Tuesday, March 1, 2016

The Problem of Joint Accounts Owned by a Married Couple when a Professional Fiduciary Gets Involved


Often one member of an older couple develops dementia, and the spouse, although not incapacitated, is not capable of caring for the the disabled one. Sometimes a child steps up to become guardian and or conservator for the incapacitated member of the couple. Other times a professional fiduciary steps in.

Two common situations result in a professional becoming involved.

Situation 1: This is where the couple have children from previous marriages who may not get along with each other and who may be looking to protect their respective inheritances. A child goes to an Oregon elder law lawyer and the lawyer, anticipating trouble among the siblings and step-siblings, suggests that the worried client nominate a professional to be guardian and conservator for the disabled parent.

Situation 2: This is where there is trouble in the home of the elder couple and Adult Protective Services (APS) is called. The APS social worker determines that the couple has money--not eligible for government services--and calls his or her favorite elder law lawyer. The lawyers in my field all have their preferred professional fiduciaries. The lawyer then calls his or her favorite and the fiduciary petitions to be appointed both guardian of the disabled spouse and conservator of the disabled spouse's money.

This second situation happens a lot. I do it when my favorite APS worker calls me. It is good for my business and good for the business of my favorite professional fiduciaries. Some of the elder law lawyers in Oregon do a lot of this.

It is rather unseemly for a professional fiduciary with no connection to the family to petition to be guardian or conservator when no one in the family has asked them to do it, but it is allowed. The courts don't seem to like the idea, but they will put up with fiduciaries and their lawyers making a little money in return for assuring that elders are safe from abuse.

I call the task of finding an appropriate professional fiduciary for a case, "fishing for fiduciaries". It is not an easy job. Fiduciaries, like lawyers, are also businessmen. They have to make money to stay in business. When fishing for fiduciaries, the amount of money to be made is the lure. Fiduciaries want conservatorships rather than guardianships because that is where the money is. When fishing for fiduciaries, I get a fiduciary to sign on for the hard work of being a guardian by coupling the the job to the task of managing the elder's money. The fish always wants to know how much money there is and who will be managing it. If the fiduciary is managing the money, he or she knows that they will get paid.

When a conservator is appointed to manage the money of a married disabled person, the big question becomes, 'what rights does the spouse have?'. As guardian, the professional makes medical and placement decisions. As conservator the fiduciary is to take possession of the property of the disabled spouse. But what exactly is that property?

There has been an informal practice in which the fiduciary declares that the disabled spouse has a right to one half of the couple's joint accounts and thereafter goes to the bank and takes half the money out of those accounts to be held and managed by the fiduciary. Unfortunately, there is no legal authority for a fiduciary to do this. Fiduciaries have been able to do it because the non-disabled spouse is often not willing to lawyer up and object.

The theory used by fiduciaries, although not openly stated, seems to be that if the parties were divorced each spouse would receive fifty percent of the marital assets. Thus, the practice got called by the more cynical in the profession, "divorce by conservatorship." However, the rights of a spouse to fifty percent of the marital assets only accrue when a divorce is filed. Similarly, I may have a right to inherit from my aging father, but the right becomes operative only when he dies. I can't walk in and start taking money out of his account because he has the flu.

Often, the last thing in the world the elder couple wants is a divorce, yet the fiduciary treats the incapacity of one as ground to divide the assets according the principles applied in divorce cases. If one spouse abandoned the other and refused to use marital assets for care, a fiduciary might be able to convince a court to allow him or her to file for divorce on behalf of the disabled spouse, but that brings us into very unsettled law.

More often than not, the joint accounts held by the married couple have a right of survivorship. This means when the first of the couple dies, the other gets the entire account without judicial supervision or oversight. Most couples use survivorship provisions as an essential part of their estate plan. I certainly do. I own my house, my cars and most of my accounts jointly with my wife. Thus when I kick the bucket, she owns all that stuff without undue fuss. While we are both alive, either of us can take as much as we want out of our joint accounts without regard to which of us put the money in the account.

In the past, fiduciaries have taken the position that the fiduciary has the same right as the account owner and can remove assets from the jointly held accounts with the same freedom that the disabled elder could. This, however, is not the law. An Oregon case has held that the right of a conservator to withdraw funds from a survivorship account is limited to those funds immediately necessary for the disabled person's care. The conservator is not allowed to simply grab half of the couple's joint accounts.

A second hurdle stands in the way of a fiduciary who wants to take possession of jointly held accounts. ORS 708A.465 provides as follows:

708A.465 Ownership of multiple-party accounts. (1) A joint account belongs, during the lifetime of all parties, to the parties in proportion to the net contributions by each to the sums on deposit, unless there is clear and convincing evidence of a different intent.

This provision seldom affects married couples because if they have a dispute they settle it in divorce court. However, if one of the people with an interest in the account is a fiduciary, it should apply. The fiduciary should only have rights to money in the account to the extent that the disabled person put the money in there. Having to prove who put money in a jointly held account is not easy.


I am not sure what the moral of the story is, but a lesson should be that the spouse of a person subject to a conservatorship does not lose his or her rights in jointly held accounts simply because the fiduciary says so. The fiduciary can access funds to provide for the physical well being of the disabled spouse, but beyond that they may not extract funds to protect the funds themselves. The disabled spouse opened the joint account and created the survivorship provisions when he or she was capable. A fiduciary does not by his or her appointment alone, have the right to change that arrangement.

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