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CONSERVATORSHIPS OF ADULTS

When is a conservatorship necessary?

  1. Appointment can be requested by the individual to be protected.
    1. When an individual because of age or physical infirmity is unable to manage his/her property and affairs effectively.
  2. Appointment can be requested by another individual.
    1. When the individual is unable to manage his/her property and affairs effectively by reasons such as: mental illness, mental incompetency, physical illness or disability, chronic use of drugs, chronic intoxication, confinement, detention by a foreign power, and disappearance; and
    2. The individual has property which will be wasted or dissipated unless proper management is provided; or
    3. Money is needed for support, care, and welfare of the individual or those entitled to be supported by the individual; and
      1. Protection is necessary or desirable to obtain or provide money.

Who may file the petition?

  1. An individual mentally competent but due to physical infirmity needs a conservator.
  2. An Individual interested in the person's estate, affairs, or welfare.

Where do you file the petition?

  1. In the court at the place in this state where the individual to be protected resides whether or not a guardian has been appointed in another place.
  2. If the individual to be protected does not reside in this state, in the court at a place where property of the individual is located.

Who are the interested persons?

  1. The individual to be protected if 14 years of age or older; and
  2. The presumptive heirs of the individual to be protected; and
  3. If known, a person named as attorney in fact under a durable power of attorney; and
  4. The nominated conservator; and
  5. A governmental agency paying benefits to the individual to be protected or before which an application for benefits is pending.
The following may be additional interested persons required by law or court rule:
  1. The Attorney General if the protected person has no known presumptive heirs;
  2. Foreign counsel, if required by law;
  3. Administrator of Veteran's Affairs, through the administrator's Michigan district counsel if the individual's benefits are payable by the Veterans' Administration;
  4. A guardian, conservator, or guardian ad litem of an interested person;
  5. A special fiduciary;
  6. A person who filed a demand for notice.

Who prepares the notice of hearing?

  1. A petitioner, fiduciary, or other moving party must cause to be prepared, served, and filed, a Notice Of Hearing. It must state the time and date, the place, and the nature of the hearing.

What must be included in the proof of service?

  1. The Proof of Service must include a description of the papers served, the date of service, the manner and method of service and the person or persons served.

What are the rights of the individual at the hearing?

  1. The Notice on Petition for Conservator or Protective Order must be served on the individual along with the petition, which lists the rights as follows:
    1. An independent evaluation;
    2. To be present at the hearing;
    3. To be represented by an attorney;
    4. To present evidence at the hearing;
    5. To cross-examine witnesses at the hearing;
    6. To a trial by jury;
    7. To request that the hearing be closed to the public;
    8. To nominate a conservator.

Who can waive the right to notice of a hearing and consent to the relief requested in the petition?

  1. The Waiver/Consent may be made by
    1. A legally competent person;
    2. A person designated to be served on behalf of an interested person who is a legally disabled person;
    3. On behalf of an interested person, whether competent or legally disabled, by an attorney who has previously filed a written appearance.

    However, a guardian, conservator, or trustee cannot waive or consent with regard to petitions, motions, accounts, or reports made by that person as guardian, conservator or trustee.

When does the notice have to be served?

  1. Personal service - 7 days before the date set for hearing.
  2. Mail - 14 days before the date set for hearing.
  3. Publication - 14 days before the date set for hearing.

What is the form of the petition and its contents?

  1. Petition For Appointment of Conservator or Protective Order
  2. Contents - The petition shall contain specific examples of the individual's recent conduct that demonstrates the need for a conservator's appointment.

What does the Court do upon the filing of a Petition For Appointment of Conservator or Protective Order?

  1. Set a hearing date.
  2. Appoint a guardian ad litem to represent the individual who is the subject of the petition unless he/she has legal counsel of his/her own choice.
  3. If necessary, the court may order that the individual who is the subject of the petition be examined by a physician or mental health professional appointed by the Court.

On what does the Court base a decision?

  1. The Court must find that a basis for a conservator's appointment or other protective order is established by clear and convincing evidence.

GENERAL INFORMATION

  1. Fiduciary - Conservators are particular types of "fiduciaries." The word "fiduciary" is a derivative from the Latin word "fides" meaning faith, honest or honor. A fiduciary is one appointed who has a duty to act primarily for the benefit of another. The individual who is protected is called the "protected individual."

  2. Inventory - The Inventory (Conservatorship) is a list of the assets in an estate. A conservator (guardian of the estate) must file an Inventory (Conservatorship) within 56 days from the date of the Letters of Conservatorship. NOTE: Property the protected person owns jointly or in common with others must be listed on the Inventory (Conservatorship) along with the type of ownership.

  3. Accounts - A conservator must make a complete itemized Account of Fiduciary of the administration of the estate to the Court at least once every year. The accounting must show all receipts, disbursements, and sales of property during the accounting period. It will also show the property remaining in the hands of the fiduciary at the end of the accounting period, together with the form of such property. It must also have attached a current account summary or monthly statement from the financial institution. If this accounting is not received by the Court each year, within 56 days following the anniversary date of the appointment, the fiduciary is considered delinquent and subject to serious Court action. However, the Court cannot receive the accounting more than 56 days prior to the anniversary date. The "anniversary date" is the month and day the Judge signed the Letters of Conservatorship.

  4. Final Accounts - When the estate is ready for closing, the conservator must file a Final Account and an itemized and complete list of all of the remaining property.

  5. Notice - A Notice of Hearing and copies of the Inventory (Conservatorship) and Account(s) must be sent to all interested persons, with the original to be filed with the Court, along with a Proof of Service. The "interested persons" are defined by Court rule and include: 1) the protected individual or ward, if 14 years of age or older and can be located; 2) the presumptive heirs of the protected individual; 3) claimants; and 4) additional interested persons required by law or court rule.

  6. Standards of Conduct - Fiduciaries are held to the strictest standards of conduct in regard to estates. If you have a question on whether your proposed action in an estate is lawful, you are advised to contact an attorney for legal advice.

  7. Filing on Time - You have a strict obligation to file reports, inventories and accountings on time. Failure to do so can result in your removal as a fiduciary and subject you to a contempt of court action.

  8. Commingling of Funds - A fiduciary is absolutely forbidden from commingling his or her own funds or properties together with the ward's assets. The most common violation here is creation of joint accounts. WARNING: If accounts are already joint at the time of your appointment, you should seek legal advice before you make any change.

  9. Negligence in Handling the Estate - A fiduciary must handle the assets of the estate with the greatest care. A fiduciary can be held personally liable for failure in this duty. For example: If the fiduciary forgets to pay the insurance and the house burns down, the Court may hold the fiduciary liable for the loss.

  10. Loss Through Self-Dealing - A fiduciary must not transact deals where the fiduciary's own self-interest is opposed to his or her duty to the estate.

  11. Wanton and Willful Mishandling - A fiduciary may not purposely use the estate in a manner that is against the interest of the estate.

  12. Borrowing - A fiduciary may not borrow or use funds of properties from the estate for the fiduciary's own purposes.

  13. Tax Returns - The estate might be required to file certain tax returns. It is the fiduciary's duty to file these returns. Therefore, as soon as you are appointed and regularly thereafter, you should determine whether or not you must file tax returns.

  14. Pre-Notice Cards: As a reminder, in conservatorships a pre-notice postcard will be sent to the fiduciary the month prior to the due date of the account along with the appropriate form to be completed and filed with the Court.

  15. Prudent Investor Rule - A fiduciary shall invest and manage assets needed in a fiduciary capacity as a prudent investor would, taking into account the purposes, terms, distribution requirements expressed in writing and other circumstances of the fiduciary estate. It is important that the fiduciary become familiar with all the aspects of the prudent investor rule.

    700.1501 Short title; definitions.

    Sec. 1501.
    1. This part shall be known and may be cited as the "Michigan prudent investor rule". This part prescribes the Michigan prudent investor rule.
    2. As used in this part:
      1. "Governing instrument" includes, but is not limited to, a court order.
      2. "Portfolio" means all property of every kind and character held by a fiduciary on behalf of a fiduciary estate.

    700.1502 Prudent investor rule.

    Sec. 1502.
    1. A fiduciary shall invest and manage assets held in a fiduciary capacity as a prudent investor would, taking into account the purposes, terms, distribution requirements expressed in the governing instrument, and other circumstances of the fiduciary estate. To satisfy this standard, the fiduciary must exercise reasonable care, skill, and caution.
    2. The Michigan prudent investor rule is a default rule that may be expanded, restricted, eliminated, or otherwise altered by the provisions of the governing instrument. A fiduciary is not liable to a beneficiary to the extent that the fiduciary acted in reasonable reliance on the provisions of the governing instrument.

    700.1503 Portfolio strategy; risk and return objectives.

    Sec. 1503.
    1. A fiduciary's investment and management decisions with respect to individual assets shall be evaluated not in isolation, but rather in the context of the fiduciary estate portfolio as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the fiduciary estate.
    2. Among circumstances that a fiduciary must consider in investing and managing fiduciary assets are all of the following that are relevant to the fiduciary estate or its beneficiaries:
      1. General economic conditions.
      2. The possible effect of inflation or deflation.
      3. The expected tax consequences of an investment decision or strategy.
      4. The role that each investment or course of action plays within the overall portfolio, which may include financial assets, interests in closely-held enterprises, tangible and intangible personal property, and real property.
      5. The expected total return from income and the appreciation of capital.
      6. Other resources of the beneficiaries.
      7. The need for liquidity, regularity of income, and preservation or appreciation of capital.
      8. An asset's special relationship or special value, if any, to the purposes of the fiduciary estate or to 1 or more of the beneficiaries.
    3. A fiduciary shall make a reasonable effort to verify facts relevant to the investment and management of fiduciary assets.
    4. A fiduciary may invest in any kind of property or type of investment consistent with the standards of the Michigan prudent investor rule. A particular investment is not inherently prudent or imprudent.
    5. A fiduciary who has special skill or expertise, or is named fiduciary in reliance upon the fiduciary's representation that the fiduciary has special skill or expertise, has a duty to use that special skill or expertise.

    700.1504 Diversification.

    Sec. 1504. A fiduciary shall diversify the investments of a fiduciary estate unless the fiduciary reasonably determines that, because of special circumstances, the purposes of the fiduciary estate are better served without diversifying.

    700.1505 Duties at inception.

    Sec. 1505. Within a reasonable time after accepting appointment as a fiduciary or receiving fiduciary assets, a fiduciary shall review the assets, and make and implement decisions concerning the retention and disposition of assets, in order to bring the fiduciary portfolio into compliance with the purposes, terms, distribution requirements expressed in the governing instrument, and other circumstances of the fiduciary estate, and with the requirements of the Michigan prudent investor rule.

    700.1506 Loyalty.

    Sec. 1506. A fiduciary shall invest and manage fiduciary assets solely in the interest of the beneficiaries.

    700.1507 Impartiality.

    Sec. 1507. If a fiduciary estate has 2 or more beneficiaries, the fiduciary shall act impartially in investing and managing the fiduciary assets, and shall take into account any differing interests of the beneficiaries.

    700.1508 Investment costs.

    Sec. 1508. In investing and managing fiduciary assets, a fiduciary may only incur costs that are appropriate and reasonable in relation to the assets, the purposes of the fiduciary estate, and the skills of the fiduciary.

    700.1509 Reviewing compliance.

    Sec. 1509. Compliance with the prudent investor rule is determined in light of the facts and circumstances that exist at the time of a fiduciary's decision or action, and not by hindsight. The prudent investor rule requires a standard of conduct, not outcome or performance.

    700.1510 Delegation of investment and management functions.

    Sec. 1510.
    1. A fiduciary may delegate investment and management functions provided that the fiduciary exercises reasonable care, skill, and caution in all of the following:
      1. Selecting an agent.
      2. Establishing the scope and terms of the delegation, consistent with the purposes and terms of the governing instrument.
      3. Periodically reviewing the agent's actions in order to monitor the agent's performance and compliance with the terms of the delegation.
    2. A fiduciary that complies with the requirements of subsection (1) is not liable to the beneficiaries or to the fiduciary estate for a decision or action of the agent to whom the function was delegated.
    3. In performing a delegated function, an agent owes a duty to the fiduciary estate to exercise reasonable care to comply with the terms of the delegation. If an agent accepts the delegation of a fiduciary function from a fiduciary that is subject to the laws of this state, the agent submits to the jurisdiction of this state's court.

    700.1511 Language invoking standard of prudent investor rule.

    Sec. 1511. The following terms or similar language in a governing instrument, unless otherwise limited or modified, authorize any investment or strategy permitted under the Michigan prudent investor rule:
    1. "Investments permissible by law for investment of trust funds".
    2. "Legal investments"
    3. "Authorized investments".
    4. "Using the judgment and care under the circumstances then prevailing that persons 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 fund, considering the probable safety of their capital".
    5. "Prudent man rule".
    6. "Prudent trustee rule".
    7. "Prudent person rule".
    8. "Prudent investor rule".

    750.1512 Application to existing fiduciary estates.

    Sec. 1512. The Michigan prudent investor rule applies to a fiduciary estate that exists on or is created after this act's effective date. As applied to a fiduciary estate that exists on this act's effective date, the Michigan prudent investor rule governs only a decision or action that occurs after that date.

  16. Other Duties - There are other duties of a fiduciary which are imposed on you when you accept this important trust. This information is not intended to advise you of your complete responsibility as fiduciary. You should consult with your attorney, or, if not represented by an attorney, take it upon yourself to become fully aware of your responsibility as a fiduciary.

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