Florida Banking October 2023

TRUST BANKING

WHO’S THE BOSS? NAVIGATING THE TRUSTEE-GUARDIAN RELATIONSHIP BY KELLY O’KEEFE, ATTORNEY, AND HANNAH MURPHY, ATTORNEY, STEARNS WEAVER MILLER

I n an ideal world, every adult would maintain the cognitive ability to independently make personal and financial choices. In reality, many people will suffer cognitive impairment, becoming temporarily or permanently dependent on others. Those making decisions for an incapacitated individual might be family, friends, or professionals, such as trust companies or corporate guardians. In extreme cases, the decision makers might be state appointed guardians. In this article, we examine some of those potential decision-makers. We provide a general overview of the guardianship process and identify potential alternatives that allow individuals to choose their own future fiduciaries. Finally, we will offer tips for navigating the trustee-guardian relationship when both are tasked with serving the best interests of an incapacitated individual. What is a guardian? Generally, guardians are court-appointed decision makers tasked with making personal and/or financial decisions for people who lack capacity to do so themselves. Any person can file a petition to determine another person’s incapacity, which triggers a process outlined by Florida law. First, notice is given to the alleged incapacitated person—and that person’s attorney if he or she has one—that a hearing to determine capacity will be held. If the person does not have counsel, the court appoints an attorney to represent the person’s interests. Next, the court appoints an examining committee of accredited medical professionals. If a majority of the committee finds the person is not incapacitated, the case is dismissed. If the committee determines the person lacks the cognitive capacity to do things like vote, travel, manage property, or make healthcare decisions, the court must hold an evidentiary hearing to determine capacity.

The court may only decide a person is incapacitated based on clear and convincing evidence and must consider less restrictive means than a guardianship to address a person’s incapacity. For example, the court must look at whether the person has a durable power of attorney, trust, joint account or health care surrogate, which might eliminate the need for a guardian or limit the guardian’s role. A guardian’s authority can be limited to the person or the property, or extend over all aspects of a person’s life. Guardians, if appointed, may be friends, family, or professionals. The guardian is a fiduciary, but unlike a trustee, does not hold legal title to the property of the person (the ward) they serve. Whether it is appropriate for a trustee also to serve as a guardian for a ward depends on the circumstances in each particular case. Choosing future fiduciaries before incapacity Considering how all-encompassing a guardian’s authority can be, your clients should be wary of the guardianship process and the loss of control it entails. The cost of guardianship is also significant, as it requires court oversight. While there is no guaranteed way to avoid guardianship, your clients can take steps now to minimize the need for it. One of those steps is creating and funding a revocable trust. By placing assets in trust, and naming a successor trustee, the settlor can determine who will make financial decisions on his or her behalf, and can guide how those decisions are made. Specifically, the settlor can name the person to take over trust administration if the settlor decides to resign as trustee or is determined to be incapacitated as expressly defined in the trust. The terms of the trust, not a judge, will direct the successor trustee. For health related decisions, through a living will and designation of health care surrogate, your clients

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