But if she failed to do so, you may face a lengthy legal procedure to petition the court to become either a conservator or guardian for your aunt that could cost $5,000 to $8,000 in court, attorney and investigator fees.
Sean Scott, an elder law attorney in Largo, Fla., says planning pays off when it comes time to take the financial reins for a loved one.
"The analogy I use is: Have you ever locked yourself out of your car?" he says. "If you have a spare key (power of attorney), it's easy to get back into your car, but if you don't have a spare key, you have to call a locksmith (for a court-appointed position). While you're waiting for that locksmith, you're missing appointments and costing yourself money in a dozen different ways."
What are the differences between a power of attorney, a conservatorship and a guardianship? What are your rights, responsibilities and risks when taking on another's finances?
Let's find those answers now, while Aunt Mary is still able to balance her checkbook.
Delicate conversations
If Aunt Mary loses the ability to manage her financial affairs, a world of trouble awaits. Unpaid bills find their way to collection agencies. Bank accounts go awry, triggering steep monthly fines. Credit card balances skyrocket with penalties and interest. It all works up to a perfect storm of computer notices and dunning telephone calls that only serve to anger and confuse someone in diminished capacity.
Joseph Matthews, attorney and author of "Long-Term Care: How to Plan & Pay for It," says all sorts of fears prevent people from drafting durable powers of attorney.
"Sometimes people don't like to recognize that they need help," he says. "Or there may be several people competing for control and it gets messy. These are delicate conversations to have with an elder because you are basically saying, 'Look, you can't handle your own affairs.' That's a hard thing to say to somebody and for them to accept."
Elders who are estranged from their families or who fear that family members may be positioning to snatch their cash often needlessly avoid drafting a power of attorney. Matthews says the power of attorney is the solution, not the problem.
"It can be done in one of several ways," Matthews says. "You can give that power of attorney immediately, basically saying you now make the decisions. It can be done immediately but jointly; perhaps you say that anything over X amount of dollars has to be signed off by both of you. Or it can be done with something called a 'springing power of attorney,' which means it doesn't go into effect until the elder is incompetent or incapable of making those decisions."
Although Aunt Mary can tailor her power of attorney to make it broad or narrow in scope, drafting a durable power of attorney indicates her desire to extend your powers after she loses capacity. This can be a significant advantage if, in the future, Aunt Mary refuses to accept her inability to manage her affairs or someone challenges your position as her assigned agent.
Courting conservatorship
Of course, only those with capacity may designate a power of attorney. That means that when Aunt Mary loses the ability to effectively manage her finances, it will likely be too late for her to sign a durable power of attorney.
In that case, you would need to petition the court to appoint you as her conservator or guardian.
What's the difference between the two? It's a little confusing and varies state to state, but typically a conservator is empowered to make financial decisions only (think "conserves resources") for his or her conservatee, while a guardian is responsible for all decisions affecting his or her ward, including housing, food, clothing and medical treatment. In some states, a conservator is called a "guardian for finances," hence the confusion. For the purposes of this article, we will focus strictly on conservatorships.
How would you become Aunt Mary's conservator?
Becoming conservator for a loved one:
1. File a petition with the appropriate county court, typically probate or family law court.
2. Appear for an initial hearing before a judge. Aunt Mary will also be notified to appear. At this hearing, the court usually orders an investigator from Social Services or Adult Protective Services to prepare a report on both Aunt Mary, to determine her capacity, and you, to determine your suitability as a potential conservator. In some jurisdictions, Aunt Mary can request a jury trial.
3. Return to court once the reports are complete. This is typically when the judge will ask questions of both of you, hear your witnesses and perhaps order additional investigations.
4. Return to court for decree. The judge grants your petition for conservatorship, with conditions set by the court.
As conservator, you are empowered to act on Aunt Mary's behalf in all financial matters and may do so against her wishes. Remember: In order to be appointed a conservator, the court must find that Aunt Mary is incapacitated; that is, she can no longer effectively manage her own money.
But along with the conservator's power comes responsibility. Typically, the court will require you to prepare an annual financial report on your aunt's finances to make sure that you are acting, as authorized, in your aunt's best interest.
It doesn't mean your investments have to beat the street or anything; in fact, you could be a lousy money manager and still fulfill your duty to do your best for Aunt Mary. But, if your actions show a pattern of flawed judgment or even a hint that you are using your position to enrich yourself or others, you could be challenged, replaced or even charged with fraud.
On the plus side, Aunt Mary's creditors cannot come after your assets.
"Financially, you are not personally responsible," says Matthews. "Otherwise, no one would be willing to be a conservator."
Although a conservatorship is easier to get than a guardianship, which typically requires extensive medical documentation, it can still take several months from petition to decree. You can hasten the process considerably if you petition with Aunt Mary's cooperation and support while she still has capacity.
"In that case, you want to make it clear that (Aunt Mary) is competent to make this decision and that it is voluntary," says Matthews. "A conservatorship can be with or without the consent of the elder. If it's with their consent, of course it goes a lot smoother."
Scott says conservatorship proceedings are rarely the hotbed of family intrigue that made-for-TV movies would have us believe.
"If a person was going to steal their parent's money, they wouldn't need to come see me to do it. If they're taking the time and effort and money to hire me to do this, they usually don't have their parent's money on their mind." |
