STAYING OUT OF TROUBLE: THE PERSPECTIVE OF THE HENNEPIN COUNTY PROBATE COURT - MAGiC JOURNAL, JULY 2000. By Brent Wm. Primus, J.D.
This article will attempt to convey the observations and concerns of the Hennepin County Probate Court regarding the activities of guardians and conservators and, in particular, professional guardians or conservators. Accordingly, it will be assumed that the reader has at least a basic familiarity with guardianships and conservatorships.
To save a few words, the term “guardian” will be used to refer to both guardians and conservators and the term “guardianship” will be used to refer to both guardianships and conservatorships. The information for the article was obtained by meeting with Hennepin County Probate Court Referee Richard Wolfson; Referee Bruce Kruger; Gail Clapp, Probate Court Administrator; and JoAnne Cardenas, Senior Court Clerk. The starting point of the article will be to address the issue as to why a guardian should care about the views of the Probate Court.
A Guardian Is an Agent of the Court. The relationship between the Court and a guardian is not the same as the relationship between the Court and a party in civil litigation or a criminal prosecution. Rather, a guardian, by statutory definition, is an agent of the Court. Minn. Stat. § 525.56, Subd. 1, reads as follows:
A guardian or conservator shall be subject to the control and direction of the court at all times and in all things..
Accordingly, a guardian, and especially a professional guardian, who has been appointed by the Hennepin County Probate Court should be very concerned with the perspective of the Probate Court because the Court is " the boss".
Belaboring the Obvious. There are certain aspects of being a guardian that presumably every professional guardian well knows. For instance, a guardian cannot act on behalf of the ward until the letters of guardianship have been issued by the Court; an inventory is to be filed within thirty (30) days of the appointment of a guardian; a personal well-being report is to be filed every year; and, for guardianships of the estate, a financial accounting is to be filed every year. Although presumably well known, these basic requirements are not always met.
As of May, 2000, there were 2,623 open guardianship and conservatorship files in Hennepin County. In addition to guardianship and conservatorship matters, the Court also administers probate proceedings, trust matters, and mental health matters. As with any organization, the Hennepin County Probate Court has only a specified allocation of budget and staff to accomplish all that it is charged to do. Accordingly, the Court finds it very irksome, to say the least, that it has to use its scarce resources to remind, and re-remind, persons holding themselves out as professional guardians of the need to make a required filing.
Annual Accounts. The Court often receives annual accounts which do not balance on their face. Accordingly, it is strongly recommended that prior to filing an annual account that a tape calculator be used for its preparation and that the calculations be "double-checked".
Referee Kruger recommends that a cash method of accounting, as opposed to an accrual method, be used. In other words, assets should be shown on the annual accounts at their inventory values and neither appreciation nor depreciation of an asset be reflected on the account until the asset is sold or disposed. The gain or loss arising out of the sale or disposal should then be reflected in the account.
The beginning balance for the first annual account should be the balance for personal property shown on the inventory. The beginning balance for subsequent annual accounts should be the "balance due to ward" shown on the previous account.
Joanne Cardenas, who is one of the persons responsible for auditing annual accounts, points out that the anniversary date of an account cannot be changed except through court order and that verification of funds on deposit and verifications for stock must be submitted with any account that reflects bank accounts, saving accounts or stocks. Ms. Cardenas strongly recommends that a fiduciary checking account be established at a commercial bank that returns canceled checks on a monthly basis. All expenditures made for the ward should be paid directly by checks from this account. Reimbursements are to be avoided.
Hearings on Annual Accounts. It is recommended that the guardian be familiar with the status of the assets as of the time of the hearing, as well as their status as reflected in the accounts. This arises out of the fact that a hearing is typically several months after the end of the accounting pers, the bond requirement (as expressed in relation to the value of the assets) is higher for liquid assets, e.g., cash, and lower for non-liquid assets, e.g., real estate.
Also, at the time of the hearing a guardian should be very aware of the current personal status of the ward. While it may be a truthful response, an answer of "I don¹t know" is not an acceptable response for a professional guardian.
Unusual Purchases. A "rule of thumb" has arisen over the years to the effect that prior court approval is needed for an unusual purchase and that an unusual purchase is something that costs more than $500. While it is true that something truly unusual would warrant prior court approval, the Court sees many petitions which it feels to be unnecessary.
For instance, Referee Kruger pointed out that Petitions are routinely filed seeking approval of a prepaid funeral plan costing an excess of $500, however he could not recall an occasion when such a Petition was denied. The same would be true with respect to the purchase of an item such as a wheelchair.
It should also be kept in mind that the $500 threshold amount embodied in the "rule of thumb" has been made obsolete through inflation. Based on the observations of the Referees, the author would suggest that professionals should reconsider his or her view of "unusual" ---- taking into account both the nature of the asset and the cost of the asset in relationship to the overall assets of the ward. While such an analysis does require more professional judgment than rigid adherence to the old "rule of thumb", the benefit would be that the time and expense associated with unnecessary Petitions could be reduced for the benefit of the Court and guardian as well as the ward.
DNR/DNI Petitions. There may be situations where the guardian wishes to bring a petition to seek approval to terminate a ward's life support or to initiate DNR/DNI Orders even though, in the author's opinion, they are not legally required to do so. (See "The Power Not to Consent to Medical Care, MAGiC, August, 1997). An example of this would be the situation where relatives of the ward have differing views - either with each other or with the guardian. In any event, the filing of a Petition will lead to a hearing.
The expectation of the Court of a professional guardian in such a circumstance is that the guardian thoroughly acquaint himself or herself with the religious and cultural background of a ward. And, having done that, to take the next step and to determine what is the position of the ward's religion or culture. For example, once one determines that a ward is a member of the Catholic church, one should then determine what the Catholic church's position is with respect to these issues.
The guardian should also attempt to determine to the extent possible whether the ward has ever expressed any personal thoughts on the subject. The guardian should also try to determine the view of the involved family members.
To say much further would be far beyond the scope of this article, but the message for today is that once the decision has been made to file a Petition, that the guardian thoroughly prepare for the Hearing. This would apply not only when the hearing is expected to be contested, but also when it is to be uncontested. In the later situation, the guardian could well be the only source of information available to the Court upon which to base a truly "life or death" decision.
Sale of Real Estate. The sale of real estate by a guardian is considered to be a "judicial sale". (See Restatement of Property: judicial sales). The advice of the Court for staying out of trouble when selling real estate is to "follow the statute". Sections 525.62 through 525.702 of the Minnesota Statutes govern sales of real estate from a guardianship and conservatorship, as well as other real estate matters.
The first step of the sale process is the filing of a Petition to Sell Real Estate. Until the Petition is granted, a conservator does not have the authority to even offer or list the property for sale. A further step of the process, after the Court issues an Order Directing Sale, is to file a Report of Sale. Referee Kruger strongly recommends that a copy of the purchase agreement and a copy of the preliminary closing statement be attached to the Report as exhibits.
Again, a thorough discussion of the procedures and issues relating to the sale of real estate are beyond the scope of this article, however a guardian should be very well aware of the provision of Minn. Stat. § 525.651 which reads as follows:
No real estate shall be sold at private sale for less than its value as fixed by such appraisal.
Thus, once a sale has been approved by the Court at a certain price, the guardian may not re-negotiate the price, even if acting in perfectly good faith, without seeking the re-approval of the Court.
This area can be tricky. For instance, it would be appropriate at closing to deduct the real estate commission which would result in a net payment to the guardianship of less than the appraised value. However, in a transaction where the guardian did not use a realtor, it would not be appropriate for the guardian to attempt to facilitate a sale by providing a proposed buyer a 7% discount from the appraised value, even though the net payment would be the same.
Charging for Personal Services. The charging for personal services is a practice which at a minimum raises an appearance of impropriety and, in extreme cases, could lead to disapproval of the fees or even a surcharge. An example of charging for personal services is when a ward has had a lifetime love of going to the symphony, but can no longer go unaided. Accordingly, the guardian goes with the ward to the symphony and uses guardianship funds to pay for two tickets and charges the ward for the guardian's time spent at the symphony. A similar issue arises when a guardian accompanies a ward on a trip.
Unfortunately, there does not appear to be a simple answer or "rule of thumb" to address this situation. The conservative approach would be to avoid the situation altogether. Depending upon the circumstances, a guardian could spend the time and not charge for it or, alternatively, hire another person to perform the service. If the guardian concludes that it would be in the best interest of the ward for the guardian to personally perform the services, the guardian would do well to consider obtaining prior approval of the Court using an analysis similar to the one discussed above in conjunction with an "unusual purchase".
Hiring of Relatives. There is no prohibition per se against a guardian hiring a relative to perform services for the ward, e.g., mowing the lawn or preparing tax returns. However, the sense of the Court is that it creates an appearance of impropriety and, ultimately, is a no-win situation for the guardian. In the event the relative charges less than the market rate, the guardian gets little credit. However, if the relative where to charge even slightly more than the market rate, the guardian is opening up himself or herself for criticism.
Removal of a Guardian. When a guardian doesn't "stay out of trouble" he or she may be "removed", i.e., his or her appointment as a guardian is terminated. The removal of a guardian is governed by two statutes in particular.
Minn. Stat. § 582(d) reads as follows:
If a guardian or conservator becomes unsuitable, incapacitated or disabled, or violates the trust or fails to perform any duty imposed on him by law or the lawful order of the court, the court upon petition or the court¹s own motion may remove the guardian or conservator after notice.
Minn. Stat. § 525.61, Subd. 3, reads in part as follows:
The court shall appoint a new guardian or conservator if it finds that:
(1) the existing guardian or conservator has failed to perform the duties associated with the guardianship or conservatorship or to provide for the best interests of the ward or conservatee;
Obvious examples of conduct leading to the removal of a guardian would include theft, physical or sexual abuse of the ward, or a material conflict of interest. Less obvious examples would be the failure to file an inventory, personal well-being report or an annual account. These are statutory duties imposed upon guardians, not just "suggested paperwork". (See Minn. Stat. § 525.58). Other statutory duties imposed upon a guardian are set forth in Minn. Stat. § 525.56, Subd. 4.
Communication, Communication, Communication. Both Referee Kruger and Referee Wolfson felt very strongly that the single best way to "stay out of trouble" was communication with those involved in the ward's life. Referee Kruger felt that it was very important to be in touch with the ward's family to the extent possible. For instance, he suggested inviting involved family members to care conferences. Another technique he has observed is the circulation of a "family newsletter" when there is a large extended family for which it would be too time consuming to make individual contact.
Referee Wolfson observed that most of the family fights he has seen over the years arise out of placement issues or issues involving personal property or the homestead. He suggested that the guardian should try to keep the family advised not only of the current status, but also of anticipated major changes, e.g., a change in placement or a shift in investment strategy. He also believes that it is important to keep interested persons updated as to the ward's personal health status, not just the ward's financial status.
Conclusion. To conclude, the author would summarize the observations of the Court as follows:
1.Prepare and file the requisite reports in as accurate and as timely fashion as possible;
2. Read the Statutes;
3. Follow the Statutes; and
4. Be as engaged as possible with the other persons involved in the ward's life.
Finally, the author would like to point out that he is an attorney with very poor handwriting and not a news reporter with short hand skills. Accordingly, he would like to apologize in advance for any misquotes, errors of attribution, or misstatements of legal theories.
All for now!
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