What is Guardianship and Does my My Loved One Need It?

Ken Robinson, JD, CFP® and Britta Koepf, CFP®, ChSNC®

If you are a parent who has a child with special needs or if your parents are no longer able to care for themselves, it is important to know your options when it comes to managing the medical and financial well-being of your loved one.

For the first 18 years of your child’s life, you, as a parent, have the decision-making rights in your child’s medical, educational, and financial affairs. But the day your child turns 18, your legal relationship with them changes, because it is presumed that your child suddenly can make decisions on their own, regardless of their abilities. If your child has special needs, one option worth exploring at this point is to become your child's legal guardian, so that you can continue to make the important medical and financial decisions on their behalf. Here is a basic explanation of what guardianship is, when it is appropriate, and how to pursue one.

Every adult is assumed to be capable of making their own decisions unless a court determines that they are incompetent. If an adult is or becomes incapable of making responsible decisions due to a mental disability, the court will appoint a substitute decision-maker, often called a guardian. (Some states use the term conservator or another title.1) Guardianship is a legal relationship between a competent adult (the guardian) and a person who, because of incapacity, is no longer able to take care of their own affairs (the ward).

The guardian may be authorized to make legal, financial, and health care decisions for the ward. Depending on the terms of the guardianship and state practices, the guardian may have to seek court approval for various decisions. Some incapacitated individuals can make responsible decisions in some areas of their lives but not others. In such cases, the court may give the guardian decision-making power over only those areas in which the incapacitated person is unable to make responsible decisions (a so-called limited guardianship). In other words, the guardian may exercise only those rights that have been removed from the ward and delegated to the guardian.

The Guardianship Process

In most states, anyone interested in the proposed ward's well-being can request a guardianship. The person is not required to be a family member of the ward. An attorney is usually retained to file a petition for a hearing in the probate court in the proposed ward's county of residence. Protections for the proposed ward vary greatly from state to state, with some simply requiring that notice of the proceeding be provided and others requiring the proposed ward's presence at the hearing. The proposed ward is usually entitled to legal representation at the hearing, and the court will appoint an attorney if the allegedly incapacitated person cannot afford a lawyer.

At the hearing, the court attempts to determine if the proposed ward is incapacitated and, if so, to what extent the individual requires assistance. If the court determines that the proposed ward is indeed incapacitated, the court then decides if the person seeking the role of guardian will be a suitable appointee.

A guardian can be any competent adult–the ward's spouse, another family member, a friend, a neighbor, or a professional guardian (an unrelated person who has received special training). A competent individual may nominate a proposed guardian through a durable power of attorney in case they ever need a guardian.

In naming someone to serve as a guardian, courts give first consideration to those who play a significant role in the ward's life–people who are both aware of and sensitive to the ward's needs and preferences. If two individuals wish to share guardianship duties, courts can name co-guardians. But the guardian need not be a person at all–it can be a non-profit agency or a public or private corporation. If a suitable guardian cannot be found, courts in many states can appoint a public guardian, a publicly financed agency that serves this purpose.

Reporting Requirements

Courts often give guardians broad authority to manage the ward's affairs. Guardians are expected to act in the best interests of the ward, but given the guardian's often broad authority, there is the potential for abuse. (In addition to lacking the power to decide how money is spent or managed, where to live and what medical care he or she should receive, wards also may not have the right to vote, marry or divorce, or carry a driver's license.) For this reason, courts hold guardians accountable for their actions to ensure that they don't take advantage of or neglect the ward.

A guardian responsible for the ward’s property will inventory the property, invest the ward's funds so that they can be used for the ward's support, and file regular, detailed reports with the court. Such a guardian must also obtain court approval for certain financial transactions. Typically, guardians must file an annual account of how they have handled the ward's finances. In some states guardians must also give an annual report on the ward's status, and offer proof that they made adequate residential arrangements for the ward, provided sufficient health care and treatment services, and made available educational and training programs, as needed. Guardians who cannot prove that they have adequately cared for the ward may be removed and replaced by another guardian.

Due to the difficulty, costs, and restrictions placed on the ward, it is frequently best to look into other options. In some cases, financial and health care powers of attorney will adequately suit your needs. For more on this subject, see the article, "Making Decisions for a Special Needs Child Who Becomes an Adult."

1. These terms can be confusing because they’re used differently in different places. The state of Oregon uses these titles as they’re often understood colloquially: the guardian looks after the ward’s personal well-being, and the conservator looks after their financial matters. Ohio law, by contrast, refers to these roles as the guardian of the person and the guardian of the estate. And Connecticut goes the other way, using conservator of the person and conservator of the estate for the same functions.

This content is developed from sources believed to be providing accurate information and is provided at least in part by the Academy of Special Needs Planners. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. Original content of Practical Financial Planning, Inc. only is copyright © 2021 by Practical Financial Planning, Inc.

By Ken Robinson, JD, CFP® and Britta Koepf, CFP®, ChSNC®

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