I have written many articles in the area of Trust and Estate Planning, often outlining the benefits of having a trust prepared, as well as the supporting cast of powers of attorney. The revocable grantor trust is commonly used as well to allow the continuation of physical and financial management of an individual in the event of incapacity. In the absence of this planning is the other alternative, Guardianship.

A guardian is described as “one appointed by a court to have the care and custody of the person, or of the estate, or of both, of an incapacitated person”, Arkansas Code 28-65-101(3). It is a useful tool for either adults or minors who do not have “sufficient understanding or capacity to make or communicate decisions to meet the essential requirements for his or her health or safety or to manage his or her estate."

Once a guardianship is established the guardian has the duty to “preserve and protect” the assets of the ward, (ward – an incapacitated person for whom a guardian has been appointed) under the supervision of the Court. The Guardian has the right to distribute assets of the ward to meet the “essential requirements for health and safety,” which according to statutes, means the “health care, food, shelter, clothing, and protection without which serious illness or serious physical injury will occur.”

It is the duty of the guardian of the estate to exercise due care to protect and preserve the assets of the ward; to invest the assets and apply them for purposes previously mentioned; to account for it; to perform all other duties required by law; and at the termination of the guardianship, to deliver the assets of the ward to the persons entitled to them.

Bill Kerst President, Community First Trust Company. He has been conducting educational seminars on IRAs, asset management, and trust management for over 15 years. He has served as the moderator for the Income Taxation of Estates and Trusts course offered by the Arkansas Society of CPA’s and provided many seminars to civic and church groups in the community. For more information, call 501-520-3660.

The two most difficult parts of guardianship management are (1) investments and (2) transferring control. The investments are very limited in Arkansas as the goal of the guardian is “preservation and protection,” so the choices are primarily limited to government bonds or mutual funds that are comprised of government bonds, with some equity exposure available only through “common trust funds” which have all but been eliminated due to “self dealing.” The Courts are typically and correctly not inclined to allow equity exposure, although you can petition for it, as it again, is outside the guardians’ normal scope.

Once you get accustomed to the investment side, the next challenge is terminating a guardianship that has been established for a minor child. I know I mention this often, but it is amazing how excited an 18 (legal age of capacity and control) year old can get with $100,000. They think it will last a lifetime and that they can get everything they want, well they can for about a year, then there is nothing left, and it really doesn’t matter if it's $100,000 or $500,000, the toys get bigger and the friends get closer.

This may not be the best time to absorb the cost of estate planning, but if you have minor children, or family members with special needs, this may be the best investment you make this year. At least you can make the plan, instead of the State taking care of it for you.