Generally speaking, a guardian is not personally responsible for the ward’s debts or bills. The guardian has a duty of care to ensure that all bills are paid on time, but if there are no assets to cover the ward’s liabilities then the guardian’s responsibility stops there. He or she is not required to pay the ward’s bills with their personal assets, and if the ward’s bills are sent to collections it will have no impact on the guardian’s credit.
However, if a guardian fails to pay the ward’s bills when there are assets available, the guardian may be held responsible for the consequences of not paying those bills. Simple, inconsequential mistakes may be swept under the rug, but any cases of negligence or willful failure will result in the guardian being dismissed. In serious cases, the guardian may be held liable for damages incurred by the estate.
When the court appoints a guardian to care for a ward, the judge will provide a detailed explanation of the guardian’s duties in the guardianship agreement. If it’s a general guardianship, the agreement will likely provide complete unsupervised access to the ward’s estate. The guardian will be asked to prudently use these assets as they exercise control of the ward’s healthcare, living situation, and finances. If it’s a limited guardianship, the guardian’s access to estate assets will be limited to the extent of their specific duties.
Generally speaking, a guardian may have the following responsibilities:
- Approve and monitor non-medical services (e.g. counseling, group therapy)
- Consult with physicians and approve treatment plans
- Determine the ward’s living situation
- Ensure the ward has transportation to appointments and recreational activities
- Institute a care plan for the ward
- Invest the ward’s assets in accordance with their risk tolerance and income needs
- Keep a detailed accounting of expenditures
- Make important end-of-life decisions
- Manage real estate holdings
- Maximize the ward’s independence
- Monitor the ward’s living situation
- Release confidential information
- Serve as a representative payee
- Pay debts and bills
A guardian’s liabilities
Guardians have a duty of care to place the needs of the ward above their own. Additionally, a guardian is asked to employ reasonable care and caution when they are acting or speaking on behalf of the ward. Taking control of someone else’s life and affairs isn’t a light matter, after all.
When it comes to managing the ward’s assets, the court imposes a simple test—how would the average prudent investor act when managing the assets in question? If the average prudent investor would act similarly, then the guardian’s actions are safe. If the guardian conducts greater due diligence and exhibits more care than the average investor, that’s even better.
In some cases, the court may require a guardian to take state-mandated classes, but a guardian is not required to have any specialized skills (e.g. he or she doesn’t need a background in law or finance). That said, a guardian who has specialized skills is expected to utilize them, so a guardian with an extensive background in finance may be held to a higher standard than the prudent investor rule.
Generally speaking, guardians aren’t liable for actions taken on behalf of the ward, providing the actions are within the bounds of the guardianship agreement and they reflect how a prudent investor would act. A guardian is not personally responsible for debts that the ward incurred prior to the guardianship’s initiation, nor is a guardian liable for reasonable and necessary debts incurred during the guardianship. If the guardian enters into a contract that’s permissible under the guardianship agreement, the guardian is not personally liable unless the contract specifies that they are.
However, a guardian could be held responsible for their actions if the estate suffers damages due to the guardian’s carelessness, negligence, or personal fault. Cases of negligence, unauthorized use of estate assets, or misappropriation of property typically result in the guardian being dismissed. If the estate doesn’t have a bond (some guardianships require a bond to protect the estate’s assets), the guardian may be personally liable for damages or losses incurred by the estate.
Given the risk of dismissal and personal liability, it’s important that a guardian fully understands their duties and limitations under the guardianship agreement. Guardians who have any questions about their responsibilities should consult with an attorney. For financial questions, it may be prudent to consult with a financial advisor or an accountant.
In some guardianship cases, the court will ask the guardian to take out a bond to protect the ward’s estate. The cost of the bond is covered by the estate, not the guardian. The amount of the bond is set by the court and is typically equal to the value of the estate that the guardian has stewardship over, plus one year’s expected income. If the guardian makes a mistake that results in a financial loss, the bond would protect the ward’s assets and compensate the estate for the guardian’s mistake.
Alternatives to guardianship
If you are considering whether a family member or friend needs assistance handling their affairs, guardianship shouldn’t be the first option. As long as the adult in question has a sound mind (i.e. they’re not mentally incapacitated), he or she can issue a durable power of attorney instead. While guardianship proceedings can take months to complete and will likely incur substantial court costs, a power of attorney can be drafted in less than an hour and is significantly less expensive.
With a power of attorney, the principal (in this case, the adult who needs help with their affairs) voluntarily designates an agent (known as the attorney-in-fact) to legally act on their behalf. The agreement can take effect immediately, or the transferal of authority can wait until the principal is declared mentally incapacitated by a physician or psychologist. Either way, once the agreement takes effect the agent will have the same powers and authority as a court-appointed guardian.
If the adult in question is already incapacitated, then unfortunately a power of attorney isn’t an option. Instead, you’ll need to petition the court for a guardianship if the adult needs a proxy to handle their healthcare and living situation, a conservator if the adult needs someone to manage their assets, or both if they need assistance with all of their personal and financial affairs.