by Margaret (Mia) Lorenz, Attorney
Last month, we explored the circumstances that may cause an incompetency and guardianship lawsuit to be initiated against a Senior. The “stage had been set” for the culmination of the process, which involves a hearing at the courthouse where all interested parties and next of kin are summoned.
Recall that the Guardianship lawsuit is initiated by a family member, an interested party, or the state of North Carolina (Petitioner), when a Senior is incapacitated and there is no enforceable power of attorney in place. Alternatively, it is initiated if the Senior is incapacitated and even though there is an enforceable power of attorney in place, the Senior is conducting him or herself in a manner that is causing harm to the Senior. The Senior is uncooperative in taking action that the medical profession deems necessary to ensure their continued good health or the Senior is taking action that is jeopardizing their financial security. In such event, a lawsuit is filed by the Petitioner and all culminates in a hearing at the courthouse.
Most of the time, the Senior appears at the court hearing with their attorney guardian ad litem, and they stand “opposite” the Petitioner and hear the case that details their incompetency. The Senior has an opportunity to speak at the hearing in testimony that may be offered by the Senior’s attorney guardian ad litem. Family and interested parties may also testify. Sometimes medical opinions are offered as testimony.
At the end of the hearing, the Clerk of Superior Court – our judge of probate – makes a determination of whether or not the Senior is incompetent and whether a guardianship or “limited” guardianship should be in place. If a Senior is adjudicated incompetent without any limits, then all rights and liberty of the Senior are stripped from the Senior. The appointed Guardian will totally control the Senior’s financial and personal affairs. If a limited guardianship is determined, then the Senior may maintain some rights. For example, in a limited Guardianship, the court may decide that the Senior may maintain the right to vote in elections. The next phase of the hearing (after adjudication of incompetency) is to determine “who” should be the guardian of the Senior.
If a Senior is viewed as NOT incompetent, then the matter is dismissed and all parties go home. The court listens to all testimony of interested persons and makes as informed a decision as possible.
Guardianship: the terminology and cost.
In North Carolina, “guardianship of the person” applies to probate court appointment of a fiduciary to make decisions in regard to the protected person’s personal care. The Senior is now called a “ward” in North Carolina. I prefer to use the term “protected person,” but technically, the Senior is a “ward.” A Guardian of the Person generally does not have control of the protected person’s finances.
“Guardianship of the estate” refers to probate court appointment of a fiduciary to administer the finances and assets of the protected person. If the Guardian of the Estate is the same as the Guardian of the Person, the Guardian is called a General Guardian, in North Carolina.
Guardianship of the estate is much like trusteeship and/or obtaining power of attorney over the protected person (but the protected person has no rights to make financial decisions for themselves anymore). However, the powers of, and restrictions on, the Guardian of the Estate are defined by statute, rather than a trust declaration or power of attorney document, and are much less flexible than the powers authorized for a trustee and power of attorney. Also, one of the key differences between guardianships, trusts and durable powers of attorney is that guardianships are strictly court-supervised. The Guardian is an extension of the court, and therefore many decisions of the Guardian require the court’s permission. For example, for a Guardian of the Estate to sell land of a protected person, the Guardian must petition for Clerk of Superior Court approval as well as Superior Court Judge approval. This process is time consuming and can be costly.
Once a Guardian of the Estate is appointed, accountings of the protected person’s “living estate” must be annually reported to the probate court. Such accounting needs to be accurate to the penny. Therefore, full disclosure of all of the protected person’s assets are required, and so the full extent of the protected person’s assets are published at the courthouse pursuant to the audit required by statute. Moreover, the court is paid fees (from the protected person’s “living estate”) for its services in auditing the accounting.
Guardian of the Estate work is also similar to a decedent’s probate estate administration. Like a probate Executor (except where a decedent’s will waives bond), a Guardian is required by law to obtain a probate bond through an insurance company to insure his or her fidelity to proper administration of the protected person’s assets and income. The costs of the probate bond and of the administration come out of the assets of the protected person. The amount of coverage of the bond is set by the court to cover the assets under the conservator’s administration, and may cost anywhere from just under $1,000 per year to considerably more.
Conclusion. Laws are not perfect, and our court system does its best, within the parameters of the law, to respect an individual’s rights, while protecting the individual and society. Our court system is respectful and follows the letter of the law; but all of the persons involved in guardianship – from the judge to the guardian ad litem attorney etc. – are very aware of the consequences and treat guardianship matters with due care. I have seen guardianships rip families apart. Conversely, I have seen a Guardianship appointment be a happy day for all involved. Very often in estate planning, I discuss guardianship as something to be avoided. Now that you have more knowledge on Guardianship, you are in a better position to make an informed decision regarding whether you should seek to avoid it too.
Margaret (Mia) Lorenz is an attorney in Southern Pines at Lorenz and Creed Law Firm PLLC, where she helps people with many legal needs such as preparing their wills and/or trusts, helping when a loved one dies, and helping purchase or sell real estate. She has been assisting people with their legal needs for 26 years.