A conservator appointed by the probate court is responsible for marshaling and safeguarding the protected individual’s property and using it for the care and support of that individual and his or her dependents. The conservator’s vast powers enable him or her to do virtually anything with the protected individual’s estate and property that the individual could have done if the conservatorship was not in place. This grant of authority can be very beneficial to the protected individual who can no longer manage his or her own affairs, but it can also be very dangerous if an unscrupulous conservator takes control and cheats the protected person out of his or her money and assets. As a result, Michigan’s Estates and Protected Individuals Code imposes significant duties and responsibilities upon conservators to ensure that they are only acting in the best interest of the individual. In addition, conservators are required to file regular inventories and accountings with the probate court as an oversight measure to ensure protected assets are being handled appropriately.
Conservators appointed by the probate court in Michigan must observe all of the following duties and responsibilities:
DUTY TO ACT AS A FIDUCIARY TO THE PROTECTED PERSON
“[A] conservator shall act as a fiduciary and observe the standard of care applicable to a trustee.” MCL 700.5416. As a fiduciary, conservators must put the protected individual’s interests ahead of their own and always act in good faith. Conservators are legally and ethically bound to act in the individual’s best interests. Conservators are, therefore, totally prohibited from self-dealing and using any assets or properties for their own purposes. In addition, conservators must follow the prudent investment rule and take strict measures to avoid any conflicts of interests from arising between them and the people they are charged to protect.
DUTY TO KEEP RECORDS
“The conservator must keep suitable records of the administration and exhibit those records on the request of an interested person.” MCL 700.5417(2). These records include, but are not limited to, receipts, bank statements, invoices, bills and tax documents. “Interested person” includes, but is not limited to, an heir, devisee, child, spouse, creditor, and beneficiary and any other person that has a property right in the estate of a protected individual. MCL 700.1105(c). Records can also be required to be produced upon the order of the probate court.
DUTY TO FILE INVENTORY
“Within 56 days after appointment or within another time period specified by court rule, a conservator shall prepare and file with the appointing court a complete inventory of the estate subject to the conservatorship together with an oath or affirmation that the inventory is believed to be complete and accurate so far as information permits.” MCL 700.5417(1). Also within 56 days, the conservator should provide a copy of the inventory to the protected individual (if able to be located and at least 14 years old) and to other interested persons and file proof of service with the court. MCR 5.409(B)(2).
The conservator must complete, file and serve PC 674 (Inventory – Conservatorship) to comply with this requirement. The inventory must include the name and address of each financial institution where the protected person’s assets are kept, and that address can be either the financial institution’s main headquarters or the branch office used most frequently by the conservator. MCR 5.409(B)(3). In addition, the inventory must list any property that the protected individual owns jointly or in common with others (including spouses) along with the type of ownership and value. Id.
DUTY TO FILE ACCOUNTINGS AT LEAST ANNUALLY
“A conservator shall account to the court for administration of the trust not less than annually unless the court directs otherwise, upon resignation or removal, and at other times as the court directs.” MCL 700.5418(1). The conservator must complete, file and serve either PC 583 (Account of Fiduciary – Short Form) or PC 584 (Account of Fiduciary – Long Form) along with corresponding financial institution statements or verifications of funds on deposit that reflect the value of liquid assets within 30 days of the end of the accounting period. MCR 5.409(C)(5). The accountings require the conservator to itemize all of the income, gains and other receipts, all of the expenses, losses and other disbursements, and a list of assets remaining at the end of the accounting period. The major difference between the short form and long form accounting is that the long form provides a schedule to list any realized gain or loss on the sale of non-liquid assets (e.g. real property, collectibles, vehicles, etc.).
An accounting must be filed within 56 days after the end of the accounting period and must be served on all interested persons with a notice that any objections to the account should be filed with the court and noticed for hearing. MCR 5.409(C)(1). The conservator shall also provide a copy of an account to the protected individual if the individual can be located and is 14 years of age or older. MCL 700.5418(2). “The accounting period ends on the anniversary date of the issuance of the letters of authority, unless the conservator selects another accounting period or unless the court orders otherwise.” MCR 5.409(C)(2). “If an individual who is subject to a guardianship or conservatorship dies, the guardian or conservator must give written notification to the court within 14 days of the individual’s date of death.” MCR 5.409(F). “If accounts are required to be filed with the court, a final account must be filed within 56 days of the date of death.” Id.
“Unless otherwise ordered by the court, no accounting is required in a minor conservatorship where the assets are restricted or in a conservatorship where no assets have been received by the conservator. If the assets are ordered to be placed in a restricted account, proof of the restricted account must be filed with the court within 28 days of the conservator’s qualification or as otherwise ordered by the court. The conservator must file with the court an annual verification of funds on deposit with a copy of the corresponding financial institution statement attached.” MCR 5.409(C)(4).
The probate must periodically review or allow the annual accounts. “Accounts shall be set for hearing to determine whether they will be allowed at least once every three years.” MCR 5.409(C)(6). The conservator must file PC 585a (Petition to Allow Accounts) at least every three years asking the court to allow all accounts that have been filed up to that point. This petition must be noticed for hearing and served upon all interested persons. The judge will require the conservator to appear in court to answer any questions about the accounting and entertain any objections from interested persons. The probate court may also appoint a guardian ad litem or court visitor to inspect and examine the accountings and require them to provide a report to the court of the same.
DUTY TO DISTRIBUTE INCOME OR PRINCIPLE FOR CARE OF PROTECTED INDIVIDUAL AND HIS OR HER DEPENDENTS
A conservator may expend or distribute estate income or principal without court authorization or confirmation for the support, education, care, or benefit of the protected individual or the protected individual’s dependents in accordance with the following principles:
- “The conservator shall expend or distribute money reasonably necessary for the support, education, care, or benefit of the protected individual or a dependent with due regard to all of the following:”
- “The estate size, the conservatorship’s probable duration, and the likelihood that the protected individual, at some future time, may be fully able to be wholly self-sufficient and able to manage business affairs and the estate.” MCL 700.5425(b)(i).
- “The accustomed standard of living of the protected individual and the dependents.” MCL 700.5425(b)(ii).
- “Other money or sources used for the protected individual’s support.” MCL 700.5425(b)(iii).
- “The conservator shall consider a recommendation relating to the appropriate standard of support, education, and benefit for the protected individual or a dependent made by a parent or guardian, if any. The conservator shall not be surcharged for money paid to a person or organization furnishing support, education, or care to the protected individual or a dependent in compliance with the recommendation of the protected individual’s parent or guardian unless the conservator knows that the parent or guardian derives personal financial benefit from that payment, including a benefit by relief from a personal duty of support, or that the recommendation is clearly not in the protected individual’s best interests.” MCL 700.5425(a).
- “The conservator may expend estate money for the support of an individual legally dependent on the protected individual and others who are members of the protected individual’s household who are unable to support themselves and who are in need of support.” MCL 700.5425(c).
- “The conservator may pay money to be expended… to any person, including the protected individual, to reimburse for an expenditure that the conservator might have made or in advance for a service to be rendered to the protected individual, if it is reasonable to expect the service will be performed and an advance payment is customary or reasonably necessary under the circumstances.” MCL 700.5425(d).
Before distributing estate property to the individual or dependents, the conservator “shall take into account the protected individual’s estate plan as known to them, including a will, a revocable trust of which the individual is settlor, and a contract, transfer, or joint ownership arrangement originated by the protected individual with provisions for payment or transfer of a benefit or interest at the individual’s death to another or others.” MCL 700.5428(1). The conservator has the right to examine the protected person’s will to ascertain this intent. MCL 700.5428(2). However, the conservator has no right to modify or change the terms of the individual’s will already in place.
PENALTIES FOR FAILING TO COMPLY WITH CONSERVATOR DUTIES
The penalties for a conservator failing to comply with their duties are severe. A conservator that fails to file inventories and accountings when required will receive a notice of deficiency from the probate court directing him or her to comply within 28 days. If these issues are still not resolved, the probate court will suspend the conservator’s authority until the conservator petitions the court for reinstatement. The probate court can also appoint a special conservator to assume control and direct him or her to investigate and report to the court any maladministration from the suspended conservator. The probate court may also, on its own authority or on petition of an interest person, remove the conservator from his or her position on the grounds of willfully failing to comply with statutory duties, converting assets from the estate, commingling protected funds with his or her own funds, or failing to properly account for large or unreasonable expenditures.
Even after removal from office, there can be additional monetary penalties. The probate court, upon motion to show cause from an interested person, can surcharge the suspended or removed conservator for any unaccounted funds missing from the estate, any unreasonable expenditures, any amounts determined to be misappropriated, or any improperly paid fiduciary fees and attorney fees. An order requiring surcharges to be paid to the estate can be enforced by contempt of court penalties including fines and incarceration.
In addition, the conservator can become personally liable for contracts or obligations entered into in a fiduciary capacity in the course of estate administration if the representative capacity is not revealed or if the conservator is personally at fault for tortious conduct. MCL 700.5430(2). Finally, a conservator who embezzles money or property from an estate and omits, neglects or refuses to return the money or property within 60 days from being ordered by the probate judge to return said money or property is guilty of a felony punishable by a fine up to $5,000.00 or up to 10 years in state prison, or both. MCL 750.176.
Acting as a court-appointed conservator comes with sweeping powers and authority over another person, but also comes with very strict duties and responsibilities under the law. Even innocent neglect of these duties can result in serious civil and possibly criminal penalties. Conservators are absolutely entitled to retain a skilled probate lawyer to assist them in the completion of their duties and defend them against allegations of misadministration in office. The cost of legal counsel for the purposes of assisting in completing conservator duties can be charged against the estate instead of the conservator personally. However, a probate judge who determines that the conservator committed serious violations while in office can be ordered to be responsible for his or her own fees.
If you or a loved one have any further questions about conservatorships or need legal representation, then do not hesitate to contact the experienced attorneys at Kershaw, Vititoe & Jedinak PLC today.