Asset
Management
There may come a point where the individual is unable to take care of financial matters such as paying bills, depositing and writing checks, re-opening and closing accounts. There are several legal tools to address this need: 1) joint titling of assets 2) durable powers of attorney 3) trusts 4) representative payee programs and 5) guardianship of property.
- Jointly Titled Assets
A competent individual can add another onto an asset as a joint owner, giving each joint owner a full undivided interest in the asset. The rights of the joint owner may be limited depending on whether the asset is titled as joint tenants with right of survivorship, tenants in common, or tenants by the entirety. Regardless of the titling arrangement, the joint owners have full access to the asset and thus have the ability to manage the asset. While this approach provides the ability to manage financial matters, joint tenancies present risks. For instance, financial improprieties of a joint owner or the joint owners creditors' claims may subject the initial joint owners assets to substantial risks.
- Durable Financial Power of
Attorney
This is a document in which one individual, the grantor, grants authority to another individual, the attorney-in-fact, to handle financial matters. The attorney-in-fact has a fiduciary obligation to the grantor and must exercise reasonable care and diligence in acting on the grantor's behalf. The power of attorney can be general, covering all assets owned by the grantor or limited, giving authority to handle only certain transactions. Additionally, powers of attorney can be either springing, i.e. only effective upon the grantor's disability, or effective immediately upon execution. The grantor must be competent when the power of attorney is executed. It will remain in effect even if the grantor becomes disabled and can be revoked at any time while the grantor is competent. Power of attorney is used as a management tool for a variety of reasons such as: absence from the country, incarceration, poor management skill, personal time considerations, and disability.
- Trust
A trust is a separate legal entity which is created by an individual, the grantor, who appoints an individual or an institution, the trustee, to manage assets which the grantor transfers into the trust for the benefit of a named beneficiary. The grantor must be competent when the trust is executed. The trustee is responsible for carrying out the terms of the trust and assumes fiduciary obligations with respect to the trust property and the beneficiary. Under a trust, the legal title is vested in the trustee while the incidents of ownership are vested in the trust beneficiary. Certain forms of trusts help with managing assets in the event of disability or prolonged absence; other types of trusts preserve assets from taxes, misuse or division, or preserve funds for a specified purpose such as charity or education.
- Representative Payee
Certain federal agencies (such as the Social Security Administration, Office of Personnel Management, and the Veterans Administration) will allow another individual to be appointed to receive the monthly benefit checks on behalf of an individual who is unable to handle the benefits alone. The person appointed to receive the check is called the representative payee. The representative payee can establish a bank account to deposit the income and pay the disabled person's monthly bills. The agency that pays the monthly income will oversee the representative payee, similar to the court's role in supervising a guardian of property, to ensure that the funds are being used for the disabled person's benefit.
- Guardianship of Property
A guardian of property is appointed by the court to manage the financial affairs (the property) of an individual adjudicated incompetent by the court. In Maryland, the Circuit Courts have exclusive jurisdiction over guardianship proceedings for adults. To establish a guardianship the court must determine that the alleged disabled 1) is incapacitated due to a mental or physical disability, 2) has property or assets or entitlement to benefits that require competent management and 3) is unable to provide the management. The guardian is a fiduciary and must act in the best interest of the ward. Additionally, in Maryland, the guardian is the agent of the court and as such must file reports to the court regarding the ward's assets and in some instances request permission from the court prior to expending funds or engaging in some financial transactions.