In a conservatorship of the estate, there may be several types of transactions that need to be handled by the conservator of the estate which requires the court to specifically approve. This is where a petition for substituted judgment is used. Basically, it is where the conservator of the estate asks the court to allow the conservator of the estate to take an action on behalf of the conservatee based on what the conservatee would have done if they had capacity to carry out the transaction. I file substituted judgment petitions when I need to set up a revocable trust for a conservatee, to modify an existing trust that the conservatee made when they had capacity or getting the conservator of the estate the authority to handle life insurance or retirement accounts owned by the conservatee. There are other common purposes for filing a substituted judgment petition.
These types of petitions are governed by Probate Code §§2580–2586. The code provides that the permissible purposes that a conservator can request court authority must benefit the conservatee or the estate, may be to minimize taxes or administration expenses, or to make gifts to charities, relatives, or others who would be likely beneficiaries of the conservatee. The code also lists 14 different actions that may be requested in a petition for substituted judgment, but the code does not limit the permissible transactions to those 14. The specific actions include, among other actions, making gifts, entering into contracts, creating either revocable or irrevocable trusts, funding a trust with assets, exercising the conservatee’s rights under a life insurance policy or retirement account, revoking or modifying an existing trust, and making a will.
A conservator or interested party may file a petition for substituted judgment petition. A temporary conservator can also file such a petition, but they must have specific authority from the court to do so. It is my experience that the court will always appoint an attorney to represent the conservatee regarding a petition for substituted judgment. There is a large group who is entitled to notice of a petition for substituted judgment including anyone who may be affected by the requested action in the petition. For example, I filed a petition for substituted judgment once to obtain authority to cash in the conservatee’s life insurance. He had named his niece as the beneficiary of that policy, and she was entitled to notice of the petition even though under the regular conservatorship notice requirements she would not have been entitled to notice.
There are several factors for the court to consider when determining whether to approve a petition for substituted judgment. The Probate Code does list some factors in §2583, but the court may consider other factors not listed in the Probate Code. Some of these factors include whether the conservatee has capacity to carry out the proposed transaction, the wishes of the conservatee, prior estate planning documents, changes in the law that the conservatee may have considered in making changes to his estate plan, and the likelihood that the conservatee would have taken the proposed action. The petition has to address all of the relevant factors listed in the Probate Code and any others that it is believed the court may consider.
Any trust created under a substituted judgment order is subject to the California Rules of Court that govern court created trusts. These rules include the trustee obtaining a bond, filing accountings with the court just like in a conservatorship of the estate, and requiring court approval of any modification or amendment.
The substituted judgment petition is an important and often used tool in conservatorships.