Many clients ask what should be done regarding the personal or financial affairs of an infirm or incapable elderly person. The first order of business is determining whether the individual has the mental capacity to execute a legal document. This means that the individual can understand what he or she is signing, has the ability to affirmatively give consent to the signing of the document, and can sign or place a mark on the signature line indicating his or her consent to the contents of the document.
If the individual is capable of executing documents, there are several options available:
- The first option is the most informal and has the least amount of judicial supervision. It is simply to establish joint banking accounts which enable a chosen family member to sign checks and transfer funds on behalf of the infirm individual. If either the infirm individual or the family member were to die; however, the funds in that account would automatically pass to the survivor. Effectively, this would disinherit other family members from the monies contained in these accounts. Further, there is no accounting reports required. Either party could clean out the accounts with no legal consequences to the other.
- The second option would be setting up a Power of Attorney. A Power of Attorney is a legal document which allows the named individual to act on behalf of the infirm individual in the capacities expressed in the document. A general power of attorney allows the designated person to act in all capacities on behalf of the principal. Accordingly, the attorney in fact could execute real estate documents, set up bank accounts, handle investment fund... on behalf of the principal. The Court does not oversee the actions of the attorney in fact. There are no accounting requirements. If a Power of Attorney is misused, the principal would have to bring a lawsuit against the attorney in fact claiming a breach of fiduciary duties.
- The third option would be that of establishing a trust and naming a trustee to administer the infirm individuals assets for the benefit of the infirm individual. The Trust can explicitly outline the powers of the trustee. The trust can also require the trustee to be bonded thereby protecting the trust against misuse of the assets by the trustee. The Probate Court would oversee the trust administration by requiring periodic accountings of the trust assets. A trust is an excellent estate planning tool in that it saves money on estate taxes by removing the assets from the infirm individual's estate while at the same time providing for the designation of these assets upon his or her death. Finally, safeguards such as the Probate Court review of the accountings and the bonding of the trustee protect the assets for the infirm individual.
- The fourth option would be a voluntary conservatorship. The infirm individual could agree to a conservatorship which falls under the supervision of the probate court. In approving a voluntary conservatorship, the Probate Court does not make a finding of incapacity. There is no requirement for a bond if the infirm individual does not wish to have a bond in place. The Probate Court does, however, require accountings to be filed by the Conservator.
If the individual is incapable of executing documents, the only option would be an involuntary conservatorship. Application would have to be made to the probate court in the district where the incapable or infirm person resides. The application must be accompanied by a physician's statement and the $150 filing fee. The Court will set up a hearing on the matter and will provide notice to all interested parties. At the hearing the Court will determine if the individual is legally incapacitated and if the appointment of a conservator is appropriate. If a conservator is appointed, the Court will require a Surety Bond insuring the estate against misappropriation of the estate assets by the Conservator. The bond is required in all involuntary conservatorships even if the conservator is a close family member. Finally, the Court will require the appointed conservator to file an accounting with the Probate Court listing all income and expenses for the conserved individual. In this fashion, the Court is overseeing the administration of the conserved individual's assets.
For further information on any of these options or to discuss your particular situation, please contact our office.
