Are you a guardian for an adult in North Carolina? If so, it is essential to understand the guardianship bank account rules for the state. According to North Carolina laws, there is a fiduciary responsibility of all guardians to handle the ward’s assets with their best interest in mind. In this blog post, we will discuss how to handle these accounts so that you can fulfill your guardianship duty properly.
There are 1.3 million adult guardianship cases with 50 billion dollars of assets under guardianship in the United States.
Guardianship is a court-directed relationship between someone incapable of handling their own affairs and someone directed to manage their affairs for them. Some of the most common reasons for appointing a guardian are the onset of dementia, injury, disability, or illness.
Guardianship, while sometimes avoidable with proper planning, is often a valuable way to help someone incapable of managing their own affairs.
Types of Guardianships
When a court declares someone as an incompetent or incapacitated person by court order, the court will appoint a guardian to handle aspects of their care. Based upon the abilities and needs of the Ward, the Court may designate you as a family member guardian. Or a judge may appoint a social services agency or other agency as a guardian.
So let’s look at the types of guardians and what financial authority and responsibilities you may need to take on in your role.
Guardian of the Person
Some guardians only handle the personal care aspects of guardianship and do not manage a ward’s money. However, you must keep good spending records if you need reimbursement from a financial guardian. Keep all receipts related to anything your ward needs.
A “guardian of the person” has authority over the ward’s personal care and their residential and medical decisions. Think of this as power over everything except finances. You make provisions for care, including medical and psychological treatment, education, training, and employment. You also honor any written advance instructions from the Ward for their medical or mental health care.
According to NC Statute § 35A-1241, a guardian of the person should receive reimbursement out of the ward’s estate for reasonable and proper expenditures incurred performing their duties as “guardian of the ward.” This reasoning only applies if you act within the court’s scope or the legal bits in § 35A-1241.
However, if you’re a guardian of the person acting within the proper scope of your duties, the court will not hold you liable for loss to the ward or the guardianship estate if you:
- Authorize or give consent or approval for the ward to receive legal, psychological, or other professional care, counsel, treatment, or service (if the loss comes from another person’s negligence)
- Authorize medical treatment or surgery for the ward, if you act in good faith and not in a negligent manner
So, if you carefully follow the scope of the responsibilities the court entrusts you with, you can expect reimbursement for outstanding debts you incur for the ward.
Guardian of the Estate
A “guardian of the estate” has authority over a ward’s finances, but not the personal care, residential, or medical df a ward. A “guardian of the estate” may handle financial account issues for a “guardian of the person,” ensuring the transfer of funds from other accounts into the ward’s account when needed.
Unless limited by court order, the guardian of the Estate can generally “perform in a reasonable and prudent manner every act that a reasonable and prudent person would perform incident to the collection, preservation, management, and use of the ward’s estate to accomplish the desired result of administering the ward’s estate legally and in the ward’s best interest….”
The complete listing of “guardian of the estate” powers can be found in G.S. 35A-1251 and 1253. In addition to duties imposed by law or by order of the clerk, the guardian of the estate must duty to take possession of the ward’s estate to do the following:
- Collect monies due to the ward
- Pay debts of the ward, including taxes
- Obey all lawful orders of the court
- Observe the standard of judgment and care that an ordinary and prudent person serving as a fiduciary would take in acquiring and maintaining the ward’s property. (2)
General Guardian
A general guardian has the combined power of a Guardian of the Person and a Guardian of the Estate. The general authority for this role covers almost all aspects of a ward’s affairs.
Limited Guardian
Specified limited authority over a ward may include certain facets of care, such as only medical or only residential or personal care decisions. A court generally customizes a limited guardianship around the ward’s specific needs and limitations.
Often, a disabled person who can handle their own money receives a limited guardianship for help with only particular needs.
A person with a limited guardianship may have complete financial freedom to do as they choose, whether opening a new account or buying and owning real property! They may only need assistance with personal care for a couple of hours each day.
However, a limited guardian may also have some authorization over financial issues. For example, a judge may ask a guardian to handle paying all of a ward’s expenses, such as medical insurance, financial institutions, medical expenses, credit cards, etc. In this situation, a ward may have access to only one bank to spend freely from as they choose.
Judges in North Carolina try to give a ward the most freedom possible while protecting them from themselves where needed. Whichever type of guardianship you receive in North Carolina, you must take an oath to uphold your duties. You can read more in-depth information about the Responsibilities of Guardians or talk with a guardianship attorney to better understand your role.
Guardianship Bank Accounts
Guardians with control and access over a ward’s assets and property, and some non-resident guardians, must file a bond approved by the clerk before receiving their authority. The bond helps the state ensure you do not mishandle the ward’s account or withdraw money for your own purposes.
The guardian may NOT use the real and personal property of the ward for anything or anyone other than the ward. Here are some rules to go by when handling a ward’s bank account assets.
The guardian must:
- Never list themselves on any ward’s account as a joint account holder (with or without the right of survivorship) or as a payee on death.
- APPEAR on any guardianship account as acting on behalf of the ward.
- Never borrow money from the ward.
- Keep separate the money belonging to the ward from their personal funds.
- Never loan the ward’s money to anyone unless the court orders.
- Never write any checks for “cash” (unless the court authorizes regular cash distributions to the ward) (4)
If you’re a financial guardian feeling unsure about the scope of your authority or how to manage the assets in your care, talk with a guardianship attorney about your concerns. A guardianship attorney can also help you inventory assets and make your yearly accounting to the court.
Inventories and Yearly Accountings for Guardians
As a guardian who handles finances, you will need to fill out in-depth accountings for the court each year in addition to the initial inventory of the ward’s estate. When you fill out the initial inventory for the court, you will list all of the ward’s bank accounts, whether individual, in their own name, or joint. You can see the initial inventory form here.
For the first inventory, you’ll need to provide:
- Bank account information and statements
- List of stocks, investments, and real estate
- Life insurance policies
- Pension plans and retirement accounts
- Taxes and all supporting documentation
- List of any valuable items or assets
At later yearly inventories, you’ll also need to provide:
- Documentation of any changes in the ward’s assets during the guardianship period
- A description of how you’ve managed the ward’s finances during the guardianship period
- Receipts for guardianship expenses
- All account statements
- A final accounting of all guardianship income and expenses
Power of Attorney Joint Account (NOT for Court-Appointed Guardians)
Joint bank accounts work well when someone establishes a power of attorney arrangement before becoming incapacitated. However, as a guardian, a joint account is not legal in the eyes of the court.
While guardianship is an arrangement put in place by the courts, a power of attorney is a trusted person that someone appoints BEFORE they need a guardian.
A joint account is a good management tool for someone acting as a durable general power of attorney because it requires both the ward’s and agent’s signatures for withdrawals. As a power of attorney agent, there are no court reports or inventories to worry about. An agent can often also set up automatic payment options to manage paying monthly bills or other predictable expenses.
As a power of attorney, talking about your concerns with a guardianship attorney can help you understand possible consequences to your financial decisions, including:
- Income taxes
- Interest
- Working with a trustee
- Handling funds from a special needs trust: This trust holds money for the benefit of a person with a disability to help maintain eligibility for needs-based public benefits.
- Handling funds from an ABLE account
Managing Real Estate as a Guardian
As a guardian, you must maintain a ward’s real property to ensure they have a place to live or money to pay for their living expenses. You must maintain an accurate accounting of the ward’s property, income, expenses, and disbursements.
To the extent possible, only the ward’s income (rather than any portion of the principal) should be used to pay for their care.
A guardian of the estate or general guardian must petition the clerk in advance if:
- They need to sell the ward’s real property needs to pay for the ward’s needs
- They need to sell more than $5,000 of the ward’s personal property in any one accounting period to pay for the ward’s needs.
Managing Investments
As a guardian of finances, you’ll need to invest the ward’s funds in interest-bearing accounts or other approved investment accounts in the ward’s name that also show your name as the guardian (acting on behalf of the ward).
You must also properly manage the funds to ensure money is available to pay for the ward’s needs, such as shelter, food, clothing, and medical care. When you withdraw funds, you need to retain the proof of what you spent the money on for the court.
If a guardian fails to manage and secure a ward’s funds properly, they can face personal liability for their breach of fiduciary duty.
It’s also crucial to be careful of the types of investment tools you choose to use. If you cause the loss of principal, a court may use the “reasonable prudent man rule,” and you can face personal liability for breach of fiduciary duty.
You’ll also need to maintain canceled checks and receipts of all expenditures and provide them to the clerk with each accounting, together with bank statements, titles, or other documentary evidence of balances still held or invested. (3)
What Is a Representative Payee?
Individuals entitled to receive particular state or federal benefits, who are determined unable to manage these benefits, may be assigned an individual or agency payee to receive and manage these funds for their benefit.
Examples are Social Security Income, Supplemental Security Income (SSI), and Veteran’s benefits. You can talk with the agency that sends the benefits about setting yourself up as the representative payee once a court declares you as a guardian.
Keeping a Ward Safe From Financial Exploitation
Even if you’re a guardian who doesn’t handle the ward’s money, you can still pay attention and help keep the ward safe from financial exploitation.
You can tell trusted others if the ward says that money or property is missing or if you notice assets going missing. According to the Consumer Financial Protection Bureau (CFPB), signs of exploitation may include seeing the ward:
- Making sudden changes in their spending or savings habits
- Taking out large sums of money from the bank without explanation
- Trying to wire large amounts of money
- Using the ATM a lot
- Buying things or services that don’t seem necessary
- Putting names on bank or other accounts that you don’t recognize or that they are unwilling or unable to explain
- Not receiving bank statements or bills
- Making new or unusual gifts to family or others, such as a “new best friend”
- Changing beneficiaries of a will, life insurance, or retirement funds
- Having a caregiver, friend, or relative who suddenly begins handling their money
We Can Help: Experienced Guardianship Attorneys Here For You
At Hopler, Wilms, and Hanna, our experienced guardianship attorneys understand you need to pay careful attention to the rules and regulations governing a ward’s finances, such as understanding banking rules for guardianship accounts. We work with guardians across the state of North Carolina to ensure you meet all court standards.
Our knowledgeable attorneys can help you through every step of the guardianship process, from filing for guardianship to helping you manage the initial court inventory, yearly accountings, bank accounts, or other financial matters related to your role as a guardian. Contact us today to learn more and find solutions!