When an adult cannot manage his or own affairs for financial or personal matters, a guardian may be necessary. Generally a guardianship can be avoided when the person has planned ahead with appropriate powers of attorney for financial and health care matters. Here is the North Carolina procedure for appointing a guardian, under North Carolina General Statutes, Chapter 35A. The North Carolina Statutes for Incompetency and Guardianship are available online, here.
Incompetency Definitions in North Carolina
The standard under which an adult is deemed incompetent to require a guardian in North Carolina, is a person “who lacks sufficient capacity to manage the adult’s own affairs or to make or communicate important decisions concerning the adult’s person, family, or property whether the lack of capacity is due to mental illness, mental retardation, epilepsy, cerebral palsy, autism, inebriety, senility, disease, injury, or similar cause or condition.”
A person who is declared incompetent is termed a “ward,” and the person named to make decisions on behalf of the ward is called the “guardian.”
A person cannot be declared incompetent simply because he or she makes irresponsible or bad decisions; everyone has the right to make foolish decisions without being considered incompetent. Instead, it must be shown that the person lacks the capacity to make sound decisions. For example, a person may not be declared incompetent simply because he wastes money on odd purchases or hands out money to strangers. That is a choice. But if the person is doing that and lacks the capacity to recognize that he has no money left to live on, that could be grounds for incompetency. Note too, that merely having a developmental disability or mental illness does not, by itself, make a person incompetent. The person must also lack capacity.
Starting an North Carolina Guardianship
In North Carolina anyone interested in the proposed ward’s well-being can start a guardianship proceeding. The person starting the process is called the “petitioner” and the proposed ward is called the “respondent.” The petitioner files a petition with the Clerk of Court requesting adjudication of incompetence, which includes facts showing that the respondent is incompetent and an estimate of the respondent’s assets and a list of the respondent’s next of kin.
The Clerk appoints a local lawyer to serve as “guardian ad litem” to represent the respondent and to report to the Clerk. If the respondent retains his own counsel, the Clerk may but is not required to discharge the guardian ad litem.
There will be a hearing on the petition. Prior to the hearing, the Clerk can require a multidisciplinary evaluation be done to consider in the incompetency hearing. In addition, an interim guardian may be appointed when the respondent may be in imminent or foreseeable risk of harm to his person or finances.
At the incompetency hearing, both sides will present evidence in front of the Clerk. If the Clerk decides that the respondent is competent, then the proceeding is over. If the Clerk decides that the respondent is incompetent, then the Clerk will need to appoint a guardian. The Clerk has broad discretion about who to appoint, and it is not necessarily the petitioner.
North Carolina law does allow a person to request the Clerk to appoint a particular person as guardian, should a guardianship be needed. That is done through the Durable Power of Attorney for finances (to name a requested Guardian of the Estate), and through a Health Care Power of Attorney (to name a requested Guardian of the Person). Even so, the Clerk can decide to appoint someone else if in the best interests of the ward. The guardian could be any competent adult, such as the ward’s spouse, other family member, friend, neighbor or a professional guardian.
The guardian need not be an individual. The Clerk could name a nonprofit agency or a public or private corporation. The Clerk can also name the public guardian, to handle the guardianship, particularly when family cannot agree or there is no responsible family member available.
Reporting Requirements for a North Carolina Guardianship
The guardian must comply with North Carolina law, to act in the best interests of the ward and to get court approval when needed. Courts hold guardians accountable to report about how money is invested and spent, and guardians are personally liable for their actions.
A Guardian of the Estate (and a General Guardian) will file an initial inventory of the ward’s property and investments. Then he or she will invest the ward’s funds, and file annual, detailed reports with the Court. A bond is also required. This continues every year for the rest of the ward’s lifetime, unless the ward’s condition improves to the point where a guardianship is no longer needed.
Alternatives to Guardianship
Avoiding a guardianship is a motivating factor for doing estate planning, because a guardianship requires a loss of freedom and dignity for the ward, and a tremendous amount of red tape and extra constraints. Some alternatives to guardianship include the following:
Power of Attorney. A power of attorney names someone else (called an attorney-in-fact or agent) to make decisions when the person signing the document (who is called the “principal”) cannot make those decisions for his or her own self. The power of attorney could be for financial decisions (called a Durable Power of Attorney) or for medical decisions (called a Health Care Power of Attorney). Usually the power of attorney for finances is immediately effective, but the principal does not intend for the Agent to use it until the principal becomes incapacitated.
Representative Payee. The Social Security Administration does not recognize powers of attorney, but it is possible to have a person appointed as representative payee instead.
Revocable trust. A person’s assets can be held in a revocable or “living” trust created while the person is competent. The trust creator (called a “Grantor” or “Settlor”), would include instructions in the written trust document about how the assets in trust could be used if the Grantor becomes incompetent through a stroke, illness or accident. In that case, the trust document would name someone as a “Successor Trustee” to take over management of the trust upon the Grantor’s incapacity or death.