Court Bonds

Planning Ahead: Capacity Decline



A brutal truth is that we can never know if or when we could experience a capacity decline that impedes our ability to run our businesses, handle our finances, and make sound decisions. That’s why it is important not just to make a will or trust, but also to put decision makers  in place for ourselves, should they become necessary. 


Cautionary Tale

A recent Supreme Court case in Suffolk County, New York, underscores the importance of factoring the possibility of cognitive decline into the estate planning process. Although it’s typical to think of estate planning as arranging for the distribution of assets upon death, longer lives make it ever more critical to consider the importance of putting in place safeguards for our own well being–and that of our loved ones. In the Matter of the Application of T.K. (N.Y. Slip Op. 50045), T.K, sought to be appointed as guardian for his father, K.K (the alleged incapacitated person, aka the “AIP”), after discovering that K.K., a retired advertising executive, had made a  $2.5 million investment in the “business” of Mr. Austin:

Mr. Austin (and his son), meanwhile, was indicted for fraud crimes against 20 victims in excess of $10 million. Yet, the AIP insisted that Mr. Austin “has done nothing wrong.” While Mr. Austin was under house arrest, the AIP continued to meet with him. The Court Evaluator reported that the AIP had become a “willing participant” in the exploitation perpetrated by Mr. Austin, luring the father into investments coupled with promises of major returns. The evidence also showed that the AIP’s funds were used to pay Mr. Austin’s personal expenses, including trips to Las Vegas. Cash App payments, and various other non-“business-related” charges.

As the matter unfolded, the Court appointed a property management guardian to protect K.K from further harm to himself “by reason of his functional limitations and lack of understanding and appreciation of them.” Ultimately, the Court determined there was “substantial likelihood,” that K.K. would “continue to engage in self-harming activities, due to years of being “psychologically victimized by Mr. Austin: “Such victimization caused psychological stress to the AIP, which manifested itself in the forms of “substantial weight loss, excessive consumption of alcohol and diminished abilities to concentrate and communicate.”

Anticipatory Planning

Of course (hopefully) most families will not fall prey to the criminal machinations in the case of T.K. and his father. Nonetheless, “regular” capacity declines are a possibility, making it very useful to put a Power of Attorney (POA) in place, authorizing someone we trust to make our financial decisions for us, should doing so become necessary. 


Note that a POA cannot be put in place after cognitive decline has become evident, which makes proactive planning essential. Lawyers also remind us that via a POA, it is even possible to designate a preferred guardian should one become necessary down the road: “Generally, it is our recommendation that a power of attorney be prepared by a person prior to the time that they may become incapacitated in order to deal with any future contingencies. It is also suggested that this power of attorney designate the potential guardians should they become incapacitated. On the other hand, if a sudden incapacitation arises due to an unfortunate event, then the only option would be to seek a guardianship.”


Guardianship Bonds Explained

Given the seriousness of the role and responsibilities involved, courts typically require guardians to secure a guardianship bond. Essentially, a guardianship bond is a type of fiduciary bond, which protects the interests and affairs of “the ward.” Learn more about guardianship bonds and watch a short video right here. The requirements of guardianship bonds vary, but as a national, direct writer, Colonial Surety provides bonds to meet the specific requirements in every state. At Colonial, all fiduciary bonds, including guardianship bonds, are available directly and digitally. The steps to obtaining guardianship bonds are easy: get a quote online, fill out the information, and enter a payment method. Print or e-file the bond from anywhere—even while at court. 


Obtain Guardianship Bonds Here.


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