Attorney Fees in a Conservatorship

A conservatorship involves the appointment of a conservator by a court to manage the affairs of an incapacitated person, the conservatee. For example, a child, the conservator, can file a petition for conservatorship regarding their incapacitated parent, the conservatee.

A conservatorship can take the form of a conservatorship of the person.

"A conservator of the person may be appointed for a person who is unable to provide properly for his or her personal needs for physical health, food, clothing, or shelter." Probate Code §1801(a).

A conservatorship can also take the form of a conservatorship of the estate.

"A conservator of the estate may be appointed for a person who is substantially unable to manage his or her own financial resources or resist fraud or undue influence." Probate Code §1801(b).

A recent appellate decision adjudicated the recovery of attorney fees in a conservatorship case.

Conservatorship of Brokken (2021) 61 Cal.App.5th 944

"Respondents are the adult children of appellant Doris Mae Brokken. Over their mother's vigorous objection, respondents petitioned to establish a conservatorship. They alleged that appellant suffered from ongoing mental health issues and that her behavior had become increasingly erratic. After two years of litigation and negotiation, the parties settled the matter without the need for a conservatorship. Appellant voluntarily agreed to engage in professional mental health services and the petition was dismissed.

Respondents sought to recover their attorney fees as part of the settlement. Appellant did not believe they are legally entitled to fees, but to facilitate settlement, she agreed to let the probate court decide whether respondents are entitled to fees and, if so, the amount of such fees."

Respondents cited Probate Code § 2640.1(a) as statutory authority for this request. It reads in pertinent part:

"If a person has petitioned for the appointment of a particular conservator and another conservator was appointed while the petition was pending, but not before the expiration of 90 days from the issuance of letters, the person who petitioned for the appointment of a conservator but was not appointed and that person’s attorney may petition the court for an order fixing and allowing compensation and reimbursement of costs, provided that the court determines that the petition was filed in the best interests of the conservatee."

Respondents' further cited Conservatorship of Cornelius (2011) 200 Cal.App.4th 1198 as case law that permitted the recovery of attorney fees. In Cornelius, a child had successfully petitioned for a 6-month conservatorship regarding her mother. Ultimately a permanent conservatorship was not established. The Cornelius Court held that a "temporary conservator is entitled to reimbursement of legal fees and other expenses properly incurred for the conservatee's benefit during the term of that temporary appointment regardless of whether a permanent conservator is ever appointed." Id. at 1204.  

Conversely, Respondents in Brokken neither established a temporary conservatorship nor a permanent conservatorship for their mother. The Brokken Court held that since Probate Code § 2640.1(a) requires some form of a conservatorship to be established and none was, Respondents were not entitled to recovery of their attorney fees.  

Guardianships and Conservatorships

In certain situations, a fiduciary needs to be appointed to manage the affairs of a minor, a guardianship, or the affairs of an incapacitated individual, a conservatorship. Though the circumstances when such are needed differ, there are nonetheless shared attributes between the two. The following are some similarities and differences between these legal procedures. 

For reference, a guardianship is needed when a minor child lacks a guardian, i.e. a parent, while a conservatorship is for those lack the capacity to manage their affairs. 

Differences

1. In the case of a guardianship, it automatically terminates when the minor 18. There is no deviation from this. Conversely, a conservatorship does not have a set end date. It can last for days, weeks, months, years, decades, etc. The typical termination date of a conservatorship is death.

2. When a person wishes to nominate a guardian for their child, they customarily do so through a will. Conversely, a conservatorship is not nominated in a will.

3. A guardian cannot draft a will for a minor. Whereas a conservator may draft a will on behalf of the conservatee, the incapacitated adult, if court approval is previously obtained.

4. A guardianship is automatically required if a child lacks a legal guardian, e.g. a parent. A conservatorship is not automatically required. There must be a judicial determination that the conservatee lacks the capacity to manage their affairs.

5. A guardianship and conservatorship are essentially default provisions in terms of estate planning, except in the case of a guardianship of a minor's person. For example, a parent can draft a trust which can hold a minor's inheritance in trust to avoid the necessity of a guardianship of the estate. As for a conservatorship, a power of attorney and advance health care directive can serve as substitutes for a conservatorship of the estate and person. 

Similarities

1. Both require court appointment and supervision, e.g. an annual accounting rendered to the court for approval. 

2. Both have a "person" and "estate" component to it. The former encompasses basic life functions such as where you live, what you eat, who do you socialize with, what do you do with your free time, etc. The latter entails the management of your finances. Therefore, the guardian of a minor's estate and person would have control over both where the minor attends school and management of their finances. 

3. Both roles can be held by a relative, friend, neighbor, etc. In other words, there is no licensure requirement for acting as a conservator or guardian. Although there is a limit on the amount of times a non-licensed person can act as a guardian and/or conservator.

4. Both can have the role be performed jointly by different people. For instance, a married couple can act as the guardian of their relative's child.

5. Both aspects of a guardianship and conservatorship, the  person and estate component, can be held by the same person.

Double Damages for Bad Faith Actions

Much like Santa Claus, the California probate code can provide coal to those who act naughty. Although to be exact, the California probate code provides something much worse than coal in your stockings, money damages.

Probate Code § 859 reads "If a court finds that a person has in bad faith wrongfully taken, concealed, or disposed of property belonging to the estate of a decedent, conservatee, minor, or trust, or has taken, concealed, or disposed of the property by the use of undue influence in bad faith or through the commission of elder or dependent adult financial abuse, as defined in Section 15610.30 of the Welfare and Institutions Code, the person shall be liable for twice the value of the property recovered by an action under this part. The remedy provided in this section shall be in addition to any other remedies available in law to a trustee, guardian or conservator, or personal representative or other successor in interest of a decedent."

In other words, a defendant found culpable of the above is liable for double damages as a penalty in addition to other remedies.

A real-world example of this resulted from the Estate of Moynes, San Mateo Superior Court Case # PRO116317. In this case, it was determined that the decedent's care-giver and daughter had in bad faith wrongfully obtained part of the decedent's estate prior to her passing, principally a home in Daly City for below-market value. Accordingly, the judgment, which was recently upheld by the California Court of Appeal, reads as follows: 

IT IS ORDERED, ADJUDGED, AND DECREED that 

1.     Petitioner Lynn Lintz have and recover from Respondent Marilu Ramirez the sum of $106,000, with interest thereon at the rate of seven percent (7%) per annum from January 31, 2005 to July 31, 2011 in the sum of $48,219.84 for a total sum of $154,219.84. 

2.     Petitioner Lynn Lintz have and recover from Respondent Marilu Ramirez the sum of $118,750 with interest thereon at the rate of seven percent (7%) per annum from January 10, 2005 to July 31, 2011 in the sum of $54,512.90 for a total sum of $173,262.90. 

3.     Petitioner Lynn Lintz have and recover from Respondent Marilu Ramirez the sum of $60,633.65 with interest thereon at the rate of seven percent (7%) per annum from October 31, 2006 to July 31, 2011 in the sum of $20,163.61 for a total sum of $80,797.26. 

4.     Petitioner Lynn Lintz have and recover from Respondent Marilu Ramirez twice the principal sums set out in paragraphs one through three hereof in the sum of $570,76730, with interest thereon at the rate of seven percent (7%) per annum from October 31, 2006 to July 31, 2011 in the sum of $189,807.49 for a total sum of $760,754.79 

 5.    The total sum of the four items above is: $1,168,854.79. Interest thereon at the rate of seven percent (7%) per annum from August 1, 2011 to July 18, 2012 equals the sum of $78,905.70, for a total sum due of $1,247,760.49.  

Therefore, Final Judgment shall be entered in favor of Petitioner Lynn Lintz and against Respondent Marilu Ramirez for $1,247,760.49, with simple interest at the rate of 10% per annum from the date of the entry of this Final Judgment until the full amount of the judgment plus interest is paid.

In light of Probate Code § 859, this judgment had acute consequences for the defendants. Paragraph 4 specifically spells out how damages are doubled and added to the other damage totals. This results in a rather staggering total judgment, roughly $1.25M.    

Professional Fiduciary Fees

A series of articles in the San Jose Mercury News chronicled the large fees professional fiduciaries charged their clients in conservatorship matters. Since a professional fiduciary often charges at least $125 per hour for their services, many conservatees were often aghast at the lofty cost. The series of articles prompted the Santa Clara County Superior Court to modify the local rules governing professional fiduciaries in such cases. The California legislature has also weighed in on the issue, AB 1339 (Maienschein).

According to the California legislative counsel "This bill would require that when a petition to appoint a conservator or a temporary conservator is filed, and the petitioner or proposed conservator is a professional fiduciary, as defined, the petition also include the petitioner’s or proposed conservator’s proposed hourly fee schedule or another statement of the petitioner’s or proposed conservator’s proposed compensation from the estate of the proposed conservatee for services performed. The bill would provide that provision of that schedule or statement shall not preclude a court from reducing the hourly fees or other compensation."

The thrust of this bill is to provide notice to all parties of the professional fiduciaries fee schedule whereby a large fee will not materialize out of the shadows. 

For example, a conservatorship is needed for a young man injured in an auto accident. The injured victim receives a large settlement  from the at-fault party's insurance company and a conservatorship is needed to safeguard the estate. His family is unable to handle the legal responsibilities of being a conservator. Instead a professional fiduciary is appointed conservator. The professional fiduciary then goes about doing the required tasks of being a conservator. When the annual accounting is required for the conservator, the professional fiduciary notes his hourly rate, $150 per hour, and the amount of hours worked, e.g. 100. The conservator's family is completely unaware of the fee schedule because in court filings such is not required prior to the professional fiduciary's appointment. The conservator's family is then floored upon seeing that the professional fiduciary is petitioning for a $15,000 fee.  This bill would require that the professional fiduciary provide notice of their fee schedule prior to appointment so as to avoid "sticker shock" for the conservatee and their family down the line.

This bill sailed through the California legislature, a 37-0 vote in the state senate and a 78-0 vote in the state assembly. The bill now sits on Gov. Brown's desk awaiting his signature. 

Advance Health Care Directive

If a person wishes to execute an advance health care directive, they have a number of options to choose from. The following are some examples of fill-in-the-blank forms that are used:

1. Statutory Advance Health Care Directive (Probate Code §4701)

The California probate code provides a template that a person may use for an advance health care directive. It provides instruction on how to complete and execute the document. Since there is no virtually no fee for this form, other than the printing cost, the cost-effectiveness of this option is a definite plus as compared to other options. However, the person will need to self-educate themselves on the topic of medical decision-making. Consequently, I know of no attorney who advises clients to utilize this method.

2. The California Medical Association (CMA) AHCD form.

The CMA produces a form that may be purchased online at its website for a fee. The CMA form is widely-recognized by health-care providers because it is the industry’s version of an AHCD. Hence, the concern of a health care provider not honoring a CMA AHCD dissipates. The form provides very easy to understand instructions on how to complete and execute the document. I personally use the CMA or CHA form for all of my clients.

3. The California Hospital Association (CHA) AHCD form.

The CHA, another trade association, also produces an AHCD. This form is free to download.The principal difference between this form and the CMA form is the clause pertaining to the prolonging of life. For the CMA Form, there are only two situations in which an individual may indicate a preference for not prolonging his or her life, if (1) the person has a terminal condition that will result in death in a matter of months or (2) an irreversible condition that renders the person unable to make decisions and life support is needed to keep the person alive. As for the CHA form, it contains a third option for prolonging life, (3) when the likely risks and burdens of treatment would outweigh the expected benefits.

Of note, the picture is the rod of Asclepius, the Greek symbol for medicine.

Durable Power of Attorney

A durable power of attorney for financial management is a legal written document in which a person, the principal, appoints another person, the agent or attorney-in-fact, to serve on their behalf.

For example, Patricia is leaving the country for a vacation and needs to sell her house. Patricia will not be able to sign all the necessary paperwork at closing. Hence, the sale will not go through. However, Patricia appoints Amber to be her agent so that Amber can sign on Patricia's behalf in order to sell her house.

In terms of estate planning, a power of attorney is used to guard against the unexpected incapacity of a person, since your bills will still become due regardless of your physical condition. For example, Patricia is involved in a car accident causing her to fall into a coma. If Patricia lacks a power of attorney, a court-appointed conservator of her estate is needed. For sake of argument, Patricia's conservator is named Charlize. Charlize' duties are to manage and use Patricia's property for both Patricia's benefit and those for whom Patricia is obligated to support, namely children. Prob C § 2401. In short, a conservatorship is public, costly and time-consuming.

Conversely, a power of attorney can accomplish the same objectives of a conservatorship without the need for public intervention, costly expenses or length of time. Thus, estate planning attorneys almost universally include a power of attorney when writing a comprehensive estate plan so as to avoid a conservatorship. Similarly, attorneys write others legal documents to avoid the need for court intervention in other estate planning situations. For instance, a trust avoids the need to probate a trust drafter's estate.

The key when drafting a power of attorney is to make sure it is durable. In that, the power of attorney must contain a statement that the power of attorney shall not be affected by subsequent incapacity of the principal, or shall become effective upon the incapacity of the principal, or similar words. Prob C §4124. If the power of attorney lacks the language required by Prob C § 4124, the agent lacks authority during the principal's incapacity. In our case, if Patricia's power of attorney did not contain the required language of Prob C § 4124, her power of attorney would not be valid should he become incapacitated. Thus, the power of attorney would essentially be a worthless document. Consequently, Patricia would then need a court-appointed conservator of her estate to manage her financial affairs and everybody but Patricia and her family would arguably benefit, the attorney, the conservator, the accountant, etc.

Finally, it should be noted that a power of attorney for financial management only relates to a person's estate, namely their finances. The other legal aspect of an individual is their "person." Decision relating an individual's "person" relate to health care decisions. The legal document used to coordinate an individual's health care decisions with an appropriate agent is called an advance health care directive. Prob C §§4600-4806.