Posted by: BlogMaster | March 17, 2011

17A Legal Guardians: How Broadly Can the Surrogate’s Court Interpret their Role? – Part 2

On Dec. 22, 2010, in Matter of Joyce G.S., the Bronx Surrogate Court authorized 17A guardians to make decisions about tax savings for their ward.

This case expands the authority, with prior court permission, of 17A guardians to use their powers in a manner they ‘believe’ the developmentally disabled person would have wanted, using a legal principal called the ‘doctrine of substituted judgment’.

Joyce is a middle-aged woman with Down syndrome and serious health problems. Her brothers, serving as her 17A guardians, manage her revocable trust worth $50 million. Joyce has had a 17A guardian since 1971.  She lives in a nursing institution and receives privately paid round-the-clock nursing care, amounting to $400,000 – $500,000 each year.

Her brothers/guardians asked the court’s permission to make gifts for the purpose of saving inheritance taxes. There was no question that the request would not affect their ability to continue to pay for the quality medical care Joyce will always needs.

In prior court decisions, the brothers had secured court permission to establish a revocable trust with Joyce’s funds, to designate family as partial beneficiaries, and to also designate charities or charitable foundations as other partial beneficiaries after Joyce’s death.

How does this decision impact other 17A guardians?

All competent individuals who wish to make gifts in 2011 up to $13,000 per person/donee can do so without paying a gift tax and without the need to file a gift tax return. This is called the ‘annual exclusion gift’.

In addition, up to $1 million in 2010, and up to $5 million in 2011 and 2012 may be gifted without gift tax (although complex estate tax issues are involved in the calculation).  And, where larger wealth is present in a family, charitable gifts and charitable tax planning documents (called ‘charitable remainder annuities and/or trusts’) are often established by a family to minimize estate taxes.

Joyce G.S.’s 17A guardians asked the Court for the same authority a ‘competent person’ would have in order to make tax saving gifts under the legal theory called ‘substituted judgment doctrine’. This doctrine became part of a different guardianship statute called ‘Article 81 for incapacitated persons’.  In that statute, permission can be requested from a Supreme Court judge to make gifts for tax savings, to continue a pattern of gifts to individuals and/or charities during the incapacitated person’s lifetime, and/or to support a dependent.

But no such express statutory authority is found in 17A of the guardianship statute in the New York Surrogate’s Court.

My next blog will continue on the Matter of Joyce G.S., exploring the decision by the Bronx Surrogate’s Court.

 

*** Photography by Jesse Abrahams ***

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