Legal Articles

Conservatorship

March 20, 2012

In my previous blog I wrote about the problems that can occur for children and spouses of parents who die without a valid Will.  Another issue that parents must address to protect their families in the event of such a tragedy is proper planning for their children who may be beneficiaries of life insurance policies, IRAs, 401(k)s, Certificates of Deposit, and other similar financial accounts.

Life insurance policies and many of the other types of accounts allow the policy or account owner(s) to designate primary and secondary beneficiaries to receive the funds in the event that the owner dies.  Any funds traveling from such a policy or account do not pass through the owner’s estate – and thus are not normally subject to attachment by creditors of the owner – but rather they are delivered directly to the beneficiary(s).

The intuitive decision for many individuals with young children is to designate their spouse as the primary beneficiary, and to name their child or children as secondary beneficiaries; however, this is an ill-advised strategy.  For the reasons illustrated below, a nightmare scenario can occur if minor children become entitled to receive funds as beneficiaries of a life insurance policy or other account.

Georgia statute O.C.G.A. § 29-3-1, et. seq. requires that if a minor child inherits or otherwise receives any property – including cash money – in excess of $15,000.00 in value, the property must be delivered to an independent legal conservator who acts subject to the authority of the Probate Court.  This is true even when one or both parents of the minor beneficiary are still alive, as could be the case for a child inheriting property from a grandparent or other friend or relative.

During the term of any such conservatorship, the Court will be the final authority on how conservatorship funds are managed.  The procedures and hearings involved in appointing a conservator are time consuming and expensive, and they can substantially deplete the value of the property at issue.  In addition, a court-appointed conservator charges fees and is often required to buy an insurance policy to guard against fraud – all costs that are charged to the money being held for the minor.

Perhaps the biggest problem of all is that by operation of law, when the child reaches eighteen (18) years of age the funds in a conservatorship will be delivered to the outright control of the child.  Anyone who has ever spent any time with the average eighteen (18) year old knows that this is a “magic act” in the making, as a teenager has the supernatural ability to make money disappear in the blink of an eye.

To avoid these problems and bypass the risk that a conservatorship could be established for your child, you should establish a living trust that is separate from your Will to function as a beneficiary of life insurance policies, retirement accounts, and other financial accounts for the benefit of your child.   A living trust empowers you to nominate a trustee to receive and control any funds intended for your child’s benefit, and to hold and protect those funds while your child is too young to do so for him or herself.

Depending upon the terms and provisions that you incorporate into your trust, the trustee can have the discretion to spend the trust funds for the child’s education, health, and welfare, and under Georgia law the trustee will always have a fiduciary obligation to act in the best interest of the child.

By establishing a trust, you can also select the age at which the child can acquire outright control of the trust funds.  It does not have to be eighteen (18) years of age, but rather you are permitted to require that the funds remain in the trustee’s control until the child reaches an older age as selected by you.  The oldest age of distribution that I have personally been directed to draft into a trust was sixty-two (62) – which seemed a bit extreme – but it illustrates the point.

It is crucial that the trust for insurance policies, retirement accounts, and other financial account funds be separate from your testamentary trust and estate.  You never want to make your estate the beneficiary of funds that would otherwise travel outside of your estate, e.g., life insurance, because that creates the risk that those funds would become subject to attachment by creditors of your estate.  By establishing a separate trust and making its trustee the beneficiary of such policies and accounts you can protect the funds from creditors, avoid the mandatory conservatorship issues addressed above, and establish a plan of distribution that works for the best interest of your child.

Although death may be a depressing topic for many, the issues addressed in this blog are important for those parents with young children, and unfortunately, it has been my experience over the years that people have been misinformed about this area of the law.

David L. Walker, Jr., is a partner in the law firm of Flint, Connolly & Walker, LLP in Canton, Georgia, where he represents businesses and individuals in various legal matters.

A letter on the law

February 6, 2012

Parents – you need to execute a Last Will and Testament.  I recently represented an unfortunate client whose husband unexpectedly died of a heart attack while he was getting dressed for work.  He was survived by my client (his wife) and their two young children, and he did not have a will.  I write that she was unfortunate, not only because her husband tragically passed away, but also because his untimely death left his widow with a real legal nightmare.

My client and her departed husband didn’t know that under Georgia law, if you are married with minor children and you die without a will your spouse is not your sole legal beneficiary.  Instead, your spouse becomes a joint heir with your children.  Generally speaking, this is not a good thing.

Effectively, this means that the ownership in all of the property of the deceased is split amongst the widow and the children.  To make matters worse, if those children are minors, the law requires that a conservatorship be set up through the Probate Court (above and beyond what is typically required to handle the deceased person’s estate).  In most cases, the conservatorship requires that the guardian of the children (who is appointed by the Probate Court) must purchase a surety bond and file annual returns with the Court.  Whenever the surviving spouse wants to take action with regard to the property that he or she inherited from their partner – such as selling or refinancing the marital residence – he or she will have to get permission from the Judge of the Probate Court to do so.  Filing the motions and attending the hearings to obtain such permission is time-consuming, expensive, and an emotionally draining exercise.

On the other hand, if a spouse with minor children dies with a valid will, the estate will be administered in accordance with the terms of the will, and the aforementioned steps are avoided.  By simply executing a valid Last Will and Testament, parents can control the disposition of their estate and avoid all of the hassles that my unfortunate client has been forced to endure.

It does not matter where you go to get a Will.  Wills are inexpensive, but they can be an invaluable form of “cheap insurance”  against hassles and expenses for your surviving family should you die.  As long as your will meets the requirements of Georgia law, your family is protected.

So please, do your family a favor.  Protect them, even after you die, with a Will.

David L. Walker, Jr., is a partner in the law firm of Flint, Connolly & Walker, LLP in Canton, Georgia, where he represents businesses and individuals in various legal matters.

Georgia employers must act to protect themselves against allegations of workplace discrimination

August 2, 2011

It is important for Georgia business owners to be familiar with federal employment regulations such as Title VII of the Civil Rights Act of 1964, the Equal Pay Act of 1963, The Age Discrimination Act of 1967, and Title I of the Americans with Disability Act of 1990.

Although business owners and managers may be familiar with the general requirements of these laws, which were originally designed under the auspices of limiting discrimination in the workplace, it is important to effectively institute workplace policies and procedures to avoid encountering unintended liabilities arising out of these and other state and federal regulations.

1. The Equal Employment Opportunity Commission

Created in 1965, the U.S. Equal Employment Opportunity Commission (EEOC) is the arm of the federal government primarily responsible for enforcing anti-discrimination laws and regulations in the workplace.  Generally speaking, any employer who employees fifteen (15) or more employees is subject to EEOC enforcement.

The EEOC investigates allegations of discrimination by employees, and in certain instances it may institute civil proceedings and other sanctions against employers that it accuses of violating EEOC enforced laws or policy.  In other instances, the EEOC may permit individual employees and their attorneys to seek damages from their employers – or former employers – by filing private lawsuits directly against the employer for alleged acts of discrimination.

2. Anti-Discrimination Policies in the Workplace

In order to avoid being subject to damaging allegations of workplace discrimination, it is important that employers adopt policies and procedures to deter discriminatory conduct within their business.

To avoid such liability, an employer must first be conscious of what types of conduct are prohibited.  The EEOC prohibits discrimination based upon a person’s race, color, religion, sex (including pregnancy), national origin, age (40 or older), disability or genetic information.  It is also prohibits discrimination against individuals who have complained about discrimination, filed a charge of discrimination, or participated in an employment discrimination investigation or lawsuit.

It is critical that all employers adopt and implement policies prohibiting discriminatory conduct.  A company should conduct regular training of its managers and employees concerning their rights and obligations arising under anti-discrimination laws and the remedies that are available to any individual who believes they have been subjected to discrimination in the workplace.  Likewise, an employer is well-advised to adopt internal procedures by which employees may report alleged acts of discrimination to management and/or ownership, and have those allegations properly investigated and addressed.

3. The Employee Handbook

As a general rule, an Employee Handbook is an important tool for employers to establish requirements, privileges, and expectations of workplace conduct for their employees.  It is vital for any employer to have a well-drafted employee handbook to confront a host of potential work-related liabilities that can arise between employers and employees.

In the context of establishing EEOC compliant anti-discrimination policies, it is critical for owners and management to promulgate Employee Handbooks which advise managers and employees about a company’s anti-discrimination policies and the remedies available to employees who believe they have been subjected to improper treatment.  These handbooks operate as an indispensible first line of defense for any employer who is faced with an EEOC investigation.

Any Georgia business owner who does not already utilize a professionally drafted employee handbook is well-advised to consult with a qualified attorney to ensure that his or her company has exercised all available means to protect itself against EEOC scrutiny and charges of discrimination.

David L. Walker, Jr., is a partner in the law firm of Flint, Connolly & Walker, LLP in Canton, Georgia, where he represents businesses and individuals in various legal  matters.

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