Gifts, Wills, and Guardians: A Case Study (Part 3 of a 3-Part Post)

By Fredrick P. Niemann, Esq. a New Jersey Guardianship Attorney

So far, in my last two blog entries, I have discussed the fight over Henrietta’s estate plan, who prior to being declared incapacitated in 1997, established an estate plan designed to benefit both of her boys and their families, and was specifically designed to place her one child’s, Howard’s, share in trust to bypass his wife Jacqueline.  After being declared incapacitated, the settlement placed on the record included a gifting plan that specifically includes a distribution to Jacqueline to be placed into trust for her, through which she could access a portion of the funds right away.  Jacqueline’s stepdaughter, Michele, contested this plan, arguing there was no settlement consented to by all parties and that the settlement proposed would not have been agreed to by Henrietta if she were not incapacitated.

The court started by declaring that it could act in the place of an incapacitated person as if that person had full capacity to make these decisions on his or her own.  Using another Appellate Division case, the court adopted a five-part analysis to determine when to authorize a gift from an incompetent’s estate:

  • the mental and physical condition of the incompetent are such that the possibility of her restoration to competency is virtually nonexistent
  • the assets of the estate of the incompetent remaining after the consummation of the proposed gifts are such that, in the light of her life expectancy and her present condition of health, they are more than adequate to meet all of her needs
  • the donees constitute the natural objects of the bounty of the incompetent
  • the transfer will benefit and advantage the estate of the incompetent by a reduction of death taxes; and
  • there is no substantial evidence that the incompetent, as a reasonably prudent person, would, if competent, not make the gifts proposed in order to effectuate a saving of death taxes.

As the court noted, while there could be advantages to the settlement plan that would reduce estate taxes, Henrietta specifically would never have made those gifts, particularly outright distributions to Jacqueline, as she wanted Howard and her grandchildren to maintain control over her funds and gave indications to her lawyer that she wanted everything in trust for her son.  The court here really drew upon the certification of Henrietta’s lawyer in coming to the conclusion that Henrietta would never have adopted this estate plan.  Therefore, the court refused to enforce the settlement plan, concluding it was an improper modification to Henrietta’s estate plan.

While guardians of a ward’s estate have the power to control their ward’s finances, they cannot overrule what the ward would have wanted.  The courts do not have the power to change a ward’s will, but they can approve gifts.  If you or a loved one suspects that a guardian is improperly managing your loved one’s funds, and not seeking court approval for major transactions, give us a call to discuss what we can do to help ensure your loved one’s finances are being properly taken care of.

To discuss your NJ Will or Guardian matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing consultations if you are unable to come to our office.

Posted in Guardianship, Wills & Trusts and tagged , , , .