Minnesota Attorney General's Office
1400 Bremer Tower
445 Minnesota Street
St. Paul, MN 55101
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Probate and Planning
Guardianship and conservatorship typically result from court proceedings in which the court appoints someone (a “guardian” or “conservator”) to manage another person’s financial affairs or personal care decisions. Generally those proceedings are permitted only when a person becomes so incapacitated or impaired that he or she is unable to make financial or personal decisions, and has no other viable option for delegating these duties to another (e.g., through a durable power of attorney, or living trust or some other means). Using these standards, for instance, guardianships or conservatorships might be established for people who are in a coma, suffering from advanced stages of Alzheimer’s disease, or have other serious injuries or illnesses.
Under Minnesota law, guardianships and conservatorships are used to appoint a person when an individual is unable to make personal decisions or is unable to meet his or her financial needs, even with appropriate technological assistance. The court orders the appointment of a person (a conservator or guardian) to act as a decision maker for another person (the protected person or ward). A court must base this decision on clear and convincing evidence that the protected person or ward has been found to be unable to make necessary decisions on his or her own behalf and the court makes a Conservatorship/Guardianship finding of incapacity or impairment. Once a court makes a finding of incapacity or impairment, the person no longer has the right to manage his or her affairs until proven capable.
A conservator is appointed to make financial decisions for a protected person. The conservator typically has the power to collect all the conservated assets, pay bills, make investments and perform other financial functions, as well as engage in estate planning, including the right to amend or revoke the protected person’s will. However, the conservator must seek court approval for transactions such as the purchase or sale of real property, gifting of assets or engaging in estate planning for the protected person.
A guardian is appointed to perform duties related to personal care, custody and control. The guardian has the authority to make decisions such as where the ward will live and what medical treatment they will receive.
Many duties are required of guardians. The guardian has the duty to assure that provisions have been made for the ward’s care and comfort, including food, health care and social requirements. Whenever possible, the guardian should meet these 19 needs through governmental benefits or services for which the ward is entitled, rather than from the ward’s estate.
The guardian also shall take reasonable care of the ward’s clothing, furniture and other personal effects. The guardian must file a notice of intent to dispose prior to the disposition or sale of the ward’s personal effects. The guardian must also know the religious faith of the ward.
The guardian must file with the court a report of the ward's personal well being, at least annually or whenever ordered by the court. The report must contain the current mental, physical and social condition of the ward; the living arrangements for all addresses of the ward during the past years; the medical, educational, vocational and other services provided to the ward; and a recommendation as to the need for continued guardianship.
Many duties are required of conservators. Within 60 days after being appointed, a conservator must inventory the protected person's estate, noting the fair market value of any real estate, furniture, clothing, mortgages, bonds, notes or debts, and any other personal property. Thereafter, the conservator must file an annual accounting with the court showing in detail all property received and disbursed, and listing all property on hand. The conservator must pay for the support, maintenance and education of a protected person, using government benefits when available, paying the protected person's debts, and managing the protected person's estate. Often the conservator must also post a bond — a kind of insurance policy that pays if the conservator steals or misuses property. The conservator may also have to receive court approval for certain transactions, such as selling real estate or making slightly risky investments. A conservator's duties terminate at death or when capacity is restored.
The law allows the court to grant the guardian or conservator limited power to exercise authority over the ward or protected person. A guardian or conservator may only use their authority as necessary to provide care and services for the ward or protected person. The court should ensure that decisions of a guardian or conservator will not be overly restrictive of the ward’s or protected person’s rights.
If you have other informal arrangements with relatives or formal planning arrangements, such as a durable power of attorney, you may not need to do conservatorship or guardianship planning. However, if it is likely that someone would challenge your planning arrangements (for example, if there might be disagreements within the family); you may want to consider using conservatorship or guardianship planning as a “backup” to your other planning arrangements. Remember, anyone can 20 petition to be a conservator or guardian for an incapacitated or impaired person, and a conservator or guardian can revoke or terminate some prior planning arrangements. By choosing a person you would want to be your conservator or guardian, you protect yourself against the appointment of someone you would not want to be in this position.
“Conservatorship planning” (also called “nomination of conservator”) involves a written document, like a will, in which you name the person you want for your conservator. You can also include instructions on how you want your financial matters handled by your conservator. For example, the conservator could be instructed to manage your property, and be informed about your wishes regarding estate planning. Then, if you should become impaired and need a conservator, the court must name the person you chose and order that your instructions be followed, unless the court finds that this would not be in your best interests. Be aware that the person you choose is not required to serve as your conservator — so choose a reliable person and discuss your plan with the person in advance to make sure he or she agrees with it. You should consult an attorney for conservatorship planning. Any person may petition the court for the appointment of a conservator of an individual who is unable to manage property and business affairs because of an impairment in the ability to make decisions. Once a petition is filed with the court, a court investigator may be appointed to interview the proposed protected person. The investigator reports back to the court with an opinion on whether or not the appointment of a conservator is justified. The petition is set for hearing and the protected person must appear in court unless medically unable to do so or unless excused by the court for good cause. The judge determines, based on the petition, the investigator’s report, and any evidence taken during the hearing, whether or not the conservatorship is required and what types of special powers may be granted to the conservator. The proposed protected person has a right to have an attorney represent his or her interests in conservatorship proceedings.
Conservatorships are subject to court supervision which provides a powerful safeguard for an impaired adult’s property. Because the conservator is required to file an inventory of the protected person’s property, and provide accountings and other reports to the court, a conservatorship offers a higher degree of protection to the protected person than other management mechanisms. A conservatorship also allows for the management of an impaired person’s financial affairs when he or she does not have an alternative mechanism in place to do so. Another advantage to a conservatorship proceeding is that it provides a method to assist an impaired individual who may be unwilling to accept such assistance.
Conservatorships are time-consuming and expensive; they often require court hearings and the ongoing assistance of a lawyer. The paperwork can also be a hassle because the conservator must keep detailed records and file court papers on a regular basis.
The conservatorship can also be a cumbersome method of managing a person’s financial affairs, as the conservator must return to court for approval of certain transactions, such as the sale of real property, borrowing money, setting up a trust, etc. These formal court hearings require additional attorney fees and can create delays in completing these transactions.
In addition, as noted above, a conservator must usually post a bond. The bond premiums are paid by the protected person’s estate. Bonds are usually required, but may prove to be an unnecessary expense if the conservator is competent and trustworthy.
Another disadvantage is that occasionally a conservator will mismanage a protected person’s assets. Common abuses range from reckless handling of the protected person’s assets to outright theft. Although each state has rules and procedures designed to prevent mishandling of assets, few have the resources to keep an eye on conservators and follow through if they spot trouble. Many cases of incompetence or abuse go unnoticed.
Finally, a conservatorship can be emotionally trying for the protected person. All court proceedings and documents are public records, which can be embarrassing for someone who values independence and privacy.
Revocable living trust. Through the establishment of a revocable living trust the individual can appoint a trustee to manage his or her financial affairs and thus can avoid the need for an appointment of a conservator of the estate. A person must be competent to establish a living trust.
Durable power of attorney for asset management. A durable power of attorney is a document in which the individual can delegate to an agent the power to make financial transactions on his behalf if he is unable to do so himself. However, the individual must be competent to execute a durable power of attorney and the agent acting under the durable power of attorney is not subject to court review of his or her actions.
Health care directive. An individual can nominate an agent to make health care decisions on his behalf in a health care directive. These health care decisions can include the decision to withdraw or continue life support systems. The individual can also give specific instructions as to health care in the directive. As with a living trust and durable power of attorney for asset 22 management, a person must be competent to execute a health care directive.
Joint tenancy property. While the joint tenant may make decisions regarding the property that is held in joint tenancy, there are significant risks that make this form of ownership a poor choice for the purposes of asset management. In particular, in a joint bank account, a joint tenancy allows either joint tenant to access the funds and thus one joint tenant can withdraw all the joint tenancy funds. Further, there can be adverse tax and estate planning consequences as a result of creating a joint tenancy.
What is a power of attorney?
A power of attorney is a document authorizing someone to act on your behalf it is limited to one person, a married couple would each need their own power of attorney. You determine how much power the person will have over your affairs. Your power of attorney may be a general or limited power of attorney. A general power of attorney authorizes your agent to conduct your entire business and affairs. A limited or special power of attorney authorizes your agent to conduct specified business, perform specified acts, or make certain decisions on your behalf.
In Minnesota there are two types of power of attorney. One is the general appointment, (known as the long from) and the second is the Statutory Short form (known as the short form). You may wish to consult with an attorney to determine which power of attorney is the best for you.
In any power of attorney, you are considered to be the “principal” and the person to whom you assign the power is your “agent” or “attorney-in-fact.” Your attorney-in-fact does not have to be a lawyer, but it should be someone you trust a great deal.
What is a durable power of attorney?
When a power of attorney is considered “durable,” it remains valid even if you become incompetent or incapacitated. An ordinary power of attorney expires if a person becomes unable to make his or her own decisions. Durable powers of attorney can be prepared either to take effect immediately or to go into effect only if and when you become unable to make decisions for yourself (a “springing durable power of attorney”).
The power of attorney form should indicate what kind of power of attorney you want. You may want to consult an attorney regarding the type of power of attorney you want.
When should I use a power of attorney?
You may want to use a power of attorney if you are unable or unwilling to handle your financial affairs yourself. You may also use a power of attorney to allow another individual to take care of your responsibilities at the time you become incapacitated. Having a power of attorney does not restrict you from doing these things on your own, but instead shares these responsibilities with someone else.
How much power does a power of attorney have?
You may give your attorney-in-fact as much or as little power as you wish. You could choose to give your attorney-in-fact power to do some or all of the following:
- Use your assets to pay your everyday expenses and those of your family;
- Buy, sell, maintain, pay taxes on and mortgage real estate and other property;
- Manage benefits from Social Security, Medicare or other government programs or civil or military service;
- Invest your money in stocks, bonds and mutual funds; 24
- Handle transactions with your bank and other financial institutions;
- Buy and sell insurance policies and annuities for you;
- File and pay your taxes;
- Operate your small business;
- Claim property you inherit or are otherwise entitled to;
- Hire someone to represent you in court; and
- Manage your retirement accounts.
How do I create a power of attorney?
You don’t need an attorney to prepare a power of attorney. You may want to consult with an attorney if you have specific questions. However, you should know that powers of attorney are required to be:
- In writing;
- Signed by you in front of a notary public;
- Dated appropriately; and
- Clear on what powers are being granted.
If you want to create a durable power of attorney, you must include a statement such as: “This power of attorney shall not be affected by incapacity or incompetence of the principal.”
In the back of this booklet in the Sample Forms section on page 37, you will find Minnesota’s standard power of attorney form (short form), as set out in Minn. Stat. § 523.23 (2008). This form allows you to choose whether or not you want the power of attorney to be durable.
Some banks and brokerage companies have their own power of attorney forms. If you want your attorney-in-fact to have an easy time with these institutions, you may need to prepare two (or more) durable powers of attorney, one using your own form and one or more using the forms provided by the institutions with which you do business.
What happens if I don’t have a durable power of attorney for finances?
If you become incapacitated and you haven’t prepared a durable power of attorney for finances, a court proceeding for conservatorship is probably inescapable. Your spouse, closest relatives or companion will have to ask a court for authority over at least some of your financial affairs.
If you are married, your spouse has some authority over property you own together - he or she may pay bills from a joint bank account, for example. There are significant limits, however, on your spouse’s right to sell property owned by both of you.
If your relatives go to court to get someone appointed to manage your financial affairs, they must ask a judge to rule that you cannot take care of your own affairs and request that the judge appoint a conservator. When this person is appointed, you may lose the right to control your own money and property. Conservatorships are discussed more starting on page 18.
When does a power of attorney end?
If you are mentally competent, you may revoke your original power of attorney at any time with a signed document, such as the form found on page 40 in the Sample Forms section. The revocation is not effective until the attorney-in-fact has received notice of the revocation. If you do not revoke it, a power of attorney ends at your death. If you want your attorney-in-fact to have authority to wind up your affairs after your death, use a will to name that person as personal representative.
Also, if you get a divorce, and your spouse is your attorney-in-fact, your ex-spouse’s authority is automatically terminated. Finally, if there is no one to serve as attorney in- fact, the power of attorney ends. To avoid this problem, you can name an alternative attorney-in-fact in your document.
The maker of the power of attorney may hold the original power of attorney document. This can allow the maker to remain in control and generally results in a simple revocation.