Legal, Regulatory, and Privacy Issues

Conservatorships, guardianships: taking over someone’s finances


Watching a family member lose his grip on his finances can be maddening. However, in some cases you can take control by going to court to set up a conservatorship, a legal relationship that makes you the custodian of another adult’s finances.

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Watching a family member lose his grip on his finances — ignoring the bills, forgetting to file taxes, running up massive credit card bills — can make you desperate to take the reins. In some cases, you actually can do just that by going to court to set up a conservatorship — a legal relationship that makes you the custodian of another adult’s checkbook, credit cards and, often, major life decisions. Conservatorships: Stepping in for those who can't help themselves

According to the National Guardianship Association, conservatorships govern an estimated 1 million or more Americans who show a “diminished capacity” for handling their own finances or personal affairs, usually because they suffer from Alzheimer’s or dementia, a debilitating head injury, a mental disability or drug or alcohol addiction.

When “they’re forgetting to file tax returns, not cashing checks, forgetting to pay bills, not making appropriate decisions,” it may be time for a family member or even a concerned neighbor or friend, to step in, says Terence Nunan, an attorney with Rutter Hobbs & Davidoff in Los Angeles, who specializes in estate planning and probate law.

The ins and outs of conservatorship

To create a conservatorship, first hire an estate lawyer to get the ball rolling. The lawyer will file a petition requesting the legal power for you to make decisions and handle financial affairs on someone else’s behalf. What follows is an elaborate set of court procedures to make sure help is really needed. While the process varies from state to state, most require examinations by more than one physician, an Everest of paperwork and an in-person court appearance by the potential conservatee. Even after the conservatorship has been set up, regular visits from the state and annual financial accountings are the norm.

A last resort

Conservatorships are not for the fainthearted. “Guardianship should be a last resort,” says Terry W. Hammond, executive director of the National Guardianship Association. First of all, it’s expensive. Since the rules surrounding guardianship are complex, it’s not a DIY operation; expect to pay a lawyer anywhere from $1,000 to $10,000 to help set one up.

There’s also an emotional cost. “One of the hardest things about conservatorship is going to court with your mother and saying, ‘My mom can no longer take care of her personal affairs.’ That’s the gut-wrenching part,” says Nunan.

Even after you’ve weathered the legal storm, actually being a conservator isn’t a piece of cake. According to Carol Dabner, a private guardian and attorney in Dallas, “I’m the financial brain for taking care of this person’s business. Although the person may be incapacitated, their affairs still move on.” That means doing everything from setting a budget to hiring an accountant at tax time. You may or may not be offering day-to-day care, but expect to go over every penny spent with a fine-tooth comb. If you’re doling out $200 for a full-time caregiver to buy groceries, you’ll have to review the receipts to make sure that half the money wasn’t spent on dinners out.

Need to spend a little more? You’ll have to have your lawyer file legal paperwork. “Extraordinary expenses require court permission,” says Bart Scovill, a Sarasota, Fla.-based probate lawyer. “In one of the first cases I worked on, we were just having the house painted, but that was an extraordinary expense.”

All the red tape is why Scovill sometimes steers clients away from taking on guardianship duties, recommending that they hire a professional guardian instead. “The requirements are very stringent, and if you’re not familiar with them it can be overwhelming,” he says. Despite that, two-thirds of guardians are family members — in part because it might not feel right passing the buck on taking care of a family member, and in part because private or professional guardians often cost $75 an hour and up.

Avoiding a conservatorship

A head injury or a diagnosis of Alzheimer’s doesn’t mean you’ll inevitably end up in a conservatorship. “Preplanning is the best thing you can do,” says Scovill. To make your intentions for your finances and your health clear before you lose the ability to call the shots yourself, document your wishes well ahead of time with these so-called “advance directive” forms:

  • A durable-power-of-attorney form, which allows someone to handle your financial affairs and make decisions for you.
  • A health care proxyform to designate someone to make health care decisions on your behalf.
  • A living will to convey your end-of-life wishes.
  • A designation of pre-need guardian. “There are a couple instances when you can’t avoid guardianship,” says Scovill. “If you have one of these documents, you get to choose who that guardian will be.”

Expect to pay around $100 per document, or $400 to $500 for a suite of them; your family will consider it money well spent.

When a guardianship works

Even with advance directives on file, occasionally a conservatorship is still the best way to take care of a relative. Mitch Gooze, of Santa Clara, Calif., became the conservator for his 17-year-old son, a high school student with high-functioning autism, to keep him from signing the paperwork to drop out of high school when he turned 18. Since the conservatorship made the boy unable to enter legal contracts, there were some unexpected financial benefits, too. “He’s a sucker for Internet scams,” says Gooze. “He would sign up for something, and I would get it undone by forwarding his conservatorship paperwork.” When it became clear after a few years that Gooze’s son was capable of managing his finances on his own, the family went back to court to end the conservatorship.

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