If you want legal and financial protection from a greedy or meddling relative, a voluntary conservatorship can put the court between that relative and your property. To get the protection in Connecticut, you file a Petition for Voluntary Representation in the Probate Court where you live. The Court will hold a hearing and if appropriate, appoint a person you designate as conservator. The Court will appoint the conservator without ever finding that you lack capacity. The conservator will have to account to the Court for all of the financial transactions they make. If you decide you no longer need the conservator, you can terminate the conservatorship by giving the court 30-days notice.
What powers do you keep when a voluntary conservator is appointed? That is the question the Connecticut Superior Court wrestled with in Day v. Seblatnigg. In a case decided on December 23, 2015, the Connecticut Superior Court ruled that a conserved person retains no power over their property. In other words, the conservator has the power to manage all of the conserved person’s property and the conserved person loses the power to enter into contracts involving the property.
Day v. Seblatnigg involves a women named Susan Elia, the sister of the plaintiff. Susan suffers from Parkinson’s disease and lung cancer. Susan has 2 children – Marc and Christine. Susan worried that her children would take over her life and her money. In 2007, when she was 63 years old, Susan created and funded a revocable trust drafted by Renee Seblatnigg, Susan’s attorney for over 30 years (herein referred to as “the Connecticut Revocable Trust”). For 4 years, Susan managed the securities in the Connecticut Revocable Trust and had over $6,000,000 in her Connecticut Revocable Trust.
Susan became increasingly fearful of interference by her children and decided to resign as Trustee of her Connecticut Revocable Trust. She appointed Seblatnigg and her financial advisor, Salvatore Mulia, as Co-Trustees. On Seblatnigg’s recommendation, Susan also filed a voluntary petition in the Greenwich Probate Court to appoint Seblatnigg as Conservator of her estate. The Probate Court approved the appointments on June 28, 2011. The Decree empowered Seblatnigg to manage the conservatorship estate, including supporting Susan, paying her debts and collecting debts due her.
Susan continued to be concerned about protecting her wealth from her children. Consequently, Seblatnigg consulted with Attorney Richard Mauceri who works for First State Facilitators which is a Delaware LLC that provides sophisticated asset protection services to clients of substantial net worth; who for professional or other reasons, are particularly exposed to the risk of lawsuits or other risks of loss. Mauceri recommended that Susan transfer her assets to a Delaware limited liability company owned by a self-settled Delaware domestic asset protection trust.
On September 15, 2011, Seblatnigg as conservator entered into an asset protection agreement with First State Facilitators and a legal representation agreement with Mauceri. Susan, as Grantor, signed the Susan D. Elia Irrevocable Trust with Seblatnigg and Mulia as Trustees and First State Fiduciaries as Trust Protector (herein referred to as “the Delaware Irrevocable Trust”). During Susan’s lifetime, the Trustees must pay to or for the benefit of Susan, any charitable organization, and Susan’s grandchildren so much of the net income and/or principal of the trust, in such proportions and amounts as the Independent Trustees shall determine, in their absolute and uncontrolled discretion. The Independent Trustees are not required to distribute any net income of the trust currently, and may, in their absolute and uncontrolled discretion, accumulate all or any part of the net income of the trust and add it to principal. Thus, like most asset protection trusts, the Delaware Irrevocable Trust not only provided for Susan it also gave the Trustees the power to withhold income and gift trust assets to others.
On September 20, 2011, Seblatnigg, Mulia, and Susan individually authorize Morgan Stanley to accept the assets of the Connecticut Revocable Trust held by Goldman Sachs in Delaware. The Co-Trustees of the Delaware Irrevocable Trust then create Peace At Last, LLC (“the Delaware LLC”), with the Irrevocable Trust as owner. The Co-Trustees of the Delaware Irrevocable Trust open an account at Morgan Stanley in the name of the Delaware LLC. Between September 2011 and April 2012, the Co-Trustees of the Connecticut Revocable Trust transfer $6,538,415.49 to the Delaware LLC; Seblatnigg as Conservator transfered $80,000 to the Delaware LLC and did not obtain the authorization of the Greenwich Probate Court to enter into the asset protection agreement, transfer funds to the Delaware LLC, or create and fund the Delaware LLC. Seblatnigg thought she had the power to fund the Delaware LLC without court approval because she held most of the assets as Trustee of the Connecticut Revocable Trust. Trust assets are not usually considered probate assets.
On April 5, 2013, Seblatnigg resigned as Conservator of Susan’s estate at the request of Susan’s litigation counsel. On May 20, 2013, Seblatnigg fileed a Final Account. On May 21, 2013, the Greenwich Probate Court appoints Mulia as the Conservator of Susan’s estate. Two days later, the Probate Court appointed Susan’s sister, Margaret E. Day, as conservator of Susan’s person Because Susan had a falling out with Seblatnigg and no longer wanted Seblatnigg’s legal representation.
On December 17, 2013, Susan objected to Seblatnigg’s attorneys’ fees and conservator fees shown in the Final Account. On January 9, 2014, at Susan’s request, the Probate Court nameed Day the co-conservator of Susan’s estate for the limited purpose of matters related to Susan’s interest in the Delaware Irrevocable Trust. Apparently, Mulia had a conflict of interest because he was one of the Co-Trustees of the Delaware Irrevocable Trust and Susan wanted the funds returned to the conservatorship estate.
On March 4, 2014, Day commenced a declaratory judgment action in the Connecticut Superior Court seeking return of the assets. On February 26, 2015, Day filed a motion for summary judgment on the ground that Connecticut General Statutes §45a-655(e) requires Seblatnigg, as the conservator of Elia’s estate, to obtain approval from the Greenwich Probate Court to create and fund the Delaware Irrevocable Trust. Because Seblatnigg failed to obtain such approval, Day argued the Delaware Irrevocable Trust was void ab initio (i.e. from the beginning) and unenforceable. Thus, the assets from Susan’s conservatorship estate—including the assets from the Connecticut Revocable Trust— must be returned to the conservator under supervision of the Court.
Day won the case. The Superior Court found that it didn’t matter that Susan Elia was a fully capable person when she signed the Delaware Irrevocable Trust. When she asked the Court for a conservator, she lost all power to contract and so she had no power to sign the Delaware Irrevocable Trust. The Court noted that it would be inconsistent for a conserved person to retain the power to manage her property when the Court had appointed a conservator at her request. The Court found that the conservator has the same powers whether under a voluntary or involuntary conservatorship. The only distinction between a voluntary and involuntary conservatorship once established is that the conserved person in a voluntary conservatorship can terminate the conservatorship on 30-days advance notice. On January 6, 2016, Seblatnigg appealed this declaratory judgment to the Connecticut Appellate Court.
On August 2, 2016, Judge Hopper of the Greenwich Probate Court held a hearing on Seblatnigg’s final account. The Court ruled that the conservator’s fees, in the amount of $227,200, are unreasonable and excessive and reduced them to $36,768.50. On September 16, 2016, Seblatnigg appealed the Court rulings on the Conservator’s final account to the Connecticut Superior Court. Now there are 2 cases pending in the Superior and Appellate Courts between the parties.
The briefing in the Appellate Court on the declaratory judgment action ended on March 16, 2017. However, on April 3, 2017, Day filed a Motion to Strike a portion of Seblatnigg’s reply brief. It appears that it will be a while before the Appellate Court hears argument in the case.
Until the Appellate Court issues a final ruling in the declaratory judgment action, any person who wants the protection of the Court through a voluntary conservatorship must understand that they surrender control of their property to the conservator even if they are capable of managing that property. Their only recourse is to abandon their request for court supervision and petition the court to terminate the conservatorship.