Best Practices in Guardianships and Conservatorships
December 11, 2019 § 2 Comments
The UCCRs impose a heavy duty on attorneys to advise and supervise the client-fiduciary in fiduciary matters, including guardianships and conservatorships. The burden can be so onerous that some cases refer to it as the “yoke of probate.” You can not blithely turn your fiduciary loose to figure it out for himself or herself. You have a duty to the court, the ward, creditors, and, in estates, the beneficiaries or heirs.
Make sure your fiduciary knows what are the do’s and don’ts. Put together an instruction sheet and have your client sign a copy to keep in your file for your protection.
There is a reason that UCCR 6.01 requires every fiduciary to have an attorney (unless excused). It’s because the attorney is the arm of the court who is responsible to supervise the fiduciary and make sure everything is being done properly. As you have heard many times before, if you find that too burdensome, simply refuse to handle fiduciary matters.
Some GAP Act considerations:
• § 93-20-125, MCA, deals with coverage of the GAP Act. All cases commenced on or after January 1, 2010, proceed under the GAP Act. “A civil action is commenced by filing a complaint with the court.” MRCP 3(a). So when you file your complaint to open the guardianship or conservatorship will determine coverage. Cases that were commenced before January 1, 2020, are covered by the GAP act unless you move the court for a finding the “application of a particular provision of this chapter would substantially interfere with the effective conduct of the proceedings or prejudice the rights of the parties …” and the court finds that the particular provision does not apply.
• MRCP 18(a) specifically states that “A party asserting a claim to relief as an original claim, counter-claim, cross-claim, or third-party claim, may join, either as independent or as alternate claims, as many claims as he has against an opposing party.” Some people have raised the question whether the GAP Act allows a combined guardianship/conservatorship action. The GAP Act is silent on the point, yes. But MRCP speaks loudly that you can. And the GAP Act expressly provides at Section 107 that procedures are governed by the MRCP.
• Some people have also questioned whether, if combined actions are allowed under the MRCP, are two filing fees required? Why would they be? They are not now for combined guardianships of the person and estate, which are merely the old (now existing) terms for what under the GAP Act will be guardianship and conservatorship.
• There are some hiccups with MEC adapting to the new nomenclature imposed by the GAP Act. That is being fixed even as this is being written. Our fingers are crossed that the issues will be fixed before January 1, 2020.
• Also to be addressed are technical corrections to the Act to address some concerns that have been raised. This is normal and to be expected. Every statute with the extent of the GAP Act undergoes a similar process.
Some general suggestions …
• Always accompany the fiduciary to the bank or other financial institution to open the conservatorship account. That way you can make sure that the funds are properly deposited into a restricted account, and that the fiduciary does what she is supposed to do.
• Always ask that a duplicate bank statement be sent to you for the conservatorship account. If the bank balks, direct that the bank statement be sent to you and not the fiduciary. Review each bank statement promptly when you receive it to make sure that no unauthorized disbursements are being made. Also, when the next accounting comes due — Voila! — you have a complete set of bank statements.
• Have your secretary or paralegal call the fiduciary every couple of months to inquire how things are going, to remind of upcoming deadlines, and to ensure that the address and telephone info in your file is accurate. This is not only great client relations, it’s one of the best means possible to discover and address problems in their early stages.
• Accompany your fiduciary to inventory that safe deposit box, and, if possible, bring a witness. It seems that there is often someone lurking in the wings ready to allege that there were all sorts of valuable items in there that the fiduciary is not accounting for.
• Do an inventory even when one is not required. Inventory establishes the baseline for accounting. It also can help neutralize the claims of many disgruntled parties claiming an interest. The GAP Act inventory form is exactly what you need to go by.
• GAP Act forms are not only helpful; they also were carefully crafted to include every item you are required to plead or report. Use them. Slavishly using the exact forms is not (yet) required; however, if you prefer to make your own forms, yours should substantially conform to those published.
• As of today, we have no body of law interpreting the GAP Act, but that will surely change over time. Until it does, we can look to court decisions under our former law. MCA §93-13-38 provided that, “All the provisions of the law on the subject of executors and administrators , relating to settlement or disposition of property limitations, notice to creditors … “ , etc. also applied to guardianships and conservatorships. Just in case that principle is found to apply to GAP Act cases, you need to keep in mind that, in an estate, when real property is sold pursuant to a decree of the court, § 91-7-205, MCA, requires that the executor or administrator shall execute a bond equal to the proceeds of the sale of the land. This code section does not apply to a sale by the heirs or devisees in whom title has vested. There is an exception to the requirement of bond. If the time within which all claims of creditors against the estate has expired, the court may waive all or any part of the bond when all the beneficiaries to the proceeds of the sale petition the court to authorize the sale and waive the necessity of a bond. § 91-7-205, MCA. If an executor or administrator fails to give the bond required, the court may direct a master to make the sale, and, after confirmation, convey the land. Section 91-7-207, MCA. An early case held that failure to give the bond voids the sale. Buckner v. Wood, 45 Miss. 57 (1871).
• Your fiduciary is obligated to increase the ward’s estate, if possible. The courts apply the prudent investor standard, which can be second-guessed. There are a few ultra-safe investments that the fiduciary may make without prior approval, per MCA § 91-13-3, including time CD’s, CDAR’s, savings accounts, and most FDIC- and FSLIC-insured accounts (Note: to my knowledge, credit union accounts do not qualify). Only problem is that in this era, those accounts produce interest rates closer to zero than anything that would actually increase the ward’s estate. So the prudent investor has to look to more speculative investments, which are allowed under MCA 91-13-3 and -5, but require a bond. See In re Guardianship of Roshto, 134 So. 3d 739 (Miss. 2014). Under the GAP Act, you will need to submit your investment plan to the court for approval, with adequate supporting documentation so that anyone looking at it later will be able to see that the court had a valid basis for its order.
• All expenses and receipts must be accounted for annually or more frequently if ordered by the court. UCCR 6.03 – 6.06 detail the voucher requirement. There’s a right way and a wrong way to file an accounting; do it the right way. Forms are published to help you. Use them.
• § 93-13-69, MCA formerly required that accounts of several wards must have been kept separately. We still think that the best practice under the GAP Act will be to open a separate guardianship or conservatorship, or guardianship/conservatorship for each of several wards, even if they are guardianships only, because if assets come into the child’s estate, they must be accounted for separately. The former statute did authorize the judgments dealing with them to be combined “wherever practicable.”
Minor’s settlements …
• Yes, there is nothing in the GAP Act that does away with the requirement of minor’s settlements. § 93-20-431 does allow transfers not exceeding $25,000 to a minor in a given year without court approval, which is commensurate with the law pre-January 1, 2020. So when, exactly, is court approval required? In every transaction in which the minor is to receive a liquidated sum over $25,000, and in every case involving an unliquidated sum. A liquidated sum would include, for example, life insurance proceeds or a lump-sum survivor’s benefit for a set amount by contract. If the settlement is for an unliquidated sum, such as for personal injury settlement, the settlement must be found by a chancellor to be in the best interest of the ward; i.e., in a minor’s settlement proceeding. The statute does not specify the liquidated/unliquidated dichotomy spelled out above, but I believe that approach is the best practice and most protective of all parties.• You should always obtain a letter from the Mississippi Division of Medicaid either stating the amount of its lien against the proceeds, or stating that it asserts no lien. Never accept your client’s word that Medicaid has no lien. Failure to protect Medicaid’s lien can subject both you and your client to an action by Medicaid to recover double damages, and your client can lose Medicaid eligibility as well.
• Remember that, in minor’s settlements, only statutory liens are required to be withheld from the minor’s proceeds. Memorial Hospital at Gulfport v. Proulx, 121 So. 3d 222, 224 (Miss. 2013). It is the duty of the parents, not a child, to provide for the child’s medical care; when you ask the court to order that unpaid medical expenses be paid out of the child’s proceeds, you are essentially asking the court to order the child to pay his or her own medical bills. If you do want the child to have to pay for his own medical care, you will have to put on proof that requiring the parents to pay would put an undue financial burden on the family that will impact other children and the parents, and that if the parents are unable to pay and it goes into collection, the ward’s future ability to obtain medical care will be adversely affected. Otherwise, the chancellor will have to assign responsibility for expenses not included in the settlement on the parents.
• Remember, too, that the chancellor is responsible to make sure that the settlement is reasonable. It makes no difference that everyone with responsibility agrees that the settlement is reasonable. It is the chancellor’s duty to make the decision that it is in the child’s best interest.
• My best prognostication is that, although the law will have changed, chancellors will continue to have the same expectations of diligence, responsibility, candor, and honesty in handling of fiduciary matters that they have had under existing law.