When an incapacitated person is eligible to receive money or property, legal issues arise regarding who will have authority and responsibility to manage the funds. If the incapacitated person has a natural or court-appointed guardian of the estate, the guardian has the authority. A classic example is life insurance proceeds payable to a beneficiary that is a minor child, which under Texas law, is deemed to be incapacitated. Often, the life insurance company will not release the funds even to the child's parent, who is a natural guardian of the child, due to concern that the parent may not safeguard and protect the funds for the child's benefit. In such cases, the life insurance company will hold the money and insist that a Court appoint a guardian to manage the funds so that the Court can have oversight over the proper management of the funds. Today's blog will summarize the Management Trust, which is one of the main legal tools for managing the funds of an incapacitated person.
Why a Management Trust?
If the Court appoints a Guardian of the Estate to manage the funds, the Guardian is required to post a bond, which can be a significant cost to the guardianship estate. Moreover, the Guardian is required to provide annual accountings to the Court, which is a costly undertaking. On the other hand, a Management Trust establishing a corporate fiduciary as Trustee avoids the necessity of a bond and gives control over the funds to a professional money manager who is familiar with the reporting requirements. Finally, the Court has authority to appoint a guardian of the estate only if there is no less restrictive alternative that is available. In many cases, the creation of a management trust is a less restrictive alternative to guardianship of the estate.
How is a Management Trust created?
An experienced attorney is retained by a family member of the incapacitated person. The attorney files an Application in the appropriate probate court. The Court may appoint an attorney ad litem to represent the alleged incapacitated person. Then, after proper notice requirements have been met, the Court schedules a hearing. At the hearing, the Court considers the evidence and determines that the person is, in fact, incapacitated, and that the creation of a Management Trust is in the best interest of the incapacitated person. The Judge will then sign an Order that creates the Management Trust, and approves the terms of the trust agreement.
If your loved one is incapacitated and is due to receive funds or property, it is critical to seek legal assistance to protect the assets. Christiansen Law Firm has significant experience handling probate and guardianship matters, and can assist with the creation of a Management Trust. Contact Christiansen Law Firm in Houston or San Antonio to schedule a free consultation to discuss your legal matter.