This comment provides a brief and incomplete educational introduction to legal alternatives to a court ordered and supervised guardianship for an elderly incapacitated individual. Always consult experienced legal, estate planning, medical, financial, and tax professionals in specific situations.
There are a number of well-known and easily created documents that a competent individual should consider preparing well in advance of incapacity. A current will is fundamental. Other items include a medical power of attorney, durable power of attorney, joint accounts with survivorship, joint ownership generally, and a variety of trust funds. Of course, review how trusted individuals will access safety deposit boxes, storage facilities, and passwords for computers, cellphones, and accounts generally. One should not hide coins, jewelry, and money so that heirs are either completely unaware of their existence or must conduct a "treasure hunt." Utilize a safety deposit box. All of this should be discussed with an experienced professional.
Somewhat like a power of attorney, many statutes allow the creation of a "Supported Decision-Making Agreement" in which an adult with disabilities, but not incapacitated, agrees with a "supporter" to assist her or him in understanding, making, and carrying-out a variety of life decisions. It is also possible to designate a "Geriatric Care Manager" that may conduct assessments and coordinate services.
Some states allow the deposit of money in a "Court's Registry" with the money then placed in an interest-bearing account. However, there are statutory fees associated with this service. Under a "Mini-Administration," specified individuals are allowed to withdraw funds, under bond, to be expended for the benefit of the incapacitated person. After a final accounting is approved by the court, the bond may be released.
If an incapacitated individual owns a business, a court may be required to appoint a receiver to conduct or liquidate the business. Again, statutory fees may be involved. Receivership is best avoided by a well-prepared succession plan, typically triggered when a business founder or proprietor anticipates retirement. Right of first refusal and buy-sell agreements with business partners are desirable.
The Social Security Administration and Department of Veteran's Affairs allow the appointment of a person to manage benefits without the court appointment of a guardian. There are also a variety of state and federal agency services especially designed for the disabled or elderly. All of these should be researched.
State statutes allow surrogate medical decision making in the absence of documents designating a decision maker. There is a statutory hierarchy of potential decision makers beginning with the individual's spouse and then flowing to adult children, and parents. However, there may be limitations on the types of decisions that may be made by the undocumented statutory surrogate. A well prepared advance medical power of attorney and related directives are best.
Many states allow a concerned physician or other individual to report a potentially dangerous elderly driver (often above age 80 or 85) for possible retesting. There is also a "Family Driving Agreement" under which an individual designates in writing someone to advise her or him when to stop driving.
If there is a dispute among family members concerning the need for a guardianship, mediation and a "Family Settlement Agreement" may be possible. These typically require court approval to be enforceable but may establish less demanding provisions than a traditional guardianship for the disabled or incapacitated person. It may be possible to create safekeeping or "freeze" agreements with financial institutions.
If concerned individuals fear that an individual is being isolated and held against her or his will, or subjected to abuse and undue influence, it may be possible to petition a court to issue a Writ of Habeas Corpus, demanding that the individual in question be produced in open court and that the total circumstances be opened to inquiry. These situations easily produce family divisions and might in part be prevented by the individual, while clearly competent, preparing a statement of her or his wishes for the future, from living arrangements through funeral planning. Expressions of desired future living arrangements might be coordinated with the individuals named in advance planning documents and joint accounts, etc.
State statutes and judicial decisions frequently have somewhat differing legal standards for determining if an individual has the legal capacity to create a will, to enter into a binding contract, or to require a guardian. To create a will, the traditional standard is to be of "sound mind" that involves understanding the general nature and extent of one's property and being able to formulate a plan for its disposition upon death. To create a contract, one typically must, at the time of contracting, appreciate the effect of what she or he was doing and understand the nature and consequences of her or his acts and the business she or he was transacting. To require a guardian, one must be "substantially unable" to care for herself or himself. These standards are often understood to mean that it is easiest to have the capacity to make a will and hardest to prove the necessity for a guardianship, with contractual capacity somewhat between the two. Proof of these standards requires both factual testimony and frequently professional medical or psychological evaluation. The legal presumption is that an individual has legal capacity with the burden of proof being on one who disputes capacity.
A contract entered into with an incapacitated individual is voidable at the option of that person only but not the other party to the contract. Steps must be taken by the incapacitated person or her or his representative to disaffirm the contract. Otherwise, the contract is valid and enforceable. However, if an individual is declared mentally incompetent by judicial action, subsequent contracts are void and unenforceable without any intermediate steps being taken.
Incapacity short of permanent incompetency, as is well known, may come and go depending upon the day, situation, and overall circumstances. A variety of disorders, conditions, diseases, and sometimes medication interactions may produce temporary or reversible incapacity. Legally, the attempt is to determine capacity at the moment the will or contract was signed. For this reason, many commentators suggest that the will signing (execution) be recorded on video with some conversation before and after the signing.
Undue influence compromises an otherwise capable individual's free will. An individual may be found to be legally susceptible to undue influence due to bad health, dependency, or depression, for example. Common situations involve isolation, excessive-persuasion, or flattery. If undue influence exists, agreements such as contracts or wills may be invalidated. A finding of undue influence is very dependent on the total circumstances. Has the individual acted "out of character" or rejected the "natural objects of her or his bounty?"
Many states have created an "Elder Bill of Rights" relevant to persons who are legal residents of the particular state and are age 60 or 65 and older. It is somewhat a confirmation of personal autonomy and basic freedom of choice. Note that "visitors" or "non-residents" may not be included under this legislation or be legally able to assert its rights. It is essential that the elderly individual clearly establish a state of residency. Sometimes a person with diminished capacity is moved to another state to live with a relative but her or his driver's license, voting registration, bank accounts, and home remain in the original state. Lack of clarity concerning residency may create problems such as eligibility for state programs designed for "residents" and jurisdictional issues if a guardianship is required or contested.
An Elder Bill of Rights may place duties on caretakers and nursing homes and limit transfers and discharges. It may also impose an affirmative duty to report abuse, neglect, or exploitation. These requirements coordinate with state criminal code provisions related to injury to an elderly or disabled person, theft, misappropriation of fiduciary property, securing the execution (signing) of documents by deception, and exploitation of a child, elderly individual or disabled individual.
Be aware of the increasing use of contractual arbitration clauses and related provisions limiting the right to sue or limiting damages. Juries are frequently very sympathetic to an elderly plaintiff. These provisions exclude jury trials. They appear in agreements prepared by nursing homes, physicians, and care facilities. They tend to be upheld by courts.
A very few states by statute require a bold type notice in the care contract that it contains an arbitration clause or even require an attorney for the individual to sign that the contract has been examined and reviewed. Some states require attorney representation in marriage prenuptial agreements and these few health care statures generally follow that model. Frequently arbitration clauses are either not mentioned in advance or presented in a take-it-or-leave-it fashion. Of course, the best course of action is to carefully exercise due diligence before selecting a nursing home, physician, or care facility. For example, check with licensing agencies and a variety of consumer protection agencies, as well family, friends, and Internet research.
This comment provides an incomplete educational overview of a complex subject and is not intended to provide legal, disability planning, or estate planning advice. Always consult experienced professionals in specific situations.