The Powers and Duties of a Guardian of an Incompetent Adult in North Carolina

Following an adjudication of incompetence of an adult by a clerk of court, the clerk will appoint a guardian. The clerk may appoint separate people to serve as guardian of the person (who is tasked with custody and physical care of the ward) and guardian of the estate (who is responsible for managing the ward’s finances) or appoint one person as general guardian (who serves the ward in both capacities). When appointing a guardian, the Clerk of Superior Court will enter an order that sets forth the powers and duties of the guardian.  The order may limit the guardian’s powers and duties, depending upon each individual ward’s capacities.  In addition, a guardian owes the ward a fiduciary duty, meaning that they must act in the ward’s best interests.

To the extent that it is not inconsistent with the terms of any order of the clerk or any other court of competent jurisdiction, a guardian of the person has the following powers and duties, outlined in North Carolina General Statutes Chapter 35A:

(1) The guardian of the person is entitled to custody of the person of the guardian’s ward and shall provide for the ward’s care, comfort, and maintenance, and shall, as appropriate to the ward’s needs, arrange for the ward’s training, education, employment, rehabilitation or habilitation. The guardian of the person shall take reasonable care of the ward’s clothing, furniture, vehicles, and other personal effects that are with the ward.

(2) The guardian of the person may establish the ward’s place of abode within or without this State. In arranging for a place of abode, the guardian of the person shall give preference to places within this State over places not in this State if in-State and out-of-State places are substantially equivalent. The guardian also shall give preference to places that are not treatment facilities. If the only available and appropriate places of domicile are treatment facilities, the guardian shall give preference to community-based treatment facilities, such as group homes or nursing homes, over treatment facilities that are not community-based.

(3) The guardian of the person may give any consent or approval that may be necessary to enable the ward to receive medical, legal, psychological, or other professional care, counsel, treatment, or service; provided that, if the patient has a health care agent appointed pursuant to a valid health care power of attorney, the health care agent shall have the right to exercise the authority granted in the health care power of attorney unless the Clerk has suspended the authority of that health care agent in accordance with G.S. 35A-1208. The guardian of the person may give any other consent or approval on the ward’s behalf that may be required or in the ward’s best interest. The guardian may petition the clerk for the clerk’s concurrence in the consent or approval.

A guardian of the person is entitled to be reimbursed out of the ward’s estate for reasonable and proper expenditures incurred in the performance of his duties as guardian of the ward’s person. In addition, a guardian of the person, if he has acted within the limits imposed on him by statute or the Clerk’s order shall not be liable for damages to the ward or the ward’s estate, merely by reason of the guardian’s:

(1) Authorizing or giving any consent or approval necessary to enable the ward to receive legal, psychological, or other professional care, counsel, treatment, or service, in a situation where the damages result from the negligence or other acts of a third person; or

(2) Authorizing medical treatment or surgery for his ward, if the guardian acted in good faith and was not negligent.

By contrast, a guardian of the estate has the power to 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, including but not limited to the following specific powers:

(1) To take possession, for the ward’s use, of all the ward’s estate, as defined in G.S. 35A-1202(5).

(2) To receive assets due the ward from any source.

(3) To maintain any appropriate action or proceeding to recover possession of any of the ward’s property, to determine the title thereto, or to recover damages for any injury done to any of the ward’s property; also, to compromise, adjust, arbitrate, sue on or defend, abandon, or otherwise deal with and settle any other claims in favor of or against the ward.

(4) To complete performance of contracts entered into by the ward that continue as obligations of the ward or his estate, or to refuse to complete the contracts, as the guardian determines to be in the ward’s best interests, taking into account any cause of action that might be maintained against the ward for failure to complete the contract.

(5) To abandon or relinquish all rights in any property when, in the guardian’s opinion, acting reasonably and in good faith, it is valueless, or is so encumbered or is otherwise in a condition that it is of no benefit or value to the ward or his estate.

(5a) To renounce any interest in property as provided in Chapter 31B of the General Statutes, or as otherwise allowed by law.

(6) To vote shares of stock or other securities in person or by general or limited proxy, and to pay sums chargeable or accruing against or on account of securities owned by the ward.

(7) To insure the ward’s assets against damage or loss, at the expense of the ward’s estate.

(8) To pay the ward’s debts and obligations that were incurred prior to the date of adjudication of incompetence or appointment of a guardian when the debt or obligation was incurred for necessary living expenses or taxes; or when the debt or obligation involves a specific lien on real or personal property, if the ward has an equity in the property on which there is a specific lien; or when the guardian is convinced that payment of the debt or obligation is in the best interest of the ward or his estate.

(9) To renew the ward’s obligations for the payment of money. The guardian’s execution of any obligation for the payment of money pursuant to this subsection shall not be held or construed to be binding on the guardian personally.

(10) To pay taxes, assessments, and other expenses incident to the collection, care, administration, and protection of the ward’s estate.

(11) To sell or exercise stock subscription or conversion rights; consent, directly or through a committee or other agent, to the reorganization, consolidation, merger, dissolution, or liquidation of a corporation or other business enterprise.

(12) To expend estate income on the ward’s behalf and to petition the court for prior approval of expenditures from estate principal.

(13) To pay from the ward’s estate necessary expenses of administering the ward’s estate.

(14) To employ persons, including attorneys, auditors, investment advisors, appraisers, or agents to advise or assist him in the performance of his duties as guardian.

(15) To continue any business or venture or farming operation in which the ward was engaged, where that continuation is reasonably necessary or desirable to preserve the value, including goodwill, of the ward’s interest in the business.

(16) To acquire and retain every kind of property and every kind of investment, including specifically, but without in any way limiting the generality of the foregoing, bonds, debentures, and other corporate or governmental obligations; stocks, preferred or common; real estate mortgages; shares in building and loan associations or savings and loan associations; annual premium or single premium life, endowment, or annuity contracts; and securities of any management type investment company or investment trust registered under the Federal Investment Company Act of 1940, as from time to time amended.

(17) a. Without a court order to lease any of the ward’s real estate for a term of not more than three years, or to sell, lease or exchange any of the ward’s personal property including securities, provided that the aggregate value of all items of the ward’s tangible personal property sold without court order shall not exceed five thousand dollars ($5,000) per accounting period. When any item of the ward’s tangible personal property has a value which when increased by the value of all other tangible personal property previously sold in the estate without a court order would exceed five thousand dollars ($5,000) in the current accounting period, a guardian may sell the item only as provided in subdivision (17)b.

b. A guardian who is required by subdivision (17)a to do so shall, and any other guardian who so desires may, by motion in the cause, request the court to issue him an order to lease any of the ward’s real estate or to sell any item or items of the ward’s personal property. Notice of the motion and of the date, time and place of a hearing thereon shall be served, as provided in G.S. 1A-1, Rule 5, Rules of Civil Procedure, upon all parties of record and upon any other persons the clerk may direct, and the court may issue the order after conducting a hearing and upon any conditions that the court may require; provided that: 1. A sale, lease, or exchange under this subdivision may not be subject to Article 29A of Chapter 1 of the General Statutes unless the order so requires; and 2. The power granted in this subdivision shall not affect the power of the guardian to petition the court for prior approval of expenditures from estate principal under subdivision (12) of this section.

(18) To foreclose, as an incident to the collection of any bond, note or other obligation, any mortgage, deed or trust, or other lien securing the bond, note or other obligation, and to bid in the property at a foreclosure sale, or to acquire the property deed from the mortgagor or obligor without foreclosure; and to retain the property so bid in or taken over without foreclosure.

(19) To borrow money for any periods of time and upon the terms and conditions as to rates, maturities, renewals, and security as the guardian shall deem advisable, including the power of a corporate guardian to borrow from its own banking department, for the purpose of paying debts, taxes, and other claims against the ward, and to mortgage, pledge, or otherwise encumber that portion of the ward’s estate as may be required to secure the loan or loans; provided, in respect to the borrowing of money on the security of the ward’s real property, Subchapter III of this Chapter is controlling.

(20) To execute and deliver all instruments that will accomplish or facilitate the exercise of the powers vested in the guardian.

(21) To expend estate income for the support, maintenance, and education of the ward’s minor children, spouse, and dependents, and to petition the court for prior approval of expenditures from estate principal for these purposes; provided, the clerk, in the original order appointing the guardian or a subsequent order, may require that the expenditures from estate income also be approved in advance. In determining whether and in what amount to make or approve these expenditures, the guardian or clerk shall take into account the ward’s legal obligations to his minor children, spouse, and dependents; the sufficiency of the ward’s estate to meet the ward’s needs; the needs and resources of the ward’s minor children, spouse, and dependents; and the ward’s conduct or expressed wishes, prior to becoming incompetent, in regard to the support of these persons.

(22) To transfer to the spouse of the ward those amounts authorized for transfer to the spouse pursuant to 42 United States Code § 1396r-5. (23) To create a trust for the benefit of the ward pursuant to 42 United States Code § 1396p(d)(4), provided that all amounts remaining in the trust upon the death of the ward, other than those amounts which must be paid to a state government and those amounts retained by a nonprofit association as set forth in 42 United States Code § 1396p(d)(4)(C), are to be paid to the estate of the ward.

(24) To petition the court for approval of the exercise of any of the following powers with respect to a revocable trust that the ward, if competent, could exercise as settlor of the revocable trust: a. Revocation of the trust. b. Amendment of the trust. c. Additions to the trust. d. Direction to dispose of property of the trust. e. The creation of the trust, notwithstanding the provisions of G.S. 36C-4-402(a)(1) and (2). The exercise of the powers described in this subdivision (i) shall not alter the designation of beneficiaries to receive property on the ward’s death under that ward’s existing estate plan but may incorporate tax planning or public benefits planning into the ward’s existing estate plan, which may include leaving beneficial interests in trust rather than outright, and (ii) shall be subject to the provisions of Articles 17, 18, and 19 of this Chapter concerning gifts.

Complying with the terms of a clerk’s guardianship order and ensuring that a guardian does not breach their fiduciary duty to their ward is often complicated and can require the assistance of an attorney experienced in such matters. A failure to comply with the terms of the order can result in removal as guardian or being held in contempt of court, and a breach of fiduciary duty may expose a guardian to an expensive lawsuit and monetary damages. Both can usually be avoided with advance consideration of potential issues.

Evan Lohr is a trusts, estates, and guardianship attorney in Raleigh. He can be reached at (919) 348-9211 or at evan@lohrnc.com.

Guardianship of Adults in North Carolina

The law presumes that all adults are legally competent and have the ability and right to manage their own affairs and to make decisions for themselves. Oftentimes, however, family members or friends find that a loved one cannot take care of their own finances or make the necessary decisions to live independently. If the person has executed a power of attorney, then the named attorney-in-fact may act on the person’s behalf in the manner authorized by the power of attorney (there are two general types of POAs – healthcare and financial). If the person has a trust which authorizes the trustee to take certain financial actions upon the incompetency of the person, then the trustee may do so. A problem arises, however, when a person needs to execute these documents but no longer has legal capacity to do so. In this situation, in order for a child, spouse, or other loved one to become authorized to make decisions on behalf of a person who no longer can, they must be appointed guardian by the Clerk of Superior Court in the county in which the incompetent person resides.

There are two aspects of a guardianship proceeding in North Carolina – first, the adjudication of incompetency, and second, the appointment of the guardian(s). The procedure to adjudicate competency and to appoint a guardian is laid out in Chapter 35A of the North Carolina General Statutes. 

To initiate a proceeding, a person must file with the Clerk of Court a verified petition for the adjudication of incompetence of an adult. The petition should include a general statement of the respondent’s assets and liabilities, a statement of the facts tending to show that the respondent is incompetent and the reason or reasons why the adjudication of incompetence is sought, and the name, address, and county of residence of the respondent’s next of kin and other persons known to have an interest in the proceeding. Upon filing of the petition, an attorney will  be appointed as guardian ad litem to represent the respondent.

Within five days after filing of the petition, the clerk shall issue a written notice of the date, time, and place for a hearing on the petition, which shall be held not less than 10 days nor more than 30 days after service of the notice and petition on the respondent, unless the clerk extends the time for good cause, for preparation of a multidisciplinary evaluation as provided in G.S. 35A-1111, or for the completion of a mediation. Copies of the petition and initial notice of hearing shall be personally served on the respondent.  Respondent’s counsel or guardian ad litem shall be served pursuant to G.S. 1A-1, Rule 4, Rules of Civil Procedure.  The petitioner, within five days after filing the petition, shall mail copies of the notice and petition to the respondent’s next of kin alleged in the petition and any other persons the clerk may designate.

Usually, guardianship hearings are held with the clerk of court sitting as finder of fact. However, the respondent has a right, upon request by him, his counsel, or his guardian ad litem, to trial by jury. If the finder of fact, whether the clerk or the jury, finds by clear, cogent, and convincing evidence that the respondent is incompetent, the clerk shall enter an order adjudicating the respondent incompetent.  The clerk may include in the order findings on the nature and extent of the ward’s incompetence.

Following an adjudication of incompetence, the clerk shall appoint a guardian pursuant to Subchapter II of Chapter 35A. Any individual, corporation, or disinterested public agent may file an application for the appointment of a guardian for an incompetent person by filing the same with the clerk. During a hearing to determine the appointment of a guardian, the clerk shall make such inquiry and receive such evidence as the clerk deems necessary to determine: the nature and extent of the needed guardianship; the assets, liabilities, and needs of the ward; and who, in the clerk’s discretion, can most suitably serve as the guardian or guardians. If the clerk determines that the nature and extent of the ward’s capacity justifies ordering a limited guardianship, the clerk may do so.

The clerk may appoint as guardian an adult individual, a corporation, or a disinterested public agent. In most circumstances, a person appointed as general guardian or guardian of the estate must post a surety bond to guarantee their performance. A nonresident of the State of North Carolina, to be appointed as general guardian, guardian of the person, or guardian of the estate of a North Carolina resident, must indicate in writing his willingness to submit to the jurisdiction of the North Carolina courts in matters relating to the guardianship and must appoint a resident agent to accept service of process for the guardian in all actions or proceedings with respect to the guardianship. Such appointment must be approved by and filed with the clerk.

Evan Lohr is an attorney with Lohr & Lohr PLLC in Raleigh. He regularly handles estate and guardianship matters. He can be reached at evan@lohrnc.com or at (919) 348-9211.