What is 'Conservatorship'

Conservatorship is a legal concept whereby a court appoints a person to manage an incapacitated person or minor's financial and personal affairs. The conservator's duties include overseeing finances, establishing and monitoring the physical care of the conservatee or ward, and managing living arrangements.

BREAKING DOWN 'Conservatorship'

Conservatorship and guardianship are often interchangeable, however, regarding the law, there are differences.  Guardianship is the appointment of a person or entity to oversee the physical and medical care of a person with limited capacity.  Alternatively, conservatorship refers to the designation of a conservator to manage the financial affairs of an incapacitated person, minor, or older adult with limited capacity.

There are two types of conservatorships: LPS conservatorships, and probate conservatorships. LPS conservatorships, as established by the Lanterman-Petris-Short Act of 1967, are governed by California’s probate code and welfare and institution codes. Probate conservatorships are governed by the state in which the individual resides or by the state in which the conservatorship is established. In some jurisdictions and states, a conservatorship is referred to as a guardianship and conservators are sometimes related to as trustees.

Individual and Organization Conservatorship

There are two ways to establish a conservatorship. For individuals, a court order will set a conservatorship. For individuals, conservatorship incorporates the legal care of a minor or a physically or mentally disabled person. Mentally disabled includes those who are suicidal, psychotic, demented or disabled to the extent that the person is unable to make legal, financial, and medical decisions on their behalf. Elderly individuals, specifically those with Alzheimer's or dementia, are also included among those individuals who may fall under a conservatorship. For conservatorships regarding individuals, mental capacity must be determined by a psychiatrist, psychologist, or physician with extensive experience and training to diagnose conditions like dementia. Every diagnosis or determination made must be documented and verified before a conservatorship over an individual can be ordered.

Regarding organizations or corporations, a statutory or regulating authority creates the conservatorship. In reference to government control of private organizations or corporations, such as in the case of Fannie Mae (FNMA) and Freddie Mac, conservatorship implicates authority that is temporary. The Federal Housing Finance Agency (FHFA) acts as conservator for these two agencies. The conservatorships, established in 2008, allow government intervention in response to financial pressures from the deterioration of the housing market. Without this intervention, Fannie Mae and Freddie Mac could not meet their missions.

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