31 Jan 15 Ways To Avoid Guardianship Of The Estate
Guardianship is often needed for an incapacitated person, but it is an expensive legal process which should be avoided if possible. Thus, planning should be considered as an alternative to guardianship. Texas law defines an “incapacitated person” as: 1) a minor; 2) an adult, who because of a physical or mental condition, is substantially unable to (a) provide food, clothing or shelter for himself or herself; (b) care for the person’s own physical health; or (c) manage the person’s own financial affairs. Also, a guardian may need to be appointed for a person to receive funds due to that person from a governmental source.
There are two (2) types of guardianship in Texas: (1) guardianship of the person which concerns the care of the incapacitated person; and (2) guardianship of the estate which concerns handling of the assets of the ward (the incapacitated person).
Common tools to avoid guardianship of the estate include:
- Durable Financial Power of Attorney – this document gives authority to someone else to handle your financial matters either immediately or upon your disability. (Caveat: Some financial institutions only accept their own forms contrary to Texas law).
- Convenience accounts – a depositor can name another person to have check writing privileges before or after the depositor’s death without giving ownership rights. Joint ownership accounts also avoid guardianship as such accounts also allow someone else to pay your bills – although the depositor could be affected by issues such as creditors of the joint owner.
- Revocable Living Trust – assets held in a trust so guardianship of estate is not needed. Revocable living trust also are commonly used to avoid probate.
- Special Needs Trust – federal law permits the creation of a trust with your own funds (if you have mental capacity and if not, then by parent, grandparent, court or guardian) if the disabled individual is under the age of 65 to obtain or retain valuable Medicaid (which is “means-tested”) benefits.
- Court Created Trust – often created by the court when a minor is involved in a lawsuit and has no legal guardian or for certain other incapacitated persons. Funds are held by a bank or trust company as trustee.
- Guardianship Management Trust – property management and administration by trustee.
- Testamentary Trust – trusts created within a will of the deceased which can be used to avoid guardianship of estate for any beneficiary with special needs (including spouse).
- Modification of Will by court order after death of decedent to create testamentary special needs trust to avoid guardianship for a disabled beneficiary and not lose public benefits for the beneficiary.
- Pooled Trust – an alternative to a Special Needs Trust and Guardianship Management Trust which preserves Medicaid qualification by joining a subaccount to a Master Pooled Trust.
- Community Administration – one spouse can manage all community property assets of the incapacitated spouse.
- Court Registry – up to $100,000 may be deposited in the court’s registry used to avoid administration of a minor’s or other incapacitated person’s guardianship estate.
- Uniform Transfer to Minors Act (UTMA) – donor appoints a custodian of the account who has authority to invest without court order for the education, maintenance or support of the minor.
- ABLE account – if person is on public benefits such as Supplemental Security Income and Medicaid which is “means-tested”, up to annual exclusion (presently $17,000 per year total – not per person) can be contributed to such an account without a transfer penalty and without it counting towards the $2000 countable resource limit. Government is a remainder beneficiary. The disabled individual must have been disabled before age 26, although the age limit will be increased to 46 as of January 1, 2025.
- Representative Payee – a representative payee may be appointed by the Social Security Administration to handle Social Security benefits without the need of a guardian.
- Veteran’s Benefits Fiduciary – veteran’s pension benefits can be managed by a person as permitted by the Department of Veteran’s Affairs.
There are numerous other options to avoid guardianship of the estate. Additionally, there are many options to limit the effect of guardianship of both the person and the estate. Planning to avoid or limit guardianship is essential to any estate plan.
If interested in learning more about this article or other estate planning, Medicaid and public benefits planning, probate, etc., attend one of our free upcoming Estate Planning Essentials workshops by clicking here or calling 214-720-0102. We make it simple to attend and it is without obligation.