If you’re a layperson not familiar with conversational Yiddish there is a lot to unpack in yesterday’s Superior Court panel decision In re J.C.B. 2397 EDA 2025. Unlike the now constant retinue of appeals related to protection from abuse orders, this case merited publication as precedential.
We’ll get to the chutzpah momentarily. In Pennsylvania when a family member loses his or her marbles and can’t manage property or make sound decisions, the remedy is to apply to the Orphans’ Court for a guardianship. In most states they call it probate court but that’s equally wrong since probate applies to those who are dead. In 2024 a petition was filed in Chester County Orphans’ Court acknowledging that J.C.B. was still quick (i.e., alive) but in need of a person who could manage his affairs. The court determined that J.C.B. was afflicted with dementia and appointed his daughter Julie to manage both his person (where he would live) and his estate (his money).
As the opinion notes, guardianship is a fiduciary role. In Pennsylvania a fiduciary duty is the highest duty implied by law. Miller v. Keystone Ins. Co., 636 A.2d 1109, 1116 ([Pa.] 1994) (Cappy, J., dissenting). A fiduciary duty requires a party to act with the utmost good faith in furthering and advancing the other person’s interests[.] See Basile v. H & R Block, Inc., [] 761 A.2d 1115, 1120 ([Pa.] 2000); Young v. Kaye, [] 279 A.2d 759, 763 ([Pa.] 1971) (“When the relationship between persons is one of trust and confidence, the party in whom the trust and confidence are reposed must act with scrupulous fairness and good faith in his dealings with the other and refrain from using his position to the other’s detriment and his own advantage.”); Sylvester v. Beck, [] 178 A.2d 755, 757 ([Pa.] 1962); McCown v. Fraser, [] 192 A. 674, 676–77 ([Pa.] 1937); In re Null’s Estate, [] 153 A. 137 ([Pa.] 1930)[;] see also Black’s Law Dictionary (10th ed. 2014) (defining a fiduciary duty as “a duty to act with the highest degree of honesty and loyalty toward another person and in the best interest of the other person”). Guardians operate under judicial supervision and their conduct is subject to review by the court appointing them.
Julie’s father had assets and a pending dispute with his girlfriend related to a residential property in Lancaster County. Once appointed Julie would have been substituted as a party in that litigation since her father was no longer able to manage the case himself. Among Julie’s other duties would be to manage where he lived and oversee his assets. 20 Pa.C.S. 5501-5555. Imbedded in that law is Section 5536. Recognizing that there are times when an incapacitated person has assets beyond any reasonably foreseeable needs, the guardian may apply to make gifts of assets. These gifts are to be consistent with the ward’s history of gifting, expressed testamentary intent and the assumed desire to minimize the taxable probate estate at death. The classic examples would be where Julie’s dad routinely gave his kids the annual tax free excluded gifts under federal law or provided in his will that he wanted to contribute to a grandchild’s tuition.
But, the key element is to first assure that there are always the resources on hand to get J.E.B. and his ilk to the finish line. The first responsibility of the guardian is to care for his or her ward. Here’s where the rubber meets the proverbial road.
The guardian reported that her father’s care was consuming $18,000 a month. She presented a plan by which she would gift herself (she was his sole heir) enough funds to render her father Medicaid eligible. At that point, the cost contribution would be reduced to $3,300 a month and she would have sufficient funds to pay that discounted amount. The $3,300 reflected his ongoing social security and pension income. Daughter notes that this would not change his care level. But the facility would have to accept the 80% reduction in payment because her father’s assets were exhausted by the gifts she proposed to make to herself. She cited a New Jersey case from 2004 suggesting this was appropriate estate planning.
This is a frequent subject of discussion in the estate planning world. When the brain and body function well, we all want the benefits of a cushy facility with daytrips to Longwood Gardens or the Phipps Conservatory. But, if we reach the stage of memory care, the thrill is gone and the kids might as well enjoy the surplus. At least, the kids see it that way.
The trial and appellate courts weren’t going along with that reasoning. The Chester County court found the guardian “is not seeking to reduce [J.C.B.’s] gross taxable estate at his death by an amount which would produce a net savings. Rather, [Guardian’s] plan has nothing to do with preserving his estate while optimizing tax savings . . . and everything to do with optimizing the amount of money she can take from him.” The court further noted that Guardian presented no evidence that J.C.B. had carried out a lifetime giving pattern during his capacity. The court expressed concern that J.C.B.’s circumstances could change and, “[i]f the ‘fiduciary’ guardian has already usurped the ward’s lifetime savings, the ward would be trapped by unnecessary indigency and unable to enjoy [] care enhancements.” Citing an 1883 Pennsylvania Supreme Court case, Hambleton’s Appeal, the court noted that “personal comfort and welfare are the prime objects which are to be kept in view, and not the welfare of his next of kin.” 12 W.N.C. 542 (Pa. 1883).
The Superior Court affirmed, noting at [by definition], an incapacitated person lacks the ability to determine whether or not to engage in medical assistance planning and, thus, the Orphans’ Court is empowered to substitute its judgment for such an individual, within the parameters established by statute, and based on evidence presented by the guardian of the estate. But, it seems that should not be construed as an invitation to deploy a ward’s assets such that he effectively becomes a ward of the Commonwealth rather than one of his adult child/guardian.