This is the second of two blogs (yesterday and today) on an important topic. I hope you find it helpful.
Terminology varies from state to state, but in general, guardianship (sometimes called "guardianship of the person") applies to court appointment of a fiduciary ("guardian") to make decisions in regard to the protected person's personal care. The protected person may be called a "ward" under some state laws, but that term is being phased out. A guardian generally does not have control of the protected person's finances, although state law or the specific terms of the guardianship may authorize the guardian to hold small amounts of the protected person's funds if no conservator has been appointed and the protected person does not have a durable power of attorney.
Conservatorship refers to court appointment of a fiduciary ("conservator") to administer the finances and assets of the protected person. In some states, conservatorship may be called "guardianship of the estate." Conservatorship is much like trusteeship, although the powers of and restrictions on the conservator are defined by statute and regulation, rather than a voluntary trust agreement and are typically are much less flexible than the powers authorized for trustees. Conservatorships are also analogous to durable powers of attorney. However, one of the key differences between conservatorships, trusts and durable powers of attorney is that conservatorships are court-supervised and directly accountable to the court. It is common for conservators to be required by state law and regulations to account annually to the probate court. Such accounting needs to be accurate to the penny.
Conservatorship is also similar to a decedent's probate estate administration. Like a Personal Representative or Executor (except where a decedent's will waives bond), a Conservator may be required by law to obtain a probate bond through an insurance company to insure his or her fidelity to proper administration of the protected person's assets and income. The costs of the probate bond and of the administration come out of the assets of the protected person. The amount of coverage of the bond is set by the court to cover the assets under the conservator's administration and may cost anywhere from just under $1,000 per year to considerably more. The judge may have the authority to waive the probate bond requirement under certain circumstances, such as where the spouse is the conservator and is the primary beneficiary under the protected person's will.
A conservator does not have unlimited power to do whatever financial transactions he feels are warranted. For example, a conservator needs specific court authorization to sell real estate in most states.
In most circumstances, the fiduciary is entitled to "reasonable compensation." Reasonable compensation often is based on a list of criteria such as the time spent, lost opportunity to do other work that the fiduciary normally does, difficulty of the work, etc. Unlike provisions under some state probate codes for Personal Representatives of decedents' estates, reasonable fees for a conservator or guardian are not related to a percentage of the value of the protected person's assets that the fiduciary manages.
For a guardian and conservator of an adult, the code generally imposes a standard that the protected person's rights are to be removed to the minimum degree necessary to protect them. This is because the removal of personal rights and liberty by the court is analogous to a civil form of imprisonment. Where a protected person is capable of making some kinds of decisions safely and prudently in regard to their living conditions, care, or finances, the theory is that their rights to make such decisions should be preserved as long as possible. On a practical level, keeping seniors involved in their care and financial decisions also helps to keep them engaged with life, reality and higher mental functions, so this legal construct is very consistent with practical experience in caregiving for seniors who are in a process of deteriorating mental capacity. There is a growing movement nationwide to maximize decision-making by adults who are under guardianship and/or conservatorship.
Maximizing the decision-making by protected persons can make it more difficult for the fiduciary, since he or she is not able to make unilateral decisions where the protected person retains decision-making power. How this works out in practice depends very much on the personalities of the protected person and fiduciary. When circumstances are such that retained decision-making by the protected person unduly hampers the process of making or implementing needed decisions, the fiduciary can file to obtain guidance or an order of the court.
Although attorneys correctly advise clients to plan to avoid unnecessary guardianship and conservatorship, there are many situations where guardianship and conservatorship are appropriate and very beneficial. Court supervision in difficult cases can be beneficial to impose financial accountability and to bring about sound decisions for the care of a protected person. Examples are where the protected person is unwilling to comply with doctor's orders or other considerations that are important for the safety of the protected person and others. Under modern guardianship and conservatorship theory, courts impose the minimum restrictions on protected persons that are needed to accomplish the personal safety and prudent financial management that are the goals of these court-supervised protective measures.
You can learn more about this topic as well as other strategies on our website under the tab entitled: elder law planning in Virginia. Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning.