Harry Potter and the Great Estate Planning Fiasco

A lot of families find it helpful to hear what other families have done in their estate planning, and they get ideas from what others have done.  It’s most helpful, I think, when you know something about the family itself, so let’s talk about Harry Potter. (We have previously discussed Batman here)

Who will care for the orphan?

Harry was famously orphaned as an infant when his parents were murdered by Voldemort. At the time, though, it was believed that Sirius Black had either killed them or was involved in their killing.  Because Harry’s parents, James and Lily, had named Sirius as Harry’s godfather, under wizarding law that would mean he was the designated guardian for Harry in the event something happened to the parents, which of course, it did.  But because it was believed that Sirius was involved in the killing, Dumbledore stepped in and took Harry to be raised by his relatives, the Dursleys, which in hindsight was a very bad deal for Harry.

[If you’re interested in more case studies and discussion about how the wizarding world handles it orphans, like Tom Riddle and Teddy Lupin, you might want to check out this chatboard. ]

In the muggle world, if a family had named a designated guardian for the child who was determined to have killed the parents, a court, much like Dumbledore, would likely determine that person not to be a suitable guardian, and refuse to appoint them, even though the parent’s had named that person.  A judge will always look to see if the named person is otherwise suitable at the time the appointment comes along, thus protecting the child much as Dumbledore attempted to do.

While James and Lily could not have predicted that Sirius would be alleged to have been involved in their murder, they could have predicted that for a variety of reasons Sirius might not be able to serve as guardian when the time arose, and their best course of action would have been to name backup guardians.  With an apparently large number of close friends in the wizarding world, naming a backup to Sirius would have allowed Dumbledore to consider other people as guardian before turning to the Dursley’s, and Harry might have been spared the closet and abuse he endured as a young child.

How to handle the money

Lily and James also would have needed to create a plan for the property and money they had, and how that would be left to Harry.  Kids who inherit from their parents while still minors are never handed the keys to the bank account, but they generally do get full access and control of the property and money as soon as they turn either 18 or 21, depending on the state. In the wizarding world the age is 17, so Harry would have gotten full control of everything in the Gringott’s Vault as soon as he turned 17, which is a scary thought for most parents. Butter Beer for all!

The better way for the Potters to have done this would have been to appoint a trusted person – and some back up people since Sirius would likely have been their first choice – to act as trustee for the property until Harry reached an age that they felt he would be able to appropriately handle the money.   Until that time, the trustee would make decisions about spending for Harry’s benefit.  The actual age chosen by each set of parents depends on what they know about their child, their own philosophy of money and adulthood, and the amount of money likely to be available. The scenes where Harry heads to the Gringott’s vault at the beginning of each school year and grabs a bunch of money, with no supervision and no thought about budgeting or accounting, should make every parent cringe.  Setting up your estate plan to avoid that is easily accomplished.

If you’re ready to avoid your own estate planning fiasco, call or email us for a quick consultation on how we might be able to help. legal@parkercounsel.com or 833-RED-BOOT (833-733-2668)

Power of attorney is alternative to guardianship for elderly persons, not young adults with developmental disabilities

ID-10067073One of the most common questions I get from parents of teenagers and young adults with special needs is whether they should do a guardianship or a power of attorney.  Powers of attorney are frequently talked about as alternatives to guardianship, but in reality, it’s not that black and white. For elderly people, a power of attorney can head off the need for a guardianship.  But for people with developmental disabilities, it’s a very different story.

A guardian is a person appointed by a court to care for an incapacitated person.  The legal description of incapacity in Texas law is: An adult who, because of a physical or mental condition, is substantially unable to provide food, clothing or shelter for himself or herself, to care for his or her own physical health, or to manage his or her own financial affairs.  Other states will have slightly different, but similar definitions.

A power of attorney, on the other hand, is an appointment by an individual of someone to handle that person’s affairs on their behalf. The person signing the power of attorney must NOT be incapacitated, or the power of attorney appointment is not valid.  In other words, the person signing the power of attorney must be able to fully understand the nature of the document and its consequences.  A durable power of attorney means that once you sign it, it will continue to be effective until you revoke it, even if you subsequently become incapacitated.

Powers of attorney are extremely useful in avoiding the need for a guardian in elderly people who develop dementia or other conditions that cause them to be legally incapacitated.  As long as they have signed a durable power of attorney before the incapacitating condition occurred, the person they named in the power of attorney will be able to handle their financial and other affairs without having to go to court and seek guardianship.

Although there are many reasons to have a power of attorney, one of the most important ones is so that in case you become disabled later in life, someone will be able to take care of you without anyone having to go to court and spend the time and money to get a guardianship.

For children with developmental disabilities, that’s not a possibility.  Unlike an adult who becomes disabled later in life, a child who is born with or who is diagnosed with a developmental disability and who meets the legal definition of incapacity,  has never had a time when they were not incapacitated.  Therefore, there is never a time when they have the capacity to sign a power of attorney. There was never an in case for them.  For children with a developmental disability who cannot care for themselves when they turn 18, guardianship is the only option.

Of course, not all young adults with a developmental disability are unable to understand and handle their own care.  If they are not legally incapacitated, then a power of attorney is completely appropriate so that they can name someone that they want to be able to help them with their affairs.

The decision whether to seek guardianship or a power of attorney is not an either/or situation for a young person with a developmental disability.  If they are incapacitated, they cannot legally create a power of attorney.  And if they are not incapacitated, then they are not in need of a guardian.  The question is not whether to have a guardian or a power of attorney, but rather the question is whether they are legally incapacitated or not.

What you do for your child when they turn 18 is dependent on your child’s individual abilities and level of functioning.  If it is not clear, begin discussing this with your child’s doctor’s in the year prior to their 18th birthday.