A conservatorship is a court-ordered guardian who takes charge of the financial or personal affairs of an individual if he or she is unable to care for him or herself. A conservatorship is often necessary when a disabled adult (called a “conservatee”) does not have a proper estate plan—i.e., he or she has not signed a power of attorney designating an agent to act on his or her behalf. In some cases, a California court will name a “public guardian” to serve as conservator if nobody else is qualified and available.
Court Sides With Conservator Over Lender in Property Sale Dispute
A critical function of a conservator or agent is protecting the assets of the disabled adult. Here is an illustration from a recent California case. This is only an example and should not be construed as a complete statement of California law on the subject.
In 2015, Los Angeles County petitioned a probate judge to establish a conservatorship for a 75-year-old man suffering from dementia. There was evidence that he was unable to manage his financial affairs; specifically, a rental property he owned had fallen into disrepair. The judge agreed a conservatorship was in the man’s best interests and appointed the county’s Office of the Public Guardian to serve as conservator.
As conservator, the public guardian exercises full control over the man’s assets. This enabled the public guardian to address an issue that arose shortly after the court approved the conservatorship. Last December, the public guardian learned the mortgage holder on the conservatee’s rental property had foreclosed and was prepared to sell the property at auction.
The public guardian then moved to sell the property on its own. Litigation followed between the public guardian and the mortgage holder. A judge issued a preliminary injunction to stop the foreclosure sale.
The public guardian successfully argued that it was likely to obtain a higher sales price for the property than if the lender proceeded with a quick foreclosure auction. This would benefit both the conservatee and the lender, who was promised 11% interest on the outstanding loan debt while the sale remained pending. The lender nonetheless appealed the injunction.
But the California Second District Court of Appeal upheld the injunction. The Second District noted the probate court had the legal authority to “preserve a conservatee’s property and determine claims against it.” In addition, the appeals court said there were “some unique aspects” to this case. For example, there was evidence that the conservatee’s dementia may have extended back to the time he signed the mortgage note—which would mean he lacked capacity to enter into the agreement in the first place.
Avoid a Potential Conservatorship Through Estate Planning
In this case, the conservator will hopefully be able to sell the property, pay off the mortgage, and ensure the conservatee is left with something. This is why it is essential to always have someone ready and and able to act in the event of your incapacity. If you want to speak with an experienced San Diego estate planning attorney on how to avoid the need for a conservatorship, contact the Law Office of Scott C. Soady today.