Addressing conservatorships

In recent decades, there have been high profile, celebrity cases involving conservatorship. From involuntary psychiatric holds put in place for Britney Spears and Amanda Bynes, to a temporary psychosis for Kanye West. Generally, the need for conservatorship involves individuals suffering from a coma or cognitive loss due to a serious illness or injury.

When an individual loses their ability to manage their own financial assets and/or take care of their health matters, the law recommends conservatorship. This court-ordered power is established when a guardian or a protector is appointed by a judge to manage finances, health care and/or daily life of another due to physical or mental limitations, or age. Each conservatorship is based on specific facts and circumstance to the individual case along with the state’s guidelines on the law.

Types of Conservatorship

  • Conservator of the person – The appointed conservator cares for the incapacitated individual’s health care.
  • Conservator of the estate – The appointed conservator cares for the financial concerns for the incapacitated individual.
  • In some instances, the appointed conservator may have a duty and power over both health care decisions and financial matters.

Some considerations on Conservatorships

  • The conservator must be supervised by the court.
  • The duties of the conservator can be both time consuming, through the legal process, and costly with court fees, extending the conservatorship time period (as needed), time away from work, attorney fees, etc.
  • Meticulous records must be kept and routinely provided to the court.
  • At times, a conservator must obtain court permission to take action on behalf of the incapacitated individual.
  • The conservator may need to post bond to act as the financial conservator.

Planning for the loss of capacity

Establishing a durable power of attorney for both financial and health care matters allows the designated agent to act on the incapacitated individual’s behalf. Furthermore, these documents allow an individual to appoint their agent (or attorney-in-fact) before there is a need, to circumvent legal proceedings, to avoid supervision and cost from the courts, and to avoid the requirement of the agent to post bond to serve. Although durable powers of attorney do not guarantee fiduciary compliance, by law it is a duty.

In some instances, agents serving in a durable power of attorney circumstance have violated their fiduciary role by stealing and not taking prudent care of the incapacitated individual’s assets. Conservatorships might aid in improving this concern through court supervision and requiring a bond by the agent can be methods and a tool to guard against such malfeasance, but again, there is no guarantee. Conservatorships are run by law and court procedure and do not give the individual to make choices before a need occurs. There have been instances that even with court supervision, some conservators have enriched themselves or have been negligent while not being detected by the courts.

Conservatorship vs. a Power of Attorney

Does one supersede the other in its effectiveness and procedures, balanced with the principal’s intentions? Facts and circumstances are a keystone for either to work. Generally, most individuals who take steps to plan to address their loss of capacity will establish durable powers of attorney for finances and health care. Often this includes discussing concerns on how these powers could be abused. Furthermore, the individual’s financial professional plays a key roll through routine review of the individual’s appointed agents.

There is no one set it and forget it solution, but conservatorships are available when planning has not been done or is incomplete. Be sure to consult with an attorney to determine the best approach for you.

About the authors

Aaron Huntoon, MBA, CRPC®, CBEC® Director of Planning
Aaron consults on comprehensive financial plan design and technical topics with Lincoln Financial Network advisors nationally. He is a Sagemark Consulting Private Wealth Services Advisory Specialist, providing customized strategies for highly affluent clients. Additionally, he serves as a Business Intelligence Institute Advisory Specialist, an agribusiness planning specialist and a charitable planning specialist. He conducts several annual presentations on estate, charitable and business planning topics company-wide. He co-leads the Estate and Charitable Planning committee for the National Planning Department and presents at Lincoln Financial conferences.

Stephen Smith, JD, Director of Planning
Stephen consults on comprehensive financial plan design and strategies with an emphasis on estate and business planning with Lincoln Financial Network advisors nationally. He is a Sagemark Consulting Private Wealth Services Advisory Specialist, providing customized strategies for highly affluent clients. Additionally, he serves as a Business Intelligence Institute Advisory Specialist. He co-leads the Estate and Charitable Planning committee for the National Planning Department.