This is the first in a series of blogs addressing the three important elements of estate and elder law planning: Incapacity; property transfer and asset protection. We will spend several blogs on each important point.

Incapacity is not a condition where someone takes over. Most often it mean someone needs help. Women have about a fifty-fifty chance to live to age ninety. There are not many of us at age ninety who do not need some assistance. Incapacity planning is to determine who and under what conditions we received assistance.

If you do not have an incapacity plan in place, your default plan is that eventually someone goes to Court and obtains a guardianship.

Important Points about Guardianship

The Elder Law Attorneys at Estate & Elder Law Services of Delaware address three basic issues for our clients: Incapacity; quick cheap transfer of property upon death and asset protection. Most clients come into our office and immediately want to talk about who gets what when they die. “Well Johnny was never there for me, but he should get his father’s antique shotgun.” “Suzy was always there for me; she should get all the jewelry.” “I want all the grandchildren to get $10,000.00, but only if they use it for education, not a new car.” Deciding who gets what, is the fun part of estate planning. But the most pressing issue is incapacity planning. Who makes decisions for us when we cannot make decisions for ourselves? More subtle, who assists us when we need help. Rare is it when we need someone to take over for us. Often we just need help.

According to the Social Security Administration, we are nine times more likely to become disabled than we are to die in any given year. Most women have a 50% chance of living to age 90. There are not many of us at age 90 who do not need some assistance. What this means is that all should have a plan for incapacity. Planning for incapacity does not necessarily mean planning for someone to “take over,” but who do you want to assist you if you need assistance?

There are many ways to plan for incapacity. But if one fails to plan, then eventually a likely result is a court-imposed guardianship.

A guardianship is necessary when a person is unable to care for themselves, is in danger of hurting themself, or becoming a victim. The statutory standard is when a person “by reason of mental or physical incapacity is unable properly to manage and care for their own person or property, or both, and… is in danger of dissipating or losing such property or of becoming the victim of designing persons or,… such person is in danger of substantially endangering [the] person’s own health, or becoming subject to abuse by other persons….” 12 Del. C. § 3901 (a)(2).

The guardian of the person is appointed to meet the daily needs of an individual and make decisions such as healthcare, living conditions and medical treatment. The guardian of property is appointed to safeguard and preserve property and make financial decisions. Most of the time a guardian is appointed of both property and person. There can be separate guardians for property and person.

Guardianships are started by filing a petition in the Court of Chancery. A physician’s affidavit is required. Many people ask how long it takes to obtain a guardianship. The longest delay is obtaining the physician’s affidavit.

Along with the petition and physician’s affidavit, the proposed guardian must file several affidavits and authorizations. A background check will occur on the proposed guardian, who cannot have been a recent bankrupt or convicted of a serious crime. The proposed guardian must promise to follow all of the court rules.

As soon as a petition for guardianship is filed, a second attorney is appointed by the court. This attorney will visit the proposed person with a disability and file a report with the Court.

Based upon the physician’s affidavit, and the second attorney’s report, the Court may require the proposed disabled person to be served with the petition for guardianship.

All interested parties must be served with a copy of the petition. “Interested party” is defined very broadly by court rules; it may include a facility that the proposed ward is living in. If someone entitled to receive notice does not sign a consent, then the Court will conduct a hearing.

All the property of the proposed ward should be listed in the petition along with marital status, age current residence, all interested parties, next of kin, whether there is a will or power of attorney, and whether the proposed ward has an attorney.

While this seems very intrusive, all guardianship proceedings are confidential.

Guardianship can be useful when:

1. An adult can no longer take care of him or herself and there is no power of attorney.
2. When a disabled person has a power of attorney, but it is being misused.
3. When the disabled person has a power of attorney, but the power of attorney is inadequate.
4. When a person is being exploited.
5. When medical decisions must be made and there is not a valid healthcare directive.
6. When healthcare decisions need to be made and there is no next of kin.
7. When several parties with conflicting interests are trying to act for the disabled person.

Guardianship proceedings are paid from the proposed disabled person’s s property. Guardians are permitted to be paid for their services.

An inventory must be filed with the Court. Accountings can be required every year by the Court. When the ward dies, the guardianship property is frozen and the guardianship must be dissolved by the court.

The guardian can spend only a certain amount each month without approval; any expenses in excess of the stated amount must be approved by the Court. However, the guardian is not required to use his or her personal funds towards the guardianship. Section 3922(d). He or she may also employ, retain, or consult accountants, investment counsel, attorneys-at-law and other professional advisers and pay their reasonable fees and expenses. Section 3921(e).

Guardianships can be avoided by having an adequate power of attorney. In my experience, most power of attorneys are in adequate. The state statutory form is rarely filled out correctly. The form does not contemplate common estate planning or elder law scenarios.

Ironically, when the current power of attorney statute was created, it was thought that a statutory form needed to be promulgated to guide people. However, at most power of attorney seminars I attend, the presenters who teach the requirements for lawyers to instruct clients on powers of attorney are so complex that have no correlation with the statutory form.

Powers of attorneys are complex, and financial institutions review them carefully and impose their own requirements upon them. The New York Times in May 2016 ran an exposé on financial institutions and banks rejecting valid powers of attorney because of internal or perceived regulatory rules.

Another method of handling property in incapacity is to create a trust. Trusts are more complex than powers of attorneys, but property is held by the trust not by an individual. It easier for a trustee, who has legal title to the property in a trust, to manage trust property, than an agent for a power of attorney who is managing another person’s property.

William Erhart is a Certified Elder Law Attorney certified by the National Elder Law Foundation, the only accredited authority by the American Bar Association. The Elder Law Attorneys at Estate & Elder Law Services have over sixty years’ experience serving Delaware seniors. For a free consultation, call 302-651-0113 and mention this blog. Or email “[email protected].