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When Does A Minor Child Need A Conservator In Michigan?

 

It seems strange that a child would come into a substantial sum of money at a tender age.  However, the passing of a parent or family member might result in a life insurance policy payout or a large inheritance.  Since children do not have the maturity or knowledge to properly manage their money, the probate court may appoint a conservator or enter an order to protect and safeguard their financial affairs until they become of age.

Upon petition and after notice of hearing, “[t]he court may appoint a conservator or make another protective order in relation to a minor’s estate and affairs if the court determines that the minor owns money or property that requires management or protection that cannot otherwise be provided, has or may have business affairs that may be jeopardized or prevented by minority, or needs money for support and education and that protection is necessary or desirable to obtain or provide money.”  MCL 700.5401(2).  The minor, a person who is interested in the minor’s estate, affairs, or welfare, including a parent, guardian, or custodian, or a person who would be adversely affected by lack of effective management of the minor’s property and business affairs may petition for a conservator’s appointment or for another appropriate protective order.  MCL 700.5404(1).  The petition may be filed in the county where the minor resides or, if the minor lives out of state, in the county where the minor’s property is located.  MCL 700.5403.

After the petition is filed, the minor has the following rights and protections regarding the proceedings:

  • The probate court may appoint a guardian ad litem, court officer or employee as a visitor to interview the minor and make recommendations to the court regarding the petition. MCL 700.5406(2).
  • “If, at any time in the proceeding, the court determines that the minor’s interests are or may be inadequately represented, the court may appoint an attorney to represent the minor, giving consideration to the minor’s choice if 14 years of age or older. An attorney appointed by the court to represent a minor has the powers and duties of a guardian ad litem.”  MCL 700.5406(1).
  • The minor has a right to be present at the hearing in person, to be represented by counsel, to present evidence, to cross-examine witnesses and to a trial by jury. The issue may be decided at a closed hearing or without a jury if the minor requests.  MCL 700.5406(5).

“After hearing, upon finding that a basis for a conservator’s appointment or another protective order is established by clear and convincing evidence, the court shall make the appointment or other appropriate protective order.”  MCL 700.5406(7).  In lieu of appointing a conservator, the court can order a protective arrangement for the money to be transferred to a restricted financial account, used to purchase an annuity contract, contract for training and education, or as an addition or to establishment of a suitable trust.  MCL 700.5408(1).  If the court does choose to appoint a conservator, the following people are entitled to consideration in the following order of priority:

  • A conservator, guardian of property, or similar fiduciary appointed or recognized by the appropriate court of another jurisdiction in which the minor resides. MCL 700.5409(1)(a).
  • An individual or corporation nominated by the minor if he or she is 14 years of age or older and of sufficient mental capacity to make an intelligent choice. MCL 700.5409(1)(b).
  • A parent of the minor or a person nominated by the will of a deceased parent. MCL 700.5409(1)(e).
  • A relative of the minor with whom he or she has resided for more than 6 months before the petition is filed. MCL 700.5409(1)(f).
  • A person nominated by the person who is caring for or paying benefits to the minor. MCL 700.5409(1)(g).
  • If none of the foregoing persons are suitable and willing to serve, any person that the court determines is suitable and willing to serve. MCL 700.5409(1)(h).

For the protection of the minor’s assets, the probate court will generally require the appointed conservator to furnish a bond.  Generally, the amount of the bond will be the aggregate value of the estate property plus one year of the estate’s estimated income.  MCL 700.5410(2).  However, the judge can waive the bond requirement under one or more of the following conditions:

  • The estate contains no property readily convertible to cash and the cash is in a restricted account with a financial institution. MCL 700.5410(1)(a).  For example, the estate might solely consist of real estate that may not be sold without a court order.  Likewise, any cash placed in a restricted account cannot be used or spent without a court order.
  • The conservator is a financial institution granted trust powers under Michigan’s banking code. MCL 700.5410(1)(b).
  • The court determines that requiring a bond would impose a financial hardship on the estate. MCL 700.5410(1)(c).
  • The court states on the record the reasons why a bond is not necessary. MCL 700.5410(1)(d).

The primary duty of the conservator over a minor is to protect the money and property until he or she turns 18 years old.  Generally, the conservator can receive, hold, invest and insure the property consistent with Michigan’s prudent investor rule.  In addition, a conservator of the estate of an unmarried minor (of which no one has parental rights to) has the powers, responsibilities, and duties of a guardian under the Estates and Protected Individuals Code until the individual is no longer a minor or marries.  MCL 700.5423(1).  The conservatorship lasts until the minor turns 18, at which point the ownership or control of the property passes to the formerly protected individual.  MCL 700.5431.

One of the biggest questions that come up in minor conservatorships is whether any of the estate funds can be spent on the minor’s behalf.  Can the conservator use the funds to buy expensive items for the minor like a computer or a car?  What about a school trip or an extraordinary medical or dental expense such as necessary surgery or braces?  In general, the minor’s estate is not a substitute for the parent or guardian’s duty to support for the minor child.  It is the responsibility of the minor’s parent or guardian to provide food, shelter, educational and medical care.  If the conservator improperly spends funds on the minor’s behalf without court permission, then he or she can be held in contempt of court, ordered to repay the funds to the estate with interest, and be removed from this fiduciary position and replaced.  Depending on the intent of the conservator, he or she could be sued by the minor or another interested person for tortious damages.  Even worse, the conservator can be subject to criminal prosecution for wrongfully embezzling funds.  A conservator should always seek the permission of the judge before making any kind of expenditure from the minor’s estate that may be questionable.  As always, there is no substitute for good legal advice from a knowledgeable lawyer if the conservator has questions about what is acceptable.

If you are involved in a conservatorship as a fiduciary or interested person and need legal representation, then do not hesitate to contact the experienced probate attorneys at Kershaw, Vititoe & Jedinak PLC today.

 

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