By: Virginia Hammerle, Hammerle Finley Law Firm, SENIOR Magazine (Denton edition)
There are certain things that you want to avoid in your life—such as the plague, an IRS audit, and an earthquake measuring 7.5 or better. You need to add one more thing to the list; a Texas Guardianship.
There are few legal proceedings that are more invasive, embarrassing, costly, and secretive than a Guardianship. There are also few courts where the judge, county employees and attorneys are more cozy than the Probate Court, which has jurisdiction over Guardianships. The problems with the Texas system could fill a very large book. You do not want to get into one if you can avoid it.
Luckily, there are a few precautions that you can take now that will make a guardianship less likely.
Medical Power of Attorney is a document where you designate the person who will make your medical decisions if you are incapacitated. This, hopefully, will prevent the court from appointing a “guardian of the person” to oversee your care.
Durable Power of Attorney is a document where you designate a person or entity who will make decisions regarding your financial affairs. If the powers are broad enough (the statutory form doesn’t go quite as far as it should), then this may prevent the court from appointing a “guardian of the estate.” One point often forgotten is that the POA doesn’t prohibit you from also handling your assets, a problem if you have Alzheimer’s or another type of disease/disability that divorces you from reality.
A Trust is a document that actually establishes a legal entity with specific powers. The Trust holds assets and is managed by a Trustee, often a corporate fiduciary which is capable of making strategic investment decisions. The bigger your estate the more likely it is that you will need a Trust.
A Limited Liability Corporation and Family Limited Partnership are each entities that can be structured specifically for your needs. Like the Trust, these can place the management of your affairs in the hands of a third party.
Transfer of Assets to a Third Party—Gifting is a strategy also often used for Medicaid planning. This takes the estate out of your hands, but is very dangerous for a lot of reasons, including adverse tax implications and the danger of being defrauded.
Annuity moves a large bulk of assets into a company, but the income stream will still be part of your estate and subject to a guardianship if not combined with one of the other strategies.
These strategies should work if the court exercises restraint in interpretation of the law that, although you are incapacitated, a necessity does not exist for a guardianship because you have in place the planning documents. Sometimes, though, the court focuses on the incapacity and ignores the precautions you have taken. The court can then vacate Medical Power of Attorney, the Durable Power of Attorney, and “bust” the trust nullify the gifting or transfer, and place your corporate, partnership or income interests under the power of a guardian.
That said, it’s better to have the documents in place so an argument can at least be made that you don’t need a guardian. There’s even one more document you can put in place for the worst case scenario; you can designate your preference for who you want as your guardian.
Virginia Hammerle can be reached via www.hammerle.com or at 940-383-9300. Virginia Hammerle owns Hammerle Finley Law Firm and is a member of National Academy of Elder Law Attorneys. Her article is for general reference and does not constitute legal advice.