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.
Why?
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?
An individual with dementia, for
example, is able to contract with, say, a financial advisor as to
supported decision-making for their financial affairs and a health care
professional for their health care affairs.
What would that mean for FAs?
They would need to look at the local
law. There would probably be contractual provisions that could be put in
to protect them because when things go wrong, they can go real wrong.
But the idea is for people to keep
their liberty, self-determination and autonomy. With a conservatorship,
all that’s generally lost because the conservatee loses the right to
contract, marry, vote, be employed.
It’s said that convicted murderers in the local prison have far more rights than a conservatee.
What are the challenges for someone who wants to end a conservatorship, like Britney Spears says she does?
Conservatorships are secret. A lot of people in a conservatorship can’t escape them.
[When they try] in a restoration proceeding, [attorneys] can’t look
at the court records to see what the court has allowed and not allowed.
This is Britney Spears’ effort — to
get her rights and freedom back as a citizen. You can see why in a case
like hers, a supported decision-making arrangement [would be
appropriate].
She could have her own financial advisor and her own health advisor.
But California [where her case is being litigated] has no statute on
supportive decision-making.
In the Spears case, Bessemer Trust, the financial co-conservator with her father, Jamie Spears, asked to resign. Please discuss.
I can see why they wanted to resign.
They probably don’t like their name in the news for alleged abuse
against a conservatee, particularly a really famous conservatee.
I would think that the court will let them resign, with some conditions.
Why are conservatorships so commonplace and hard to get out of?
In general, the courts should consider
the least restrictive alternative because conservatorships take
people’s freedom and autonomy away. But [less restrictive alternatives]
are given short shrift in the annual review of conservatorships.
The American Bar Association says that
annually, there ought to be at least consideration of a less
restrictive alternative so that the conservatorship can be dissolved or
unwound. But that’s not being considered as part of the review.
Recently released was a TV documentary series, “The Price of Care,” about the California conservatorship system, and for which you were interviewed. Why is it controversial?
There’s an industry around conservatorships: for-profit conservators. And it’s a major problem.
For example, California has about
1,200 for-profit fiduciaries who might be serving as conservators. They
are lightly regulated; the oversight is very, very poor.
The Legislature is looking at changing
the rules, but it hasn’t happened yet. You see runaway fiduciaries.
This is part of the court system for conservators. It’s really
incestuous.
And who’s paying the fiduciary, the fiduciary’s lawyer, their subcontractors [et al.]? The conservatee.
All’s well until the money runs out. At that point, the [paid]
professional conservator isn’t going to stay. So the court will appoint a
public guardian, who [likely] will get paid with taxpayer money.
How bad can the looting get?
I’ve seen some atrocious situations
that start with a lot of money; but by the time the conservator, their
lawyers, their advisors [et al.] are paid, homes get sold because
whoever has been chosen to provide care for the conservatee may be
really expensive.
I’m not saying that 100% of conservatorships go wrong, but I don’t think our laws have caught up with the reality.
What’s blocking the reform?
When legislative changes are proposed,
the for-profit conservatorship organizations fight upgrading the laws
to reflect the reality that our citizens should have better protections.
Do they do that because they’re getting paid high fees?
Yes. It’s that simple. I understand that people have to make a living, but we need to assess the policies.
Are conservatorships overused?
I’m in a field that deals with elders.
I see the sad cases — the dementia, Alzheimer’s. About 6.5 million
people have Alzheimer’s.
I deal with clients who I think may have it but maybe aren’t
diagnosed with it. So they’re in need of help, and some are going to be
in need of a conservatorship.
But probably a smaller percentage of these clients can be helped by a trusted contact or family member.
(Pictured: Michael Hackard)
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