One of the most difficult decisions confronting a family involves having a member incapable of handling his or her own affairs and facing the question of whether to seek to assume legal responsibility for those tasks. Often it is an elderly parent or relative. At times it can be someone who has been injured, or a victim of a drug or medication overdose. At times it can be a minor or someone with mental illness.
And most times the choice is not really a choice at all since the inability to manage a checking account or credit cards or even pay the rent or make day-to-day decisions forces upon the family the requirement to take over the responsibility.
Often the tasks are assumed without a formal procedure being undertaken, but that method soon runs into problems when third parties such as banks or governmental agencies require some type of legal form in order to deal with a person who claims to represent the interest of another. Further, other family members or friends may be uncomfortable or suspicious when a parent’s assets or care is handled without oversight or court control.
Lastly, but certainly not least, the person being cared for, the “”Ward,” can him or herself become angry or resistant to another person suddenly claiming rights to make decisions for him or her, and the law of the United States invariably gives the Ward the right to insist upon some method of due process before another can make decisions on his or her behalf.
Thus the courts have adopted complex and complete procedures and regulations concerning the appointment of guardians and this article shall briefly outline the basic law that usually applies. Each state has variations on the law, but almost all follow in one form or another the themes and procedures described in this article.
DEFINITIONS - CONSERVATORSHIPS AND DURABLE POWERS OF ATTORNEY COMPARED TO GUARDIANSHIPS:
A guardian is someone who is chosen, either by a court or by being named in a document appointing a guardian, a trust, a durable power of attorney or a will, to make decisions for someone else when that person, normally termed the ward, has become unable to perform those tasks for him or herself. These types of decisions may include giving consent to medical care or treatment; purchasing or arranging for purchase of such necessities as food, clothes, cars, household items, and other personal items; arranging for education; and managing finances and bank accounts, making investments, hiring professionals, etc.
A durable power of attorney is a document which also provides for this type of appointment of a person providing care in California and is normally recommended as a more inexpensive and less disruptive method by which a person may appoint a trusted person to take care of him or herself. Durable Powers of Attorney can be prepared for both medical decisions and control of assets. See our article on Wills and Trusts for a fuller discussion of this type of arrangement. If a Durable Power of Attorney has been executed, that document, usually without court involvement, and based on the written certification of two physicians, can allow a person to act on behalf of another in the event of incompetency. The guardianship procedure normally arises when a Durable Power of Attorney has not been created ahead of time and is thus not in effect.
A guardian is court appointed and would be required if no Durable Power of Attorney is in effect. A guardian is not the same as a conservator. Unlike a guardian, a conservator has no power or responsibility over the individual. Only the assets such as money and property are subject to the conservator’s jurisdiction. A conservator has power to invest funds of the estate and to distribute sums reasonably necessary for the support, care, education or benefit of the protected person and any legal dependents of the protected person. In California, a conservator can also be termed “Guardian of the Assets” versus “Guardian of the Person” of the individual and can be created as described above, without court involvement if there is a valid Durable Power of Attorney. A Durable Power of Attorney for Assets is what is required to achieve the effect of a conservator without court involvement.
Either an individual or a corporation with general power to serve as a trustee may be appointed conservator for a protected person. Typically, state laws provide a preferred order of priority for those who may be considered by the court for appointment. A conservator has the powers and responsibilities of a fiduciary and is held to the standard of care applicable to a trustee. The conservator files an inventory of the estate of the protected person with the court and accountings of the administration of the ward’s estate.
Conservatorship is established by petitioning the court, or it may be performed effectively with a Durable Power of Attorney for Assets, a notarized document prepared by an attorney that relies, instead, on the certification of need by two physicians. If there is no Durable Power of Attorney previously executed by the ward, a court petition would be necessary to appoint a conservator.
The petition can be filed by the person to be protected, or by any person interested in the estate, affairs, or welfare of the protected person. This appointee could be a parent or guardian, or any individual or entity adversely affected by improper management of the property and affairs of the protected person. In most states, the person to be protected must be represented by an attorney and various due process requirements are performed before a person’s control of his or her own assets can be removed.
The court also typically requires an independent physician’s report. The court may appoint a conservator if it finds that an individual is unable to manage property and financial affairs effectively for reasons including, but not limited to, mental illness, mental deficiency, mental disorder, physical illness or disability, chronic use of drugs, chronic intoxication, confinement, detention by a foreign power, or disappearance.
A conservatorship terminates upon the death of the protected person or upon a court determination that the disability of the protected person has ceased. The protected person, the personal representative of the protected person, the conservator, or any other interested person or entity may petition the court to terminate the conservatorship. Upon termination, title of the assets passes to the former protected person, or if deceased, as provided by the protected person’s will.
POWERS OF GUARDIAN:
The court may authorize the guardian to exercise power over the ward if it finds by clear and convincing evidence that the ward lacks evaluative capacity to exercise power on his/her own. The court will only authorize the guardian to exercise power that is necessary to provide for the ward’s personal needs, safety, and rights and in a manner that is appropriate to the individual ward. In addition, a guardian must exercise powers in a manner that provides the least restrictive form of intervention.
The powers that the court may transfer to the guardian of the person in full or in part include:
• the power to provide informed consent to voluntary or involuntary medical examination and treatment if it is in the ward’s best interest.
• the power to consent to experimental treatment if the court finds that the ward’s mental or physical condition is life-threatening and the court decides that the proposed experimental treatment is in the ward’s best interest;
• the power to provide informed consent to social and supported living services;
• the power to provide informed consent to the release of confidential records other than court, treatment, and patient health care records;
• the power to make decisions related to mobility and travel;
• the power to choose providers of medical, social, and supported living services;
• the power to make decisions regarding initiating a petition for the termination of marriage;
• the power to receive all notices on behalf of the ward;
• the power to act in all proceedings as an advocate of the ward;
• the power to have custody of the ward; and
• any other power the court specifically identifies.
SELECTION OF GUARDIAN:
A guardianship requires that someone act on behalf of and protect the ward during the period of time when the ward is incapable of doing so. When asked to appoint a guardian in a particular situation, the court must be sure that the potential ward is incapacitated and cannot make decisions for him or herself because of a mental or physical disability, disease, or addiction to alcohol or other drugs. The fact that potential wards are minors who lack someone to make certain decisions on their behalf until they reach the age of majority is also sufficient reason to ask the court to appoint a guardian.
Clearly, the selection of a guardian is an extremely important task. Certain people, with ties to the ward, are preferred by courts as possible guardians. These include the person designated by the ward, before the period of incapacity occurred, by legal document or otherwise, to handle his or her affairs; the spouse; parents; or another relative; or a state employee or private person familiar with the ward and the incapacity at issue. Whoever is chosen by the court must be willing and able to perform the duties at hand and to represent the best interests of the ward and understand the full implications of the fiduciary duty imposed upon the guardian. In selecting the guardian, the court considers the prospective guardian’s character, history, physical capacity, and other relevant attributes. A potential guardian’s limited education or financial resources are not disqualifying conditions in and of themselves.
The guardianship statutes of each state detail the specific duties, responsibilities, and powers of the guardian. They should be examined in order to determine the regulations that apply to each situation.
A guardian may be nominated by a Will, by a Trust document, by a separate document so nominating, or by a Durable Power of Attorney. It may also be nominated in the petition with the court. The person for whom a guardian is appointed is called a ward. Generally, the ward cannot provide food, clothing, or shelter for himself or herself without assistance. A conservatorship is the appointment of an individual or a corporation with trustee powers, to manage the financial affairs of a minor or other person who cannot manage his or her own financial matters. A conservator is not authorized to make decisions regarding the personal care as a guardian does.
In the world of Durable Powers of Attorney, the holder of a Durable Power of Attorney for assets is akin to a conservator, the holder of a Durable Power of Attorney for Medical Care is akin to the guardian. The court may appoint a conservator for a single transaction or indefinitely. A person may need a guardian or a conservator or both and the same person can be appointed in both capacities. Similarly, the same person may hold both Durable Powers of Attorney.
CALIFORNIA UNIQUE LAW AS TO STANDBY GUARDIANS OF CHILDREN:
Under California law, a custodial parent diagnosed with a terminal condition as confirmed by a physician is eligible to nominate a standby guardian. Such a parent can nominate a guardian for his/her child. A nomination for appointment of the guardian may be made:
- In the petition for the appointment of the guardian or at the hearing on the petition.
- In writing signed either before or after the petition for the appointment of the guardian is filed.
The law of California permits joint guardianship of the child. Therefore the court may appoint the custodial parent and a person nominated by the custodial parent may also be appointed as joint guardians of the child.
The nomination of the guardian becomes effective when made or upon the occurrence of a specified condition/conditions. These conditions may include subsequent legal incapacity or death of the person making the nomination.
The noncustodial parent also has some rights when the nomination of the guardian for the child is made. Generally, a parent may nominate a guardian for the person and/ or estate of a minor in either of these cases:
- The other parent nominates or consents in writing to the nomination of the same guardian for the same child.
- At the time the petition for the appointment of the guardian is filed, either the other parent is dead or lacks legal capacity to consent to the nomination, or the consent of the other parent would not be required for the adoption of the child.
The appointment of the standby guardian cannot however be made over the objections of a non custodial parent unless it is found that the noncustodial parent’s custody will prove detrimental to the minor.
The custodial parent and standby guardian will share in the care, custody, and control of the child. Once a guardian is appointed for a child, such nomination remains effective even in the event of subsequent legal incapacity or death of the person making the nomination. However, this will not be the case if the writing making the nomination provides otherwise.
GUARDIANSHIP OF THE ELDERLY
The reader should read our web article on Elder Abuse in California.
Guardianship of an elderly or incapacitated individual may include guardianship of the person, guardianship of the estate, or both. Guardianship of the person requires the guardian to make decisions regarding the care and support of the elderly or incapacitated individual. The guardian may be required to consent to and monitor medical treatment as well as monitor the ward’s living condition. The guardian is expected to consider the ward’s wishes and desires, as well as their physical and financial needs when making decisions. The guardianship continues until the ward dies or until the court determines that the guardianship is no longer necessary.
Guardianship of the estate requires the guardian to assume responsibility for the ward’s property. The guardian is required to take steps to preserve and protect assets, obtain appraisals of property, and distribute income. The guardian is also required to keep the court continuously informed of the status of the estate. The financial guardianship continues until the ward dies or until the court determines that the individual no longer requires a legal guardian.
Our office normally recommends the use of Durable Powers of Attorney for any elderly clients we represent to avoid the publicity and cost of a hearing to appoint a conservator or guardian.
LIABILITY OF GUARDIAN:
A guardian has to use reasonable care and caution when making decisions and acting on behalf of the ward. However, absent negligence or conflict of interest, the guardian is generally not personally liable for any of the actions taken on behalf of the ward. In addition, the guardian is not liable for managing the ward’s estate if the guardian has acted as a prudent person would in dealing with the property of another.
However, the guardian may be held liable for his/her actions where the ward’s property is damaged due to the careless acts of the guardian or if the guardian is personally at fault.
In some cases, the court will require a bond from the guardian to protect the ward financially. The bond is paid for by the ward’s estate and it protects the ward in the event the guardian’s mistake causes the estate to lose money. The amount of the bond is generally fixed at the total value of the estate property over which the guardian has unsupervised control, plus one year’s estimated income.
If the guardian enters into a contract which s/he has authority to enter into on behalf of the ward, the guardian is generally not personally liable on it. However, the guardian is personally liable on the contract if the contract so specifies.
The guardian does not assume personal responsibility for the ward’s debts which may have been incurred by the ward prior to the court’s determinations that he or she is an incapacitated or disabled person. However, unauthorized use of the ward’s estate or misappropriation of the ward’s property by the guardian will result in revocation of legal authority as guardian by the court and may result in personal liability by the guardian for any harm or loss suffered by the estate. Liability under the Elder Abuse laws could also apply.
A guardian must understand the responsibilities, use common sense and exercise sound judgment to prevent problems. Obtaining good professionals to advise and assist is critical and those costs are normally paid by the ward’s estate. A guardian is not required to have any special skills. However, if the guardian has special skills, s/he must use those skills to manage the ward’s estate. There are certain circumstances under which the guardian is personally liable for a debt of the ward. These include cases where:
- The guardian or conservator agrees to be personally responsible for the debt.
- The debt was incurred for the support of the ward and the guardian is liable for that debt because of another legal relationship that gives rise to or results in a duty of support relative to the ward.
- The negligence or intentional wrong doing of the guardian or conservator gave rise to or resulted in the debt.
- The act of the guardian was beyond the guardian’s authority and this gave rise to or resulted in the debt.
A guardian is not required to expend his/her own funds on behalf of a protected person. However, a guardian may be held liable if they have failed in taking reasonable steps to assure that the protected person receives proper care and services, or the guardian has improperly managed the protected person’s property or finances.
ACCOUNTING AND INVESTMENT DECISIONS BY THE GUARDIAN:
Of the different types of duties and responsibilities entrusted to the guardian, the duty of accounting and financial management is the most important. The guardian is required to use reasonable care and caution when handling the financial resources of the ward. The guardian should also maintain proper written and accurate accounts of the income and expenses incurred for the ward.
The most important accounting responsibility of the guardian is to file an annual accounting. This accounting must set forth a detailed accounting of how the ward’s assets have been bought, sold, invested, and spent on behalf of the ward during the previous year. If the ward is mentally incapacitated, the report must normally also contain a doctor’s report detailing the ward’s current mental and physical conditions and whether a guardianship is still required. In addition, the report must contain a plan detailing the medical treatment and personal care received by the incapacitated ward in the previous year and an outline of the plan for the ward’s medical and personal care for the next year. Local jurisdictions may have additional requirements for the annual accounting.
Investment and management of the ward’s assets are also an important duty of the guardian. The guardian is responsible for deciding where the ward’s liquid assets will be held and who will be responsible for overseeing the investments. If the ward owns any real estate, the guardian is responsible for paying all of the bills for maintaining the property such as taxes, mortgages and insurance.
The guardian is also vested with the duty of preparing and filing income tax returns on behalf of the ward. Because the guardianship assets will need to be invested to produce income sufficient to take care of the ward’s needs, in most cases the guardian will need to prepare and file a yearly income tax return on behalf of the ward and pay any taxes that may be due.
Many of the duties and responsibilities of the guardian can be carried out only after asking for court approval. This however depends on the laws of the state where the guardianship has been established.
Many of these duties actually comprise supervising professionals to perform the required work, from accountants to attorneys to financial advisors. Nevertheless, the guardian is the one ultimately responsible for the results.
COMPENSATION OF GUARDIAN:
The tasks assumed by the guardian are major, requiring much time and responsibility. Recognizing this, the courts do allow compensation for the tasks undertaken. Generally, a guardian is entitled to reasonable compensation. When appointed as guardians, family members often serve without compensation. On the other hand, a professional guardian is not related by blood or marriage to the ward and receives financial compensation to carry out the statutory responsibilities given by the court. In all cases, the guardian is legally entitled to reasonable compensation for the services performed. What is reasonable compensation depends on the types of service being provided and the skill of the guardian. The court will review the compensation paid to the guardian in the annual account filed by the guardian and most courts have schedules as to what is typical compensation and what acts allow extraordinary compensation, including sale of property. Such compensation is fully taxable to the guardian as any income would be.
A guardian is entitled to reimburse the out-of-pocket expenses. In order to establish the reasonable out-of-pocket expenses, good record keeping is essential.
Nationwide, a guardian is generally paid an amount which is not more than five percent of the ward’s yearly income. The amount may vary slightly from jurisdiction to jurisdiction.
TERMINATION OF GUARDIANSHIP:
As soon as practical, the courts wish to end guardianships since there is a firm policy that provides that a person should be able to control his or her own assets. Guardianships are only invoked when needed and normally removed as soon as it is practical.
If any interested person feels a guardianship should end but is remaining in place, that person may petition the court to terminate the guardianship or wait until the next annual accounting and seek termination at that time. Support of medical testimony will normally be required and competent legal counsel is essential for the process.
A guardianship of the person ends when:
• the minor ward becomes 18, unless the ward is incompetent;
• the minor marries lawfully;
• the court decides the ward is competent; or
• the ward dies.
A guardianship of the estate ends when:
• the minor ward becomes 18, unless the ward is incompetent;
• the minor marries lawfully and the court approves the termination;
• the court decides the ward is competent to handle his/her estate;
• the court ends the guardianship; or
• the ward dies.