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Protecting Your Parents' Assets

How do you protect your parent’s assets from bad people? That can be harder than you think. If your parent has a Trust and you are named as the successor Trustee, then helping your parent may be possible. But most Trusts allow the Trust creator—your parent—to act as Trustee so long as they have the capacity to do so. When people age and begin to lose the capacity to manage their financial affairs, they are not always honest with themselves (or with you) about their abilities. This poses a problem.

Can Someone with Diminished Capacity Manage Trust Assets?

Do you allow a parent with diminished capacity to continue managing the Trust assets, or do you try to take action? If you do choose to take action, what action can you take to replace your parent as the successor Trustee? The easiest route is to have your parent voluntarily resign as Trustee.

When a parent voluntarily steps down, then the successor Trustee can take office and begin managing the Trust assets.

What if my Parent Refuses to Resign as the Trust Manager?

If your parent refuses to resign, then you will have to review the capacity provisions of the Trust document. Most Trusts have a provision on capacity. That provision will typically say that a Trustee is deemed to lack capacity (and therefore can no longer act as Trustee) if two physicians state in writing that the Trustee lacks the capacity to manage financial affairs. Keep in mind that this is a standard set by the Trust—not a legal finding of incapacity under the law.

Where do I find the Capacity Standard for my Trust?

The Trust document can specify its own standard for when a Trustee can no longer act. Of course, even under this type of capacity standard, you would still need to have your parent evaluated by two physicians and the physicians would have to state their determination in writing.

Does Your Parent Refuse to Resign from Trust?

When you have a parent who refuses to admit that they need help, even getting them to a doctor for evaluation can be difficult. Unfortunately, there really are no other options. In order to take over as Trustee, you must follow the Trust terms.

What if my Parent has Power of Attorney?

Let’s suppose that instead of a Trust (or in addition to the Trust) your parent also has a power of attorney naming you as an agent. This could be useful in managing non-Trust assets. But many powers of attorney also require an incapacity determination by two physicians before they spring into place. That means you may still need to have your parent evaluated by two physicians before you can act under the power of attorney. However, some powers of attorney only require one physician, or they may have a different standard by which to judge incapacity. You will have to review your parent’s power to an attorney to determine what is required for an incapacity determination.

The Last Resort: Filling for Conservatorship

The legal action of last resort if all else fails is to file for conservatorship. This is by far the worst option. With a conservatorship filing, you are asking the court to make a legal finding that your parent lacks legal capacity. This is a big deal. And it often is viewed by the parent and a direct attack against them. You may think you are trying to help your parent, but your parent may think you are trying to hurt them. Worse yet, a parent could choose to disinherit you in the event you bring a conservatorship action against them.

The bottom line: there are rarely any good choices when trying to protect your parent. The best result is when a parent cooperates with your efforts.