Estate Plans Should Consider and Attempt to Resolve Guardianship

Well-crafted estate plans consider and attempt to resolve issues arising from incapacity and incompetency. Many estate plans are crafted to avoid or prevent guardianship. A recent New Jersey case illustrates why these concerns are worthy of attention.  After a trial court refused to consider the wishes of a putative ward, both respect to choice of guardian and place of residence, and accepted a "settlement" regarding guardianship to which the ward objected, a New Jersey appellate court was compelled to rule that a person who is incapacitated may still be able to express a preference as to his or her choice of a guardian or place of residence, both of which the court must consider before making rulings regarding the ward.  Matter of the Guardianship of Walter J. Macak, 377 N.J. Super. 167 (App.Div. 2005).

In the case, Mr. Macak’s daughter filed a complaint seeking the appointment of a guardian for her father and his million dollar estate based on her claim that he was incapacitated. The impetus for the complaint was her concern that Mr. Macak had Alzheimer’s disease, was unable to manage his finances, and was falling prey to financial “scam artists.”  Mr. Macak directed his attorney to oppose the guardianship application and specifically indicated that, if he was declared incapacitated, he was opposed to having his daughter appointed as his guardian.

Instead of opposing the guardianship or advocating for Mr. Macak's choice of guardian, his attorney negotiated a “settlement” under which she signed a consent order on Mr. Macak's behalf. The consent order, which the trial court signed without holding a hearing or making findings of fact and conclusions of law, declared Mr. Macak to be incapacitated and appointed another attorney as his guardian, and providing that the guardian could "continue" Mr. Macak’s “gifting program” of giving his daughter $ 18,000 per year.  The "settlement" also required that Mr. Macak  sign a separate written agreement with the attorney appointed as his guardian, in which he agreed to move out of his house into an assisted living facility within five days of the date of the agreement, but that she (his guardian) would agree to permit him to visit his house on a regular basis.

After the court-appointed guardian refused him access to his house, Mr. Macak sought to set aside the guardianship, claiming he had signed the guardianship “agreement” under duress, duress being the threat that if he failed to sign, his daughter would be appointed as his guardian. Mr. Macak also contended that he was not legally incapacitated but only needed assistance in managing his finances, and on that basis asked the court to appoint a conservator.

Both sides filed reports from doctors who had examined Mr. Macak, and reports from a geriatric specialist concerning whether he could resume living in his house. Mr. Macak's personal physician, Dr. Paul Rosenberg, opined that he suffered from mild dementia, but was not legally or medically incapacitated. The doctor retained by the guardian, as well as the independent court-appointed doctor, disagreed with Dr. Rosenberg. Anthony J. Serra, Esq., a guardian ad litem appointed by the court, issued a fifty page report cogently detailing the errors in the prior guardianship proceeding and advocating that the court consider allowing Mr. Macak to resume living in his house.

If you are counting, there was, at this point in the proceedings, an attorney representing the sister, an attorney representing Mr. Macak, an attorney appointed as a guardian, an attorney appointed as guardian ad litem, Mr. Macak's pysician, a physician retained by the court-appointed guardian, and an independent court-appointed doctor, adding to the reports of various other doctors and geriatric specialists.  Obstensibly, Mr. Macack was paying all of the lawyers except the attorney representing his daughter, although the court may have hinted that Mr. Macack was, in effect, paying his daughter's counsel by referring to  the "gifting program" (quotation marks included in the original opinion) allegedly continued by the court appointed guardian.

The court declined, however, to hold an evidentiary hearing, instead, granting the guardian's motion for summary judgment, concluding that Dr. Rosenberg's opinion was in the “vast minority" (and suggesting implicitly that the court gave little or no weight to the fifty-page opinion of the the guardian ad litem appointed by the court precisely for the purposes of representing Mr. Macak's interest.

The court, thus, denied the application to set aside the guardianship, and Mr. Macak appealed. The appeals court reversed and remanded the case for a plenary hearing. The court found that the trial court erred when, without holding a hearing, it accepted a “settlement” in which the allegedly incapacitated person agreed to be declared incapacitated:

An incapacitated person cannot enter into a consent order declaring him to be incapacitated nor can he consent to the appointment of a plenary guardian. An incapacitated person by definition “is unfit and unable to govern himself or herself and to manage his or her affairs,” and hence cannot “settle” a guardianship action in such a fashion. … Further, as this case illustrates, the potential for overreaching and undue influence is unacceptably high.

The appellate court also ruled that, if the ward retained sufficient capacity express a preference, the trial judge should give due consideration to the wishes of the incapacitated person in deciding (1) who to appoint as guardian, and (2) where the ward shall live:

If the court finds that a person is incapacitated, the court must then determine whom to appoint as guardian. In making that determination, the court should consider … the wishes of the incapacitated person, if expressed. A person who is incapacitated may nonetheless still be able to express an intelligent view as to his choice of guardian, which view is entitled to consideration by the court. … [Moreover], a person who is incapacitated in some respects may nonetheless have sufficient capacity to make a choice as to where he wishes to live, and if he does, the guardianship should be limited to allow him to make the choice.

The appeals court also held that the wishes of the incapacitated person, even if expressed, are not controlling unless the expressed preferences are rational:

In determining whether the person in fact has the capacity to choose where he will live, the court must differentiate between “glimmerings of rationality,” and the medically-documented ability to make a rational choice on the issue. The ability to express a preference is not necessarily the same as the ability to make a rational choice. Where the choice of residence presents safety risks, for example, the court must consider whether the person can recognize and appreciate the potential risks presented by the choice, and whether he can and will take reasonable steps to mitigate those risks. For example, a person who does not have the capacity to live alone in his own house might recognize the attendant risks and be willing to accept twenty-four hour a day, live-in assistance.

The appeals court was also concerned regarding the leverage exerted against  Mr. Macack resulting from the threat that the court would appoint his daughter as guardian.  The court warned that "under no circumstances should a person in Mr. Macak's situation be coerced into agreeing to a guardianship under the threat that, if he does not do so, the court will appoint a particular person as guardian whom he does not want to serve as his guardian."

The court was troubled, as well, by the continuation of the "gifting program."  The court ruled that it was error to accept a settlement regarding gifting, without specifically inquiring into whether the gifts were in Mr. Macack's best interest.  The court wrote that the probate court:

 further failed to make the findings, required by [law] necessary to authorize the guardian to make gifts of Mr. Macak's money to his daughter. This omission was particularly troubling, because Mr. Macak's daughter was also the plaintiff in the guardianship action. Moreover, counsel for the guardian readily concedes that Mr. Macak agreed to this “settlement” in order to avoid the likelihood that, should he insist on a hearing and be declared incapacitated, his daughter would be appointed his guardian.

The good news is, of course, that Mr. Macack will now be given what one hopes is a fair hearing regarding the need for a guardian, and if necessary, a guardian or conservative protecting his best interests.  The bad news is, regardless the outcome, Mr. Macack's million dollar estate is substantially lighter due to what must be extraordinary costs incurred in resolving his rights and needs. 

Prior related articles:

GAO reports on Guardianship Abuse

Report on Abuse by Guardians and the Guardianship Process Released

Does Your Trust Discourage Guardianship? Most Don't Do Enough!