Guardianship and Trust Administration

Guardianship

According to the American Bar Association Commission on Law and Aging, guardianship and conservatorship involve the following:

"Guardianship or Conservatorship is the legal tool of last resort for decision-making and management of your affairs."

A guardian is usually court-appointed to manage the property and/or personal affairs of persons who are not capable to do so for themselves. Conservatorship typically involves management of just one's assets without control over the person. The court can limit the guardian's authority to specific areas of need or give unlimited power to the guardian.

People need a guardian when they cannot make decisions themselves and serious harm may come to them. In its most basic form, guardianship of person encompasses the job of making decisions for a person who has been legally declared incapacitated, incompetent or legally disabled.

If you already have an agent or family member under a durable power of attorney or under a health care advance directive, the court will normally determine that the agent's or family member's authority shall continue to function.

Because of the critical nature of the relationships among those involved - the family, the individual protected person and the guardian, the National Guardianship Association, Inc. (NGA) certifies guardians and encourages them to adopt a specific code of ethics. It provides its members with education and training and the opportunity to set a national agenda to ensure standards of excellence.

Trust Administration and Management

A trust is a legal document that "entrusts" property to a trustee to manage that property for a person or persons whom the maker of the trust wants to benefit. In most cases, the maker of a trust is creating a benefit for a loved one that will be distributed after his or her death. Trusts usually involve very specific and detailed instructions on how a trustee is to carry out the duty of managing or distributing the property on behalf of a beneficiary. A trustee can be a bank, an attorney, an individual, or a trust company.

A trustee will manage investments, keep records, manage assets, and prepare court accountings--paying bills and (depending on the nature of the trust) medical expenses, charitable gifts, inheritances or other distributions of income and principal.

A trust relationship is also created in a will when the maker of the will specifies an entity to be an executor or personal representative of the estate. This person or company then becomes a trustee for the deceased individual who made the will. The responsibilities of an executor in settling the estate of a deceased person include collecting debts, settling claims for debt and taxes, accounting for assets to the courts, and distributing wealth to beneficiaries.

A third party trust officer such as a bank, attorney or trust company may also assume the role of a guardian for a minor child, distributing assets in a prearranged manner when the child becomes an adult. Or the trust officer may also act on behalf of a developmentally disabled or mentally retarded person distributing assets under a special needs trust.

Trusts are most often used with estate planning. The purpose of estate planning is to minimize the cost and streamline the process of distributing assets to the next generation. Here are some of the more common reasons people create trusts in estate planning:

• To avoid probate
• To minimize or eliminate estate taxes
• To create life insurance trusts
• To avoid capital gains taxes on the sale of property
• To create an annuity income through charitable gifting
• To receive a charitable gifting income tax deduction
• To manage assets on behalf of a minor or someone who cannot handle his or her own affairs

Trust companies are valuable partners in the management of trusts and in the process of estate planning. These companies, for a small fee, will manage and invest assets, maintain escrow accounts, hold property pending an exchange sale, provide life insurance and income annuities, and provide safekeeping of valuables.

Many people who create trusts or wills or both will designate a trust company or bank to be a trustee for their property instead of using a member of the family or close friend to do this. The reason is that, all too often, assets are mismanaged or even stolen by family members or friends. Using a trust company that has a legally mandated, public fiduciary responsibility avoids this problem.