I’ve received questions asking for recommendations to minimize the possibility of a court-supervised guardianship and conservatorship proceeding.
When an individual becomes incapacitated, the courts might become involved to name a “guardian” to make health care decisions and a “conservator” to make financial decisions. This can be expensive and result in an invasion of privacy.
A properly drafted and maintained estate plan can help minimize the likelihood that a proceeding will be necessary if a person were to become mentally incapacitated. Here are some general recommendations to discuss with your own estate planning attorney.
• Make sure your trust is funded.
Even though a trust is not necessary for everyone, trusts generally provide protection against the possibility of a court-supervised conservatorship proceeding down the road. The trust agreement should provide clear authorization for a trustee to make financial decisions and administer assets in the event of a grantor’s incapacity.
The trust agreement only pertains to assets that are titled in the name of the trust. If you have a trust, please make sure that it is properly “funded.” In other words, deeds should be recorded transferring real estate into the name of the trust, and nonqualified (meaning nonretirement) accounts should generally be transferred into the name of the trust.
• Update your statutory power of attorney every three years.
Even if you have a trust, and your assets are properly titled in the name of the trust, an updated statutory power of attorney is still essential. Qualified retirement accounts (such as IRAs) cannot be “owned” by your trust. Your designated financial agent would need to use a statutory power of attorney to make decisions pertaining to your qualified retirement account such as changing the investment strategy, authorizing a withdrawal, etc.
If you do not have a trust, it is essential that you update your statutory power of attorney every three years.
• Provide your statutory power of attorney to financial institutions and advisers.
Consider providing your statutory power of attorney to each financial institution that you work with, as well as to your other trusted advisers (CPA, financial adviser, etc.).
Verify that each institution accepts the form you provide, and notes it in their records. Some institutions have their own version of a power of attorney. Discuss with your attorney how to coordinate the institution’s document with your estate plan.
• Carefully select your financial and health care agents.
Does the person you named as your health care or financial agent know your wishes? Does he have the skills and the time available to properly serve as your agent?
Do not name a child as an agent only because he is the oldest child. Verify the child has the appropriate characteristics to serve as agent.
• Trust your instincts; be clear about your concerns.
Do you have a sense that someone may cause a problem in the event of your incapacity (or death)? Even if you feel it is a remote possibility, please talk to your attorney about it. Your estate planning documents can be useful tools to speak for you, if the time comes when you cannot speak for yourself.
• Update your HIPAA release.
Update your HIPAA release to specifically list by name those individuals you give permission to, so that they can have access to your private medical information.
• Meet regularly with your advisers (attorney, CPA, financial adviser, etc.).
Keep your advisers updated about your situation. Do your advisers know your wishes and your concerns? Is a beneficiary a spendthrift or particularly litigious?
Have you reviewed your current assets (including titling and beneficiary designations) with your advisers? Have you discussed concerns regarding any disagreements or disputes in your family?
One of the most important steps you can take to prevent an unwanted guardianship and conservatorship is to keep your advisers informed.