A guardian of a legally incapacitated adult can do a lot of things for him or her: pay and collect debts, file lawsuits on the ward's behalf, make investments, manage real estate, and more. But can a guardian make an estate plan for a ward?
It is easy to see the advantages and disadvantages to a guardian being able to make an estate plan for a ward. On the one hand, if the ward did not have an estate plan, giving the guardian the power to create one could allow the ward's estate to be distributed according to the ward's likely wishes. Otherwise, they would be distributed according to state law, which may or may not line up with those wishes. On the other hand, there might be the potential for abuse if the guardian is allowed to make an estate plan for a ward. For instance, the guardian might reduce the inheritance of one beneficiary and increase that of another for improper reasons.
As Ohio law currently stands, guardians can do limited types of estate planning for their wards with probate court approval. They may convey or release present, contingent, or expectant interests in the ward's real or personal property. They may create revocable trusts for the ward's property, but those trusts may not extend beyond the minority, disability, or life of the ward. A guardian may also exercise a ward's right to elect options under an insurance policy or annuity, or to surrender an insurance policy for its cash value.
Ohio Revised Code 2111.50 allows a guardian the same powers that the ward could exercise if present, not a minor, and not under a disability, except the power to make a will. (These powers, are, of course, subject to the guardian's duty to act in the best interests of the ward.)
However, the powers listed in the statute fail to include several common estate planning tools that, if used, could benefit not only the ward but his or her estate and beneficiaries. Among other things, the law as written does not permit a guardian to:
The existing limitations prevent the guardian from using estate planning techniques that could offer asset protection for the ward's beneficiaries or federal estate tax savings for the estate.
The guardianship committee of the Ohio State Bar Association Estate Planning, Trust, and Probate Law Section have proposed changes to ORC 2111.50 that would expand the power of guardians to engage in estate planning for the benefit of their wards and their wards' estates.
These proposed changes will allow guardians to create TOD beneficiary designations and change beneficiary designations for annuities, insurance policies, and retirement plans of the ward. Under the proposed changes, a guardian could also disclaim a ward's interest in property.
Perhaps most significantly, a guardian would be permitted to create a revocable trust for a ward that would be able to extend beyond the ward's life. This would make possible such things as creating a special needs wholly discretionary trust for the benefit of a ward's child with special needs. If the child is receiving needs-based governmental benefits, such a trust could allow him or her to receive assets from their parent's estate without jeopardizing their own benefits.
The proposed legal changes would also include protections for those who have an interest in the ward's estate. Before probate court approval could be granted for the guardian to make or alter the ward's estate plan, notice would have to be given to anyone with an interest in the ward's estate.
Under current law, a guardian may, but is not required to, engage in limited estate planning for the ward. Under the proposed changes to the law, this would continue; the law would explicitly state that the guardian would have no duty to engage in estate planning for the ward, or liability if he or she did not.
Be aware that these proposals are, as of now, only proposals. But if you have a guardian and are concerned about your ward's estate, it will be worth watching whether these proposals ripen into actual changes in Ohio guardianship law.
In the meantime, consider consulting with an experienced Ohio estate planning attorney in order to do as much as you legally can to protect your ward and his or her estate. We invite you to contact Gudorf Law Group to schedule a consultation.