MEET THE SPECIAL GENERAL GUARDIAN
March 28, 2013 § 2 Comments
The governor signed a bill into law on March 14, 2013, that will introduce the concept of “Special General Guardian” to our jurisprudence.
SB 2375, which goes into effect July1, 2013, addresses an increasingly frequent, and troubling, phenomenon — the absent parent. More and more, we are seeing cases in chancery where the parents simply abandon responsiblity for their child or children to relatives or even neighbors. Drugs are the most common reason, but so are immaturity, mental illness, and incarceration.
Under our current system, the person who wants to take responsibility for the child must apply to the court for either a guardianship or custody. A guardianship requires an attorney, accountings, notices to creditors, and on and on. A custody action usually entails litigation because even irresponsible parents balk at losing custody.
Under the new law, codified at MCA 93-13-37, “If the minor ward has a father or mother but no parent able to take responsibility for the minor, and the minor’s assets do not include any real property, cash-on-hand of no more than Two Hundred and Fifty Dollars ($250), and personal property worth no more than One Thousand Dollars ($1,000), and the court finds that it would be in the best interests of the minor, a special general guardian who is related to the minor by blood or marriage may be appointed for the minor.” An attorney is not required, and the court “shall waive” annual or final accountings. At any time that any realty, personalty or monies of the ward greater in value than the initial limits come into the hands of the special general guardian, he or she must comply with all requirements of the law pertaining to general guardians, and, in addition, must seek directions from the court as to the disposition of the assets.
The law also provides an abbreviated procedure for closure, which does not necessarily require a final accounting.
This provision will definitely meet a pressing need in chancery court. The general guardianship statutes do not quite fit this situation. Also, many grandparents (by a large percentage the most frequent petitioners) in these cases are already financially pressed and are getting no financial help from the natural parents, and they find it difficult to divert funds to legal expenses that they would prefer to spend on their new responsibilities.
THE CONSERVATOR AND THE STATUTE OF LIMITATIONS
March 20, 2013 § Leave a comment
Angela and Brian filed a joint complaint for divorce on the sole ground of irreconcilable differences. While the 60-day waiting period was running, Angela was involved in a car wreck, suffering a broken neck and brain damage. Because she was no longer able to handle her business, a conservator was appointed and authorized to proceed with the divorce action.
On January 10, 2000, the trial court entered the final judgment of divorce. It included a provision that Brian reimburse Angela for $5,500 she had paid toward purchase of an automobile. In a subsequent proceeding brought by the conservator for enforcement of the judgment, Brian was ordered to pay the money, and the court awarded a judgment with interest, entered January 9, 2001.
In January, 2011, nearly ten years after the 2001 judgment, Angela’s conservator sought and obtained a writ of garnishment. After back-and-forth series of rulings, the trial court cancelled the writ because the judgment had expired due to the statute of limitations in MCA 15-1-47. The court rejected the conservator’s claim that Angela’s incapacity had tolled the statute of limitations as provided in MCA 15-1-59 because the “conservator is fully authorized to employ attorneys and bring actions on the [ward’s] behalf,” citing USF&G v. Conservatorship of Melson, 809 So.2d 647, 654 (Miss. 2002).
Angela’s conservator appealed.
In the case of Conservatorship of Lewis v. Smith, rendered March 5, 2012, the opinion has some key observations about the duties of a conservator when it comes to enforcing and protecting the rights of the ward:
¶8. Lewis contends that the chancellor erred in finding that section 15-1-59 does not toll the statute of limitations in regard to the judgment’s expiration under section 15-1-47. Under section 15-1-47, a judgment lien expires after seven years from the entry of the judgment.
¶9. In her August 26, 2011 order, the chancellor found that section 15-1-59 was “inapplicable to the present matter as it concerns persons with disabilities and minor children; when a conservator was appointed to protect the legal rights of the mentally incapacitated Angela Ann Lewis, thus invoking the provisions of Miss[issippi] Code Ann[otated] [s]ection 15-1-53.” Mississippi Code Annotated section 15-1-53 (Rev. 2012) states:
When the legal title to property or a right in action is in an executor, administrator, guardian, or other trustee, the time during which any statute of limitations runs against such trustee shall be computed against the person beneficially interested in such property or right in action, although such person may be under disability and within the saving of any statute of limitations; and may be availed of in any suit or actions by such person.
It is important to note that “the duties, responsibilities and powers of a guardian or conservator are the same.” Harvey v. Meador, 459 So. 2d 288, 292 (Miss. 1984). See also Miss. Code Ann. § 93-13-259 (Rev. 2004).
¶10. From the language of the order, the chancellor found that the right vested in the conservator and not in Lewis. Lewis contends that this contention is contrary to Weir v. Monahan, 67 Miss. 434, 7 So. 291 (1890). The Mississippi Supreme Court in Weir found that section 15-1-53 only applies “where the legal title to property or the right of action, at law or in equity[,] is in the guardian, and not the infants.” Weir, 67 Miss. at 455, 7 So. at 296. The court noted that “[w]hen the legal title to the property is vested in a trustee who can sue for it, and fails to do so within the time prescribed by law[,] . . . his right of action is barred . . . .” Id.
¶11. Under Mississippi Code Annotated section 93-13-38(1) (Rev. 2004), “All the provisions of the law on the subject of executors and administrators[] relating to settlement or disposition of property limitations . . . shall, as far as applicable and not otherwise provided, be observed and enforced in all guardianships.” Also, Mississippi Code Annotated section 93-13-38(2) (Rev. 2004) states: “The guardian is empowered to collect and sue for and recover all debts due his said ward . . . .”
¶12. From the language of section 93-13-38, the conservator had a fiduciary duty to pursue the $5,500 owed to Lewis. Therefore, the right of action was in the conservator and not Lewis. The conservator was appointed prior to the entry of the judgment of the divorce. The conservator brought the motion to hold Smith in contempt for failure to pay. It was the conservator’s fiduciary duty to file a writ of garnishment when Smith failed to pay. Under the plain language of section 15-1-53, if the right is in the guardian, in this case the conservator, the statute of limitations runs against the guardian and not the ward.
¶13. The right in action is in the conservator, therefore making the savings clause of 15-1-59 inapplicable, because “[t]he purpose of the savings statute is to protect the legal rights of those who are unable to assert their own rights due to disability.” Rockwell v. Preferred Risk Mut. Ins. Co., 710 So. 2d 388, 391 (¶11) (Miss. 1998). Lewis has a court-appointed conservator who is able to assert rights on her behalf. Therefore, Lewis does not require, nor is subject to, the protections provided by the saving clause.
If you are representing a conservator — or a guardian, executor or administrator, for that matter — make sure that your client is doing what is necessary to protect the legal interests of the ward or beneficiary, and is not allowing statutes of limitation to run.
the burden of responsibility of a fiduciary is a heavy one, as I have emphasized here before. This case points up yet another way in which your fiduciary may make a “perilous mistake” in handling the ward’s business. It’s your job to steer your client in the right path, and to help avoid the common mistakes that fiduciaries commit.
A FEW THOUGHTS ON DISABILITIES OF MINORITY
February 27, 2013 § 4 Comments
In a case before me recently, one of the lawyers filed a motion to set aside an agreed judgment executed by a nineteen-year-old woman by which she had agreed that the father of her child could have custody. The lawyer argued that she was incompetent by virtue of her age to execute and be bound by such a judgment. The motion got me thinking that maybe a few thoughts about disabilities of minority would be in order.
- MCA 93-19-13 provides that all persons 18 years of age or older “shall have the capacity to enter into binding contractual relationships affecting personal property,” unless otherwise disqualified or prohibited by law. It goes on to allow persons 18 or older to sue or be sued in their own right over such contracts.
- “We therefore hold section 93-19-13, (Supp. 1980) effectively removes the disability of minority of all persons 18 years or older for the purpose of entering into contracts affecting personal property including the right to settle a claim for personal injuries, to execute a contract settling the claim, and to accept money in settlement of the claim.” Garrett v. Gay, 394 So.2d 321, 322-23 (Miss. 1981).
- Garrett also stated that an 18-or-older minor has the right to deal with his or her own choses in action, which “is the right of bringing an action, or a right to recover debt or money, or a right of proceeding in a court of law to procure the payment of a sum of money, or a right to recover a personal chattel or a sum of money by action, or, as it is defined by statute, a right to recover money or personal property by a judicial proceeding.”
- The statute pertains to personal property rights only, and does not extend to real estate. MCA 93-19-1 provides for removal of disabilities of minority to authorize the minor “to sell and convey, to mortgage, to lease, and to make deeds of trust and contracts, including promissory notes,” with respect to his or her interest as effectively as if he or she were 21 years or older.
- MCA 93-19-13 provides that a married minor (Note: MCA 1-3-27 defines “minor” as a person under the age of 21) is under no disability with respect to bringing or defending a divorce or separate maintenance action, child support and custody and any other marital issues between the parties. The statute specifies “married” minors, and would not appear to embrace unmarried minors.
- MCA 93-5-9 essentially mirrors 93-19-13.
- Minors may not vote. Article 12, Section 241, Mississippi Constitution, except as provided in the 26th Amendment to the U.S. Constitution.
- Minors may not waive process. Rule 4(e), MRCP.
- Minors may not select their own domicile, but must have that of the parents. Boyle vs. Griffin, 84 Miss.41, 36 So. 141, 142 (Miss. 1904); In re Guardianship of Watson, 317 So.2d 30, 32 (Miss. 1975); Mississippi Band of Choctaw Indians vs. Holyfield, 490 U.S. 30, 40; 109 S.Ct. 1597, 1603 (1989).
- Minors may not enter into binding contracts regarding personal property or sue or be sued in their own right in regard to contracts into which they have entered. Section 93-19-13, MCA.
- Minors may not have an interest in an estate without having a guardian appointed for them. Section 93-13-13, MCA.
- Minors may not be bound by contracts for the sale of land, and may void them at their option. Edmunds vs. Mister, 58 Miss. 765 (1881).
- Minors may not choose the parent with whom they shall live in a divorce or modification; although they may state a preference, their choice is not binding on the Chancellor. Section 93-11-65, MCA; Westbrook vs Oglesbee, 606 So.2d 1142, 1146 (Miss. 1992); Bell vs. Bell, 572 So.2d 841, 846 (Miss. 1990).
- Minors may not after emancipation be bound by or enforce contracts entered into during minority except by following certain statutory procedures. Section 15-3-11, MCA.
- Minors may not legally consent to have sexual intercourse. Section 97-3-65(b).
- Minors may not legally consent to be fondled. Section 97-5-23(1).
- Minors are protected by an extended statute of limitations. Section 15-1-59, MCA.
There may be more, and I have not gone back and checked all of the authority above. Before using any of this, be sure to verify the citations and what they say.
WHO HAS PRIORITY TO SERVE AS CONSERVATOR?
October 16, 2012 § 2 Comments
Conservatorships are becoming more commonplace as we baby-boomers and those at the end of the previous generation age.
With the increase in numbers of conservatorships we are seeing more disputes over who gets to serve as fiduciary for the ward. Should it be the neighbor who has always been there while the uncaring children were doing their thing in Phoenix and Chicago? Should it be the only living brother who has a questionable past? Should it be the sister who lives on the other side of town and has visited the ward every day, or should it be the sister who lives in the county and sees the ward every day, or both? Or should it be someone named by the ward before she slid off into incapacity?
Family members often have competing interests. There may be an honest difference of opinion as to what is best. Or there may be bad blood. Or there may be ulterior motives. Any combination of these and other undertones can lead to a court confrontation.
The latest case comes out of Madison County.
Caryn Quilter filed a petition to be named conservator for her aunt, Medora Weaver. Caryn had begun visiting Medora at her home in Houston, TX, after Medora’s husband died. Caryn heard from neighbors that aunt Medora wasn’t doing well, so she moved her to an assisted-living home in Riddgeland, MS, near where Caryn lived.
Caryn filed a petition with the chancery court, supported by the proper physicians’ affidavits. But Caryn’s father, John Salter, filed a counterclaim, asking that he be appointed conservator, since he was the older brother of Medora. In his pleading he admitted that a conservatorship was necessary, he just did not agree that Caryn should serve in that capacity. He also said that Medora requested that he, not Caryn, serve as her conservator.
Chancellor Cynthia Brewer heard testimony from the contending petitioner and counterclaimant, as well as from Medora herself, and she considered the physicians’ affidavits. Based on the proof, she ruled that a conservatorship would be in Medora’s best interest, and that the conservator should be “an objective, non-related person,” and she appointed Arthur Johnston, Chancery Clerk of Madison County, to serve.
John appealed, claiming (1) that the chancellor was in error in determining that Medora needed a conservator, (2) that he was more suited to serve since he had experience in a similar role, (3) that Medora had designated him to serve, and (4) that he was more closely related.
In Salter v. Johnston and Quilter, rendered October 9, 2012, the COA affirmed Judge Brewer.
As for Salter’s argument that it was error to find that a conservatorship was in Medora’s best interest, the COA found that substantial evidence supported the chancellor’s decision. And, besides, the court pointed out that Salter had pled himeslf for appointment of a conservator, and Salter’s own attorney at hearing announced that his client did not dispute that a conservatorshipw as necessary in the case. The COA rejected this argument.
The court disposed of the remaining arguments as follows:
¶13. Salter alternatively contends that, if a conservatorship is needed, he is the proper party to act as conservator. He bases this contention on the fact that Weaver has requested that he act as conservator and on the fact that he has previous experience as a conservator. Salter also contends that he should be given preference as conservator because he is Weaver’s brother.
¶14. We note at the outset that our laws concerning conservatorships give no preference to an individual’s next-of-kin to act as conservator. See Miss. Code Ann. §§ 93-13-251 to -267 (Rev. 2004 & Supp. 2011). Furthermore, the chancery court determined that it would be in Weaver’s best interest if a non-relative served as conservator after hearing testimony regarding the contentious relationship between Salter and Quilter. Given these facts, the chancery court did not err in appointing Johnston to serve as conservator. This issue is without merit.
This case highlights that it is well within the chancellor’s discretion to decide whether a conservatorship is necessary, and who should be appointed to serve as fiduciary. Interestingly, the statute also provides that the chancellor shall be the one to determine the number of witnesses and quality of testimony necessary to decide the issues in the case. Here, the chancellor quite prudently allowed a full hearing at which the parties were at liberty to develop the proof that they felt was necessary to support their claims.
APPROACHING ZERO TOLERANCE
October 2, 2012 § 7 Comments
If you have gotten the impression that many chancellors are tightening down on the handling of fiduciary matters, it’s not just your imagination or overactive paranoia glands. More and more chancellors across the state are approaching zero tolerance for sloppy handling of estates, guardianships and conservatorships.
There are several reasons for this. One, and perhaps paramount, is that it is the judge’s job. But here are several others:
- There is the case of attorney Michael J. Brown, of Hinds County, who helped fritter away hundreds of thousands of dollars of a ward’s account.
- There is the case of the lawyer in jail in Rankin County who has been unable to account for fiduciary funds, and who will begin serving federal and state sentences therefor as soon as Judge Grant releases him from his civil contempt sentence — which is contingent on his accounting.
- There is the case of another lawyer in Rankin County who refuses to account for fiduciary funds, and who is likewise cooling his heels in the county bastille until he complies.
- There is the case of the lawyer on the coast who committed suicide when the questions started floating about how fiduciary matters in his charge were handled, and the last I heard the missing funds are more than $1.2 million.
The genius of our fiduciary system in Mississippi is that it creates a three-tiered system of protection for the ward or beneficiaries. The fiduciary is bonded (in most cases) and is accountable to the court; the lawyer works with the fiduciary, providing advice, guidance and oversight to see that the law is followed; and the court authorizes actions, demands and approves accounts and inventories, and scrutinizes the actions of both the fiduciary and the ward. Whenever any one tier fails, it is up to the other two to catch and fix the failed part. When judges wink at incompetent legal work in fiduciary matters we are shirking our duty to innocent beneficiaries, creditors and people who are unable to protect their own interests.
It’s not the stuff of movies and detective novels that money is stolen from fiduciary accounts. I have seen it right here in our little backwater, and I am sure it is happening and has happened in yours (not meaning that you live in a backwater).
Fraud and mishandling of funds thrive in the sloppy handling of fiduciary matters. When you leave it up to the fiduciary to go about unaccounted for and unadvised and unsupervised, you are inviting trouble. And chancellors are becoming ever more vigilant and intolerant.
THE SYMPTOMS OF PROBLEM ESTATES
August 30, 2012 § 2 Comments
Arizona courts pioneer in a lot of ways. The latest accomplishment involves monitoring of probate matters.
That state requires that probate cases be classed as minimum risk, moderate risk, or maximum risk. Each file is evaluated to classify it based on certain factors or indicators. Insted of our one-size-fits-all system, the level of reporting and monitoring in Arizona is tailored to meet the needs of the particular case. Each category requires court personnel to meet periodically with the ward or beneficiaries. Minimum risk cases involve a telephone interview every other year, moderate risk require an annual visit, and maximum risk call for a variety of measures including case compliance audit or even forensic investigation. Each level is prescribed meaures of accounting appropriate to the risks inovlved.
I found the risk indicators used by the court to be quite interesting. In fact, I have seen cases where multiple risk indicators were present in cases before our courts. There are 39 used in Arizona. Here are some of them:
- No family members.
- Large estate.
- Dispute among the parties.
- Late or no inventory or accountings.
- Inaccurate or no record keeping.
- Unacceptable accounting practices.
- Disproportionate or unusually large transactions.
- NSF checks and bank charges, late payment charges, payment of interest or penalties.
- Use of ATM’s or gift cards.
- Health, business or personal problems of the fiduciary.
- Financial problems of the fiduciary, such as tax liens, judgments or bankruptcy.
- Difficulty in obtaining a bond or failure to renew it.
- Attorney with a history of neglecting or mishandling probate matters.
- Fiduciary with limited experience (especially where the estate is large or complex).
- Poor or no supervision of fiduciary by the attorney.
- Ignoring requests of court and show cause court orders.
- Pattern of rebuffing reqquests for information by attorneys and court.
- Unauthorized gifts or loans.
- Pattern of complaints against the fiduciary.
- Transfers between bank accounts, particularly when close in time to inventory or accounting dates.
- Lack of contact between guardian of the estate or conservator and the ward.
These are what the courts look at to decide whether a fiduciary should be removed, or whether some other action should be taken to protect the interest of the ward or beneficiaries, but many of these you should monitor yourself in carrying out your role as attorney for the fiduciary. These are the symptoms of an ailing probate matter that require your immediate therapeutic attention. Some of them can be fatal. And if you fail to act promptly, some of them can cost you money.
[The information here comes from Future Trends in State Courts, 2012, published by the National Center for State Courts]
INVESTMENT RESPONSIBILITIES OF FIDUCIARIES
July 30, 2012 § 4 Comments
Executors, administrators, guardians and conservators have a fiduciary duty to the beneficiaries or wards (trustees have their own, separate body of law, although they are fiduciaries also). The fiduciary’s duty (in the absence of explicit directions in a will) …
” … is to provide honest, intelligent management … [h]owever it might be more accurate to think of the [fiduciary] as a co-manager (and perhaps a junior co-manager at that) with the court being the other manager. The [fiduciary] can do very little without the prior approval of the court. The [fiduciary’s] responsibility is to be knowledgeable about the estate, to anticipate problems and dangers, as well as opportunities, to decide upon the intelligent and prudent thing to do, and then to go to the Chancellor to try to get the authority to do it.” Weems, Wills and Administration of Estates in Mississippi, 3rd Ed., §2.34, p. 65.
Absent directions in a will or court authorization, or specific authority by statute, the fiduciary has no authority to: bind the estate by contract such as a lease or note; purchase or sell real estate or any other asset; warrant title on behalf of the estate; borrow money for the estate; mortgage property of the estate; or even to continue a decedent’s business except to wind it up or as provided in MCA 91-7-173.
MCA §93-13-38 requires the guardian or conservator to improve the estate of the ward, and to “apply so much of the income, profit or body thereof as may be necessary for the comfortable maintenance and support of the ward and his family, if he have any, after obtaining an order of the court fixing the amount.” The duty of the fiduciary is to employ the funds in their hands profitably, and they may be liable on their bonds for failure to improve the estate.
Does that duty to improve the estate mean that there is a duty to invest?
The answer to that question, of course, is that every case is different, and several factors come into play, including:
- Whether the the amount of funds in excess of those needed in the immediate future to pay claims and administration expenses, and in the case of wards, the necessary, authorized expenses, make investment practical;
- The economic conditions in the markeplace;
- Whether in the case of a decedent’s estate that it will be open for a length of time that would make investment practical.
In the case of McNeil v. Hester, 753 So.2d 1075 (Miss. 2000), the court held that the fiduciary has no duty to invest because MCA 91-13-3 because that statute uses the permissive may rather than the mandatory shall.
But simply because there is no explicit statutory duty does not mean that not investing would be prudent. The fiduciary is under a duty to deal prudently with the estate, and in a given circumstance non-investment may be judged imprudent. MCA 91-13-3 says that the ” … fiduciary shall exercise the judgment and care under the circumstances then prevailing which men of prudence, discretion, and intelligence exercise in the management of their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income as well as the probable safety of the capital.”
MCA 91-13-3 and -5 allow certain investments to be made without specific authority of the court, giving the fiduciary some flexibility to park funds until a more prudent investment, if any, can be made. Those investments, unless prohibited by court order, include: time certificates of deposit; savings or other interest-bearing accounts of any state or national bank whose main office is located in Mississippi, and whose deposits are FDIC-insured; any state or federal savings and loan association whose main office is located in Mississippi, and the deposits of which are FSLIC-insured. Not included are credit union accounts, online banks, e-trade, Schwab or Fidelity, or the mayonnaise jar buried in the back yard.
Whether a given investment is prudent was the issue in the COA case of In re Estate of McGee, 982 So.2d 428 (Miss.App. 2007), in which the court held that, where the decedent had invested in the stock market for many years and the fiduciary had received his portfolio, which he put in the control of a reputable broker pursuant to court order, the fiduciary was not liable to the heirs when the portfolio declined in value after 9-11-01. The court pointed out that “administrators are not insurers or guarantors of the estate’s assets.” Citing Harper v. Harper, 491 So.2d 189, 198 (Miss. 1986).
So what exactly is and is not prudent? For guidance in addition to particular case law you might want to look at the Mississippi Uniform Prudent Investor Act, MCA 91-9-601- et seq., which actually applies to trustees, but would certainly be persuasive authority for any court to consider in weighing the prudence of any other fiduciary. Section 603 sets out factors for the court to consider as a standard of care. Other sections in the law address the duties of diversification, loyalty, impartiality, reasonability of cost, and care in delegation of management responsibility.
The attorney representing a fiduciary has a duty to advise him or her of the responsibilities involved, and to make sure that the fiduciary is acting prudently and in compliance with the law. The subject is more complex than the scope of this post, so consider this an introduction and prompt to study it in adequate depth to be of service to your clients.
[Much of the information here is derived from a presentation by Bob Williford, Esq. to the chancery judges last April]
FIVE MORE MISTAKES THAT FIDUCIARIES MAKE
July 24, 2012 § 3 Comments
We talked here about some mistakes that fiduciaries make. Continuing the hit parade, here are five more:
- Failure to account timely and properly. All expenses and receipts must be accounted for annualy 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. There is a checklist for doing an accounting here. You can read more about accounting and vouchers here.
- Failure to seek and heed legal advice.The UCCR impose a heavy duty on attorneys to advise and supervise the client-fiduciary in probate matters. The burden can be so onerous that I call it 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 and the beneficiaries. A case showing how severely the Supreme Court views the joint duty of the attorney and fiduciary-client, read this post on the case of Matthews v. Williams. And a case showing the disastrous consequences of an attorney’s complicity in the fiduciary’s malfeasance, check out this post on the ongoing Hinds county trainwreck involving (soon-to-be-former) attorney Michael J. Brown. Make sure your fiduciary knows what the do’s and don’ts are. 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. 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 I have said many times before, if that is an unpalatable concept for you, simply refuse to handle probate matters.
- Failure to get authority for investment of the ward’s estate.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, 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. You should have your investment plan approved in advance by the court, 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. Again, one of the transgressions in Matthews v. Williams was the fiduciary’s helter-skelter, unapproved investment scheme.
- Failure to give proper notice to close.MCA 93-13-77 requires that the final account in a conservatorship or guardianship must be on file for 30 days, and the ward must have have 30-days notice and an opportunity to inspect it and file any objection. A ward who is a competent adult may waive the notice and accounting. A ward under 21, however, must be served with process and may waive nothing. In estates, every beneficiary or heir must either join in the accounting, or waive process, or be served with process and given an opportunity to be heard.
- Failure to keep the attorney and court informed of contact information. Make sure your fiduciary knows and understands that you need to notified immediately of any change of address, telephone number and other contact information. It’s a good idea to get the names and telephone numbers of a couple of local relatives and/or long-standing friends who can help you locate a fiduciary who has wandered off.
There are some simple strategies to avoid these missteps. Here is a link to Five Tips to Improve Your Probate Practice that outlines some things you can do. The primary attribute you need, though, is vigilance. Set up procedures in your office to get the information you need, to instruct and advise your fiduciary, and to keep in touch. It could keep you out of some costly trouble.
FIVE MISTAKES THAT FIDUCIARIES MAKE
July 18, 2012 § 7 Comments
- Failure to file an inventory. In every type of probate matter, it is required that an inventory be filed, usually within 90 days of appointment of the fiduciary. Often the will waives inventory, but the better attorneys I know always file an inventory, whether waived or not. Why? Because the inventory (a) sets a base line for later accountings, and (b) covers the lawyer’s rear from later claims by other heirs or beneficiaries that items are missing. Better to get those matters out up front where they can be dealt with than to let it hold up closing the estate. MCA 93-13-33 provides that an inventory must be filed within three months of appointment in a guardianship or conservatorship, and even requires an annual inventory. A guardian who fails to do so may be removed and be liable on his or her bond.
- Failure to publish notice to creditors. This requirement is mostly overlooked in guardianships and conservatorships. MCA 93-13-38(1) expressly states 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, probate and registration of claims, proceedings to insolvency and distribution of assets of insolvent estates, shall, insofar as applicable and not otherwise provided, be observed and enforced in all guardianships.” And remember that the statutory affidavit of creditors must be filed before publication of the notice to creditors. MCA 91-7-145(2) says that “Upon filing such affidavit …” it shall be the duty of the fiduciary to publish. An affidavit filed after the publication is a nullity.
- Failure to get authority of the court for expenditures. Perhaps the most pervasive error of fiduciaries. MCA 93-13-38 requires the conservator to improve the estate of the ward, and to “apply so much of the income, profit or body thereof as may be necessary for the comfortable maintenance and support of the ward and his family, if he have any, after obtaining an order of the court fixing the amount” [emphasis added]. Every expenditure must be approved in advance. Emergency expenditures may be ratified, but only if properly proven to be for the ward’s benefit, and properly supported by vouchers. Caution: as set out below, self-dealing expenses may be neither approved or ratified.
- Failure to keep the ward’s estate separate and to avoid self-dealing. It often happens that a son or daughter is appointed to serve as conservator of momma’s or daddy’s estate. The child simply adds his or her name to the parent’s account and proceeds from there. This complicates matters because that joint account belongs 100% to each person whose name is on the account, and becomes the property of the survivor on death. That is certainly not an appropriate or even legal arrangement for a guardian or conservator. The fiduciary in every kind of probate matter needs to open a separate estate, guardiandhip or conservatorship bank account, and make all financial transactions through it and through it alone. MCA 91-7-253 prohibits the fiduciary from paying herself any money from the ward’s estate without prior court approval, and loans to the fiduciary and family members are prohibited also. The statute says that the court can not ratify or approve such payments. If the fiduciary has some expense that needs to be reimbursed, make sure the fiduciary has proper documentation and petition the court for authority. Don’t expect a cash payment or check made out to cash to be approved without abundant supporting documentation.
- Failure to get court permission to move the ward to another county. It’s prohibited to relocate the ward to a county other than the one in which the fiduciary was appointed, unless approved in advance by the court. MCA 93-13-61.
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