncontested guardianship/conservatorship. This fee will be your responsibility regardless of how the proceeding turns out. It can be reimbursed from your family member’s resources if you are successful, but most lawyers will expect to be paid up front, or soon after proceedings are initiated, and not wait until you have been appointed and can get access to funds.
  3. The court-appointed lawyer’s fees. Unless your family member already has a lawyer (and you can’t select one for him or her — it would have to be someone they already had a relationship with or they hired after the proceeding began) the court will appoint an attorney to represent them. The lawyers who accept these appointments come from a rotating list, and they mostly charge their regular hourly rates. Some do more extensive investigations and pursue different lines of inquiry. The bottom line: don’t be at all surprised if the court-appointed lawyer’s bill exceeds $1,000, but that’s a pretty good maximum figure for a rule-of-thumb approximation. This one can be paid by the court itself if your family member has no resources.
  4. The court-appointed investigator. Another list of court appointees yields someone who has a social work, medical or legal background, and who is appointed to report to the court about your family member’s circumstances. The cost for that investigation and report is frequently in the range of $500-1000. As with the court-appointed attorney, these charges can be collected from the court if there are no assets available.
  5. In addition to the investigator, the court reviews a report from a medical provider. That is usually your family member’s primary care physician, but there are others who can qualify. Still, that is likely to add another $100-200 to the cost. In the real world, you will have to pay this up front to get the doctor’s opinion letter, though sometimes it might be included in a general check-up under Medicare or private insurance.
  6. Bond premiums are due if you (or someone else) are appointed conservator (of the estate). The premium for this insurance policy can be paid from your family member’s assets, and if they have no assets then it is unlikely that they need a conservator in the first place. The cost of the bond varies by the size of the estate being managed. Surety bonds can be difficult to purchase at any price, and the availability of bonding companies is often limited.

Add all that up and you can see that the cost of getting a guardian and conservator appointed will probably exceed $3,000, and can quickly grow to more like $5,000. And remember: that only gets you to the starting point. Additional costs for lawyers, accountants and court proceedings will add more to that figure over the years after your appointment. You need to be able to clearly articulate what benefit you will get from the guardianship or conservatorship to incur that kind of expense.

Several Factors Increase Cost Of Conservatorships in Arizona

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.

“Joint Control Agreement” Leads to Lawyer’s Liability

JUNE 15, 2009  VOLUME 16, NUMBER 44

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.

Employer Pays Twice After Guardian Mishandles Funds

FEBRUARY 25, 2002 VOLUME 9, NUMBER 35

When Ashley Tatum’s father Ernest died Ashley was still a minor. Ernest Tatum had named Ashley as beneficiary on several retirement and life insurance accounts with his employer, BellSouth, and so Ashley’s mother Rosalyn Felder had to go to court to secure an appointment as guardian of Ashley’s estate in order to handle the proceeds.

Ms. Felder hired Memphis, Tennessee attorney Philip Cooper as her attorney for the guardianship proceeding. Mr. Cooper presented the pleadings and evidence to the court, and Ms. Felder was appointed as guardian of Ashley’s estate (in Arizona and a number of other states, incidentally, Ms. Felder would have been named as “conservator” rather than “guardian”—but the roles would be the same).

The court was concerned, however, about protecting Ashley’s estate from poor management or misappropriation. In order to ensure that nothing would go awry, the court imposed two requirements on Ms. Felder. She was ordered to post a surety bond and the accounts were to be under the “joint control” of Ms. Felder and her attorney, Mr. Cooper.

A surety bond is essentially an insurance policy protecting the estate in a guardianship or conservatorship proceeding, and Ms. Felder purchased her bond through Fidelity & Deposit Company of Maryland (F&D). The joint control requirement was to be satisfied by attorney Cooper taking responsibility for collecting and overseeing Ashley’s money.

Mr. Cooper wrote to BellSouth to tell them of the conservatorship appointment. His letter enclosed a copy of the court pleadings and instructions that all monies were to be sent to his office address. Then he set up a guardianship account for Ashley and began depositing the life insurance and retirement proceeds into it.

Despite the instruction, however, BellSouth sent one of the checks directly to Ms. Felder, made payable to “Ashley J. Tatum, Rosalyn W. Felder Guardian of”. That check was in the amount of $18,622.38, and it never made it into the guardianship account. Presumably, Ms. Felder cashed the check and spent it, without ever notifying her attorney she had received it.

Five years later Ms. Felder was removed as guardian of Ashley’s estate and Fidelity & Deposit (the insurance company) paid off on its bond. Then the bonding company went after BellSouth for its failure to follow the lawyer’s initial instructions. The probate court (which handles guardianships of minors’ estates) ordered BellSouth to pay F&D the amount it had sent directly to Ms. Felder, plus interest, and BellSouth appealed.

The Tennessee Court of Appeals upheld the probate court’s judgment against BellSouth. The company knew about the joint control requirement, said the court, and if the company had followed instructions no loss would have occurred. BellSouth was ordered to pay the original amount, plus interest, and also costs of the appeal. Guardianship of Tatum, February 4, 2002.

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