Once appointed, Guardian should inform third parties

The entry of a Judgment appointing a legal Guardian for an incapacitated person may be the end of the court process, but it marks the start of a new process in which the Guardian has many obligations and responsibilities. After all, the Guardian’s primary obligation is to protect the personal and financial interests of the ward. One of these responsibilities is to “let the world know” that the individual has been declared by the Court to lack capacity to govern him/herself [in full or in part] and that another person has been vested by the Court with authority to make major decisions for that person. The Guardian should send a copy of the Judgment or Surrogate Certificates to every person or entity who is delivering services or holding money for the incapacitated person and should direct the necessary communications accordingly. This could include health care providers, financial advisors, banks, retirement fund administrators, etc.

There is a legal concept referred to as “actual notice” and “constructive notice.”  Legal ramifications flow from whether another party had actual notice, constructive notice or no notice. For example, when a Will is admitted to probate, the estate’s Executor/administrator is obligated to give notice of the probate to each person who is an heir at law and each person who is a named beneficiary (and there are court rules and case law specifying how notice can be given if it isn’t certain just where the person resides). N.J.R. 4:80-6. It is the giving of the notice of probate that then triggers a limited time period for a person to file a challenge to the Will. N.J.R. 4:85-1.

A sad case in another State illustrates what can happen if actual notice of the incapacity and guardianship aren’t given. In this case, M.B. had been working and had accumulated an ESOP stock plan benefit. He was declared to be incapacitated, and a guardian (conservator) was appointed. He was working in a grocery store at that time. The guardian gave a copy of the judgment to a person at the store and instructed them to direct-deposit his pay to a certain account. Some time later, M.B. retired at age 56. He requested and received his $78,509 of ESOP stock benefits. The Plan Administrator did not know that a guardian had been appointed over his property, and did not know about the interactions involving the direct-deposit of the paycheck. The plan administrator granted his request and turned over the money to him. He was a vulnerable adult, and unfortunately quickly lost all his money to an internet scammer.

 

The Guardian asked the company to reinstate the benefit. The request was denied, and suit was filed under ERISA. The federal district court for the Northern District of Georgia granted summary judgment in favor of the company (Publix Markets), and the Eleventh Circuit U.S. Court of Appeals affirmed. The court held that “actual knowledge” of M.B.’s incapacity had to have been received by the  Publix Retirement Department. The Guardian’s communication with a Publix employee regarding payroll issues did not satisfy this requirement. Bauman v. Publix Supermarkets Inc.,, 2017 WL 4510322 (11th Cir. Oct. 10, 2017) (unpublished).

Call us for legal advice concerning the duties of a guardian and carrying out the responsibilities of guardianship, and for legal actions such as sale of property that  a guardian may need to file …. 732-382-6070

“Avoiding Probate” can cause more problems than it prevents

You may have heard that you should set things up to “avoid probate.” Bank or brokerage personnel may have recommended that you ” add a pay on death beneficiary, or a joint owner, so you can avoid probate.” There are fallacies built into that advice which can lead to unintended complications after death.

Estate administration is a process that can include many elements that aren’t known until after the death. These may include: the necessity to file & pay estate and inheritance taxes; settling up debts; selling real estate; paying taxes & costs to maintain property while it’s on the market; preparing and filing the final income tax returns; collecting money that’s owed to the estate by a family member or someone else; selling a small business; finding missing heirs. It can easily take a year to get everything resolved.

The probate of a Will at the County Surrogate in NJ — and the mailing out of the Notice of Probate to the heirs at law and the people named as beneficiaries in the Will — is the minimal initial step in the process. Everything after that is called “administration.”  The Executor of the Estate (who’s named in the Will) or the Administrator appointed by the Court (if there was no Will or the Executor is unable to serve) needs to have access to cash to fund an estate account so that all of these tasks can be handled smoothly.The Executor handles the assets that are in the decedent’s name along, and can liquidate them and transfer the funds to the estate account to use for expenses.

With very limited exceptions, every asset owned by the decedent would be included in the value of the estate when calculating death taxes, even if it has a pay-on-death beneficiary, and having the assets in this non-probate asset form doesn’t eliminate the need for the Executor to deal with the issues just listed.

On many occasions I have had to advise Executors in cases where all of the assets except the house were jointly owned or were set up as pay-on-death to various members of the family. At the time of death, those assets are presumed to be the property of the person whose name was placed on the account. They are not presumed to be “estate property” to be used for expenses. This means that unless those people choose to either give the money back to the estate (by disregarding their ownership) or lend the cash to the estate, the Executor won’t have cash for operations. If one child agrees to give money back and the others don’t … you can see the problem. When the estate is subject to inheritance tax or estate tax, there can be yet further problems because the Executor is obligated to remit the tax, but doesn’t have access to funds for that purpose. If the pay-on-death owner isn’t really known to the Executor, the Executor may need to chase them down to contribute their pro rata share of funds for the tax. An unpleasant task at best.

There are circumstances where it is appropriate and reasonable — from a legal standpoint — to place beneficiaries or co-owners on certain assets. The best estate plan for a married person may be a terrible plan for an unmarried or widowed person. There is no “one size fits all.” We call it “estate planning” because the client and the lawyer together evaluate the estate  — big or small — and plan for ease of administration. The takeaway is that making everything a joint or POD asset to simply “avoid probate” won’t necessarily “make things easier,”  can often prove to be counterproductive, and can cause greater expense, delays and problems for the estate in the long run.

For legal advice on individualized Estate Planning, and for assistance with Estate Administration, call 732-382-6070