CBA

The Colorado Bar Association

1900 Grant Street, 9th Floor, Denver, Colorado 80203-4336

SO NOW YOU ARE A CONSERVATOR
	You've recently been named as someone's conservator by the courts. What does this mean? What are your responsibilities? What are potential liabilities? This pamphlet is meant as a general guide. If you have detailed questions, you should consult an attorney.
Introduction	A conservator is a person appointed by the courts to manage the financial affairs of another if they can't do it themselves. Don't confuse this with being a guardian, which is a person appointed by the courts to manage the personal or medical affairs of a minor or severely impaired adult. An incapacitated person (generally referred to in this pamphlet as a "ward") could have either a guardian or a conservator or both. Where there is both, the same person may serve in both capacities or different persons may serve. A conservator is responsible for the overall financial situation while a guardian is more concerned with day-to-day matters that affect the ward's personal affairs. A guardian, for instance, can receive current income for support and maintenance and pay current bills of the ward. The guardian may generally receive the ward's Social Security benefits, disability income, etc. Any excess should be turned over to the conservator. If there is no guardian or if you are serving as both guardian and conservator, you should assume responsibility for all items of income and disbursement. Under Colorado law, a conservator appointed for a minor without parents may also exercise the powers of a guardian of a minor.
Some Helpful Suggestions	When you are appointed conservator, you acquire title as a trustee to all property (or to that part specified in the conservatorship order) which is owned by the ward in his name alone or as a co-tenant with others. As to jointly-owned property, you "step into the shoes" of the ward as a joint tenant. Your letters of appointment are evidence of your authority over the ward's property, or that part which is specified in the letters. To place others on notice of your capacity as conservator, you should have the title to all conservatorship property registered in your name. With real estate, this is accomplished by recording your letters of appointment in the county in which the property is located. With stocks and registered bonds, you need to submit current letters of your appointment along with the securities for reregistration. (The securities can be sold without reregistration if necessary, but it usually takes longer to receive the proceeds.) Bearer securities require no reregistration. Because you now hold title to the ward's property, it is important that you keep it separated from your own property. In fact, you might want to have a separate safe deposit box for this purpose. If you have a checking account for the conservatorship estate, it will make it easier for you to prepare court accountings if all receipts and disbursements are recorded in that account.
Accountability To The Court
Inventory and Bond:	"You are required by the Probate Code, within three months of your appointment, to prepare and file an inventory of your ward's assets on court-approved forms. You may be required to obtain and post a surety bond to protect cash and other assets under your control or to pledge property of your own or make other arrangements to protect the assets (such as depositing stock certificates or bank books in the Registry of the Court or obtaining agreement from banking institutions restricting the withdrawal of money from the estate accounts). These financial protections will be worked out among the judge, you and your attorney when you are appointed. It's important to note that the existence of a surety bond does not eliminate your financial responsibility. Should there be a problem and the estate recovers against the bond, the bonding company has the right to recover the amount of its liability from you.
Financial Plan:	The court probably will ask you to develop a "financial plan" for the ward's assets within the first few weeks after your appointment as conservator. This is simply a budget for the ward, an estimate of monthly expenses of the ward compared with the anticipated income from the assets you will be handling plus outside income (such as monthly Social Security benefits, etc.). By projecting expenses and income, it should become clear whether, or when, you may need to start using capital (i.e., start drawing upon savings accounts, or perhaps start selling assets) to meet your ward's expenses. If the court has required a financial plan it will be subject to review and approval (or modification) by the court. Even if the court has not required you as conservator to file your financial plan with the court, it still is an excellent idea to develop a written financial plan for your own information and guidance. If you are operating under a court-approved financial plan, you must follow it faithfully; any necessary modification of it must be approved by the court.
Accounting:	Under the Probate Code, you may also be required to file financial reports with the court on a periodic basis. Under the Rules of Probate Procedure, this is required at least annually unless excused by the court. The frequency of the accounting (quarterly, semi-annually or annually) will be specified at the time of your appointment. The accountings should be made on court-approved forms. If there is any significant change in the ward's estate or you move to a new address, you should promptly notify the court without waiting for the regular time to file a report. It is mandatory that you set up a bookkeeping system reflecting all cash receipts and expenditures so that you will have the information to prepare the court accountings as well as income tax returns if necessary. Even if you are not required to file reports with the court, formal records must be kept since you have a duty to account to your ward.
Your Duties	In managing the property of your ward, keep these basic rules in mind. First is your duty of undivided loyalty. You may not profit from your position as conservator or, without prior court hearing and order, enter into any financial transaction with the ward. Another basic rule is your duty of care. You must manage your ward's assets with the care of a "Prudent man" dealing with the property of another. The Prudent Man Rule is stated by the Colorado Statute as follows:
	The Prudent Man Rule In acquiring, investing, reinvesting, exchanging, retaining, selling and managing property for the benefit of others, fiduciaries (including conservators) shall be required to have in mind the responsibilities which are attached to such offices and the size, nature and needs of the estates entrusted to their care, and shall exercise the judgment and care under the circumstances then prevailing, which men of prudence, discretion and intelligence exercise in the management of the property of another not in regard to speculation but in regard to the permanent disposition of funds, considering the probable income as well as the probable safety of capital. Thus, in making investments and distributions you should be cautious and prudent. You may not speculate.
Distributions:	In caring for the financial needs of your ward, you are not limited to spending only income. If income is inadequate, it may be necessary to expend principal. If the size of the estate is sufficient, you as conservator may make distributions not only to your ward but to those dependent upon him or her for financial support. Under some circumstances, a limited amount of income may be given to charity or to the ward's family members if the income and assets are otherwise adequate for the care of the ward. With regard to very large estates, substantial distributions may be authorized by the court to carry out an estate plan. Your authority to expend estate funds together with the level of expenditure may depend upon the source of funds and the purpose for which they were received. For example, if the funds are for a minor on account of a personal injury verdict or settlement, their use would normally be limited to paying doctor bills and other expenses unrelated to the injury. The principal and unused income would accrue for ultimate delivery to the child when he or she reaches majority. In such cases conservatorship funds would not normally be spent for normal living expenses (food, clothing, transportation, education, etc.) since receipt of the personal injury proceeds does not affect the parent's continuing obligation of support. On the other hand, if the source of funds was life insurance or other death-related proceeds regarding the deceased parent who was the family bread winner, conservatorship funds might be expended more liberally to assist with the minor's basic support. It is important that you consult with the attorney for the conservatorship estate before any expenditures are made for the benefit of anyone other than your ward so that necessary orders of court may be obtained. This applies to attorney fees as well as to any compensation which you may personally request. When you are appointed, the court clerk prepares a written document called "Letters of Conservatorship." This is evidence of your authority to act as your ward's conservator. Certified copies are normally obtained and shown or delivered to interested parties (such as banks and stock transfer agents) upon request. These "letters" and often the accompanying court order, will reflect any special powers or limitations on your powers. It is important to note that under the Colorado Probate Code, by serving as conservator you do not normally assume personal financial responsibility for the investments and contracts of your ward. You may be personally liable if you fail to reveal that you are acting in your capacity as conservator.
Compensation:	As conservator you are entitled to reasonable compensation for your services, payable from the ward's estate. Any compensation which you receive is taxable income to you and is tax deductible from the income of your ward. Many family members serve for no compensation other than reimbursement of out-of-pocket expenses, including mileage. There is no statutory schedule or guideline for conservator's fees. Rather, the Probate Code simply says that such fees must be fair and reasonable, leaving the matter of compensation to be determined on a case-by-case basis. If you plan to claim compensation, you should keep a record of the time you spend and a description of your service, in order to avoid possible questions on compensation when your final accounts are reviewed by the court. Time spent for friendship and companionship is not compensable. Petitions for compensation may be prepared and presented to the court on a periodic basis by the attorney for you as conservator. Generally such fee petitions will not be considered more than once a year and then only when the required financial accountings are current. Reasonable attorney fees are also payable out of the ward's estate. Similarly, they will be reviewed by the court either periodically or in connection with a final accounting.
Termination:	Several events may terminate the conservatorship estate. If the ward is a minor who reaches majority, a final accounting is made to the ward. Upon the death of the ward, the conservatorship estate may merge into a decedent's estate and a final accounting will be made to the personal representative of the decedent's estate. The court may end a conservatorship if it finds after notice and hearing that the disability of the protected person has ceased. Finally, a conservatorship estate may terminate when its assets are exhausted. In each case, court proceedings are necessary to wind up the estate and to obtain your discharge or release from further liability as conservator.
Words of Caution	This pamphlet can't answer everything you may need to know about being a conservator. It is intended to alert you to your duties and to impress you with your responsibilities. If you have questions on how to proceed, consult your attorney before acting. Obtaining his or her advice before you act may avoid more costly legal services later.

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