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EXPLAINING CONSERVATORSHIP TO YOUR LOVED ONE
Patricia Bloom-McDonald • Mar 03, 2022

It can be difficult to talk with loved ones about protecting their assets or managing their financial affairs. Even if you have been assisting your loved ones with their finances for some time, it can be quite emotional and even complicated to explain that it might be time for more protection, and what that would look like.

WHAT IS A CONSERVATOR?

A conservator is a court-appointed fiduciary who oversees and manages the assets – particularly the finances – of the protected individual. A conservator protects the property and business affairs while a guardian manages the individual’s physical well-being. Potential duties include collecting, holding, and investing assets, paying bills, operating a business, and selling tangible personal property.

A conservatorship may either be unlimited or limited in scope, and may be limited to specific actions, or a specific property, or apply to all of a protected person’s property. A full conservatorship generally takes over all of the individual’s financial affairs. In such a case, a conservator must manage and protect all aspects of the individual’s finances, including assets and income. They may exercise authority only as necessitated by the mental and adaptive limitations of the protected person. If the court determines that a protected person maintains capacity concerning some aspects of his or her financial affairs, it may establish a limited conservatorship allowing the protected person to retain some level of control and management of financial affairs.

WHO MAY SERVE AS A CONSERVATOR?

Any qualified, suitable individual or corporation may serve as conservator of a protected person. Typically, an adult child of an elderly individual, or the parent of a minor child, serves as a conservator for their loved one. Suppose the individual’s fiduciary affairs are complex, such as the management of various entities or properties. In that case, it may be advisable to appoint a professional conservator.

A conservator may be nominated in an estate plan or durable power of attorney instrument. In that case, the court “may” consider such nomination. The court is not required to appoint the nominated individual or corporation as conservator but will consider the preferences of the person being protected.

WHY WOULD MY LOVED ONE NEED A CONSERVATOR?

There are no restrictions on what kind of circumstances could involve the appointment of a fiduciary to manage financial affairs. While many conservatorships involve older adults, questions of capacity can arise at any age. Families often use conservatorships to help protect loved ones who can no longer manage their day-to-day financial affairs. A conservator may also be appointed for a minor (a person under the age of eighteen (18)) or an adult who, because of disability, cannot manage their own property, or has property that will be wasted or dissipated unless management is provided.

An appointment may be necessitated when an individual lacks mental capacity to manage his or her own financial affairs due to mental illness, cognitive impairment, a substance use disorder, or any variety of compromising conditions that impact their competence to make meaningful financial decisions. Thus, it is not uncommon for a conservatorship to be sought for a young person, particularly where that young person has significant assets. Remember the Britney Spears’ conservatorship matter, which has been sensationalized in the media?

DOES MY LOVED ONE STILL NEED A CONSERVATOR EVEN IF I SERVE AS HIS OR HER ATTORNEY-IN-FACT?

The short answer: maybe. Like a conservator, an attorney-in-fact is a person designated under a durable power of attorney instrument who is authorized to act on behalf of another person, whether in business, financial, or personal matters. The powers conferred on an attorney-in-fact may be general, limited, or special.

A conservator bears ultimate responsibility for a protected person’s assets, over ruling the person(s) appointed under a durable power of attorney regarding financial decision-making authority. Conservators have the same power to revoke or amend a power of attorney instrument which the protected person would have done were he or she not incapacitated. Furthermore, a conservator may demand that the attorney-in-fact account for actions and transactions performed concerning the protected person’s assets. If you currently serve as attorney-in-fact, you should determine whether you have appropriate authority to assist with financial affairs; if not, you should consider pursuing a conservatorship.

SO, I THINK MY LOVED ONE NEEDS A CONSERVATOR – WHAT DO I DO NOW?

After you’ve determined that a loved one needs a conservator, you or someone else will need to file a Petition with the Probate and Family Court in which the protected person lives. It must be accompanied by a Medical Certificate completed by a licensed physician or clinician who evaluates and certifies the medical findings of the individual of need of protection. The certificate demonstrates the scope of conservatorship needed for the protected person.

HOW LONG IS A CONSERVATOR APPOINTED FOR?

While a Petition for conservatorship is pending, the court may appoint a temporary conservator if the court finds that the time it will take to appoint a permanent conservator “will likely result in substantial harm to the property, income or entitlements of the person to be protected or those entitled to the person’s support occurring prior to the return date,” and no other person has authority to act in the interim. An order appointing a temporary guardian typically expires after ninety (90) days and is renewable for up to ninety (90) days thereafter.

If the individual requires permanent protection due to an enduring impairment, a permanent conservator may be appointed for the protected person’s lifetime. If it is determined that the protected person no longer requires a conservator, the protected person or any person interested in the protected person’s welfare, may petition for the removal of a conservator.

 

RVATORSHIP TO YOUR LOVED ONE

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Using a Credit Card When You Have a Special Needs Trust

25 May, 2023
A special needs trust (SNT) allows you to meet your needs while receiving government benefits, such as Medicaid/MassHealth and Supplemental Security Income (SSI). When you have a special needs trust, you can use it to pay for goods and services government benefits do not cover, such as therapy, education,and housing. Since receiving income directly from your trust would jeopardize your eligibility for benefits, your trustee cannot give you cash from your SNT. When you use a credit card for permitted transactions, and your trustee pays off the balance with funds from your trust, these payments to a credit card company are not considered income. An SSI or Medicaid/MassHealth recipient who is capable of managing their own affairs can therefore use a credit card to make small purchases, and the trustee of the special needs trust need not micromanage every transaction. In the past, beneficiaries of SNTs sent their bills to their trustees for payment. Today, an individual with an SNT who qualifies for a personal credit card may find that using a credit card is more convenient. Credit cards have several benefits. Using a credit card to manage payments from your special needs trust allows you to maintain independence, gain access to some of the advantages of a credit card, and easily keep records while preserving your eligibility for Medicaid/MassHealth and SSI. Although credit cards can help people manage their special needs trusts, there are also several important restrictions and considerations to keep in mind. Consult with a special needs planner to ensure all transactions are acceptable under the trust's rules and comply with government regulations. The Benefits of Using Credit Cards When You Have a Special Needs Trust If you have a special needs trust, using a credit card has many benefits, including: Independence : Allowing you to maintain your independence. You can use your card to make qualifying purchases yourself. Your trustee does not have to make the transactions for you. Access to the Typical Advantages of a Credit Card : Using it responsibly can help you establish or build credit history, which may be important for your future financial needs. Record-Keeping : Credit cards provide easy record-keeping and a convenient way to monitor transactions from your special needs trust, which can also help special needs trustees fulfill their duty to maintain records. When you use your card, your trustee can observe your purchases and ensure that all expenses are allowable under the trust’s rules. Your statements can help your trustee keep track of funds leaving the trust. Benefits Eligibility : While adhering to Medicaid/MassHealth and SSI’s income and asset limits, you can access funds from your SNT. Credit cards can help prevent your trustee from accidentally providing you with cash payments that could affect your eligibility for government benefits. Considerations When Using a Credit Card for Your Special Needs Trust While you can use a credit card to access funds from your special needs trust for certain transactions , restrictions apply. If your trustee sees a charge on your card that could affect your benefits eligibility , they can flag it for review. You cannot use your credit card to pay for food and shelter, which SSI would cover. When administering your funds, your trustee must ensure that any expenditures are for your sole benefit if you have a first-party special needs trust. While using a credit card is appropriate, you should not use a debit card. Debit cards are considered cash income. Best Practices When using a credit card for a special needs trust fund, remember several best practices. Choose a card with low fees and interest rates. Set a clear budget and monitor transactions regularly. Keep thorough records and receipts of expenses. Consult with your special needs planning attorney. A special needs planning attorney can help you navigate the rules that apply to your trust and understand how to use a credit card to preserve your Medicaid/MassHealth and SSI eligibility. 

How an ILIT can help offset estate taxes

12 May, 2023
With the Federal estate tax exemption possibly about to be lowered, it may be time to think about steps you can take to keep your estate from being taxed. An irrevocable life insurance trust allows you to pass on money to your heirs while avoiding both the federal estate tax, as well as any applicable state estate tax which is currently $1 million in the Commonwealth of Massachusetts. Senate Democrats have proposed lowering the current estate tax exemption from $11.7 million for individuals and $23.4 million for couples to $3.5 million for individuals and $7 million for couples. While it is unclear if this proposal will pass, it is likely that some change to the estate tax is coming. Even if Congress does not take any action, the current rate will sunset in 2026 and essentially be cut in half, to about $6 million per individual. In the Commonwealth of Massachusetts, the current estate tax exemption is $1 million for individuals and is taxed at dollar $1.00. A proposal to raise it to $3 Million and the tax to start at $3 Million (not at $1.00) has been submitted in the legislature but has not yet been voted on or enacted. One way to make up for any estate tax your estate may have to pay is by setting up an irrevocable life insurance trust [ILIT]and funding it with a policy that has a death benefit that would pay your heirs some or all of the amount your estate will be taxed. If you purchased such a life insurance policy directly, it could end up being taxed as part of your estate. But if a trust owned the policy, it could pass outside your estate. While a life insurance trust can be highly beneficial, it is also complicated to set up and maintain properly. The following are some of the requirements: Trustee . If you are setting up the trust, you cannot also serve as a trustee. If you are the trustee, you have control of the trust, which could lead to the trust being included in your estate. You will need to name another trusted person or financial institution to act as trustee. Policy ownership . The trust must own the life insurance policy. If you transfer an existing policy to the trust and die within three years, the policy will still be considered a part of your estate. To avoid this risk, the trust can purchase a policy directly rather than receive an existing policy. Premiums . You need to transfer funds to the trust to pay the policy premiums, which creates an issue with gift taxes. A transfer to a trust is usually not subject to the $15,000 yearly gift tax exclusion. For a gift to qualify for the exclusion, the recipient must have a "present interest" in the money. Because a promise to give someone money later does not count as a present interest, most gifts to trusts aren't excluded from the gift tax. To avoid this, you can use something called a “Crummey” power which gives beneficiaries the right to withdraw the funds transferred to the trust for up to 30 days. As part of the process, the trustee needs to send them a letter, known as a Crummey letter, letting them know about the trust funding and their right to withdraw the funds. After the 30 days have passed, the trustee can use the funds to pay the annual insurance premium. You run the risk of the beneficiaries withdrawing the funds, but if they know that by allowing the money to stay in the trust they will receive more money later, it shouldn’t be a problem. Beneficiaries . The beneficiary of the life insurance policy is usually the trust. Once the funds are deposited in the trust, the trustee can distribute the assets to the beneficiaries in the way specified by the trust. For example, if your beneficiaries are minors, you can wait to have the trustee distribute the assets. Keeping the assets in the trust will also protect them from your beneficiaries’ creditors. The downside of an irrevocable life insurance trust is that you do not have the ability to change it once it is set up, although the policy would effectively be canceled if you stopped paying the premiums. If you are considering this type of trust, discuss it with your attorney.
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