Colorado Conservatorships and Breach of Fiduciary Duty

Many families experience a time when an aging loved one requires help managing their money. When necessary, the court will appoint a conservator to oversee the finances, imposing a fiduciary duty to always act in the conservatee’s best interest. 

This article outlines a conservator’s fiduciary duties, common ways in which fiduciary duties are breached, and the steps to hold someone accountable for fiduciary misconduct.

Definition	Fiduciary duty is breached when a conservator prioritizes their own interests over those of the person they are protecting.
Legal Obligations	Conservators in Colorado are required to adhere to strict ethical standards, particularly involving conflicts of interest and self-dealing.
Guiding Statutes	C.R.S. 15-14-423 and C.R.S. 15-10-504 govern conflicts of interest and financial penalties.
Legal Actions	You can sue for breach of fiduciary duty to recover stolen assets, impose penalties, and remove the conservator.The Conservator’s Fiduciary Obligation

Courts appoint conservators to manage the finances of individuals who are unable to do so, imposing a fiduciary duty to always act in the conservatee’s best interest and adhere to a specific set of ethical standards. In Colorado, a conservator’s role is strictly financial and fiduciary in nature. Their primary duty is to safeguard the protected person’s estate and assets and ensure all financial obligations are met.   

To fulfill their fiduciary obligation, a conservator must handle: 

• Asset management - Overseeing properties and investments

• Disbursement - Paying debts, mortgages, and expenses in a timely manner

• Financial transactions - Managing banking deposits and transfers

• Regular accounting - Providing the court with detailed financial records 

A conservator breaches their fiduciary duty when they prioritize their own interests over the best financial and personal interests of the protected person. Given the significant power the courts grant conservators, a breach of fiduciary duty is considered a substantial legal claim. 

If a conservator fails to protect the estate the way they would their own, or allows personal motives to interfere with their legal obligation, they’ve committed a fiduciary breach. 

A conservator may be removed for cause if they fail to perform the duties required of them by the court. This type of breach often involves inaction rather than malicious theft. Examples of failing to perform duties include:

• Administrative failure - Neglecting to file detailed financial reports or inventories with the court on time

• Ignoring needs - Failing to ensure the protected person’s daily financial needs are met despite having sufficient funds

• Non-payment - Forgetting to pay the protected person’s debts, mortgages, or expenses in a timely manner

Even if a conservator doesn’t engage in outright theft, they can be liable for making decisions that result in the estate losing financial value. This can look like:

• allowing property to deteriorate or failing to insure valuable assets

• making high-risk investments without preserving the estate’s principal

• commingling personal and estate funds, even if no money is stolen

A common breach of fiduciary responsibility involves undisclosed conflicts of interest. A conflict exists if a conservator participates in a transaction that benefits:

• Themselves

• Their close family

• Their agent or lawyer

• A business that they own a substantial part of

Under C.R.S. 15-14-423, any transaction affected by a substantial conflict between the fiduciary’s duty and their personal interests is voidable unless approved by the court. This principle—that a transaction rooted in a fiduciary’s self-interest is voidable—is clearly illustrated by the judicial findings in Colorado case law. 

Case Study: Black v. Black

In the case of Black v. Black, both the trial court and appeals court found the defendant had used his sister’s assets to benefit his own inheritance, constituting a breach of fiduciary duty. The court found that he failed to preserve her assets for her sole benefit and was ordered to reimburse the estate $1.5 million, plus treble damages (three times the actual damages). 

The key to the court’s finding was that the conservator’s transaction was conflicted. In other words, the conservator executed a disclaimer on his sister’s behalf upon his appointment without adequately disclosing his personal financial motives to the court, which satisfied the elements of civil theft under Colorado law, resulting in a $4.5 million judgment. 

A conservator’s powers are not infinite; they are strictly limited by Colorado law to safeguard against overreach. 

Gift Giving Restrictions

Unless the court says otherwise, a conservator may only use estate funds for gifts when: 

1. The conservatee’s account has sufficient funds to cover their personal needs.

2. The gifts are customary.

3. The value of the gifts is less than 20 percent of the year’s income.

Actions Requiring Court Approval

Under C.R.S. 15-14-411, conservators must acquire prior court authorization for the following: 

• Managing trusts

• Changing retirement or insurance beneficiaries

• Exercising spousal elective share rights 

Suing for breach of fiduciary duty allows you to hold a conservator accountable for misconduct. To file a claim, you must prove that the:

1. conservator acted in a fiduciary capacity,

2. they breached their fiduciary duty,

3. the protected person incurred damages, and the

4. breach of fiduciary obligation caused those damages

If a court finds a conservator responsible for misconduct, they face significant financial consequences intended to make the estate whole and punish the offending fiduciary. 

Remedy	Description	Statute
Surcharge	The court can fine the fiduciary for any loss caused to the estate.	C.R.S. 15-10-504
Civil Theft	Recoverable if the conservator knowingly obtained assets to permanently deprive the owner.	C.R.S. 13-9-103
Emergency Action	Immediate suspension of powers if there is an imminent risk to the estate.	C.R.S. 15-10-503The court can also order the offending conservator to pay interest and attorney fees. The specific penalty is left to the court’s discretion.

The court can also order the offending conservator to pay interest and attorney fees. The specific penalty is left to the court’s discretion.

Emergency Action (Ex Parte Relief)

If the breach involves an imminent or substantial risk to the estate, the court can act without notifying the conservator. The court may grant relief by:

• temporarily restricting or suspending the conservator’s authority 

• appointing an interim conservator to take over the estate and conducting a formal review 

• holding a hearing to determine if the breach constitutes cause for removal

• naming a successor to take over the estate’s financial management 

To reverse the damage caused by a fiduciary breach, the court may also order certain transactions to be voided and compel the offending conservator to submit a detailed accounting of all activities for review by an independent accountant. 

Conservatorships are designed to protect individuals who are vulnerable and require assistance. If a conservator has breached their duties, it is essential to halt the improper actions and restore the family to their rightful state. Call 303-688-0944 or schedule your case assessment online to speak with a breach of fiduciary duty attorney about your family’s situation.