Increasingly, many older people with dementia and Alzheimer’s disease are living under conservatorships, which allow others to manage their affairs. From a legal standpoint, a financial advisor can become a conservator.
But Michael Hackard, a veteran estate and trust attorney specializing in elder law, doesn’t recommend it. His clear advice to advisors: “Don’t become a conservator,” as he tells ThinkAdvisor in an interview.
Pop star Britney Spears’ legal fight to end her 13-year-long conservatorship is hot news, but many non-celebrities try, with frustration, to break free of theirs too when the need for total control may be unwarranted.
More than 1 million U.S. adults are in a conservatorship, also called a guardianship, according to the Justice Department’s Elder Justice Initiative.
Spears, 39, has been in a conservatorship, petitioned by her father, James Spears, since 2008, when the singer was deemed dangerous to herself because of mental health and substance abuse issues. Her estate is reportedly worth more than $60 million.
At a June 23 hearing, she asked to be free of what she called an abusive conservatorship. And on July 14, the court granted her the right to appoint her own lawyer.
That day, she said she wanted to press charges against her father for conservatorship cruelty.
Bessemer Trust, the co-conservator of Spears’ estate (there is a separate one for her person), had earlier asked to resign the position, and the court granted the request.
In the interview, Hackard, founder of Hackard Law in Sacramento, California, and author of “Alzheimer’s, Widowed Stepmothers & Estate Crimes” (2019), discusses “restoration proceedings” — such as Spears’ action — to dissolve a conservatorship, also known as a guardianship.
All of this is against a background of what Hackard calls a poorly regulated “industry of for-profit conservators” — “runaway fiduciaries” — in California, where the Spears case is being litigated.
An alternative to conservatorships and what has become “a trend,” Hackard points out, is “supported decision-making,” a less restrictive approach that has been adopted by 12 states. California isn’t among them.
ThinkAdvisor interviewed Hackard on July 14. He was on the phone from Sacramento. As for advisors becoming conservators, he argues: “It’s probably best left to family members or a professional conservator.”
Here are highlights of our interview:
THINKADVISOR: How often do financial advisors run into clients who need a conservator?
MICHAEL HACKARD: They’re running into it now with regularity because people are living longer; baby boomers have come into older age.
A FINRA rule says that advisors can put a hold on disbursements if there’s suspected financial exploitation. Under the federal Senior Safe Act, advisors have immunity from disclosing people they suspect [of having impaired decision-making ability].
But it doesn’t give them immunity with regard to communications with nongovernment agencies.
Suppose an FA has a client they suspect is in cognitive decline. Can they recommend to the client’s trusted contact, as defined by FINRA, that they should look into the matter?
Yes. They could say, “I suspect there are severe memory problems or judgment issues.” The trusted contact could talk to other family members to address it.
But if the financial advisor goes much beyond that, they could potentially be responsible for an invasion of privacy. It’s case by case.
Can a financial advisor be a conservator?
From a state law perspective, they could. But it might well conflict with their own professional [advisor] requirements or licensing.
It’s probably best left to family members or a professional conservator.
My advice to any financial advisor: Don’t become a conservator. As a fiduciary, they’ll pick up all kinds of potential liability; and depending on the state, their fees will have to be approved by the court every year or two.
How is the relationship with an FA impacted if the client is under a conservatorship?
When someone becomes conserved, they no longer have contractual rights, so the conservator takes over the finances of the conservatee. Therefore, in a sense, the financial advisor has a new client.
But the conservator might have his or her own preferences for an advisor. In one case I’m dealing with, involving about $100 million, the conservator has her own preferred financial advisor.
I’m sure that the people who are conserved had an advisor; but in all likelihood, they were different from the one the conservator picked.
So, if a client is under a conservatorship, the conservator could very well make them leave their existing advisor?
They can leave them easily.
Is there an alternative to a conservatorship?
A couple of years ago, the American Bar Association came out with a resolution that the states ought to enact statutes for “supported decision-making.”
That’s now a trend and gives conservatees much more autonomy. About a dozen states allow this approach [including Colorado, Delaware, Nevada, North Dakota and Texas, as well as the District of Columbia].
What does it entail?