Guardianship: general considerations

A guardian is an individual or institution such as a bank trust department appointed by the Texas probate court to care for an incapacitated person. There can be a “guardian of the person” and a “guardian of the estate.” The person who needs protection of a guardian is called a “ward.” Appointment of a guardian is started when a “qualified person” files an application with the court. There are rules that apply in determining who shall be appointed where more than one person seeks to be appointed. There are many bodies of law that affect guardianship issues. Just one of those bodies is the part of the Texas Probate Code on Guardianship. Those who wish to review that part of Texas law can connect to the statutes through this link.

Parents may execute intervivos designation of guardians for their children and themselves in advance of actual need. Texas law will support the appointment of the persons named unless found to be not qualified for any of various reasons. The rules impose some strict requirements and may be accessed through this link to Texas Probate Code sections 676 and forward.

Avoiding Guardianships: Reasons and Methods

Guardianship creates a public record of all assets subject to administration for the benefit of the ward. Sometimes it is preferred to avoid making public records of the estate, the ward’s condition, and the proceedings before the court. And even where a guardianship should be established to maximize the protection provided the ward, it is still possible to conceal much information from the public record by using a trust to hold and manage all assets. Under the law an annual accounting must be filed with the court showing all assets, income, dispositions, distributions, and all other activity pertaining to the assets administered by the guardian. The accounting becomes part of the record and there are often reasons to not disclose the kinds of assets managed and applied for the benefit of the ward – the value of those assets, the locations of those assets, the account numbers, the identity of institutions and the like. See Trusts: Avoid Public disclosure of Assets.

It can all be avoided if there is a trust that holds assets applied for the ward’s benefit. Because the trustee controls the assets and the guardian does NOT have any duties with regard to trust management, the trust’s assets are not part of the annual accountings. Account numbers are not revealed – asset kind and character is not disclosed – aggregate values are not made part of the record. Only trust distributions paid to the ward’s guardianship estate show up as an item of income received. It is prudent to explore these matters in conjunction with development of a coherent plan to provide for the care and protection of persons who may require appointment of a guardian at some time.

Guardian of the Person of the Ward:

Guardians can be obligated to maintain custody of a minor ward. In such circumstances the guardian is said to stand in loco parentis – to have the duties and obligations or a natural parent. Parents are considered the “natural guardian” of minors. It is not common for a non-parent to be designated as guardian of a minor; but there are times when it happens. For example, when a child will attend school in a district other than where the child resides with parents, the parents will sometimes designate a person residing in the preferred school district as the child’s guardian. A guardian of the person of a minor must generally diligently attend to the ward’s health, education, and support. Guardians have authority to separate minor wards from the company of improper associates. Guardians have authority to obtain services for the ward. Legal services, medical attention, tutoring, transportation and etc. – all manner of services that promote the health, maintenance and education of the ward. Guardians have authority to purchase and make contracts to acquire goods and services for the benefit of the ward.

Guardian of the Estate of the Ward:

Minors and incompetent persons may own property. However, such persons have no legal capacity to manage or control the disposition of their estate. When a guardian is appointed to manage the ward’s assets a full and detailed “inventory” of all assets must be promptly filed with the court. A bond must be posted to assure the guardian’s faithful performance of all duties. Every year the guardian must provide a detailed accounting to the court. The accounting must reflect all things that came to or were removed from the ward’s estate. All income, expenses, sales, acquisitions and all other transactions affecting the estate must be shown in the accounting. Once filed, the detailed accounting becomes a matter of public record. The purpose of the accounting requirement is to permit the objective determination of whether the guardian has acted properly in regard to the ward’s assets.

In all events, the guardian’s accounting must establish that the estate was properly managed and applied in the most advantageous way. If improper or unlawful expenditures are made the guardian is personally liable. The guardian is obligated to care for the estate as “a prudent man would manage his own property.” Generally, a court must authorize the sale of estate assets. In proper cases, the court may enter an order allowing the disposition of funds for the support of the ward’s spouse, children or parents. Where realty is held in common with other owners the guardian may seek to partition the property in the same way any other owner could. Before investing the estate in property or securities, the guardian must obtain the court’s approval. The application filed to obtain approval must express why the guardian has concluded the investment would be beneficial. Charitable contributions can be authorized by the court. For example, where a significant tax benefit would be produced by a plan that involves charitable giving. As part of the plan, gifts may be made on approval by the court to (1) charitable organizations if it can be shown the ward would have an interest in supporting such organizations, (2) the ward’s heirs, and (3) to devisees named in the ward’s will, if such exists. There are limitations that restrict the amount that may be gifted.

Briefly stated, sales, investments, transfers to anyone other than the ward or persons contracted to provide proper goods and services must be submitted to the court for approval. Every time, the application and all related matters become part of the public record. Managing the estate will cost money, will require court-involvement, and is a public record that reveals a great deal of otherwise private information.

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