America’s Aging Population

There is no doubt that this country finds itself faced with a large aging population; the largest in our nation’s history. As the elderly population grows, so do incidents of nursing home negligence, abuse, and injury. Take for example the following chart, which shows the steeply projected incline of America’s aging population:

Projected Baby Boomer

With increased age also comes the increased rates of Alzheimer’s, dementia, and general physical decline that, combined with ever increasing rates of longevity, lead to younger generations needing to find ways to care for their parents and even grandparents. When an adult loses the ability to make decisions in their own best interests, the family will often be faced with having to petition a probate court for the appointment of a legal guardian for their loved one. The trend in cases in Missouri for appointments of adult guardianships is also projected to dramatically rise:

ChartGship Trend

How is capacity determined?

There is a big difference between legal capacity and medically determined capacity. This blog post will discuss legal capacity and will leave the more visceral discussion of medical capacity for doctors and mental health professionals. Suffice it to say that there is necessarily some overlap, but strictly speaking, legal capacity is defined by a number of factors:

Age

In Kansas, K.S.A. §38-101, states that the age of minority is under 18 years old, unless the person is married, then being a minor means under 16 years old. Despite this, K.S.A. §38-1702, states that property cannot be transferred to a minor transfers to minors, and sets the age of majority at 21 years old. Per K.S.A. §38-102, minors can be bound by contracts they enter into for more than just necessities unless disaffirmed a “reasonable time” after reaching age of majority and the benefits under contract are returned. So, for example, if a 17 year old entered into a contract to buy a car and then six months after turning 18, the car’s engine blew up, the 18 year old could probably get the contract for the sale of the vehicle voided if they returned the vehicle and the engine problem wasn’t caused by anything the 18 year old did to the car.

In Missouri, common law states the age of majority is 18 years old. Like Kansas, RSMo. §404.007, sets the age of majority at 21 years old for transfers. What this really means is that if an adult wishes to grant their niece or nephew an expensive piece of real estate, for example, they would need to wait until their niece or nephew turned 21. Missouri is a little different than Kansas on the issue of contracts. RSMo. §431.056 allows minors to enter into valid contracts for necessities (like utilities) and services if they are 16 or 17 years old and certain factors are met (other contracts must be ratified after the age of 18 is reached per RSMo. §431.060 or contracts for real estate disaffirmed within 2 years per RSMo. §442.080).

Disability

In Kansas, K.S.A. §59-3051 defines a disabled person as one “whose ability to receive and evaluate relevant information, or to effectively communicate decisions, or both, even with the use of assistive technologies or other supports, is impaired such that the person lacks the capacity to manage such person’s estate, or to meet essential needs for physical health, safety or welfare, and who is in need of a guardian or a conservator, or both.” This might refer to an adult, over the age of 18 or 21, who cannot function independently; maybe they would not bathe regularly, eat regularly, or be able to otherwise care for themselves like an average person could.

Missouri’s definition is similar: RSMo. §475.010 defines disability as being “[u]nable by reason of any physical or mental condition to receive and evaluate information or to communicate decisions to such an extent that the person lacks ability to manage his financial resources.”

Neither State considers it a disability when someone elects to forego traditional medical treatment in favor of spiritual healing alternatives.

Lawyers asked to assist in helping a family with an incapacitated person may encounter some pitfalls and should tread carefully. Kansas Rule 1.14 and Missouri Rule 4-1.14 both allow a lawyer that reasonably believes that the client has diminished capacity; is at risk of substantial physical, financial or other harm unless action is taken; and cannot adequately act in the client’s own interest, to take reasonably necessary protective action, including consulting with individuals or entities that have the ability to take action to protect the client and, in appropriate cases, seeking the appointment of a next friend, guardian ad litem, conservator or guardian – also, the lawyers should do what is reasonably necessary to protect the client, however, the lawyer may divulge only the information reasonably necessary regarding client’s incapacity as is needed to safeguard the client’s interests in order to obtain proper appointments and services.[1] Thus, once a person is determined to be incapacitated, they may not enjoy all the protections of privacy the average person does.

Guardianship and Conservatorship

When a person becomes incapacitated, normally the family seeks a guardianship or conservatorship in order to step in and help the incapacitated person manage their affairs. A Guardianship means making decisions in the best interests of the person. A guardianship is necessary when a person cannot perform their activities of daily living (like dressing, bathing, cooking, and cleaning independently), live independently without assistance, and ensure that their basic health needs are met.

A Conservatorship means making decisions in the best interests of the estate (i.e., the finances and property of the person). A conservatorship is necessary when there is more than $1,000 in assets and the individual cannot manage or handle property on their own (such as write checks, pay bills, understand financial transactions). Sometimes, just a guardianship is necessary. Other times, only a conservatorship will be needed. Often, however, the court will appoint a person to act as both.

Appointing a fiduciary

Courts give preference to agents appointed under power of attorney documents or other estate planning documents (like an executor of a will or trustee of a trust). If there are no such documents for the incapacitated person, courts then give preference to family members. However, courts will NOT appoint: a nursing home or any of its employees; a person who is a full time court staff (unless related within 3rd degree of blood); a minor; someone incapacitated or disabled; or someone who has substance abuse issues. Courts have discretion to appoint: a felon, however, it is not likely a felon will qualify for bond and if they do, bond is likely to be expensive; some courts may not appoint someone who has recently gone through a personal bankruptcy (because such individuals may not qualify to be bonded); a guardian or conservator who was disqualified may re-apply or be re-qualified after two years; and an out-of-state resident might not qualify if their distance from the ward/protectee would prevent/hamper them from carrying out their obligations.

Determining medical incapacity

As previously mentioned, the physician-patient privilege is waived in guardianship and conservatorship appointment proceedings. Physicians can be compelled to testify at proceedings, and can even be questioned by the judge. Normally, written evaluations can be used to avoid testimony and save on expense.

Costs

Costs are usually paid by the conservatorship estate if incapacity is found and estate has sufficient funds to pay the costs (an attorneys fees). If not, costs may be paid by the county if the conservatorship estate is insufficient OR may be taxed as a cost of litigation in a personal injury case if the conservatorship is necessary because incapacity was caused as the result of an accident. If there is a settlement or judgment on protectee’s behalf, then settlement or judgment will enter the conservatorship estate and costs will be reimbursed out of the settlement approved by the probate court.

If incapacity is not found, then costs are taxed to the Petitioner.

Important Notes

Once the guardian/conservator is appointed, if there is an underlying personal injury case, the personal injury attorney will be attorneys required to get approval from the probate court to enter into a contingent fee contract with the guardian/conservator OR get the contract ratified, if signed prior to appointment of a guardian/conservator. The attorney also needs to get approval from the court to pursue the personal injury action on behalf of ward/protectee OR get the pursuit of litigation ratified. An authorization for conservator to enter into settlement on behalf of the protectee if the settlement is more than $1,000 must be approved by the probate court. If the attorney finds that the settlement will be sizable, and the protectee is receiving government assistance (such as Medicaid), then the attorney will need court approval to deposit settlement funds into a special needs trust.  Some courts require that the draft trust be approved by the state Medicaid agency first before the court will set a hearing to approve the trust and authorize payment into the trust. The final, signed, original trust usually must be registered with the probate court. Copies of each finalized settlement and release agreement must be filed with the court, so injury attorneys should be careful in drafting confidentiality clauses, since probate courts have discretion in honoring confidentiality. Once a guardian is appointed, the guardian will have to file a yearly report on the ward’s status, so it is important to make sure these reports do not conflict with any of the factual allegations in the civil case! (Example: the guardian’s annual report says the ward’s condition is improving and the ward can now walk or talk – how does that affect the life care plan drafted by the plaintiff’s expert?)

Once a conservator is appointed, the conservator must file an annual accounting called a “settlement”. These are labor intensive and the conservator should be advised not to make cash purchases, ATM withdrawals, EFT/debit purchases, and purchases that have not been pre-approved by the court, otherwise the accounting may not balance and the conservator may risk removal.

If a nursing facility or hospital petitions to have a guardian/conservator removed (perhaps because bills are not getting paid and the guardian/conservator lacks resources to move the ward/protectee to another facility), NOTE that the personal injury attorney no longer has a client. If the public administrator is appointed as guardian/conservator ad litem, the attorney will need to work with the PA as the new client unless or until the client is reinstated as a court-appointed fiduciary.

What about a Power of Attorney & Other Estate Planning Documents?

Not all power of attorney documents are created equal. Durable power of attorney documents are still effective if the principal becomes disabled, provided the document was signed prior to the manifestation of the incapacity. Check the actual terms of the document to ensure that the agent has authority to pursue litigation on behalf of the principal; even so, a conservator may still need to be appointed to handle the financial affairs. Often people will have a medical power of attorney that only covers medical decisions, but does not address the need to pursue litigation or handle the financial affairs of the person that becomes incapacitated. All power of attorney documents terminate upon the death of the principal, so they cannot be used after death.

A court may appoint a successor agent to act on behalf of the principal if none of those nominated are willing or able to act on behalf of the agent, thereby avoiding a conservatorship if the power of attorney document allows for the appointment of a successor and covers financial affairs. Interested parties may petition the court to determine whether the principal is disabled, but in doing so, run the risk of the court ordering appointment of a guardian or conservator, so it is best to obtain confirmation in writing from a treating physician per the terms of the DPOA document first. Many courts will allow an agent to initiate litigation, but if the litigation looks like it will settle, often courts require appointment of a guardian & conservator – with the appointment of a GAL in the process to represent the incapacitated party’s interests – in order to approve the settlement even if there is a DPOA.

Trusts do not confer authority for a trustee to pursue litigation on behalf of a decedent. Ellison v. Fry, 437 S.W.3d 762 (Mo. 2014) held that where suit brought against a defendant who dies during the course of litigation and trustee of decedent’s trust was substituted as a party defendant, a personal representative must be appointed to pursue a cause of action personally against the deceased defendant. The naming of a trustee of the deceased defendant’s trust is improper. RSMo. § 537.010-021. The individual trust language determines whether a trustee has authority to pursue litigation on behalf of a living incapacitated person.

Continued in Part II.

[1] See also Missouri OCDC Article, “Clients with Diminished Capacity,” March 11, 2013, available athttp://www.mochiefcounsel.org/newsP.htm?id=26 for further guidance.