VOLUME 24 NUMBER 15
Every state’s laws require court-appointed conservators (or guardians) of an estate to file a regular court accounting. Usually those filings must be filed every year (as Arizona law requires), but a few states permit them once every two years. No state lets you wait eight years between court accountings, as an Indiana couple did.
We recently reviewed the Indiana Court of Appeals’ ruling in a court accounting case. It made us think about how important it is to get good legal advice. Of course we don’t know the individuals, or have complete information about their motivations — but we can see how well-meaning people can easily go astray without good direction.
The story began in 2007, when Jean Harding (not her real name) began to lose her ability to handle her own finances. That year the probate court appointed her sister Betty (and Betty’s husband David) as guardians of Jean’s estate — what we in Arizona would call conservators. Jean’s husband was in a nursing home, where, as it turned out, he would stay until his death seven years later.
For the next eight years, though, Jean lived for a time with Betty and David, with their son and his family, with another sister, and then with Betty’s daughter. During this time Betty and David handled all of Jean’s finances — but they did not file any inventory or a court accounting.
Problems arise and court accounting ordered
Eight years after the court proceedings began, another sister of Jean’s complained to the court about Betty and David’s handling of Jean’s finances. The court appointed an attorney to represent Jean’s interest, and ordered Betty and David to file a court accounting.
Betty and David apparently had not kept good records. Their court filings did not include any of the information they were supposed to submit. Eventually they filed a rough court accounting. It showed that, over the eight-year period, they had collected $193,081.08 from Jean’s Social Security and other income. They had paid $194,820.40 for rent, fees, and other costs. The documents they filed did not amount to a legitimate court accounting, however; it did not include dates, specific payments or copies of any bank statements or other documentation.
The probate court gave Betty and David another two months to file a formal court accounting. They were ordered to include copies of bank statements, checks and documentation. Apparently they could not come up with the detail they had been ordered to file; at a hearing two months after that, they showed up with copies of the monthly bank statements. They had none of the other items the court had ordered that they file, however.
Probate court orders repayment
At another hearing several months after that, the probate judge found that Betty and David had misspent Jean’s money. A large part of their problem was that they could not provide documentation for the expenditures. The judge ordered that they return $48,565 to Jean’s estate.
Betty and David were ordered to repay at the rate of $300/month. Without interest, that would mean payments for more than 13 years.
Was that a fair result? After all, Betty and David had taken care of Jean for a little more than $20,000 per year — about $2,000 per month. That seems pretty close to a good bargain for Jean’s estate.
The problem, of course, is that “pretty close” is not good enough for a court accounting. Betty and David had the obligation to prove that the income and expenditures were as they claimed, and reasonable. They did not — perhaps could not — do so.
Betty and David filed an appeal. They argued that they had not known they were required to file an initial inventory and biennial court accountings. The fault lay partly with the probate judge, they insisted. Why? Because no one in the court system told them they about their duties.
The Indiana Court of Appeals ruled against them. They were supposed to figure out their duties, even if no one explicitly told them what to do. Besides, ruled the appellate court, they hadn’t even made that argument to the probate judge. In the Matter of Hall, March 17, 2017.
And in Arizona?
Betty and David would likely be in bigger trouble if they had been in Arizona. First, the Arizona court would almost certainly have required them to file a “surety bond” at the time of the appointment. At least in theory (practice sometimes differs), that would have meant the judgment against them would have been paid immediately — and the bonding company would have pursued them for the $45,000 plus costs and interest. $300/month would not have been a likely option.
Another important difference: Arizona conservators can not claim that no one told them about their duties. Before appointment, Arizona guardians and conservators must review a short video and sign a lengthy form describing their obligations. Included in both: the duty to file an initial inventory and annual court accountings.