The State's Protection for the Unprotected
Stephen Trefts, President
We have all heard of cases where elderly or incapacitated individuals have been physically mistreated or financially exploited. The state of Washington has statutorily established Guardianships as a way to protect the vulnerable members of our society. The intent of the law is summarized in the Revised Code of Washington, section RCW 11.88.005:
“It is the intent of the legislature to protect the liberty and autonomy of all people in this state and to enable them to exercise their rights under the law to the maximum extent, consistent with the capacity of each person. The legislature recognizes that people with incapacities have unique abilities and needs, and that some people with incapacities cannot exercise their rights or provide for their basic needs without the help of a guardian. However, their liberty and autonomy should be restricted through the guardianship process only to the minimum extent necessary to adequately provide for their own health or safety, or to adequately manage their financial affairs.”
The code further states that incapacity is not due to advanced age, eccentricity, poverty, or simply a medical diagnosis. Rather, it is a legal decision made by the courts; and, generally, there are two controlling criteria. The first is that the person has a significant risk of personal harm based upon a demonstrated inability to adequately provide for nutrition, health, housing, or physical safety. The second criteria that may be used to determine incapacity is that the court will find that the individual is at significant risk of financial harm based upon a demonstrated inability to adequately manage property or financial affairs (RCW 11.88.010).
Before a court makes a decision to declare an individual as incapacitated, it retains a guardian ad litem to make a thorough investigation and report back to the court. The alleged incapacitated person is also entitled to be represented by their own attorney which is what our client did in a recent case we had. After a painful legal battle, the son’s attempt was rebuffed by the court, and we continued to provide for the mother’s care through a trust relationship.
Contrasted to Trusts
A state-created guardianship is usually the result of inadequate estate planning. Individuals can protect themselves from court supervision through the use of trusts, powers of attorney, agency agreements, or other forms of legal estate protection. In these types of arrangements, the individual voluntarily gives authority to others to act on his or her behalf should they become incapacitated. Incapacity is usually defined in the trust document as a determination made by the individual’s personal physician in writing that the individual is unable to manage his/her business affairs due to illness or for any other reason. This process is simple, less costly, more personal, private, and, most importantly, fulfills the stated desires of the individual…all in contrast to a guardian proceeding in open state court.
The court will decide if a guardian of the person is necessary (to supervise personal care and medications) or if a guardian of the estate is necessary (to handle financial matters). While both are often necessary, we are frequently appointed as the guardian of the estate only for individuals who do not care about or know the value of his/her personal fortune, but, otherwise, can care for themselves physically. The State Supreme Court monitors professional guardians. We are subject to standards of practice, annual educational requirements, and regulation and discipline by the state.
Decisions, Decisions, Decisions
Personal Care. Once the court appoints us, we continue our analysis of the individual’s personal needs. This will include the individual or the guardian of the person if one has been appointed. In a case in central Washington, we were a successor guardian of the estate to a family member. We found the disabled veteran living in squalor and unable to care for his home, and he was in need of major medical attention. By working with his family and the guardian of the person, we eventually got medical help for him, situated him in a VA facility, and eventually sold the home.
Investment Decisions. When we are appointed the guardian of the estate, the court demands that most of the assets be put into a “blocked account” with a brokerage firm. While we are responsible for managing these funds, we can only withdraw funds with a court order. The court also requires a fidelity bond to cover all other assets not in the blocked account. As a manager of all of these funds, we retain professional financial advisors; and, after considering the needs of the guardianship, we develop an investment plan that includes:
- Setting forth conservative investment risks; risk analysis.
- The estimated duration of the guardianship.
- Goals for income, growth, and estimated payouts.
- An asset allocation model (describing a diverse investment style).
- Investment procedural guidelines that include third-party analysis of recommendations, investment parameters, and periodic review of performance.
After receiving a guardianship, we immediately undertake a study as to whether the individual is entitled to receive any state or private benefits. Naturally, we will attempt to maximize these benefits. We also undertake a study as to whether the individual is owed funds from other people. In one sad situation, the court replaced a prior guardian with us and demanded that we, as the new guardian, bring a legal action if, after an investigation, we discovered negligence or malfeasance with the prior guardian. In fact, the incapacitated minor was kept as a literal slave in a drug house, with stolen cars being parked out in the garage and a huge pig wallowing in the backyard. Needless to say, we brought an action against the prior guardian and received a substantial reimbursement back to the guardianship estate.
Reporting and Tax
The state, through the Superior Court, is ultimately responsible for monitoring the guardianship. Therefore, we seek the court’s approval for any major non-routine transactions. We make thorough reports and accountings back to the court, the guardian of the person, and, if applicable, the Veterans Administration. We also prepare the tax return for the individual.
IN CONCLUSION, when guardianships are properly administered, the guardian, under the court supervision, acts as the protector of the abused and vulnerable people in society. It is a huge yet rewarding process for us, and yet it is far better for an individual to engage in proper estate planning ahead of time so this expensive and public process can be avoided and the estate can be managed professionally.
Print Date: Fall 2009