Management Trust

Management Trust: An Alternative to Guardianship

A guardianship is a court process where one party, the guardian, is appointed for another party, the ward. The guardian can then manage the ward’s financial assets and make decisions for the ward.  

The problem with guardianships is often the cost and burden of having to comply with the guardianship rules.  While these rules are important and are in place to protect the ward, they can create some challenges and be unduly burdensome in some cases.

For example, guardianships require a bond be posted and annual filings be made.  This entails a cost, both in terms of fees but also in terms of attorneys fees.  It also involves court hearings.  The courts recognize this and this is why they favor management trusts.

Management trusts can be an alternative to guardianship with respect to the management of the ward’s financial assets.  

A management trust is a legal arrangement designed to assist and safeguard individuals who are either wards or incapacitated persons, ensuring their financial resources are effectively managed for their well-being. The process involves appointing a trustee to handle the trust’s assets and disbursements in a manner consistent with the individual’s best interests.

Eligibility For a Management Trust

So who can apply for a management trust?  Here is a list:

• The guardian of a ward.
• An attorney ad litem or guardian ad litem appointed to represent a ward or the ward’s interests.
• A person interested in the welfare of an alleged incapacitated person who does not have a guardian.
• An attorney ad litem or guardian ad litem appointed to represent an alleged incapacitated person who does not have a guardian.
• A person who has only a physical disability.

If there is a guardianship proceeding in court, the application itself must be filed in the same court where a proceeding for the appointment of a guardian for the person is pending. If no guardianship proceeding is pending, the determination of venue follows the same rules as those for a guardian appointment proceeding. The court may maintain the trust under the same cause number as the guardianship proceeding if applicable.

Terms for Management Trust

A management trust created for a ward or incapacitated person must include specific terms.  Here is a summary of some of the more common terms:

• The ward or incapacitated person is the sole beneficiary of the trust.
• The trustee has the authority to disburse trust funds for the person’s health, education, maintenance, or support.
• Undisbursed trust income is to be added to the trust principal.
• A corporate fiduciary trustee serves without the need for a bond.
• The trustee is entitled to reasonable compensation for their services.
• The trust’s termination conditions based on the individual’s status (minor, incapacitated, or non-minor).

For a trust created for a person with only a physical disability:

• The trustee serves without needing to provide a bond.
• The trustee is entitled to receive reasonable compensation without court approval.
• The trustee’s compensation is determined, paid, reduced, and eliminated in line with the compensation standards of a guardian.

The court may omit or modify the required terms if necessary for the individual to receive public benefits or if it’s in the individual’s best interests.  These provisions are commonly referred to as special needs terms.

Our Houston Probate Attorneys provide a full range of probate services to our clients, including helping with management trusts. Affordable rates, fixed fees, and payment plans are available. We provide step-by-step instructions, guidance, checklists, and more for completing the probate process. We have years of combined experience we can use to support and guide you with probate and estate matters.

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Disclaimer:  The content of this website is for informational purposes only and should not be construed as legal advice and should not be acted upon without consulting a qualified probate attorney.

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