What standards should a Conservator follow with regard to investing a protected person’s money?
Minn. Stat. 524.5-417 (Powers and Duties of a Conservator) gives us some guidance. It states, in pertinent part:
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The duties and powers of a conservator include, but are not limited to:
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(3) the duty to possess and manage the estate, collect all debts and claims in favor of the protected person, or, with the approval of the court, compromise them, institute suit on behalf of the protected person and represent the protected person in any court proceedings, and invest all funds not currently needed for the debts and charges named in clauses (1) and (2) and the management of the estate, in accordance with the provisions of sections 48A.07, subdivision 6, 501B.151, and 524.5-423, or as otherwise ordered by the court. The standard of a fiduciary shall be applicable to all investments by a conservator. A conservator shall also have the power to purchase certain contracts of insurance as provided in section 50.14, subdivision 14, clause (b);
So what is the standard of a fiduciary? According to Brian Kompelien, an investment advisor who recently spoke at the MAGiC annual conference, a conservator or trustee should follow the Prudent Investor Rule. This rule essentially requires a conservator to examine the protected person’s assets (both the amount and the make-up of those assets) and consider the particular circumstances of the protected person (how much cash will he need and how soon) and then determine how to best manage and invest the funds in light of the particular purposes, terms, distribution requirements and other circumstances of the protected person.
It would be easier for the Conservator if there was a bright line rule, such as “if the protected person has X dollars of assets, then invest Y percentage in stocks and Z percentage in bonds”. No such luck. How to invest the money will be different for each protected person. One protected person may be 95 years old and living at a skilled nursing home which is paid for with the long term care insurance that the person had the foresight to purchase when he was younger, so other than a small amount for personal needs, this person may not need much. Not a lot of out of pocket money needed in the immediate future in this situation. Another protected person may be 50 years old, suffering from early onset Alzheimer’s and living in a locked Alzheimer’s facility. Lots of money needed in the near future in this case. The conservator in each of these cases would invest the protected person’s money very differently.
Individual family members who are appointed as conservators and do not have financial or investment expertise, would be wise to consult with a reputable financial planner to determine different options available for their particular situation.