From Family to Fiduciary:
A Guardian’s Duties

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From Family to Fiduciary: A Guardian’s Duties

5/25/12

Your widowed mother has been struggling with dementia for some time and did not execute a power of attorney while she was still competent.  She can no longer pay her bills or keep a check book; no one is authorized to manage her investments or to sell her house when it becomes necessary for her to move into an assisted living facility.  You live closer to her than her other children and are willing to help.  What happens next?

This is one of many scenarios in which a court appointed guardianship may be necessary. With the legal advice and assistance of an attorney, you will need to file petitions to show the court clear medical evidence that your mother cannot handle her own financial affairs and requires a legal guardian (typically a report from a doctor or medical testimony is required). The Court will set a hearing on the matter. The proposed protected person is required to appear at the hearing unless evidence is provided that it would harmful for the protected person to do so. Evidence must be presented in court including financial records and the testimony of witnesses. All interested parties are required to receive notice in advance of the hearing.

Applying for a guardianship can be draining. It can be painful to discuss a loved one’s incompetence in court, even with the help of an attorney, and sometimes the loved one who needs help is unable to understand what is happening and fights the process each step of the way. Disagreements among siblings, or other interested parties, can also make the process a struggle.

Even when the process of being appointed a guardian goes smoothly, the responsibilities of becoming someone’s guardian can be daunting. Indiana law defines a guardian as a fiduciary. A fiduciary is a person or institution who cares for another party’s assets and must always act in the other party’s best interest. Fiduciary responsibility is the highest degree of responsibility under the law.

It can be hard for a child or other loved one to make the transition from family to fiduciary. Many families treat financial matters informally - small loans are made and repaid (or not repaid), gifts are handed out to memorialize a birthday or on the spur of the moment, funds are mingled in one account for everyone’s convenience.

A fiduciary, such as a guardian, must treat financial matters much more formally. Careful records of each transaction must be kept. Guardianship funds (money and assets belonging to the protected person) must never be mingled with the guardian’s personal assets. Guardians must provide the court with an inventory of a protected person’s assets and biennial accountings of the protected person’s finances.

This careful record keeping can seem unnecessarily time-consuming and expensive to a relative who simply wishes to care for the protected person as they always have. They have no intention of cheating the beloved protected person - why is all this formality necessary?

The simple answer is that it is required by the law. The same statutes that authorize a guardian to exercise financial authority and to act on behalf of a protected person require that guardian to a make an inventory of assets, to provide regular accountings to the court, and to not mingle funds of the protected person with others’ assets.

The law exists for a reason. The court has granted the guardian extensive powers - it must have a way to monitor the use of those powers. While most guardians have no intention of betraying the great trust placed in them, a few do attempt to exploit their position for personal gain.

Careful record keeping and formal accountings protect the guardian as well as the protected person. Disputes sometimes arise in families over the management of a loved one’s finances. When a guardian fulfills his or her fiduciary duties, a clear record exists of what has been done for the protected person. The record is circulated among interested parties and approved by the court every two years. This system makes it very difficult for a relative to later argue that a protected person’s assets were not properly managed.

Fiduciary duty also shields the guardian from relatives who might pressure the guardian to make unauthorized loans or gifts from protected assets. It can be easier to say “the court won’t let me do that” than to simply say “no” to a relative’s request for help.

The duties of a fiduciary can seem challenging at first, but with time, practice, and guidance from an attorney experienced with guardianship matters, they become second nature. For most of us, they are simply a set of formal guidelines for doing what we have always intended to do in the first place: to care for a loved one to the best of our ability when they are unable to care for themselves.