Key Ways to Avoid Guardianship or Conservatorship

If you become incapacitated because of an accident or injury, who would take care of you? Who would make decisions about your healthcare, where you live, and your day-to-day activities? Who would manage your finances and property? 

If you do not have legal documents in place that authorize someone to act on your behalf, the court may appoint someone to make decisions for you. Because you cannot speak for yourself, you will not have any control over who is appointed to manage your assets and make extremely personal decisions for you. 

Any interested person can petition the court for a conservatorship or guardianship.  Therefore, if the court grants the petition, you could have someone making decisions for you and caring for you that you donot necessarily trust with those responsibilities.

What area Conservator and Guardian?

Each state has laws that provide a legal process for appointing someone to care for an adult who is incapacitated physically or mentally. If an adult cannot make decisions for himself or herself, the court can appoint an agent to act on that person’s behalf. 

A guardian is a person who has authority to make healthcare and personal care decisions for another person. The guardian oversees the personal care, the daily needs, and the living arrangements for the person. In some states, this role is referredto as conservatorship of the person.

A conservator is a person appointed by the court to manage a person’s finances and property. The conservator has complete control over the person’s income, financial accounts, personal property, and other assets. It is the conservator’s job to pay for the person’s living expenses and personal needs. The conservator also pays the person’s bills and invests/manages the person’s money. The probate court oversees a conservatorship by requiring periodic reports. The conservator requires court approval before disposing of or purchasing a large asset. In some states, this role is referred to as guardianship of the estate.

The court may appoint the same person to serve in both roles or appoint a different person to handle finances or personal care.

Estate Planning and Incapacitation Planning Tools

Fortunately, there are several legal documents you can use to potentially avoid a court-appointed conservator or guardian. Below are several of the important documents you need if you want to avoid a court-appointed conservator or guardian for yourself.

Powers of Attorney

One of the common ways many people choose to avoid guardianship and conservatorship is to execute powers of attorney (POA). There are several different types of POAs you can use in incapacitation planning. 

A Durable General POA gives your agent access to your assets and finances as soon as you sign the document. Unless you limit your agent’s powers, your agentcan perform any financial transaction that you can legally do in your name. Common powers exercised by a POA include buying and selling real estate or personal property; managing investments; opening/closing financial accounts; paying bills; entering/rescinding contracts; filing tax returns; and, settling lawsuits or other disputes.

To ensure that the POA remains in effect during periods of incapacitation, you must include specific legal wording to make the POA “Durable.” Durable means that the agent’s powers are not impactedif you become incapacitated because of an illness or injury.

Keep in mind that a Durable General POA is for financial matters. To appoint an agent to make healthcare decisions for you, you must utilize a Healthcare POA or another type of medical directive. Some states recognize Healthcare POAs. However, you should check to ensure that you have the healthcare documents needed to satisfy the laws ofyour state. Healthcare documents are discussedat greater length below.

Financial Institution Powers of Attorney

For some individuals, granting an agent unlimited financial authority while they are still capable of managing their finances is too much of a risk. If you do not want to use a POA, you can talk to each of the financial institutions you do business with about signing an internal power of attorney. Many financial institutions have a form of a power of attorney that applies solely to their accounts. 

This option may be better for some individuals. However, it can be cumbersome to sign individual POAs with multiple financial institutions. In addition, you must remember to update the POAs as you change banks or open new accounts. Furthermore, internal POAs do not give your agent the authority to transact business with other creditors or manage property and assets, such as stocks, bonds, life insurance policies, retirement accounts, real estate, motor vehicles, etc.

Jointly Titled Property

By changing the titles ofyour property and assets to joint ownership with another person, you are giving that person the authority to manage the property or asset. This authority does not change if you are unable to exercise control over the property yourself because of incapacitation. This step avoids a court-appointedconservator or guardian for the specific property that is titled jointly with another person.

However, there are some drawbacks. The joint owner can only exercise control over the specific property that has his or her name on the title or the account. In addition, the property or asset is subject to the person’s creditors (unless that person is your spouse), andyou may not want all property titled jointly with the same person.

Healthcare Documents

As mentioned above, a Healthcare Power of Attorney gives your agent the authority to make medical decisions on your behalf if you are unable to do so. However, you should check with your doctor and legal advisor to ensure this document is acceptedunder state laws. Some states use an Advance Medical Directive, which should accomplish the same thing, but in a different form. In either case, you need to ensure that the wording in the document states the power is not affected by your incapacitation and should be recognized and honored by medical providers in different states.

In addition to a Healthcare POA or an Advance Medical Directive, you may also want to consider signing HIPAA authorizations and a Living Will. A HIPAA authorization gives your agent access to your medical records and allows medical professionals to discuss your healthcare and medical treatment with your agent. A Living Will appoints an agent to make end-of-life decisions for you, including decisions related to life-sustaining or life-prolonging treatments. 

Revocable Living Trust

A Revocable Living Trust can be an efficient and effective way to avoid a court-appointed conservator. The trust holds title to the assets and property you transfer to the trust. In most cases, you serve as the trustee to manage the assets and property within the trust. However, you can name a disability or successor trustee to take over management of the trust in the event you become incapacitated because of an illness or injury.

If you choose to use a Revocable Living Trust, you must ensure the trust agreement contains specific legal language that defines incapacitation outside of a court proceeding; when your disability trustee should exercise control; and, how the trust assets should be managedfor your benefit. You must also make sure that you “fund” the trust for it to be useful. Assets must be transferred to the trust to be subject to the terms and conditions of the trust. For assets that cannot be managed by the trust, you will still need a Durable General POA for your agent to manage those assets.

Take Time Now to Plan for the Unthinkable

An accident or illness could prevent you from making decisions for yourself regarding your finances and healthcare. By utilizing one or more of the above tools, you can avoid the necessity of a court-appointed conservator or guardian. However, you must act now while the courts consider you to be “of sound mind” and capable of executing these documents.