Duties of Conservators (or Trustees for Incapacitated Veterans)
General Duties of Conservators
The general duties of a conservator are to exercise reasonable care, diligence and prudence in managing the assets of the incapacitated and acting in the best financial interests of the incapacitated adult. The language of the Court order and statutory provisions applicable to conservators must be followed to insure that the conservator’s actions do not exceed statutory authority or the authority specifically granted by the Court. If in doubt, you should consult with a qualified elder law attorney or review the resources referenced herein.
DESIGNATION OF REPRESENTATIVE PAYEE
BY THE SOCIAL SECURITY ADMINISTRATION
If you, or a third party, have specifically been appointed as “representative payee” for the incapacitated by the Social Security Administration, and you can demonstrate that appointment by presenting the appointment letter to the Commissioner, you will not have to account for the Social Security benefits to the Commissioner of Accounts if you have kept the Social Security receipts separate from other conservatorship money; but you will report annually for the use of those benefits on a report sent to you by the Social Security Administration.
If the social security benefis are the only asset of the incapacitated and the representative payee documentation is demonstrated to our auditor, the conservator will file the inventory reporting the social security as the only asset in Part 7, and in such instance we will suspend the filing of accountings until such time as assets in excess of $25,000.00 are received by the conservator, at which time accounting obligations will resume.
You will, of course, have to account to the Commissioner of Accounts if the incapacitated has other assets which are under your control. Be aware that if you comingle representative payee receipts with other receipts of the incapacitated, you will have to account for all receipts, including the representative payee social security benefits. Representative payee receipts should be segregated from other income/receipts of the incapacitated if you do not want to have to include them in your accounts to the Commissioner.
DESIGNATION AS “FEDERAL FIDUCIARY” BY THE VETERANS ADMINISTRATION
If you are conservator for a veteran or trustee for a veteran, the VA may designate you, or someone else, as the federal fiduciary to receive the veteran’s VA benefits. If you: (i) are so designated and have the paperwork to prove the designation; and (ii) report to the Veterans Administration on an annual basis; and (iii) do not comingle the VA benefits with other conservatorship assets, you do not have to account to the Commissioner of Accounts for the use of the VA benefits, only the non-VA benefits or assets. (See Form CC-1682 (INST), Part III, “Receipts”). The VA benefits received are reported on the Account Summary just as Social Security to a Representative Payee, but are not included in the totals. (See Form CC-1682, just above the signature line where the asterick is noted).
REPRESENTATIVE PAYEE TRAINING RESOURCES
If you have been designated as “Representative Payee” you have certain duties you should be familiar with which may overlap with your duties as conservator.
The Representative Payee training guide found at the following Social Security website has training instructions and five (5) short video presentations which can assist in explaining your duties as Representative Payee and being aware of potential problems and the potential for financial exploitation and abuse of the incapacitated. The website is:
PLAIN LANGUAGE GUIDE FOR CONSERVATORS
For additional information concerning your duties as conservator, what to be aware of and on the “lookout ” for in administering the incapacitated’s estate, you may wish to consult the Consumer Financial Protection Bureau publication for Conservators entitled “Managing Someone Else’s Money”, which is specific to Virginia and can be accessed at the following website and downloaded as a pdf. (http://www.consumerfinance.gov/managing-someone-elses-money/). After opening the referenced website, under “About the guides”, click on “Court-appointed guardians”, and on the next page, on the right hand side of the page, click on “State Specific”, Virginia: download.
Section 64.2-2021, Code of Virginia (1950), as amended, sets forth the specific duties of the conservator. The conservator, to the extent possible based on the incapacity of the adult, should encourage the participation of the adult in the decision making regarding the incapacitated adult’s assets.
If the incapacity of the adult is total, the conservator should take steps to see that the incapacitated has no access to the financial accounts and other assets of the incapacitated adult.
A conservatorship bank account should be established in order to provide the source for the payment of the debts and obligations of the incapacitated adult. All disbursements made for the support of the incapacitated, or the administrative costs of the conservatorship, should be made from this account. This account will be opened under the social security number of the incapacitated adult and should be in the name of the incapacitated adult, by the conservator. For example, if John Doe is incapacitated and his sister, Mary Doe, has been appointed as conservator, the account should read “John Doe, by Mary Doe, his conservator”. The account should specifically state that the incapacitated is not allowed to draw checks, unless the Court order is for a limited conservatorship and allows the incapacitated to participate in the continued use of his/her assets, which is a rare situation. The incapacitated generally should have no ability to access his/her assets and you must make that clear to the bank or stock broker.
The conservatorship bank account(s) must be interest bearing account(s) (unless the balance is so low that monthly service fees will be charged) and must be set up so that copies of the front of all checks written on the bank account are returned with the monthly bank statements. These copies must be provided to the Commissioner’s office with each account. In fact, all of the incapacitated’s accounts should be interest bearing and should be made so even if the incapacitated had failed to do so prior to appointment of a conservator.
The conservator does not need to re-title assets, as the assets remain the property of the incapacitated. However, the conservator should be careful that the incapacitated person is not able to gain access to assets and create problems in the dissipation of assets at a time when the incapacitated lacks the mental judgment and capacity to make such determinations. Frequently incapacitated adults are taken advantage of and one of the major purposes for the appointment of a conservator is to prevent such a situation. Therefore, the conservator should be diligent at all times to the assets of the incapacitated adult and should limit the ability of the incapacitated adult to continue to transact business in those assets.
The conservator pays the incapacitated adult’s financial obligations, debts for the maintenance and support of the incapacitated adult and the cost of administration of the conservatorship including the guardian’s fees and the conservator’s fees. The payment by the conservator of a fee to the guardian should be discussed with the Commissioner of Accounts prior to disbursement to obtain approval of the Commissioner for such fees.
RESOURCES AVAILABLE TO INCAPACITATED VETERANS
Be sure to explore all benefits to which an incapacitated veteran may be eligible as a result of military service. There may also be benefits available to the incapacitated surviving spouse or minor dependants of a deceased veteran. You should explore all of the various benefits and/or services resulting from military service so that these benefits may be claimed and used to supplement the support for the incapacitated veteran, or the incapacitated spouse of a deceased veteran. (www.va.gov).
If you find you cannot navigate the bureaucratic procedures, you may want to engage legal counsel who practices in the speciality of Veterans benefits or an Elder Law attorney.
Aside from the powers which are specifically set forth in the Court Order appointing the conservator, unless limited by the court order, Section 64.2-2022, Code of Virginia (1950), as amended, states and grants the management powers of the conservator. The conservator may have the powers set forth in section 64.2-105, Code of Virginia (1950), as amended, if referred to in the Court’s order. Those statutory powers generally exercised by all conservators include the following rights:
- The right to ratify or reject a contract entered into by the incapacitated adult;
- To pay sums for the benefit of the incapacitated (or a legal dependent of the incapacitated) by payment to a provider of goods and services or to a facility having responsibility for the care and custody of the incapacitated;
- To maintain life, health, property and liability insurance for the benefit of the incapacitated;
- To execute all instruments and take all other actions that will serve the best interest of the incapacitated;
- To borrow money, renew existing loans or mortgage a part of the incapacitated person’s estate;
- To preserve and manage the incapacitated persons estate upon of the conservatorship until delivery to the incapacitated or his successors.
These powers may be exercised without prior Court authorization except as provided or otherwise limited by the Court’s order of appointment.
Special Real Estate Issues
APPROVAL OF SALE BY THE COMMISSIONER
The powers of Section 64.2-105 are general powers which may be exercised by all fiduciaries when they are granted in the order entered by the Court and includes the power to sell real estate.
Review your court order. The Judge may not have granted the unrestricted power to sell real estate. You may be required to obtain review and approval of the proposed sale of real estate by the Commissioner.
The provisions of Section 64.2-2022(b) list four requirements that the Henrico County Circuit Court may impose to be satisfied by the conservator before conveying the incapacitated person’s real estate. This code section should be consulted prior to the proposed sale of real estate.The conservator is required to report to the Commissioner of Accounts that the conservator has complied with each of the requirements imposed by the Court. The Commissioner of Accounts then must report to the Court whether the requirements had been met and whether the sale is reasonable, in the best interests of the incapacitated and is consistent with the conservator’s duties . The language of the Court Order is especially important with regard to the conservator’s power to sell real estate. Consult it frequently. If you have questions consult with an elder law attorney concerning your authority to sell real estate.
DO NOT ATTEMPT TO SELL THE INCAPACITATED ADULT’S REAL ESTATE WITHOUT THE PRIOR APPROVAL OF THE COMMISSIONER OF ACCOUNTS UNLESS YOU ARE SPECIFICALLY AUTHORIZED TO DO SO BY THE COURT ORDER. SUCH A SALE COULD EXPOSE YOU TO PERSONAL LIABILITY FOR FAILURE TO COMPLY WITH YOUR FIDUCIARY OBLIGATIONS.
In the event of a sale it must be an “arms length transaction”. The sale may not be to the conservator and may not be to any family member of the conservator or incapacitated unless the Commissioner of Accounts has approved such sale. The conservator is not allowed to personally benefit at the expense of the incapacitated adult.
The closing on the sale of the real estate shall not be conducted by any attorney until the report by the Commissioner of Accounts is filed with the Henrico County Circuit Court and confirmed by the passage of fifteen (15) days from the date of filing without exceptions being filed by any person. If exceptions are filed, the report does not become confirmed until an Order of Confirmation is entered by the Henrico County Circuit Court, and the property should not be sold until those events are satisfied.
COMMISSIONER’S APPROVAL PROCEDURE
The procedure for approval by the Commissioner is as follows, if you have the power to sell real estate under the court order:
1. Conservator contacts a realtor and discusses a sale and the suggested terms thereof;
2. A listing agreement is entered into by the conservator in the name of the incapacitated, by the conservator with the condition that “any sale is subject to the approval of the Henrico Commissioner of Accounts”;
3. Commission to be paid under the listing agreement is negotiable;
4. Once an offer is made a contract is prepared, again in the name of the incapacitated, by the conservator.
The contract should include a special contract provision stating that “This sale is subject to the approval of the Henrico Circuit Court Commissioner of Accounts”;
5. The conservator then submits to the Commissioner, for approval of the sale, the following:
a. A copy of the signed contract;
b. A copy of the listing agreement;
c. A copy of the current real estate tax assessment;
d. A report of comparable sales within the last six months prepared by the realtor, or a real estate appraisal if required or available;
e. A copy of the Notice of Proposed Sale required by the Court order to be given to any family members.
6. The Commissioner reviews the documents, discusses the proposed sale with the conservator and anyone else who may have information which the Commissioner deems of value in making a decision;
7. The Commissioner issues a report approving or disapproving the proposed sale which is filed with the Clerk of the Henrico Circuit Court;
8. Within fifteen (15) days after the filing of the report, any interested party may file exceptions to the report with the clerk of the circuit court; and if no exceptions to the report have been filed, the report is confirmed at the end of the 15 days and the sale may occur (you must check with the clerk to determine if exceptions were filed or obtain a copy of the clerk’s certification that no exceptions were filed); and
9. The proceeds of sale are received by the conservator and deposited to the conservatorship bank account to be used for the benefit of the incapacitated. An increased conservator’s bond may be required before receiving the proceeds as recommended by the Commissioner in the report.
Allowable Expenditures on Behalf of the Incapacitated Adult
The conservator generally may spend funds from the income and principal as needed for the benefit of the incapacitated person. There are various Code provisions which allow for additional expenditures all of which should be consulted prior to making such expenditures. The conservator should remember that it is the general obligation to provide for the support and maintenance of the incapacitated adult and not to otherwise disburse the estate in a manner which would jeopardize that obligation.
Section 64.2-2022 and Section 64.2-2021(B), permits the conservator to contribute funds of the incapacitated adult for the support and maintenance of the incapacitated adult’s legal dependents. If the incapacitated adult has children to whom he owes an obligation of support, appropriate payment may be made for their support and maintenance. Prior consultation with the Commissioner of Accounts is recommended.
A conservator may make gifts under Section 64.2-2023(B), from the incapacitated adult’s estate under certain circumstances described in that section. There must be a finding that the person had a history of gift giving in similar amounts to the same donees during the three (3) years prior to the appointment of a conservator. These gifts are generally limited to $150.00 per donee not to exceed $750.00 total in any calendar year. Gift giving, unless it was a pattern of the incapacitated adult prior to your appointment which can be proven by documentation, and unless the estate is sufficient to provide for the future needs of the incapacitated adult, should not be undertaken. More substantial gift giving may be approved by the Henrico County Circuit Court on petition by the conservator to allow for appropriate estate planning. Section 64.2-2023(a), Code of Virginia (1950), as amended.
Expenditures associated with the normal support and maintenance of the incapacitated person as well as the preservation of the incapacitated person’s estate are generally appropriate. Expenses to improve the property of the incapacitated, as opposed to maintenance expenses, would generally be inappropriate and should receive prior approval from the Commissioner of Accounts.
Fees and costs associated with the administration of the conservatorship are legitimate payments from the estate of the incapacitated adult. These fees include the petition for appointment of the conservator and legal fees associated therewith, the fees of the guardian ad litem appointed to represent the incapacitated person at the guardianship hearing, surety premiums on the bond set by the Court, filing fees associated with inventory and accounts filed with the Commissioner of Accounts and the fees of the Commissioner of Accounts.
The conservator, of course, has the obligation to pay the income taxes for which the incapacitated person may be liable from year to year to the Federal government and to the State of Virginia. The Commissioner’s office is obligated to ensure that those obligations due to the Commonwealth of Virginia are paid by the conservator.
Caution should be exercised in the payment of family members for providing care services to the incapacitated. Virginia case law suggests that this is not an appropriate allowance as it is a family obligation, without compensation, to provide such care. There are additional concerns, including the benefits the family caregiver is receiving while living in the incapacitated’s home and the quality of care being provided. You should consult with an elder law attorney for advice before committing to such an arrangement, and the commissioner’s office should be consulted for approval in advance.
The conservator is entitled to reasonable compensation for services as conservator, as approved by the Commissioner of Accounts. The compensation to which a conservator is generally entitled is set by the Guidelines for Fiduciary Compensation.