Conservatorship

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Conservatorship is a legal concept in the United States of America which entails the process of electing someone to take care of a disabled individual. A conservatorship is when a designated person is assigned to manage a person's personal finances and/or estate. Conservatorship is usually established during a hearing before a judge. A person under conservatorship is termed a "conservatee," and the person who makes the choices a "conservator." If the conservator is appointed to make the conservatee's personal decisions, they are the conservator of the person. If the conservator manages the personal finances of the conservatee, then he or she is the conservator of the estate.

In California, the conservatorship system is governed by the California Probate Code, and the Welfare and Institutions Codes. The probate and limited conservatorships are governed by the probate code and LPS conservatorships by the WIC.

Conservatorships are generally put in place for severely mentally ill individuals who are gravely disabled, elderly individuals with Dementia or Alzheimer's Disease who lack mental capacity, or individuals with developmental disabilities who may or may not lack mental capacity. Mental capacity has to be determined by a medical physician or a psychiatrist experienced in the field and is documented and provided to the court as evidence.

When referring to government control of private corporations such as Freddie Mac or Fannie Mae, conservatorship implies a more temporary control than does nationalization.

LPS conservatorship and limited conservatorship[edit]

In California a Lanterman Petris Short (LPS) conservatorship is implemented to serve people who are considered gravely disabled (i.e. unable to provide for own food, shelter, and clothing). LPS conservatorships begin with the patient's psychiatrist sending a request to the court for a temporary conservatorship. The court sends an investigator to determine whether said individual is gravely disabled. If found gravely disabled then the individual is placed under a temporary conservatorship or T-con. The patient is entitled to a hearing which will take place before the 30 day T-con expires. The T-con is effective for 30 days and expires after 30 days if no subsequent hearing takes place. The hearing is where the court investigator submits the paper work consisting of the his or her investigation and that of the physician. The court then decides whether or not to establish a T-con. If the patient contests the decision he or she can request a writ of habeas corpus. If a request is sent then a hearing must take place to determine if the individual is gravely disabled or not. If won the T-con is dropped. If the patient continues to be considered gravely disabled, an application is filed for a Permanent conservatorship, P-con. The patient receives a notice noting the date of the court date, letters of temporary conservatorship, and what rights they are denied. In the month before the hearing the public conservator prepares a report and delivers it to the council for the proposed conservatee. A hearing takes place to establish permanent conservatorship. If the hearing finds the patient to be gravely disabled, permanent conservatorship is established for one year. The patient holds the right to request a jury trial. The request must be made five days after the hearing. The patient's rights to own a gun, vote, drive a motor vehicle, make own medical decisions, decide living arrangements, and ability to enter contracts may be suspended. If a family member cannot serve as conservator then the public guardian is elected to serve as conservator. A LPS conservator holds the power to place the conservatee into a locked psychiatric facility and make the conservatee take psychotropic medication. The conservatee can challenge the conservator's select powers through writ of heabeas corpus.

The conservatee can petition for a rehearing, writ of habeas corpus, and/or appeal to challenge the conservatorship. He or she must appeal within the first two months of establishment of conservatorship. In regards to a writ of habeas corpus and rehearing, they can take place at any time. It is preferred that a rehearing should occur before a writ of habeas corpus or appeal. The conservator can request a rehearing a year after establishment of P-con. The burden of proof for LPS conservatorships is proof beyond a reasonable doubt, which is the highest standard of proof. The standard of proof is high in order to ensure that the person's rights are not being unnecessarily restricted.

Limited conservatorship is reserved for treatment of developmentally disabled adults who are deemed incapable of making their own medical decisions. The limited conservator holds less power than an LPS conservator. In these cases, the conservatee to whom the limited conservatorship applies can retain more control over his or her personal affairs than other conservatees can; for example, he or she may retain his or her right to decide where he or she may live. Limited conservatorships are ruled by the probate code versus LPS conservatorships which are governed by the Welfare and Institutions Code (WIC) § 5350.

The limited conservator does not have the right to place a conservatee in a locked facility or make the conservatee take psychotropic medication. The exclusive rights that a limited conservator has the power to regulate the conservatee's interpersonal and sexual relationships. In addition a limited conservator holds the right to choose the education for the conservatee. The burden of proof for establishment of limited conservatorship is clear and convincing evidence. The standard of proof is lower because the conservatee holds more rights than an LPS conservatee.

Legal persons[edit]

In the United States, in some states, corporations can be placed under conservatorship, as a less extreme alternative to receivership. Whereas a receiver is expected to terminate the rights of shareholders and managers, a conservator is expected merely to assume those rights, with the prospect that they will be relinquished.[1] Robert Ramsey & John Head, law professors who specialize in financial issues, suggest that an insolvent bank should go into receivership rather than conservatorship to guard against false hope and moral hazard.[2]

At the federal government level in the United States, in July 2008, the failing IndyMac Bank was taken into administrative receivership by the Federal Deposit Insurance Corporation (FDIC) and its assets and secured liabilities transferred to a specially-established bridge bank called IndyMac Federal Bank, FSB which was placed into conservatorship, also by the FDIC.

Again, in the US at the federal level, in September 2008, the chief executive officers, and board of directors Fannie Mae and Freddie Mac were dismissed, and the companies were placed into the conservatorship of the Federal Housing Finance Agency (FHFA) via the determination of its director James B. Lockhart III, with the support and financial backing of US Treasury via Treasury secretary Hank Paulson's commitment to keep the corporations solvent.[3] The intervention leading to the conservatorship of these two entities has become the largest in government history, and was justified as necessary step to prevent the damage to the financial system that would have been caused by their failure. Entities like this are considered too big to fail.[4][5][6][7]

An even more ambitious use of the conservatorship model has been proposed by Duke Professors Lawrence Baxter, Bill Brown and Jim Cox. They suggest that the troubled US banks be placed in conservatorship, that some of their "good assets" be dropped into newly created "good bank" subsidiaries (presumably under new management), and the remaining "bad assets" be left to be managed under the supervision of a conservatorship structure.[8]

See also[edit]

References[edit]

  1. ^ Ramsey, Robert Lee; John W. Head (2000). Preventing Financial Chaos: An International Guide to Legal Rules and Operating Procedures for Handling Insolvent Banks. Kluwer. p. 32. ISBN 90-411-8848-7. 
  2. ^ Ramsey & Head (2000), p.37
  3. ^ Soloman, Deborah; Reddy, Sudeep; Craig, Susanne (September 8, 2008). "MOUNTING Woes Left Officials With Little Room to Maneuver". The Wall Street Journal. pp. A1. 
  4. ^ Paulson, Henry M., Jr.; (Press release statement) (2008-09-07). "Statement by Secretary Henry M. Paulson, Jr. on Treasury and Federal Housing Finance Agency Action to Protect Financial Markets and Taxpayers". United States Department of the Treasury. Retrieved 2008-09-07. 
  5. ^ Lockhart, James B., III (2008-09-07). "Statement of FHFA Director James B. Lockhart". Federal Housing Finance Agency. Retrieved 2008-09-07. 
  6. ^ "Fact Sheet: Questions and Answers on Conservatorship" (PDF). Federal Housing Finance Agency. 2008-09-07. Retrieved 2008-09-07. [dead link]
  7. ^ Goldfarb, Zachary A.; David Cho; Binyamin Appelbaum (2008-09-07). "Treasury to Rescue Fannie and Freddie: Regulators Seek to Keep Firms' Troubles From Setting Off Wave of Bank Failures". The Washington Post. pp. A01. Retrieved 2008-09-07. 
  8. ^ Baxter, Lawrence; Brown, Bill; Cox, Jim (February 27, 2009). "Finally, A Bridge to Somewhere". Huffington Post. 

Further reading[edit]

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