It is no secret that Americans generally live longer and enjoy greater net worth in old age today than they did even just a few generations ago. While this generally good news, we also live in an internet-driven, fraud ridden society that may be difficult for older family members and loved ones to navigate. Options such as power of attorney designations and guardianship arrangements allow trusted family members (or sometimes friends or professionals) to assist loved ones in managing their care and finances as they age. Although we generally think of “estate planning” as health directives and last will and testaments that go into effect at or near end of one’s life, mechanisms such as a power of attorney and guardianship designation are also forms of “estate planning” that can be essential under certain circumstances. New Jersey has specific rules and statutes dealing with each, which are the focus of this article.
Appointing a power of attorney is an option for family members who must assist or manage an elderly loved one’s finances and medical care. A power of attorney is a signed, notarized document by which the person needing assistance, known as the principal, authorizes someone else to perform specific acts on their behalf. The “power” may be general or limited to specific types of transactions. A “durable” power of attorney remains effective despite the principal’s later disability or incapacity, or may become effective upon such a determination. A person appointed power of attorney, also called an attorney-in-fact or agent, is considered a “fiduciary,” meaning they must act in the best interest of the principal.
While a power of attorney may grant far-reaching authority that, unfortunately, can be misused, New Jersey law requires the attorney-in-fact to maintain records of all transactions and “account” for their actions on the request of the principal, an appointed guardian, conservator or executor. If an attorney-in-fact misuses their authority by acting in their own interest, or in any way not consistent with the principal’s interest, they can be held liable for damages (including, in some instances, attorney’s fees associated with enforcement).
When a loved one becomes incapacitated, for instance, because they suffer from dementia or Alzheimer’s disease, an application for guardianship may be appropriate. Guardianship may be limited to individualized needs or general in scope, and may apply to either the person, their property or both. Guardianship of the person applies when someone must be looked after but has little or no assets to manage. Guardianship of the property (or estate) means the guardian only manages financial affairs. Full or general guardianship encompasses both. This sounds like an extreme measure, and to some extent it is. The law permits capable adults to make their own decisions, even bad ones, unless and until they are declared incapacitated.
An application for guardianship is not a simple form, and the standard applied by Courts in order to declare an adult incapacitated is very high. In order to appoint a guardian, New Jersey Courts must first find the person for whom the application is made is impaired due to mental illness or mental deficiency to the extent that they lack sufficient capacity to govern themselves and manage their own affairs. Incapacity may also stem from physical illness, disability, chronic drug or alcohol use, or a developmental disability.
Potential guardians, usually close family members, may apply for guardianship by filing a petition with the Court in the county where their relative resides. The petition must include two physician reports supporting a finding of incapacity. Getting these reports can be a task on its own, and the Court will require a sufficient explanation if they are not included and may order an independent exam.
The petition must also include a certification as to the relative’s assets and certification of the proposed guardian’s criminal and judgment history. After a petition is filed, the Court will appoint an independent attorney to represent the alleged incapacitated person. The appointed attorney will meet with everyone involved and prepare a report of their findings and recommendations for the Court.
If the Court finds a guardianship arrangement is appropriate, it will require the potential guardian to pass a background and credit check before authorizing them to act as guardian. A guardian of the property must set up a guardianship bank account, apply for a tax identification number, maintain records of transactions and file periodic reports with the Court. They may be required to post a bond to protect the estate and may entitled to compensation for their services.
Where a person is not declared incompetent but is unable to care for or manage their property or provide for themselves due advanced age, illness or physical infirmity, the Court may appoint a conservator to manage their finances rather than a guardian.
The process of applying for a guardianship can be difficult and stressful. If the relative in need objects, or if family members disagree, it can also become extremely adversarial. Planning for financial, medical or other personal decisions ahead of time is ideal. However, when this cannot be done, the last resort may be bringing the situation before the Court and trying to find a solution everyone can live with, whether it results in a determination of incapacity or not.
If you have questions about estate and trust planning, or need help navigating power of attorney and guardianship arrangements for your elderly loved ones, the experienced attorneys at KingBarnes, LLC can help. With three convenient locations in South Jersey: Northfield, North Wildwood, and Cape May, our team is here to assist you with all of your estate planning needs. Contact us today to schedule a consultation.
