Imagine you’ve had a stroke, are disabled, and people want to help. If you never gave anyone power of attorney, friends and family may have to use their own money. Your banker and broker cannot release your assets, even for emergencies, without your permission or a court order.
The court order will likely come from a guardianship, the most dreaded proceeding known to the law. Guardianships are expensive and tedious, because they invoke court supervision of every facet of your personal business, but they are sometimes necessary to bust open the piggybank. Unfortunately, they may continue until you die or the money runs out.
Chapter 1301 management trusts (formerly known as Section 867 trusts under the Probate Code) are an alternative to a long-term guardianship. They are named for the Texas Estates Code provision that authorizes them. The probate court approves a trustee, usually corporate, who can take your assets from the guardian, manage them free of court supervision, and make distributions for your health, education, maintenance, and support. An annual accounting to the court is still required, but the court does not micromanage investments or distributions.
Medicaid asset protection is possible with a statutory trust, but not a guardianship. Corporate trustees can be found to manage a statutory management trust with as little as $100,000 in liquid assets; $300,000 may be the guardianship minimum. It’s much easier to provide for child support payments or the care of a spouse or child from a statutory management trust than a guardianship. A statutory management trust can also be structured to hold a minor’s assets all the way to age 25.
A guardianship may still be needed to manage a difficult asset, e.g., a house with 47 cats or a working farm, but once the estate is liquidated, a statutory management trust may allow a guardianship to be terminated that otherwise would drag on and on.