Guardians can’t sell real property without court approval

If you’ve been appointed as the Guardian of the Property (Guardian of the estate) for an incapacitated person, you probably know that you have a lot of authority and power regarding the ward’s assets. While you do have to file an annual accounting in New Jersey as specified in the Judgment appointing Guardian (NJSA 3B:12-42), in general the New Jersey probate court does not micromanage the guardianship (unlike some other states). The guardian is expected to exercise prudent judgment in deciding what and when to spend, and how to allocate investments, all in the ward’s best interests (NJSA 3B:12-43, 44 and 45).

There are specific rules regarding real estate– NJSA 3B:12-49 and 12-59, and N.J. R. 4:94-1 to 7. If a guardian needs to sell or mortgage or purchase real property, a Verified Complaint must be filed with the Superior Court, Chancery Division, Probate Part. For a request to sell, the Complaint should be supported by proofs concerning the assets, income and budget needs of the ward, need for the transaction, value of the property, and proposed listing agreement.need for the transaction. Some counties will not only require a proceeding to get permission to sell, but a second proceeding to confirm the contract sale price. Similar appropriate proofs are needed if the guardian wishes to purchase property for the ward or his family, or wishes to place or refinance a mortgage on it to obtain cash, such as using a reverse mortgage when the ward is starting to run out of money but could safely remain in the home.

The process can take months, so it’s important not tyo wait until the last minute. Even if we can pull together the Complaint and proofs quickly, it may not be heard by a court for months. A weather mishap or other emergency can cause further delays. And sometimes a family member shows up at the last minute and throws sand in the gears. I had a case once where my client was the guardian and her ward owned a property that his daughter lived in. The daughter had been paying the taxes and insurance and utilities for a few years in place of rent, but then stopped paying, causing obvious problems. The ward was in a nursing home, applying for Medicaid, and Medicaid rules required the property to be listed for sale. We filed a petition for court permission to sell. Everyone was served. A few days before the court date, the daughter wrote a letter objecting to the sale because she wanted to stay there. As a result, the court denied the petition and placed it on the contested list, a process that can go on for many, many months. The property was now at risk of being lost to a tax sale because no one had any money to pay the taxes. It was a huge problem.

Another example involves reverse mortgages to pay for home care. Along with the delay in the court system, it can take several months administratively to close on a reverse mortgage. So the guardian shouldn’t wait until the money is running out before starting the process — how will the guardian keep paying for the home care?

As I like to say, careful planning can prevent a crisis.

Call us for advice and representation on guardianship issues throughout New Jersey… 732-382-6070

There are some limits on what Guardians in NJ can do without court approval

A Legal Guardian is a person appointed by a court to be the decision-maker for a person who is incapacitated as defined by law, and unable to manage all or some of his/her affairs. The court rules provide the complex procedures (N.J. R. 4:86-1 et seq), but the powers and duties of the guardian, as well as further details about how the court has to handle the case, are found in the statutes, such as N.J.S.A. 3B:12-48, 12-49 and  12-50.

The Guardian “steps into the shoes” of the “ward” (incapacitated person), which means that unless the Judgment of Incapacity and Letters of Guardianship issued by the court have specific limitations in them, the Guardian of the Estate (Property) may take care of banking, contracts, insurance claims, applications for benefits and insurances, securities transactions, hiring and firing of persons to work for the ward, and so on. The Guardian of the Person may decide where the ward will live, obtain and consent to any kind of medical treatment, and may decline consent to some medical treatment, without obtaining further court approval. However, certain transactions do require court approval.

For example, the Guardian may not make gifts to other people with the ward’s assets or make changes to the form of ownership or titling of a ward’s assets without court permission. See N.J.S.A. 3B:12-49 (Court can authorize Guardian to do so); 3B:12-58 (gifts) and 3B:12-50 and 3B:12-62. Several cases in New Jersey have confirmed the authority of the Court to allows guardians to transfer assets: In re Trott (Estate Tax reduction planning – 1972); Matter of Manuel Labis (Medicaid planning transfers to spouse – 1998), and In re Keri ( Medicaid planning, transfers to adult children – NJ Supreme Court, 2004). Based on these precedents,  we have also obtained court authorization to transfer assets to disabled children or to trusts for family members. The plaintiff needs to include this request in the initial Complaint for Guardianship, or the Guardian will later need to file a Verified Complaint and Order to Show Cause, serve it on all the interested parties, and go back to court.

Also, the ward’s real estate may not be sold or mortgaged without court authorization. Again, a Verified Complaint is required, with service on all interested parties.The Court rules and specific procedures are at N.J. R. 4:94-1 to 7. The Court may authorize a sale if satisfied that it is in the ward’s best interest.See N.J.S.A. 3B:12-49. The guardian needs to provide the Court with proof of value and in some cases the actual proposed contract for approval.

I must say, we  have repeatedly encountered situations over the years in which guardians thought they could “make annual exclusion gifts” or sign contracts for sale of property without going back to court. Most situations have legal remedies, but complications can ensue if the guardian doesn’t have authorization, not the least of which is a cloud on the title of the property.

Call us if you are filing for guardianship or need  post-judgment court orders … 732-382-6070