Matt Caruso and James Ryan
Roberts & Caruso
As the population of the United States ages and people live longer lives, it becomes more and more common for families to take care of elderly relatives who are no longer able to care for themselves. The best thing elderly relatives can do for the younger generation assigned the task of caring for them is to put their wishes in writing and spell out what they want to happen if the time comes when they are no longer able to make personal or financial decisions for themselves. Theoretically, the best way to designate someone to make decisions after a person loses mental capacity is for the designating person to sign a durable power of attorney before he loses the capacity to sign the power of attorney. A power of attorney for health care should allow a trusted relative to make medical decisions on behalf of a disabled person when the power of attorney is presented to medical personnel, and, similarly, a power of attorney for property should allow a trusted relative named in the document to make financial transactions on behalf of the disabled person when the financial power of attorney document is presented to a financial institution.
Under the Power of Attorney Act, the person named in a duly executed power of attorney can act on behalf of a disabled person without having to go to court to obtain a court order finding that the disabled person is indeed disabled.1 In fact, a power of attorney should be effective without any court action at all. If the disabled person never gave his family the gift of setting forth his wishes by executing a power of attorney while still competent (it is too late to sign a power of attorney once the person becomes incompetent), then the concerned family member who volunteers to take care of the disabled person has to file a Petition for Guardianship and go through the time and expense of seeking a court order appointing a guardian for the disabled person. This process involves the appointment of a guardian ad litem to investigate whether the disabled person in fact needs a guardian and to give a recommendation to the court as to who should serve as guardian for the disabled person.2 The guardian ad litem must be paid a fee, in addition to the fee paid to the attorney hired to handle the guardianship proceedings, and the fee paid to the sheriff to serve the alleged disabled person. On the other hand, a power of attorney is a form you can download off of the internet.
Under the Guardianship section of the Probate Act, a guardianship is clearly subordinate to a power of attorney.3 A guardian cannot be given any powers that have already been given to someone holding a power of attorney. Thus, theoretically, it would appear that a guardianship should not be brought any time for someone who has executed a power of attorney. But, in the experience of the authors of this article, guardianships are filed every day for alleged disabled persons who have already signed powers of attorney. Those cases are usually accompanied by a family feud over who should take care of grandpa, and those cases often involve a relative with substantial assets.
If a Power of Attorney Trumps a Guardian, why File a Guardianship When There Exists an Executed Power of Attorney? There are a number of situations where it is prudent to file a guardianship action even though a valid power of attorney exists. One common problem is the occasional reluctance of financial institutions to recognize the validity of a power of attorney. This reluctance may arise in cases where the power of attorney is many years old. Although it may be frustrating to deal with a financial institution that follows the Golden Rule (he who has the gold, makes the rules) and ignores all valid arguments from an attorney that the financial institution must follow the Power of Attorney Act, the financial institution has valid concerns if confronted with a 20-year-old power of attorney.
First of all, the law governing powers of attorney has changed over the years. Recent amendments have restricted the class of person who can sign a power of attorney as a witness; for example, owners of nursing facilities cannot witness a power of attorney, whereas 20 years ago they could (and gladly signed away if the person with the power of attorney wanted to sign a contract to put the disabled person into the facility).4
Another reason for the reluctance of financial institutions to accept powers of attorney is that it is easy to revoke a power of attorney. A revocation of a power of attorney is effective simply upon the signature of the principal on a document that says the principal revokes the power. Or if you may have a copy of a power of attorney, but the principal destroyed the original, the power of attorney is revoked.
Another way to revoke the power of attorney is to sign a new one that revokes the old power of attorney. Thus, the older the power of attorney is, the more likely the possibility exists that there is a revocation lurking somewhere, hiding in a drawer in a relative’s house, in a neighbor’s house, or in an unopened safety deposit box, waiting to see the light of day only after a financial institution has relied on the original power of attorney that had been revoked.
Conflicts Between a Guardian and Someone Holding a Power of Attorney. Another example of a reason to file a guardianship when there is a valid power of attorney is when the power of attorney is in conflict with family members who believe the person acting under the power of attorney is not acting in the best interest of the disabled person. In order to explain the potential conflict between guardians and powers of attorney, we offer the following hypothetical client, Gerty, and her unquestionably incompetent father, referred to as “Dad”. Gerty reports that she took Dad to see Dr. Smith, who informed Gerty that Dad has Alzheimer’s disease and needs 24-hour care in a skilled nursing facility.
Dr. Smith provided Gerty with a written Physician’s Report summarizing his findings that Dad is incapable of making his own decisions. Gerty has one sister, Patty, whom Gerty describes as a bully. Gerty’s mother, Myrtle, died about five years ago. After meeting with Gerty, Gerty’s lawyer files a petition for guardianship for Dad, attaches Dr. Smith’s Physician’s Report, and sends notice of the petition to Patty. The court grants Gerty’s petition for guardianship of Dad without objection and issues letters of office to Gerty as the guardian of Dad’s person and estate.
Guardian Gerty v. Power of Attorney Patty — Who Is in Charge? After Gerty received her letters office from the Clerk of the Court, Gerty went to Dad’s bank to close his accounts and open new guardianship accounts. Unknown to Gerty, Dad had signed an Illinois Statutory Short Form Power of Attorney for Health Care and Property shortly after Myrtle had died that granted Patty the right to act as his agent upon receipt of a doctor’s note certifying that Dad could no longer make his own decisions.
Unknown to Gerty, Patty used Dr. Smith’s report to activate her power of attorney to close Dad’s accounts. Patty refuses to tell Gerty what she did with Dad’s money and refuses to cooperate with Gerty on the best way to care for Dad. Gerty believes that Dr. Smith’s recommendation should be followed and that Dad should be moved into a full-time nursing facility. Patty believes Dad is fine and can live independently. Patty does not want to spend Dad’s money on a full-time nursing facility.
Who is entitled to decide what to do with Dad and his money — Patty, the holder of the power of attorney, or Gerty, the court-appointed Guardian of Dad’s person and estate? Section 11a-17(c) of the Probate Act, which refers to guardians, states in pertinent part: “Absent court order pursuant to the Illinois Power of Attorney Act directing a guardian to exercise powers of the principal under an agency that survives disability, the guardian has no power, duty, or liability with respect to any personal or health care matters covered by the agency.”5 Section 10 of the Power of Attorney Act allows a court, upon petition of an “interested person,” to revoke a power of attorney if the Court finds that the agent is not acting for the benefit of the principal or if the agent acts in ways that causes or threatens harm to the principal in a manner not authorized or intended by the principal.6 The Power of Attorney Act defines “interested person” very broadly to include the principal himself; the principal’s spouse, parent, or descendant; the principal’s caregiver and “another person who demonstrates sufficient interest in the principal’s welfare.”7 This past year, the Legislature amended the Power of Attorney Act to specifically name the Office of State Guardian, the Office of the Public Guardian, and any agency appointed under the Adult Protective Services Act as interested persons.8
Thus, looking at the statute, it would appear that Patty’s power of attorney trumps Gerty’s guardianship. Under the statute, Gerty or some other “interested person” must first obtain a court order pursuant to the Power of Attorney Act suspending or revoking Patty’s power of attorney before Gerty can act as guardian on the same matters covered by the power of attorney.
One case, however, suggests that a guardian can gain control over a ward’s money without having to first file a petition under the Power of Attorney Act and without having the court expressly revoke a pre-existing power of attorney. The Appellate Court for the Fourth District in In re the Estate of Doyle, held that a trial court’s decision to appoint a guardian carried with it an “implicit” revocation of a previously executed power of attorney.9 In Doyle, Mary Doyle’s son, James, and Mary’s son-in-law, Gary, filed a petition for temporary and plenary guardianship of Mary.10 The next day, the Court entered an order appointing James as temporary guardian, appointing a guardian ad litem to represent Mary’s interest, and setting a hearing date on the plenary guardianship of Mary’s person and estate. 11The guardian ad litem conducted her investigation, which included interviews with James; Gary; and Rose, Mary’s daughter and Mary’s agent under Mary’s power of attorney. The guardian ad litem concluded that Rose spent many years providing excellent care for Mary “but simply wore out” and could not handle the task as well as James could.12 Thus, the guardian ad litem recommended that the Court appoint James as guardian. After a five day evidentiary hearing, the trial court agreed with the guardian ad litem and entered an order appointing James as Mary’s plenary guardian.13
On appeal, Rose argued that the appointment of James as guardian was void because Rose’s power of attorney remained in effect and no petition to revoke her power of attorney had been filed. The Appellate Court rejected Rose’s argument, noting that while James and Gary did not file a specific petition under the Power of Attorney Act, they did file a petition seeking guardianship and sent notice to all of the interested persons, including Mary.14 The Appellate Court reasoned that James’s Petition for Guardianship was sufficient to satisfy the requirements under the Power of Attorney Act, and the trial court’s order appointing James as guardian was also an “implicit” revocation of Rose’s power of attorney.15
In a dissent, Justice Cook agreed with Rose that the appointment of James as guardian was void because James did not file a petition to revoke Rose’s power of attorney.
Justice Cook explained that the principal purpose of the Power of Attorney Act is to allow competent persons to choose who should act on their behalf.16 Justice Cook noted that to suggest that whenever a guardian of an estate is appointed any existing power of attorney is revoked runs contrary to both the spirit and the letter of the Power of Attorney Act.
Justice Cook further noted that the criteria needed to revoke a power of attorney are much more stringent then the criteria needed to appoint a guardian.17 For example, the Power of Attorney Act requires a specific finding that the agent was not acting in the best interest of the principal, whereas a guardian can be appointed without the need to prove specific instances of behavior that occurred in the past. Since the trial court in Doyle did not make such a finding that the power of attorney was not acting in the best interest of the principal, Justice Cook determined that the probate court erred in appointing James as a guardian. Justice Cook believed that Mary’s decision to appoint Rose as agent should be honored until it is proven that Rose had not acted in Mary’s best interest.18
It remains to be seen whether the Supreme Court will accept the Doyle court’s reasoning that the appointment of a guardian carries an implicit revocation of a pre-existing power of attorney, or whether the Supreme Court will require a potential guardian to seek to revoke a pre-existing power of attorney before petitioning for guardianship. In In re the Estate of Wilson, the Illinois Supreme Court acknowledged the Doyle ruling in a footnote but distinguished Doyle from the case before it.19 Unlike the petitioners in Doyle who filed only a petition for guardianship, the petitioner in Wilson had filed both a petition for guardianship under the Probate Act as well as petition to revoke power of attorney under the Power of Attorney Act.
Thus, for now, the Doyle decision may provide some relief to a petitioner for guardianship who does not also file a petition to revoke a power of attorney. However, it is a far better practice to file both a petition for guardianship and a petition to revoke a power of attorney.
Guardian Gerty v. Trustee Tom – Who Is in Charge? Once a guardianship is established and the guardian has won the war of control with the person holding the power of attorney, that does not necessarily mean that the guardian is finally in control of all the ward’s assets. A careful attorney bringing a guardianship action must investigate whether some or all of the ward’s assets are titled in a trust. Some older persons who have done estate planning have virtually all of their assets titled to trusts. A probate court in a guardianship generally does not have jurisdiction over assets titled to a trust that are directed by a trustee who is not a party before the court in the guardianship case. The guardian of an estate may believe he has control over all of the ward’s assets, but if some of the assets are in a trust, then it is the trustee who controls those assets, and the trustee is not necessarily the same person as the guardian.
Assume in our hypothetical that Gerty successfully obtained control over Dad’s estate and began using estate money to pay for Dad’s nursing home care. However, it soon becomes obvious that Dad’s stay at the nursing home will become permanent, and that Dad has no meaningful chance of ever returning home. Thus, Gerty believes that in order to continue to pay for Dad’s care, Dad’s house needs to be sold. Gerty looks through the house and discovers that the deed to the house is in the name of a 30-year-old revocable living trust that Dad created while he was married. The trust provides in the event Dad becomes disabled, his nephew, Tom, would act as successor trustee. Gerty contacts Tom, but, unfortunately, Tom does not trust Gerty as they have not spoken for many years. Like Patty, Tom does not believe his uncle needs to be in a skilled nursing facility. Tom objects to selling the house to pay for nursing home care. Who decides what to do with Dad’s house — Tom, the trustee of Dad’s trust, or Gerty, the guardian of Dad’s estate? Section 11a-18(d) of the Probate Act gives some direction to a guardian who is confronted with a ward whose assets are tied up in a trust. That section provides in pertinent part: “A guardian of the estate shall have no authority to revoke a trust that is revocable by the ward, except that the court may authorize a guardian to revoke a Totten trust or similar deposit or withdrawable capital account in trust to the extent necessary to provide funds for the purposes specified in [the Act].” 20 “If the trustee of any trust for the benefit of the ward has discretionary power to apply income or principal for the ward’s benefit, the trustee shall not be required to distribute any of the income or principal to the guardian of the ward’s estate, but the guardian may bring an action on behalf of the ward to compel the trustee to exercise the trustee’s discretion or to seek relief from an abuse of discretion.”21 Thus, looking just at the statute, it would appear that Tom’s power as trustee trumps Gerty’s guardianship. Under the statute, in order to get to the trust assets, Gerty would have to file suit on behalf of Dad against Tom as trustee and prove that Tom’s decision not to use the house to pay for Dad’s care was an abuse of Tom’s discretion as a trustee.
In this situation, In re Estate of Pellico has been cited as an exception to the general rule that a guardianship court does not have jurisdiction over a ward’s assets that are held in trust.22 However, Pellico must be cited with caution, because although its headnotes suggest that the Second District Appellate Court ruled that a probate court in a guardianship has jurisdiction over a ward’s trust assets, Pellico involved a set of unusual facts that apply to that case. Pellico does not stand for the concept that a probate court has jurisdiction over trust assets, unless the trustee voluntarily comes into court and files an appearance on behalf of the trust and submits the trust to the jurisdiction of the probate court. From the perspective of the attorney for the trustee, there may be times when it is strategically beneficial for a trust to submit to the jurisdiction of the probate court in a guardianship matter. In all other cases, it is best to stay away and honor the wishes of the grantor of the trust to keep trust assets out of the purview of the probate court.
In Pellico, the trustee admitted that the Public Guardian served him with a copy of the Emergency Petition for Guardianship, and admitted that he was the ward’s power of attorney and the cotrustee of her trusts. At the hearing, the court granted the Public Guardian’s petition for guardianship, and entered an order suspending all powers of attorney, and appointing the Public Guardian as the guardian of the ward’s person and estate.23
After Ms. Pellico died, the Public Guardian filed a fee petition seeking payment out of her trusts. The trustee objected to the fee petition, arguing that the probate court lacked jurisdiction to order guardian fees to be paid out of the trusts. The probate court agreed and denied the Public Guardian’s request to be paid out of the trusts. The probate court noted that trusts are separate legal entities that may be sued only through its trustee acting in his representative capacity.24 Citing the above mentioned Section 11a-18(d) of the Probate Act, the trial court ruled that the only way that a guardian can force distribution of funds from a trust through the court is for the guardian to “bring an action of [sic]behalf of the ward to compel the trustee to exercise the trustee’s discretion or to seek relief from an abuse of discretion.”25 The circuit court interpreted the “bring an action” language within section 11a–18(d) to mean “bring a separate lawsuit.”26
The Appellate Court reversed and allowed the Public Guardian’s fees to be paid out of the trust without having to bring a separate lawsuit. In reaching its conclusion, the Appellate Court stated that Illinois State Constitution created a single unified trial court vested with general jurisdiction to resolve all justiciable claims.27 The Appellate Court reasoned that Section 11a-18(d) did not limit such jurisdiction because the Legislature cannot limit a court’s jurisdiction.28 Therefore, the court concluded that the probate court had subject matter jurisdiction over the trusts.
The court also found that the probate court in Pellico had personal jurisdiction over the trust and could order the Public Guardian’s fees to be paid out of the Trusts because the trustee specifically submitted to the jurisdiction of the probate court by filing an appearance and filing pleadings on behalf of the trust in the guardianship case. Thus, without having a trustee voluntarily submit to personal jurisdiction in the probate court, a probate court in a guardianship case does not have jurisdiction over a ward’s trust assets unless the guardian first goes through some steps to “bring an action” against the trustee to bring the trust under the jurisdiction of the court.
“Bringing an Action” — the Guardian Versus the Trustee. As the case of Zagorski v. Kaleta illustrates, bringing an action against trustees can be a time-consuming and expensive endeavor, even in cases of financial exploitation.29
In that case, the disabled person, Bozenna Michalak, was an 83-year old widow who lived alone, spoke Polish, and suffered from Alzheimer’s disease.30 She had no children to assist her. Ms. Michalak’s former neighbors the Kaletas, took advantage of Ms. Michalak by driving her to an attorney’s office in order to place Ms. Michalak’s home into a revocable trust that named Robert Kaleta as the trustee and both Kaletas as beneficiaries.31
The decision to use a trust was a clever one because, unlike a will or a power of attorney for property, a trust does not require signatures from disinterested witnesses. The signature of the person creating the trust is all that is needed. Furthermore, unlike a will, which must be filed with the court upon a person’s death, trust documents are not filed with the court upon a person’s death. In these authors’ experience, it is much harder to invalidate a trust after the creator of the trust has died than trying to do so while the creator is living.
Fortunately for Ms. Michalak, she had excellent bankers who not only prevented Ms. Michalak’s bank accounts from being compromised but also alerted the police and Ms. Michalak’s niece, Jacqueline Zagorski, about attempts to access Ms. Michalak’s accounts. Unfortunately, it took Ms. Zagorski 21 months to clear all of the prerequisites needed to get control over the home that Ms. Michalak had transferred into the trust. These prerequisite steps included:
(1) a petition for guardianship,
(2) a guardian ad litem report on disability,
(3) a hearing adjudicating disability,
(4) a citation to discover assets to obtain a copy of the trust,
(5) a second guardian ad litem report investigating the ward’s finances, (6) a petition for leave to amend the trust to name Zagorski as trustee,
(6) a third guardian ad litem report on whether the ward was unduly influenced when she signed the trust, and
(7) a five-day bench trial on the validity of the trust.32
After Ms. Zagorski cleared these seven, expensive hurdles, the Court finally entered an order replacing Kaleta as trustee and beneficiary with Ms. Zagorski as the trustee and Ms. Michalak and her heirs at law as the beneficiaries.
Conclusion Doyle, Pellico, and Zagorski are all cautionary reminders of what can go wrong when trustees, guardians, and powers of attorney are not on the same page on how to properly care for an elderly person. In our hypothetical, “Dad” did not carefully plan. One person acted under a power of attorney, one as guardian, and one as a trustee. None of them communicated with each other and each had different beliefs on how to properly care for Dad. Thus, when advising clients on putting together a plan for when clients are no longer able to care for themselves, it is important to coordinate the plan with the client’s family and with those persons who will ultimately be called upon to make decisions on a client’s behalf. When powers of attorney, guardians, and trustees compete with one another for control instead of coordinating with each other, the disabled person is usually the one that loses.
These cases also provide important lessons for those advising clients involved in a family dispute over how to best provide for a disabled relative’s needs. A careful attorney should conduct a review of a disabled person’s assets, see how the assets are titled, and investigate whether there are powers of attorney or trusts in place. If assets are held in trust or if powers of attorney are in place, then a careful attorney should not only file a petition for guardianship but should also file a petition to revoke a power of attorney or to remove/amend a trust as well.
1 755 ILCS 45/1 et seq.
2 755 ILCS 5/11a-10(a).
3 755 ILCS 5/11a-17(c).
4 755 ILCS 45/3-3.6.
5 755 ILCS 5/11a-17(c).
6 755 ILCS 45/2-10(a).
7 755 ILCS 45/2-10(f).
8 755 ILCS 45/2-10(f)(6); P.A. 98-652.
9 In re the Estate of Doyle, 362 Ill.App.3d 293, 296, 838 N.E.2d 355 (4th Dist. 2005).
12 Id. at 299.
13 Id. at 297.
14 Id. at 299-30.
15 Id. at 301.
16 Id. at 306 (Cook, J., dissenting).
17 Id. at 306.
19 In re Estate of Wilson, 238 Ill.2d 529, 540 n. 9, 939 N.E.2d 426 (2012).
20 755 ILCS 5/11a-18(d).
22 In re Estate of Pellico, 394 Ill. App. 3d 1052, 916 N.E.2d 45(2nd Dist. 2009).
23 Id. at 1057-58.
24 Id. at 1060. (quoting the trial court).
25 Id. (quoting the trial court).
27 Id. at 1064.
28 Id. at 1065.
29 In re Estate of Michalak, 404 Ill.App.3d 75, 934 N.E.2d 697 (1st. Dist. 2010).
30 Id. at 78.
31 Id. at 81.
32 Id. at 75-79.
Matthew (“Matt”) Caruso concentrates his practice on business litigation, contested probate, construction law, guardianships, and criminal law. A two-time chairman of the DuPage County Bar Association Business Law and Practice Committee, Matt has been recognized by his peers for his abilities as a trial lawyer. Matt has been appointed numerous times by courts to act as Guardian ad litem for children who are the subject of adoptions, he has been appointed numerous times as Guardian ad Litem of minors and disabled persons in need of court protection in guardianship cases, and he has been designated as the court-appointed attorney for disabled persons in complex guardianship cases.
Jim Ryan of Roberts & Caruso focuses his practice primarily on contested trusts and estates, business litigation, construction and mechanics’ lien law, and guardianships. Jim has tried cases in both Illinois state court and in the United States District Court for the Northern District of Illinois, where is a member of the trial bar. Jim frequently writes articles on emerging issues in the law. His work has been published by the Illinois Association of Defense Trial Counsel, the DuPage County Bar Association, and the Loyola University Chicago Law Journal. Jim serves a member of the DuPage County Bar Association’s editorial board, an invitation only committee responsible for publishing a ten-issue per year legal journal called The Brief.
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