TRUST AND ESTATE LAW
BY MELISSA R. SCHWARTZ
This article discusses the recent audit of public administrators and the resulting changes to legal requirements governing their practice.
Over the last three years the role of Colorado public administrators (PAs) has been examined and some of the rules and procedures governing their practice revised. The recent changes include implementation of the "Guidelines for the Operations of the Offices of Colorado Public Administrators" (the Guidelines), which standardize PA office procedures and reporting requirements. These changes will improve the courts' oversight of PAs and help PAs manage and report information on the cases they administer.
This article discusses the role of PAs, reviews the recent audit examining their practice, and explains the changes to their practice implemented by the Colorado Judicial Branch.
What Public Administrators Do
A PA2 is a private individual appointed by a county district court sitting in probate (in Denver, the Probate Court) to collect, protect, and manage the assets of certain living individuals and to administer the estates of certain decedents where the decedent left no one willing or able to administer the estate.4 The appointee must be (1) a qualified elector over 21 years old and (2) a resident of or maintain a principal place of business in the judicial district in which he or she is to act as a PA. Not all counties or judicial districts have a PA, and some judicial districts share one. The number of cases handled by PAs on an annual basis also varies widely depending on the size and population of the district.
PAs are not public employees and are paid from the estates they administer.6 In some cases, assets are insufficient to pay PA fees, and in such cases PAs do not receive compensation for their services. PAs are required to be bonded7 and to fully account to the court and the parties in each case in which they are appointed by the court or in which they manage assets pursuant to the small estate provisions of the Colorado Probate Code. They must file annual reports of their administration of all PA cases with their supervising court. PAs serve at the pleasure of the appointing court until they are discharged by the court or resign.9
PAs handle a wide variety of both run-of-the-mill and more unusual probate matters. They often act as a resource for courts, individuals, and organizations, including county coroner's offices, hospitals, and apartment complexes, by providing general assistance in answering questions about how to address estates of deceased persons when the lines of responsibility are unclear. PA offices bear the costs of providing these general assistance services.
Many cases that PAs handle involve significant conflict, including disputes among heirs/ devisees and questions relating to the validity of testamentary instruments, misappropriation of estate funds or assets by various persons, litigation over ownership of estate assets, and contested claims. The cases often involve unusual circumstances, such as extreme hoarding; biohazardous conditions in real estate (including homes in which a person died without being found for a significant amount of time, or in which people lived without plumbing, water, and/or electricity for a number of years); interested parties with mental illness or substance abuse problems; and cases involving unknown or unascertained heirs.
Cases where a non-family member is appointed as a fiduciary can often involve significant hostility. The highly contested, hostile, or unusual nature of many of these cases can create significant administration expenses, including fiduciary fees. Thus, the PA environment is prone to complaints about the cost of the PA's involvement, which is usually a direct result of the highly contested nature of the cases. Such complaints led, in part, to the recent efforts to improve the oversight of PAs.10
2016 Legislative Proposal
SB 16-108, which would have changed the structure of PA appointments and compensation, was introduced in the 20161egislative session.11 The bill was initiated at least in part due to complaints made to various legislators about the actions of some PAs and their management of some cases. One of the main complaints appears to have been related to PA fees and the payment of their fees from the estates they administered. SB 16-108 would have made PAs employees of the State of Colorado and paid them from state funds rather than from the estates they administer.12 The bill would also have enabled courts to name individual attorneys as "public administrators" in individual cases; in those cases, the PA would be paid directly from the estate.13 Thus, the bill would have created two different classes of PAs.
There was disagreement about the legitimacy of some of the complaints and the motivations of die complainants, and SB 16-108 ultimately did not pass. However, there was general agreement among trust and estate practitioners that some of the concerns raised were well-founded and needed to be addressed. In addition, the time was ripe to streamline PA procedures and to standardize die reports that PAs are required to file. Accordingly, in 2016 die Statutory Revisions Committee of die CBAs Trust and Estate Section created a subcommittee, the PA Guidelines Committee (the Committee), to establish guidelines to identify and streamline PA office procedures and to address some of the concerns that led to the introduction of SB 16-108. The Committee prepared proposed guidelines and recommended a statutory change to increase die general bond required to be maintained by all PAs, which was $25,000 at the time.
In February 2017, the Committee presented die Guidelines to die State Court Administrator's Office for approval of their substance as well as consideration of the best way to implement diem. However, at that time the Office of the State Auditor (OSA) was conducting an audit of the...