A conservator has the broad power and authority to handle all assets on behalf of the protected individual and manage property for his or her health and benefit. Some of the specific powers that the conservator can exercise without court approval include, but are not limited to:
- Collect, hold, or retain estate property, including land in another state, until the conservator determines that disposition of the property should be made (including property in which the conservator has a personal interest). MCL 700.5423(2)(a).
- Continue or participate in the operation of a business or other enterprise owned by the protected individual. MCL 700.5423(2)(c).
- Invest or reinvest estate property in accordance with Michigan’s prudent investor rule. MCL 700.5423(2)(e).
- Make an ordinary or extraordinary repair or alteration in a building or other structure, demolish an improvement, or raze an existing or erect a new party wall or building. MCL 700.5423(2)(h).
- Exercise rights of stock ownership, including voting as a proxy. MCL 700.5423(2)(m).
- Insure the estate property against damage or loss or the conservator against liability with respect to third persons. MCL 700.5423(2)(r).
- Borrow money to be repaid from estate property or otherwise. MCL 700.5423(2)(s).
- Advance money for the protection of the estate or the protected individual, and for all expense, loss, or liability sustained in the estate’s administration or because of the holding or ownership of estate property. MCL 700.5423(2)(t).
- Pay, contest or settle a claim by or against the protected individual’s estate. MCL 700.5423(2)(u).
- Employ professionals to assist in the performance of administrative duties, including auditors, accountants, investment advisors and attorneys. MCL 700.5423(2)(y-z).
However, “[a] conservator shall not sell or otherwise dispose of the protected individual’s principal dwelling, real property, or interest in real property or mortgage, pledge, or cause a lien to be placed on any such property without approval of the court.” MCL 700.5423(3). “The court shall only approve the sale, disposal, mortgage, or pledge of or lien against the principal dwelling, real property, or interest in real property if, after a hearing with notice to interested persons as specified in the Michigan court rules, the court considers evidence of the value of the property and otherwise determines that the sale, disposal, mortgage, pledge, or lien is in the protected individual’s best interest.” Id.
The protected person’s home is often the most important and valuable asset he or she will possess. Not only can selling the principal residence deprive the individual of a place to live, but it can also affect the spouse and dependents living there or adversely affect the individual’s estate plans (e.g. leaving the home to the children). However, there might be perfectly legitimate reasons why the conservator would want to ask the court to sell the residence. The individual may be relocating to a warm weather climate that will create improvement for his or her overall health. The individual might be entering a long-term care facility and it is necessary to sell the home for necessary funds. Ultimately, the court has to decide if the transaction will be in the individual’s best interests.
Due to the possible effect of the real estate transaction on spouses, dependents and estate plans, the conservator must give notice to all interested persons that there will be a court hearing scheduled to decide the conservator’s request. “Interested person” includes, but is not limited to “the incumbent fiduciary; an heir, devisee, child, spouse, creditor, and beneficiary and any other person that has a property right in or claim against a trust estate or the estate of a decedent, ward, or protected individual; a person that has priority for appointment as personal representative; and a fiduciary representing an interested person.” MCL 700.1105(c).
In Grimm v P.W. Servs. Inc., unpublished per curiam opinion of the Court of Appeals issued July 14, 2016 (Docket No. 326240), Eric Grimm was initially appointed as conservator over his mother, Martha Grimm. He and the other interested parties at the time stipulated that Martha’s home should be listed for sale. However, Eric was subsequently removed as conservator because “he was too emotionally invested to provide assistance in Martha’s best interest”. P.W. Services, a professional fiduciary, was appointed as the successor conservator and listed the house for sale as originally agreed. P.W. Services and Martha’s guardian ad litem agreed that the house was uninhabitable, unsafe, and a drain on estate resources. The conservator received an offer two days later and petitioned the probate court to approve the sale. Eric objected to the sale, stating that the price was too low and Martha would have nowhere to live after he sold his own home. Over Eric’s objections, the judge found that the sale of the house was in Martha’s best interests and granted the petition. On appeal, the Michigan Court of Appeals determined:
- “The trial court’s finding that the sale of the home was in Martha’s best interest is not clearly erroneous. Evidence was presented that the house was built in the 1940s (if not before then) and that substantial work was needed to make the home habitable. Specifically, testimony was elicited from Larry Rottman, a real estate appraiser, that an additional $8,000 to $10,000 would be required to be spent on repairs to make the home habitable. The repairs required were (1) the windows needed to be replaced (which would have cost “several thousand dollars”), (2) new hardwood floors needed to be installed in one of the bedrooms, (3) a new ceiling fan needed to be added in the bathroom and (4) the rotten window sills needed to be replaced. In addition, water damage in the kitchen needed to be addressed. With regard to the value of the home, Bulthouse and Keene provided PWS with a recommended listing price of $99,900 after inspecting the house together. Rachel Cereska of PWS opined that it was in the best interest of Martha to sell the house to Michael and Cori Fris for $99,900. Therefore, there was competent evidence to support the trial court’s factual finding.”
Although the trial court’s determination of best interests was correct, Eric further alleged that P.W. Services breached its fiduciary duty to Martha by not obtaining the best sale price. It is true that, in the context of a sale of real estate, a conservator has the duty to obtain the highest possible price.
- “The duty to obtain the best price . . . specifically include[s] consideration of . . . [1] the determination of fair market value, [2] the proper marketing of the property, and [3] the adequacy of the price obtained.” In re Green Charitable Trust, 172 Mich App 298, 317 (1988). Determination of the fair market value requires a “sound” appraisal, or in the absence of an appraisal, the conservator may establish value by “testing the market.” Id. at 317-318. “Testing the market” includes organized efforts that would reasonably take the place of a sound and thorough appraisal. Id. at 318.
The Michigan Court of Appeals determined that P.W. Services met its duty to obtain the highest possible price. First, although they did not have time to perform an independent appraisal, they adequately “tested the market” by having two real estate agents walk through the home and agree that it should be listed at $99,900.00. Second, they properly marketed the property by listing the home with two local real estate agents (including one agent of Eric’s choice). Third, the price was adequate because the conservator was provided a market analysis from the real estate agent recommending a listing price of $95,650.00 and they accepted an offer a few thousand dollars higher. Under all of the circumstances, the conservator met its fiduciary duties to Martha Grimm.
A conservator contemplating the sale of a protected individual’s home should consult with a knowledgeable probate attorney before making a legal misstep. In fact, the conservator has the power, at the estate’s expense, to “[e]mploy an attorney to perform necessary legal services or to advise or assist the conservator in the performance of the conservator’s administrative duties…” MCL 700.5423(2)(z). As always, an ounce of prevention is worth a pound of treatment. A lawyer can ensure that the conservator is acting within the scope of his or her powers or responsibilities duties before a problem occurs. Any conservator who breaches their fiduciary duty can be subject to contempt of court, can be ordered to repay the estate for any loss on the transaction, or can even be removed from this position.
If you have any further questions about conservatorships or require legal representation, then do not hesitate to contact the experienced attorneys at Kershaw, Vititoe & Jedinak PLC for assistance today.
