Saturday, April 21, 2012

Oregon Elder Law: The Oregon Courts, the Department of Veterans Affairs and the problem of competing fiduciaries.

This is a complicated post. You may want to review my earlier posts on guardians, conservators and professional fiduciaries if you aren't comfortable with those concepts..

In my practice I run into three types of fiduciaries. There are social security rep payees. There are state court appointed conservators and there are fiduciaries appointed by the US Department of Veterans Affairs (USDVA).

Social Security doesn’t present much of a problem. Social Security will normally honor an appointment of a fiduciary by a state court by making the fiduciary the rep payee for Social Security. That puts the state and federal money in the same hands. Then, when I do an annual accounting to the state court, with a wink and a nod, I include the social security, as if it were subject to state court administration. It is a courtesy to the state court so that judges have a full picture of the protected person's finances.

The problem arises when state appointed fiduciaries and those appointed by the USDVA clash. The USDVA has its own system, and unlike Social Security, the USDVA and the state courts do not always play well together..

In addition to the tension inherent in having two parallel systems, there is often an atmosphere of distrust between those who work primarily in one system or the other. Partisans on the state court side allege that USDVA appointed fiduciaries are untrained, overworked, and unresponsive. Partisans on the federal side allege that state court fiduciaries are arrogant, overpaid and rapacious. I try to stay out of the crossfire, but the partisans are easy to find and can make these cases more difficult than they already are.

The problem for the elders arises when a state court conservator is appointed for a protected person who already has a USDVA rep payee. The USDVA will not normally make the state appointed conservator the rep payee for USDVA funds, so the protected person ends up with two fiduciaries. Two fiduciaries are not better than one, particularly when the two money managers don’t believe the other one truly deserves to be there. It gets even worse if the state court also appoints a professional guardian who wants to be paid by somebody, but isn’t quite sure who. In these cases, every expense has to be negotiated by the two fiduciaries.

Some lawyers believe they can avoid the two-fiduciary problem by having a state court appoint the Oregon Department of Veterans affairs as the state court fiduciary. The theory may be that the two agencies have similar names so they will cooperate with each other. That isn’t necessarily true. The lawyer hopes that the USDVA will make the ODVA the rep payee for federal VA benefits thereby putting a state agency in charge of the federal money. That might happen, or it might not. The USDVA, it seems to me, is particularly reluctant to appoint the ODVA as rep payee for federal benefits if it looks like the appointment of the ODVA was instigated primarily as a strategy to get state control of USDVA payments. In such cases, the USDVA often leaves its own fiduciary in place to manage the federal money. The protected person ends up paying both the ODVA and the USDVA fiduciary.

The situation is complicated by the fact that when amounts over $10,000 accumulate in a USDVA account, the USDVA may (or may not)  ask the local USDVA fiduciary to apply for conservatorship under state law. If the fiduciary is appointed he will thereafter be paid according to state law rather than federal law. For the fiduciary, this usually means a raise. If, however, the USDVA fiduciary is not appointed--say for example the court finds that the protected person is competent or that a different person is more appropriate to serve--then the USDVA fiduciary will continue to administer the USDVA money. Even when the USDVA initiates the proceeding in state court, the state doesn’t get to choose who will manage VA money.

I had one case where the USDVA fiduciary applied to be a successor state law conservator after a family member resigned. After reviewing a visitors report, the court found that that protected person no longer needed a conservator. The USDVA makes its own capacity determinations and ignored the state court ruling. Thereafter the USDVA left the rep payee in place and cut the monthly budget of the veteran because he could now pay his living expenses out of the funds freed up by the termination of the state court conservatorship.

If you have the USDVA involved in your case you have to remember that the USDVA is not bound by state court determinations and regularly ignores them. You cannot subpoena USDVA medical providers as witnesses in state court. The USDVA makes its own competency determinations. The USDVA fiduciaries do their own accounting's each year to the USDVA, accountings which are often disapproved (for sometimes serious and sometimes trivial reasons). USDVA fiduciaries are contractors who cannot voluntarily turn over federal money to family or state authorities and cannot, if they want to keep their contracts, resign as the fiduciary for a particular veteran. All the important decisions and expenditures are made by the USDVA field examiners and the people at the fiduciary hub.

The moral is--I think--that when I get involved with someone who has a USDVA fiduciary, I have to look ahead. I can’t adopt a legal strategy that will create dueling fiduciaries. If all the money in the case comes from Social Security and USDVA, there is no money for the state courts to manage. In those cases I have to be very circumspect about asking for a state law conservator. If I want to change the USDVA fiduciary in charge, I have to tread lightly and use charm instead of bluster. The only way to force the USDVA to do anything is in federal court where the law is stacked against me. The USDVA folks know this. They know I don’t like federal court and my clients can’t afford to go there. The people at the USDVA will, however, listen to respectful and well presented plans that enhance the life of the veteran. And, supposedly, that is what we all want.

Sunday, April 1, 2012

Oregon Elder Law: Becoming a Conservator for Your Spouse

As a general rule, when a person's husband or wife becomes incapacitated the capable spouse can handle the financial affairs of both without the intervention of the courts. The combination of joint accounts and automatic deposit of retirement income allows the capable spouse to manage he money for both husband and wife. Sometimes, however, situations arise in which the capable spouse cannot adequately manage the couple's income and assets without help from the courts. In these situations the well spouse may have to seek court help to protect the long term financial security of both persons. Court proceedings by one spouse to be named the conservator of the other create unique problems for the Oregon elder law attorney and the Oregon courts.

Common Situations

Cases in which one spouse seeks court authority to manage the finances of the other fall into two basic types. The first is when the incapacitated spouse owns property in his or her own name that is needed for long term care costs but is unavailable because the incapacitated spouse is incapable of signing the documents necessary to free up the money. The second situation is the one in which one spouse is, as a result of mild dementia or obsessive behavior, wasting the couple's life savings. This, more often than not, occurs in elderly men who become obsessed with spending money on sweepstakes, internet scams, gambling, or crackpot money-making schemes.

What to do?

In situations like the one described above the spouse who is still capable of managing money retains an Oregon elder law attorney to ask the court to make her conservator for her husband. A conservator is authorized to manage the money for the incapacitated spouse, but must carefully account to the court for all of the income and payments made on behalf of the incapacitated spouse. It is a lot of work for the attorney to set up a conservatorship like this and a lot of work for the newly appointed spouse/conservator to keep the records that the court will require.

The problem for the couple, the lawyer, and the courts in these cases is that the couple's income and outgo have usually been inextricably intertwined for many years. Now the court is being asked to oversee the finances of one of them while leaving the other free, like any other citizen, to freely manage her own income and expenditures.

This is easier said than done.

Preliminary Problems for the Spouse-Conservator.

A wife who wants to be conservator for her husband faces the normal problems that face any conservator plus some. First she must qualify to be conservator by being able to buy a bond equal to the amount of money she will be managing for her husband. She must have no criminal record and must be capable of doing the bookkeeping necessary to be a conservator. 
If the wife is appointed conservator, she will have to inventory all of the couple's income and property, determining what is jointly owned and what is owned solely by each of them. This inventory of income and assets will determine what the conservatorship will look like.

An Oregon conservatorship of a spouse to pay for long term care.

If the conservatorship was sought because the spouse needed to access assets belonging to the incapacitated spouse for long term care, then the capable wife will need to establish one or more conservatorship accounts and transfer the assets of the incapacitated spouse to that account. If, for instance, the incapacitated husband had a brokerage account in his own name and the money in that account was needed to pay his bill at a long term care center, the spouse-conservator would move the funds in the brokerage account to an account in the name 0f the conservator. The conservator might also have the retirement income of the incapacitated spouse deposited in that account. The long term care costs for the husband could then be paid from that account, and at the end of the year, when an annual accounting was due for the court, the records of that account would show the income and outgo related to the husband's long term care.

There may be other assets that belong to the incapacitated husband that must be disclosed to the court but are not going to be used for long term care. For instance, the incapacitated husband probably owns a one-half interest in the family home. This will have to be reported to the court, but it is unlikely that the home will have to be sold to pay for care (assuming that the capable wife still lives there). Sale of the house, will normally be restricted so that the cost of the bond is reduced, and the capable wife cannot disappear with all of the couple's equity leaving the incapacitated spouse high and dry. If the house needs to be sold, the court order necessary to allow it to happen will not be difficult for your Oregon elder law attorney to obtain.

If the wife/conservator is dependent upon the income of her incapacitated husband, the wife’s lawyer will provide a budget to the court allowing a withdrawal from the conservatorship account—from the husband's income—a certain monthly amount to provide for the wife's needs.

A conservatorship when a spouse is wasting assets.

If a spouse has a cognitive defect that manifests itself in wasteful spending of the couple's income the non-disabled spouse may seek a conservatorship to limit the losses. This kind of mental illness shows up in several forms. Sometimes the spouse is addicted to sweepstakes. Sometimes it is gambling. Sometimes it is phony get rich schemes. In these cases, the spouse with capacity is not usually worried about long term care or getting access to property held in the disabled spouses name. The spouse here is worried about protecting the accumulated wealth of the couple and stopping the bleeding.

If the disabled spouse used credit to fund his wasteful spending there may also be creditors—often credit card companies—wanting to be paid.

In these cases the conservatorship begins as in the previous case, by properly qualifying, getting the bond, and inventorying the income and property of the couple. Then credit card companies, merchants and other possible creditors need to be notified that the disabled spouse no longer has the legal ability to make contracts.
In these cases the spouse-conservator is not worried about paying for long term care, but rather about the normal monthly contributions that the disabled spouse makes to the couple's expenses. Once again the conservator should establish a conservatorship account and direct the disabled spouse's income to that account. The conservator should then establish a budget based upon the way bills have been paid in the past and ask the court to approve both the budget and the disabled spouse's share of the monthly expenses. Thereafter, the spouse/conservator will pay the court approved disabled spouse's share from the conservatorship account to the normal household account to be spent according to the budget. In this manner, the day-to-day expenditures by the non-disabled spouse do not become subject to the reporting requirements of the conservatorship. The money left over in the conservatorship account after the monthly contribution by the disabled spouse could be saved or applied for the benefit of the creditors of the disabled spouse.

In the first example, where the spouse started a conservatorship in order to take control of an asset held in the disabled spouse's name, the major monthly expenses of the conservatorship were the disabled spouse's long term care costs and his contribution to the wife's support. In the case of a conservatorship designed to limit the disabled spouse's spending ability, the major and maybe only monthly distribution from the conservatorship account is the payment into the couple's normal household account.

Cost and Value

No one gets a conservatorship over his or her spouse except as a last resort. It is expensive, it is time consuming, and it involves the court in your private family life for years. The annual accounting is difficult to prepare and you will be paying your lawyer for years to come. It is a legal strategy to be taken only when everything else ha failed.

On the other hand, situations arise in which you have no choice. If your husbands rental house, or his brokerage account is in his name alone and you need that money to pay for long term care, you have to do it. If your husband is sending your life's earning to Nigeria, it is far better to pay the lawyer and the court the money it takes to have a conservatorship than to lose everything to internet scams.

How to go about it

Something like this is not a do-it-yourself job. You need an elder law lawyer. The guy who got your cousin out of that speeding ticket is probably not the person to go to. Read my article on how to select and hire an elder law lawyer, bite the bullet and make an appointment. Don't kid yourself either. It is going to be expensive, but if you need a conservatorship it is because there is something very valuable you need to protect. Doing what needs to be done will be worth the cost.