Greg Mulkey — Articles — McAlister, McAlister & Nicklas

Guardianship vs. Power of Attorney: Preventing Court Intervention

If you became incapacitated, would someone have the legal authority to assist you with financial and health care decisions? An incapacitated person is an adult who suffers from an impairment and is unable to meet essential needs for physical health and safety, and/or is unable to manage financial resources. An increasingly common example of an impairment resulting in incapacity is dementia. Third parties, like financial institutions and health care providers, will not take directions from just anyone on behalf of an incapacitated person. With the possible exception of a spouse, third parties will require proof a person is authorized to act on behalf of an incapacitated person. A person can be authorized to act on behalf of an incapacitated person as a court-appointed guardian or as a nominated agent.

Guardianship

This article provides only a general overview of guardianships. Guardianship is a court supervised process. A guardian may be appointed by the court for an incapacitated individual’s person (e.g. health care decisions and living arrangements) and/or property (e.g. management of finances). A guardianship proceeding begins when the person seeking to be appointed guardian files a petition in the district court of the appropriate county. In Oklahoma, guardianship proceedings are confidential, and the court records are not accessible by the public.

The court will set a hearing date for the guardianship case within thirty days of the filing of the petition. Notice of the hearing must be given to the alleged incapacitated person, and others, including the alleged incapacitated person’s spouse and adult children, if applicable. The judge hearing the case must determine whether the individual is fully or partially incapacitated and whether the proposed guardian is qualified to be appointed as a guardian. The alleged incapacitated person or another interested party could raise objections as to the allegations of incapacity or to the person seeking appointment as guardian.

If the court appoints a guardian, the court will issue letters of guardianship, which will serve as the guardian’s proof of authority to act for the ward. The guardianship remains under court supervision for so long as the ward remains incapacitated or until the ward’s death. The guardian must file annual reports with the court concerning the ward and the ward’s property for the duration of the guardianship.

Guardianship proceedings take time and are costly due to the court process and the court’s continued supervision.

Power of Attorney

A person who is not incapacitated may nominate an agent through a power of attorney document and authorize the nominated agent to act on the person's behalf in financial and/or health care matters. The person signing the power of attorney is often referred to as the “principal.” A power of attorney for health care authorizes an agent to make any health care decision the principal could have made while the principal had capacity, except it does not allow the agent to make end of life decisions involving life-sustaining treatment, nutrition, or hydration. A power of attorney for property is generally referred to either as a durable power of attorney (effective immediately and regardless of the principal’s capacity), or a springing power of attorney (effective only after the principal is deemed incapacitated).

A power of attorney has many benefits. Power of attorney documents can be customized, within the bounds of the law, to reflect the wishes and circumstances of the principal while the principal has capacity to make their own decisions. Power of attorney documents can be amended and revoked, so long as the principal is not incapacitated. An agent is able to exercise the authority granted in a power of attorney without court involvement, which makes it important to choose an agent and successor agents who can be trusted to diligently fulfill their fiduciary duties. It is relatively inexpensive to have an attorney prepare power of attorney documents and ensure the documents are properly signed, notarized and witnessed, especially compared to the cost of a guardianship proceeding.

Comparison of Guardianship and Power of Attorney

	Guardianship	Power of Attorney
Legal Authority	Court-ordered legal authority over a person and/or their estate	Private delegation of authority by a competent individual
Who Initiates	Usually a concerned family member or interested party by filing with the court	The principal voluntarily signs a POA document
Court Involvement	Yes – court oversight, hearings, and ongoing supervision	No – unless contested or challenged
Capacity Required	Individual must be legally incapacitated	Principal must have legal capacity at the time of signing
Scope of Authority	Limited by court order; may be broad or specific	Can be broad or narrow, based on the written document
Duration	Continues until court terminates or person regains capacity	Continues until revoked or the principal dies
Cost	More expensive due to court filings, attorney fees, and possible bond	Generally inexpensive to create
Flexibility	Less flexible – must go back to court for changes	Highly flexible – can be modified or revoked while the principal has capacity

Best Practices

· Help prevent the need for a guardianship by implementing power of attorney documents before you lack capacity.

· Choose a trustworthy person as your agent, and name successor agents in the event your first choice is unable or unwilling to serve.

· Ensure your documents are updated as circumstances change.

· Keep your power of attorney documents accessible.

Conclusion

Planning for incapacity can help you avoid the need for a court supervised guardianship, saving you and your loved one’s time and money. Implementing incapacity planning before it is needed also helps ensure you have the people you choose assisting you during your time of incapacity. The attorneys at McAlister, McAlister & Nicklas, PLLC are experienced in all aspects of incapacity and estate planning. It would be our privilege to assist you with these matters of personal importance.

by Greg Mulkey

The failures of Silicon Valley Bank and Signature Bank in March of 2023 garnered national attention. An issue highlighted with Silicon Valley Bank was the large number of uninsured deposits held by the bank. In light of these failures, many people considered the possibility of their bank failing and whether their money would be insured or at risk of being lost.

The Federal Deposit Insurance Corporation (FDIC) insures deposits at FDIC-insured banks to help protect depositors in the event a bank fails. The common account types covered by FDIC insurance include checking accounts, savings accounts, money market deposit accounts and certificates of deposit. Investments, such as stocks, mutual funds, and annuities are not FDIC insured. Most people are aware of the general premise that deposits at an FDIC-insured bank are insured up to $250,000.00. Does this mean that deposits can only be insured up to $250,000.00? Not exactly. FDIC deposit insurance covers $250,000.00 per depositor, per FDIC-insured bank, for each account ownership category. It is possible for a depositor to qualify for more than $250,000.00 in FDIC insurance coverage. Accounts owned by a trust are one situation in which a depositor could be insured for more than $250,000.00.

The rules for determining the amount of FDIC insurance coverage for accounts owned by a trust currently differ between revocable and irrevocable trusts. However, effective April 1, 2024, the rules will be the same for both trust types. As of April 1, 2024, trust deposits will be insured up to $250,000.00 per owner (each trust settlor), per each unique beneficiary, up to five beneficiaries, which means a trust’s deposits at an FDIC-insured financial institution could be insured up to $1,250,000.00 per owner. The following are examples of how the rule applies to joint revocable trusts and single settlor revocable trusts in different scenarios.

Example 1 – Husband and Wife are the settlors of a joint revocable trust. The couple’s three living children are equal trust beneficiaries upon the death of both settlors. The revocable trust owns a $2,000,000.00 certificate of deposit (CD) at Insured Bank. For purposes of determining the amount of FDIC insurance coverage, each trust settlor is an owner of the account.

Example 2 – Husband and Wife are the settlors of a joint revocable trust. The couple’s three living children and two living grandchildren are equal trust beneficiaries upon the death of both settlors. The revocable trust owns a $2,000,000.00 CD and a checking account with $750,000.00 at Insured Bank.

Example 3 – Husband is the settlor of a revocable trust. Upon the death of Husband, the trust assets remain in the trust for Wife’s lifetime benefit. Upon the death of Wife, the trust assets will be distributed to Husband and Wife’s three living children in equal shares. The revocable trust owns a $1,000,000.00 CD at Insured Bank.

The examples are provided to illustrate the applicability of the FDIC insurance rules for trusts as of April 1, 2024, based on the facts in each example. You can visit the FDIC’s Electronic Deposit Insurance Estimator (EDIE) at https://edie.fdic.gov/calculator.html to see how the FDIC insurance rules and limits apply to your covered accounts.