What happens when a minor child is the beneficiary of a life insurance policy? Or when a person with dementia is unable to manage their finances and does not have a financial power of attorney? Or when a person with special needs receives a sizable inheritance? In Tennessee, the answer is often a court-supervised guardianship or conservatorship.
terminology
Let’s review some terminology. The proceeding is a “guardianship” when it involves a minor. It’s a “conservatorship” when it involves an adult with disabilities. The court appoints a “guardian” or “conservator” to manage the physical and/or financial affairs for the “respondent”, also known as the “ward.” Both guardians and conservators are “fiduciaries.” This means that they must act in the respondent’s best interest. Litigation often arises over this issue. In this post, I speak mostly about the financial affairs of the respondent.
Ad Litem Roles
Depending on the circumstances, the court may also appoint a guardian ad litem and/or an attorney ad litem. These roles are different from the guardian. The “guardian ad litem”, or “GAL”, is the eyes and ears of the court. The GAL investigates the respondent’s situation and reports back to the court. The court appoints an “attorney ad litem” to act as the respondent’s advocate. Often, the attorney ad litem argues against the conservatorship.
conservatorship example
An example may be helpful. Mike is getting on in years. His wife Carol passed away several years ago. Recently, he missed several utility payments, drove his car unexplainably into a ditch, and “invested” ten thousand dollars in his neighbor’s VCR Repair start-up. Mike also walks around town in unseasonable clothes and poor hygiene.
His adopted daughter Jan hired an attorney. Through her attorney, Jan filed a conservatorship petition in probate court. Mike was furious when he received the petition. At the first court date, he told the judge that he did not need a conservatorship, and he wanted to fight it. Mike’s sons, Peter and Bobby, also opposed the petition.
The judge appointed a guardian ad litem to investigate. As part of her ruling, the judge appointed Mike an attorney ad litem and ordered Mike to be examined by his doctor. At the three-day hearing, the court reviewed the guardian ad litem’s report and heard proof from both sides.
After considering all the evidence, the court ruled in favor of Jan, but decided to appoint a neutral third party as Mike’s conservator. The court also ruled that, since the petition was in Mike’s best interest, he had to pay the fees of all attorneys and ad litems involved. These fees were well over $15,000.
duties of the guardian or conservator
Once a guardian or conservator is appointed, the work begins. They must gather the respondent’s assets, income, and expenses and file an inventory with the probate court. Next, they must create a plan for the management of the respondent’s property and receive the court’s approval. Once the court approves, the guardian or conservator may execute the plan on behalf of the respondent. Unless further issues arise, the guardian or conservator remaining duty is to file annual accountings documenting their activities.
A guardianship continues in this manner until the minor reaches a suitable age of majority (18-25). A conservatorship continues until the respondent is able to manage his or her affairs or until he or she dies.
importance of estate planning
As you can see, these proceedings are often complicated, time-consuming, and expensive. Most of the time, they are also avoidable through proper estate planning.
Take the examples that began this article. Instead of naming a minor as a beneficiary of a life insurance policy, create a trust for the benefit of the minor and leave the life insurance to the trust. Obtain a power of attorney before the onset of dementia or other illness. Create a special needs trust and direct assets to the trust for the benefit of your child who has special needs.
Frequently Asked Questions
