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.

A Primer on North Carolina Living Trusts

Most clients who seek me out for estate planning advice generally ask for help in drafting and executing a will for them. While a will is a necessary part of an estate plan, a trust can also be a very important part of that plan – and not just for the wealthy. The various benefits of trusts – discussed below – often provide valuable results for people of all income levels.

The most widely used type of trust is referred to as a living trust (also referred to as an “inter vivos” trust). A trust is a legal arrangement where a person called the “grantor” transfers property to be held by an individual called the “trustee” for the benefit of a third party, referred to as a “beneficiary.”  While many times the grantor, trustee and beneficiary are different people, that is not always be the case. Sometimes, the grantor, trustee and beneficiary can be the same person.

A living or inter vivos trust is one that is created during the lifetime of the grantor. In most cases, the grantor is both the trustee and the beneficiary during their lifetime. Usually, the grantor reserves the right to revoke the trust. After the death of the grantor, the terms of the trust control the disposition of the assets. In the usual case, the grantor’s spouse, if living, will receive the assets of the trust, either outright, or through distributions of the trust. If the spouse is not living, the grantor’s children or other chosen beneficiaries will receive distributions from the trust. These distributions can be made either by giving the property to the beneficiaries outright or by a successor trustee continuing to administer the trust until the time that the grantor specified that the beneficiaries are of a sufficient age to receive the remainder of their share.

The primary benefits of incorporating a living trust into your estate plan are avoiding the expense and hassle of probate in North Carolina, privacy, and avoiding ancillary probate in another state in which you own real property. When property passes via a will, a probate proceeding must be opened. The process can sometimes be time-consuming and expensive, and documents filed in a probate proceeding are public record which can be viewed by anyone, including a person intentionally disinherited under the terms of the will. Also, if you own property in another state, an ancillary probate proceeding must be opened in that state, which can be costly and burdensome to an executor. A trust avoids this problem because the trust, not you, owns the property, which passes pursuant to the terms of the trust. A revocable trust also provides a measure of planning should you become incapacitated. In that event, your successor trustee assumes responsibility for the administration of the trust and can manage the property held by it.

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

Trust Reformation in North Carolina

Reformation of a North Carolina Trust Pursuant to N.C.G.S. 36C-4-415

Suppose that Mr. Smith created a trust during his lifetime that he intended to benefit his two daughters and his nephew at his death. When drafting the trust, Mr. Smith’s lawyer mistakenly omitted language naming the nephew as a beneficiary of the trust. After Mr. Smith’s death, the trustee administers the trust according to the terms of the document. Does Mr. Smith’s nephew have any means of recourse?

Historically, the nephew would have been unlikely to succeed in an action to recover his interest under the trust. However, since the codification of the North Carolina Uniform Trust Code, Mr. Smith’s nephew may be able to reform the terms of the trust to include the provision naming him as a beneficiary. N.C.G.S. 36C-4-415 provides that:

”[t]he court may reform the terms of a trust, even if unambiguous, to conform the terms to the settlor’s intention if it is proved by clear and convincing evidence that both the settlor’s intent and the terms of the trust were affected by a mistake of fact or law, whether in expression or inducement.”

The statute represents a substantial departure from the prior approach and provides aggrieved parties with a significant means of recourse: if the aggrieved party can prove by clear and convincing evidence that the person who created the trust intended to include a term but did not because of a mistake of fact or law, then a court may reform the terms of the trust to include that term. In the case of Mr. Smith’s nephew, he could petition the court to include him as a beneficiary of the trust in whatever amount the settlor intended.

As of this writing, no North Carolina appellate court has interpreted 36C-4-415, so it is unclear what its reach will ultimately be. It does, however, provide hope to intended beneficiaries mistakenly left out of trust documents.

Evan Lohr is an estates attorney with Lohr and Lohr PLLC in Raleigh. He can be reached at evan@lohrnc.com or at (919) 348-9211.