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Jun 10
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GUARDIANSHIP: What You Need To Know

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What is guardianship?

Guardianship is a legal relationship whereby the Probate Court gives one person (the guardian) the power to make personal and financial decisions for another (the ward). Some states have separated guardianship into two roles—a guardianship or power over the person, and a conservatorship for power over the finances. A guardian may be appointed when a Probate Court determines that an individual is unable to care for herself and her estate by reason of mental illness, inguardianship-handstellectual disability, or physical incapacity.

When is guardianship appropriate?

Guardianship is appropriate when impaired judgment or capacity poses a major threat to a person’s welfare. A medical evaluation by a licensed physician is necessary to establish the proposed ward’s condition. However, only a court can determine the need for a guardian.

How can I become a guardian?

Assuming that a physician is prepared to attest to the proposed ward’s incompetence, a petition must be filed with the Probate Court requesting the appointment of a guardian. Two petitioners must sign the petition and the proposed guardian must file a bond with the court. Then, the court directs that the heirs of the ward and the ward herself receive notice of the filing of the petition for guardianship. The court sets a date by which anyone wishing to object may do so, including the proposed ward. Then a hearing is held where a judge decides whether a guardian should be appointed.

How long does this appointment last?

A temporary appointment can last 90 days. A permanent appointment may last until the death of the ward or the guardian, until the ward is able to establish that she is competent, or until the guardian resigns or is removed by the Probate Court.

What authority does the guardian have?

Unless limited by the court, the guardian has total control over the finances and the personal decisions of the ward. This includes deciding where the ward will
live, determining how the ward’s funds will be spent, and making routine medical decisions for the ward. For medical decisions involving extraordinary medical care, the administration of antipsychotic drugs, commitment to a mental health facility, or the sale of the ward’s real estate, the guardian has to seek the approval of the court in a separate proceeding to expand his or her powers.

guardianWhat are the responsibilities of the guardian?

In addition to those concerning authority to consent to medical treatment, the guardian must account carefully for all of the ward’s income and any expenditures made on his or her behalf. This is accomplished by the guardian filing an inventory listing the ward’s assets with the court as of the date of appointment and by filing annual accounts with the court detailing all the income and expenses the ward has. A final account must be filed when the guardianship is terminated. The guardian is liable for her acts until the court allows (approves) the account.

What are the alternatives to guardianship?

There are several less restrictive alternatives to guardianship. These include the durable powers of attorney, representative payees, trusts, and health care proxies. Each of these options may avoid or delay the need for a guardian. These documents need to be executed before the individual is incapable of doing so due to mental impairment.

MJL Blog Footnote

Oct 16
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Special Needs Trusts: Planning for Persons with a Disability

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Special Needs Trusts – Choosing the Right Option – Excerpt from an October 9, 2015 Seminar

            Self-settled special needs trusts were authorized by Congress in 1993. The language in the statute is very brief, but raises many issues. “A trust containing the assets of an individual under age 65 who is disabled (as defined in §1614(a)(3)) and which is established for the benefit of such individual by a parent, grandparent, legal guardian of the individual, or a court, if the state will receive all amounts remaining in the trust upon the death of such individual up to the amount equal to the total medical assistance paid on behalf of the individual under a state plan under this title.” Most commonly, self-settled special needs trusts are required in connection with personal injury settlements, but can also be used when a disabled individual receives an inheritance, or is receiving equitable distribution, alimony, or child support.

The purpose of the self-settled special needs trust is to enable the beneficiary to maintain or obtain eligibility for means-tested public benefits such as SSI and Medicaid. Trusts may also be used when the beneficiary is receiving SNAP (formerly Food Stamps) or Section 8 Housing. Beneficiaries receiving SSDI and Medicare do not require a special needs trust, because these benefits are insurance-based rather than means-tested.

Means-tested public benefits have income tests and many, such as SSI and Medicaid, have asset tests. An individual with disabilities who receives the proceeds of a personal injury settlement, an inheritance, equitable distribution, alimony, or child support is likely to be in a financial position that exceeds the income or asset test limit for any given means-tested program. By placing the assets in a properly-drafted self-settled special needs trust, the assets are non-countable. If the trust is administered properly, distributions from the trust on behalf of the beneficiary are generally not considered income.

For some beneficiaries, the SSI payment, Food Stamps, or Section 8 Housing subsidy is important; for most of the beneficiaries, however, the Medicaid benefit is absolutely critical. By placing funds in the self-settled special needs trust, the individual is able to maintain important needs-based public benefits while at the same time enjoying the benefits of the settlement, inheritance, equitable distribution, alimony, or child support.

Clients are often confused as to what they can do for a disabled child or loved one. Many may have some level of experience or knowledge, having associated with many other individuals who they themselves have disabled children. The conversations and preconceptions as to what can be done based on these conversations with friends and acquaintances can be both a blessing and a curse. The blessing is in that they may have a better than average understanding that there are options to protect assets on behalf of the disabled beneficiary, the curse is that there may be a significant amount of misinformation that you may need to navigate through before a client agrees to a specific course of action.

Assessing the Degree of the Beneficiary’s Current and Future Disability Needs.

The purpose of a Special Needs Trust is to see that the money intended for the beneficiary goes to the beneficiary without jeopardizing her or his eligibility for government benefits (e.g., SSI, Medicaid, and Social Security). Secondly, it serves to protect the money from being squandered or inappropriately spent.

In a Special Needs Trust, the trustee has the duty to use the funds to pay for expenses of the beneficiary that supplement (not replace) benefits received from various governmental assistance programs. These “special needs” might include:

  • Fees for attending special-needs facilities.
  • Insurance
  • Rehabilitation
  • Medical and dental expenses.
  • Eye glasses.
  • Transportation
  • Automobile
  • Computers and electronic equipment.
  • Vacations
  • Athletic training and competitions.
  • Companion services/home health assistance.
  • Other items to enhance self-esteem.
  • Training programs.
  • Maintenance
  • Education
  • Entertainment

The Special Needs Trust is a type of discretionary trust in which the trustee is given the power to manage assets in the trust (e.g., to invest trust funds and to sell assets) and the discretion to use trust assets for the benefit of the person with special needs. Trust assets can be in the form of cash, stocks, personal property, and real property. The trust also can own or be the beneficiary of life insurance. [1]

Knowing these options is critical to understanding the drafting and advice you provide a client. If you have a beneficiary that is incapacitated and will remain institutionalized for the remainder of their lives then the Special Needs Trust can be used just as a fallback for the beneficiary as there is little to no likelihood that the beneficiary will be able to use the resources in a manner that materially enhances their life enjoyment. If on the other hand the beneficiary is able to enjoy any of the above referenced activities then the client and the beneficiaries will enjoy the Trust.

[1] “Planning For The Long Term Care Of A Special Needs Individual”, J. David Spiceland, CPA and Craig J. Langstraat, LL.M., Practical Tax Strategies, Volume 73, Number 03, September 2004.

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