Caring for a spouse with dementia can be emotionally, physically, and financially draining. As one, Arizona man found out, it can also lead to a frustrating and expensive battle in probate court if you did not plan ahead for the possibility of incapacity. The good news is that with proper advanced planning, you can avoid finding yourself in the same situation at some point in the future.

Bob’s Story

According to an interview conducted by azcentral.com, Bob McGuire and his wife Linda moved to Surprise, Arizona a few years ago after Bob retired from the Navy. After Linda was diagnosed with dementia about a year ago, the medical expenses began to add up. To help cover those expenses, Bob attempted to access a modest Individual Retirement Account (IRA) of Linda’s; however, Bob was denied access because the account was in her name only. Given that Linda is no longer able to give her legal consent due to dementia, Bob’s only recourse was to petition for guardianship and conservatorship over his wife, a process he thought would be fairly simple and straightforward. Thousands of dollars in court costs and legal fees later, Bob may end up losing one-fourth of the value of the IRA in his attempt to get access to it.

Navigating Probate Court

Probate court handles the administration of Wills and estates, but also oversees adult guardianship and conservatorship. Currently, Maricopa County probate court has about 22,000 active cases and the court has seen an annual increase of six to seven percent a year in recent years. As part of the guardianship process, the law requires the court to appoint an attorney to represent the interests of the proposed ward (the incapacitated person). That attorney is entitled to a fee for his/her services. That fee, along with all the other legal costs and fees associated with the process, can make petitioning for guardianship an expensive, and time consuming, endeavor.

Could the Need for Guardianship to Access the IRA Have Been Avoided?

Given the amount of time and money Mr. McGuire has been forced to invest in the guardianship process, the obvious question is “Could the need for guardianship to access the IRA have been avoided?” The simple answer is “yes.”

A well thought out and properly drafted estate plan typically includes an incapacity planning component because the reality is that incapacity can strike anyone at any time. Although every incapacity plan is unique, some common incapacity planning tools and strategies that could have helped Mr. McGuire’s access the IRA without the need to petition for guardianship include:

Durable power of attorney – a power of attorney allows you to appoint an Agent to whom you can grant as much, or as little, legal authority to act on your behalf as you wish. By making the power of attorney durable, your Agent’s authority survives your incapacity. Had Linda McGuire executed a durable power of attorney prior to her diagnosis of dementia, her husband would have had the authority necessary to access the IRA without the need to petition for guardianship.
Revocable living trust – a revocable living trust works as an excellent incapacity planning tool by allowing you to appoint yourself as the Trustee of the trust and someone you would want to take over control of your assets as the successor Trustee. In the alternative, married couples can appoint themselves as Co-Trustees. Assets are then transferred into the trust and you retain control over them as long as you have the capacity to do so. In the event of your incapacity, however, the successor Trustee or Co-Trustee takes over automatically without the need for court intervention. Had Bob and Linda established a revocable living trust prior to Linda’s dementia diagnosis, Bob would already have the legal right to control the IRA if it was a trust asset. Another important advantage to creating a trust is that trust assets bypass the probate process that is required to administer the estate of a decedent. Consequently, assets held in a trust can be distributed immediately after a decedent’s death instead of remaining inaccessible until the conclusion of the probate process as is the case with assets gifted in a Will.

Contact an Arizona Estate Planning Lawyer

For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about guardianship, incapacity planning, or probate avoidance, contact the experienced estate planning lawyers at Morris Hall PLLC by calling 888-222-1328 to schedule your appointment today.