Get help managing funds of minors, disabled clients

If families are struggling with estate and trust litigation, or if they’re unable to assist an incapacitated relative, the government can help.

It offers services through the Office of the Children’s Lawyer (OCL) and the Office of the Public Guardian and Trustee (OPGT). However, advisors and families should use these services only when they’ve exhausted all other options, according to an expert panel at a STEP Canada event last week.

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The panel included: Linda Waxman, legal director for the OCL; Kenneth R. Goodman, Ontario’s Public Guardian and Trustee; and Steve Adams, comptroller and accountant of the Superior Court of Justice.

About the OCL

The OCL represents children under the age of 18 in court cases involving custody, access and child protection, as well as in civil, and estate and trust cases that involve inheritances of more than $10,000, says Waxman.

In custody, access and protection cases, the OCL may be contacted if the court needs independent information about a child’s needs, wishes and interests, which lawyers and social workers can retrieve through further investigation.

When it comes to estate and trust cases, the OCL represents child beneficiaries where no financial guardian or trustee has been named on their behalf in wills or trust documents. Waxman says parents aren’t automatically chosen as a child’s financial guardian and that they must be legally named before taking control of a minor’s funds.

Read: What not to do in estate planning

Typically, the OCL either appoints someone to manage a child’s money until he or she turns 18 or the Office can manage the money, especially if relatives don’t have the expertise required. In the latter case, parents or guardians then have to file applications to the OCL if they wish to spend a child’s money on educational needs or on vacations, for example.

In general, those wishing to take over control of kids’ funds from the OCL have to put together applications that include solid, comprehensive financial plans, says Waxman. These plans must explain how funds will be invested, the risks involved and the returns expected.

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Further, potential guardians must show they know inherited funds must be turned over when kids turn 18—the only exception is when capacity is in question, at which point the OPGT steps in. People can’t place minors’ funds into long-term, illiquid investments.

Finally, says Waxman, if parents are chosen as financial guardians, “they have to remember they have the same fiduciary duty to their children as non-parent [financial professionals].” They will be held liable for any mismanagement or losses.

These days, she adds, many potential guardians propose to manage children’s inheritances by investing estate, trust or insurance proceeds in RESPs. Even if intentions are good, she suggests, the OCL considers these investments unfit since children may not go to college or university, and there’s a risk RESP subscribers could choose to name another child as the beneficiary of the funds.

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About the OPGT

The OPGT plays a role in assessing and protecting mentally incapable adults, and in helping these adults manage their funds and long-term care needs. It also searches for heirs of estate that have no named beneficiaries.

Goodman says the OPGT sometimes assists people who suspect a relative’s funds are being misused due to failing mental capacity. In these cases, however, families must prove the relative in question is legally considered incapable, because the OPGT is obligated to assess a person’s mental health via licensed doctors before offering to help.

Read: Prepare for client incapacity

If a person is incapacitated and funds are being misused, then management of those funds will go to the OPGT until investigators figure out what exactly has been occurring, who is best suited to take over as financial POA, and whether the currently incapable person is expected to regain their mental health.

Families should consider that “determining financial capability isn’t based on whether people are making bad decisions, or on whether someone’s diagnosed with a disease,” says Goodman. “Even those with dementia may still have the ability to make decisions, write wills and appoint POAs.”

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If required, the OPGT can also help manage the financial affairs of those who become incapable before naming property POAs, adds Goodman. If no suitable POA can be found, the OPGT will look at the person’s financial situation, and short- and long-term needs, and make “all financial decisions. This includes receiving and depositing income, making investments, […] applying for benefits [and] acting in legal proceedings if required,” according to the OPGT’s official website.

The main goal, however, is to appoint a spouse, child or relative as a POA. Most often, the OPGT is only called in if someone has no living relatives, or if someone dies intestate.

Read: Will assets pass away with your clients?

If the OPGT does take over for the long term, says Adams, the office must draw up financial plans that explain how funds will be invested, just as families are required to do when sending in applications to become people’s POAs.

The funds the OPGT manages are invested in low-risk funds. One such fund holds 30% Canadian equities, 15% U.S. and international equities and 40% Canadian fixed income. That fund has yielded a one-year return of about 10%, while the OPGT’s income fund has yielded a one-year return of about 5%.

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