Sowerby & Moustakis Law > Private: About > Asset Management > Managing Someone’s Assets

Managing Someone’s Assets

There are a number of ways in which a person may manage the assets of another. The choice will depend on the type and value of the assets, and whether the person for whom they are being managed is competent or incompetent. If circumstances change, the form of management may be modified. Throughout this document, the person managing the assets will be referred to as the “Manager” and the person for whom the assets are managed will be referred to as the “Owner”. Please note, this document is designed to familiarize people with the various forms of management available and should not be a substitute for legal advise. While it makes sense to use the least complicated and least expensive form of management, no one form is best for everyone. Each of the forms of management discussed below has distinct advantages and disadvantages. What works well for one Owner may cause nothing but problems for someone else. Careful evaluation of an Owner’s needs should be made before deciding on a form of management.

Joint Ownership

This form of management involves adding the Manager as co-owner of the asset. Each asset has its own procedure for changing to joint ownership. For example, bank accounts usually require the Owner and Manager to go to the bank together and fill out a few forms. There is usually no fee for establishing this form of management. The Owner must be competent in order to establish joint ownership. However, once joint ownership is established, the Manager may continue to manage the jointly owned asset, even if the Owner subsequently becomes incompetent.

Under this form of management, the Manager appears to have the same ownership rights to the asset as the Owner. This form of management may have tax consequences for the Owner and Manager which may cause inheritance problems at the time of the Owner’s death and may subject the asset to claims by the Manager’s creditors. Usually, upon the death of a co-owner, jointly owned property passes automatically to the surviving co-owner. If joint ownership is for management purposes only, that limitation must be carefully documented at the time the joint ownership is established to avoid having the Manager own the asset after the Owner’s death.

Also, there is no established procedure by which the Manager is monitored. This form of management is terminated by removing the Manager’s name from the asset. Frequently removal of the name will require the consent of the Manager, since it will appear that he or she is relinquishing ownership rights.

Representative Payee

The Owner may appoint the Manager as Representative Payee for receipt of Social Security benefits, Special Age 72 benefits, Supplemental Security Income benefits, or Black Lung benefits. After such appointment, the benefits will be sent to the Manager on behalf of the Owner.

To become Representative Payee, the Manager must go to a Social Security Office, with written authorization from the Owner, and complete certain paperwork stating the relationship of the Manager to the Owner, whether the Owner has a Guardian or Conservator, whether the Owner lives with the Manager, etc. If the Owner is incompetent to give written authorization for the appointment, the Manager must have other written authority, such as Power of Attorney or court appointment in order to be appointed as Representative Payee. The Manager must sign a statement certifying that the benefits will be used only for the Owner’s needs, and must accept personal responsibility for repayment of any benefits misused by the Manager.

The Manager is required to account to Social Security on an annual basis as to how the benefits were used. The instructions for accounting are set forth in the representative payee reporting form provided by Social Security. There is no charge for establishing this form of management and it usually takes several weeks for the change of payment to take effect.

Appointment of a Representative Payee may be terminated by written notice from the Owner, or by the Manager’s resignation. Once established, this form of management may continue to be used regardless of the Owner’s level of competence.

Durable Power of Attorney

A Durable Power of Attorney is a notarized document by which the Owner authorizes the Manager to perform certain acts. The provisions of the document may be broad or limited. An Owner must be competent to create a Durable Power of Attorney. At common law, a Power of Attorney was valid only as long as the Owner remained competent. However, by special statutory provisions, a Powers of Attorney becomes “durable” if the required statutory language is included in the document. This means that the Power of Attorney remains in effect until the death of the Owner, regardless of the Owner’s competence.

As Power of Attorney, the Manager may take whatever action is specifically authorized in the document. However, some persons and entities refuse to honor a Powers of Attorneys authority. In that case, if the Owner is incompetent, the Manager may be required to seek court confirmation that the document is effective, or to seek court appointment as Guardian or Conservator. To avoid problems, it is a good idea to review the document with any bank or other entity at which the Owner has assets, when the document is created and while the Owner is still competent, so that any special language requirements may be included in the document.

There is no established procedure for monitoring a Manager acting as Power of Attorney. Most Power of Attorney documents allow the Manager to charge a fee for his or her services. The Owner may revoke the Power of Attorney or the Manager may resign. Often the document names a successor to act in the event of the Manager’s resignation. If the Owner revokes the Power of Attorney, the Owner should send written notice of revocation to anyone dealing with the Manager as Power of Attorney. Technically, the Manager is required to present the original document each time he or she acts on behalf of the Owner, but, in practice, once the relationship is established, this requirement usually is not enforced.

Conservator

A Conservator is a court appointed representative with authority to manage the Owner’s assets. The appointment is made by the Probate Court for the county in which the Owner resides. A Conservator may be appointed for a person who is physically incapacitated, mentally weak or developmentally disabled. Generally, it is within the discretion of the physician making the assessment of competency. A Petition is filed with the Court asking that the Manager be appointed as Conservator. Only one Petitioner is required. The Petitioner may be the Owner (for an appointment based on physical incapacity) or may be one of the Owner’s friends or relatives, an unrelated person or an agency which is authorized to serve as Conservator in its corporate charter.

A Medical Certificate stating that the Owner is mentally weak or physically incapacitated must be filed in support of the Petition. The certificate is signed by a licensed physician and is valid for thirty days following the date of examination. If the Owner is not competent to consent to the appointment when the Petition is filed the Court will issue a citation. This is an official notice, which must be hand-delivered to the Owner, and delivered (or mailed by certified mail) to the Owner’s heirs, and to the Department of Mental Health. If the Owner receives benefits from the Veteran’s Administration, the V.A. must also receive notice.

If no objections are filed by the return date, the Manager will be appointed as Conservator. If objections are filed, there will be a trial on the objections, and the Court will determine whether a Conservator is needed. If so, the Court will appoint a Conservator. It is important to realize that the Court may appoint any person or agency the Court deems appropriate, and is not required to appoint the person who petitioned. As a condition of appointment, the Conservator must file a bond guaranteeing proper performance of his or her responsibilities. The Court issues a certificate of appointment, with a court seal, showing the Manager has authority to act as Conservator of the Owner. The Court requires an inventory to be completed by the Manager, on which the Manager lists all assets of which he or she is assuming control as of the date of appointment. As Conservator, the Manager is required to file an annual accounting, listing all of the assets received and disbursed on behalf of the Owner, and listing all assets remaining as of the date of the accounting. This is the method by which the Court monitors the Manager. If the Manager fails to file the inventory or annual account, the Owner, any of his or her heirs, or a third party, may petition the Court to order the Manager to render the inventory or account. A Manager may charge a fee for his or her Conservator services.

A Conservator may not sell, or mortgage, any real property without specific court authority. A Conservator has no authority to consent to medical treatment of the Owner, but may pay bills for the Owner’s medical expenses. A Conservatorship is terminated by a court order discharging the Conservator or the Conservator may resign. Prior to discharge, the Court requires the Conservator to file a final accounting for its approval.

Please note that a Guardian is not responsible for handling the Owner’s assets, rather the Guardian is responsible for the health care decision of the Owner.

Temporary Conservator or Guardian

The process for appointment of a Conservator or Guardian takes at least a month to complete because of the notice requirements. If the address of any heir is unknown, the notice period is extended. If the Owner needs to have a Guardian or Conservator appointed before the permanent process can be completed, a temporary appointment may be obtained. A temporary appointment may be sought by motion, after the Petition for the permanent appointment is filed with the Court. A separate Medical Certificate must be filed. A motion must be presented requesting the temporary appointment. An affidavit must be made to the Court, stating the reason for the temporary appointment, and setting forth the harm to the Owner if such appointment is not made. A temporary Guardian or Conservator has the same powers and responsibilities as a permanent Guardian or Conservator, but for a limited period.

Trusts

A Trust Agreement is a notarized document by which the Owner authorizes the Manager, as Trustee, to exercise certain authority over specific property. As Trustee, the Manager has legal ownership of the property, but all benefit of the property belongs to the beneficiary. Usually the Owner will be the primary beneficiary. A Manager, acting as Trustee, is responsible for managing the Trust property in accordance with the terms of the Trust Agreement, as well as following established rules for Trustees established by state and federal law.

The provisions of the Trust Agreement will be tailored to meet the specific needs of the Owner (and any other beneficiaries), and will specify how long the Trust will remain in effect. Usually a Trust requires annual accountings by a Trustee. An Owner must be competent to create a Trust and once the Trust is created, the subsequent incapacity of the Owner has no effect on the validity of the Trust. While the Manager/Trustee has many of the same powers as a Power of Attorney, certain duties are imposed on a Manager/Trustee which are not imposed on a Power of Attorney.

Trustees may be removed and replaced, by the Owner or by a court, for failure to perform duties properly. A Trust may be established without court action. The contents of the Trust documents generally are known only to the Owner, Manager/Trustee, and any other beneficiaries. Unlike the other forms of management, the Owner’s death does not automatically terminate the Trust. Most Trusts provide that the Trustee may charge fee for services.

As long as the Owner is competent, he or she may amend or revoke the Trust Agreement at any time. He or she may also remove or replace Trustees. A Trustee may resign at any time by written notice to the Owner. Because of the complexities of Trust law, it is advisable to have an attorney prepare a Trust document. One popular benefit of the Trust form of management is that, if all of the Owner’s assets are placed in the Trust and the Trust provides for distribution of the assets upon the Owner’s death, the Owner may avoid probate.

 

 

 

About the Author

Peter Moustakis
Peter Moustakis is the Managing Member of Sowerby & Moustakis, PLLC with locations in Massachusetts and New Hampshire. Peter has received an award related to estate planning, contributed to 2 family law publications and authored the book “Estate Planning and the Modern Family: Old School Meets New School. He is a former President, Vice-President, Secretary Treasurer and Education Coordinator of Business Networking International Commerce Connection in Wayland, MA. He is also the former vice chair of the animal law committee at the Massachusetts Bar Association and served on the New Hampshire Bar Association Ethics Committee. Peter believes that community service is important and has served on the Amherst town Ways and Means Committee for 4 years and was chair of the committee for 2 years.