Planning for Disability: Durable Power of Attorney, Guardianship, or Trust? (Part Two)

Following up from my last blog post, assuming you are mentally and physically “vertical” when you come in for your estate and elder law plan with our office, you will be able to create your own plan for disability or chronic illness.  Legally, you call your own shots as long as you are able to.

What about when you cannot do so any longer?  What is the best way to address that possible risk?

Elder law planning is very holistic in nature, seeking the most practical, cost effective, long range solution to each particular client’s and family’s own situation.  Also discussed last time were Florida’s Durable Power of Attorney (“DPOA”) act, as set forth in Florida Statutes Chapter 709, Part II (ss. 709.2101 – 709.2402); Florida Guardianship, covered by Chapter 744 of the Florida Statutes; and the Florida Trust Code, now covered by Chapter 738 of the Florida Statutes.

Here’s a main link to the 2011 Florida Statutes online, and you can navigate further from there as desired, or review Part 1 of this blog for specific links:

“So how do the DPOA, Guardianship of the Property, and Trust laws work together in a particular planning case?”

Let’s look at a few examples to compare and contrast.

Example 1:  Betty Brown has no legal advance planning in place.  However, her daughter is a joint owner on Betty’s primary credit union account.  Betty’s daughter can therefore write and sign checks for Betty at any time, including at the time of Betty’s incapacity.  All other things being equal, Betty’s daughter would also succeed her to that account as the sole owner upon Betty’s death.  The downside is that Betty’s credit union account is exposed to garnishment to satisfy any judgments against her daughter, which should not be acceptable to Betty from an asset protection standpoint, unless Betty keeps a very small balance in that particular account.  That risk could have been avoided if Betty’s daughter either held a DPOA for Betty, or if Betty had simply designated her daughter as her “Agent” on the signature card for that account, versus making her daughter a co-owner of the account.  Also, Betty could have designated that her daughter still receive the account upon Betty’s death by naming her daughter as the beneficiary of that account, often abbreviated as “POD”, “TOD”, or “ITF.”  No post-mortem probate for Betty is involved here.

Example 2:  Wilma White has a Revocable Living Trust (“RLT”).  Her main account at the credit union is styled “Wilma White, Trustee of the Wilma White RLT.”  Her daughter is the Successor Trustee under Wilma’s RLT.  Wilma alone would be authorized to sign checks on the account as Trustee.  In the event of Wilma being unable to continue to serve as Trustee of the RLT, as set forth therein, Wilma’s daughter would have to present basic evidence to the credit union to show that she was then succeeding Wilma as the current active and serving Successor Trustee as to that account styled in the RLT.  (Note:  Most credit unions will have the customer complete a basic form identifying the Successor Trustee of the RLT in advance, at the time of account set up, to ease the transition of the account as needed in the future.)  Upon Wilma’s death, her daughter as Successor Trustee of the RLT will hold, manage, invest, and distribute the account proceeds as Successor Trustee in accordance with the terms of the RLT.  No post-mortem probate for Betty is involved.

Example 3:  Rhonda Reed had no advance legal documents in place and no joint ownership or agency designation in place as to her primary bank account.  She has three children who live out of town.  In the event that Rhonda becomes unable to manage her own affairs, and unable to access or deal with her bank account, then a legal incapacity proceeding and guardianship action would be necessary before her bank account could be further utilized.  Obviously, there can be many variations on the theme for Rhonda’s situation, but the children are obviously Rhonda’s next of kin and would have priority under Florida Guardianship law to be appointed as an emergency and permanent guardian(s).  If there is agreement among the children, then the Guardianship Court would likely go with the children’s agreement as to the appointed Guardian.  However, if there is not agreement, then the Court may essentially conduct a legal “beauty contest” and appoint one or more of the children, or even appoint a local professional guardian, attorney or CPA to so serve, as the circumstances warrant and as may appear just and proper to the Court.  Once the Guardian is appointed, the Guardian will be able to access Rhonda’s account, but likely would not be able to go beyond that (e.g., sell home, etc.), unless specifically authorized to do so without Court approval under the then current Florida Guardianship Act.  As you can see, Guardianship is uncertain, not super cost-effective, and a formalized legal proceeding governed by intricate and specific statutory guidelines.  I personally don’t like to handle guardianships any more, even though our firm financially makes more money on a normal guardianship case than we would on a normal RLT case.

There are countless variations on the above examples, and I might further expand on this theme in the future.  Certainly none of the above scenarios is surprising for an estate planning/elder law attorney to encounter on a given day.  I’m personally a big believer in preplanning with adequate legal documents in place, and also with institution specific procedures followed as directed by your financial institution of choice, to best suit your own desired plan.  That approach tends to be more cost effective, less stressful, and yield better, more predictable, results.

One of the rewarding aspects of my profession is that I daily see creative and innovative use of available Florida laws, statutory, case law, and regulatory, along with real world community service and public assistance services, employed to the benefit of senior adults in need.  If you have a particular real life story near and dear to your own family, I would invite you to share that with me via e-mail.  It’s a big, bad world out there, and senior adults in need have to pull their collective resources together to try to make it through.  I’m looking forward to hearing from you if you have something to share with me.

Don’t be a victim of one size fits all planning.  Know your legal rights on estate and elder law planning, and act accordingly!