Withdrawals from New York Guardianship Accounts and Investment of Guardianship Account Funds

By Hon. Eugene Peckham and Ms. Karen McMullen

The statutes and case law for withdrawal of funds from guardianship accounts are based on common sense and the Surrogate's guided discretion on what will be fair and beneficial. Further, the investment of assets pursuant to an Investment Advisory Agreement is limited by the Surrogate's examination to ensure reasonable fees are charged and the prudent investor standard is followed. In this Analysis, Eugene Peckham and Karen McMullen discuss the law in this area. They write:

     The basic duty of a guardian is to preserve the funds in the guardianship account, and, if possible, increase them, so that the funds may be turned over to the ward when he or she reaches the age of majority. Surrogates' Courts receive and review guardians' petitions for withdrawal from Article 17-A guardianship accounts pursuant to SCPA 1713. The Surrogate must consider the relevant statutory factors in the context of the ward's circumstances in order to decide whether to permit a withdrawal. Further, the court must examine any Investment Advisor Agreements or set a bond when guardianship funds are to be invested in assets other than bank accounts or government bonds.

Basic Considerations for a Petition for Withdrawal

     A Petition for withdrawal of funds from the guardianship account is authorized by SCPA 1713. The court may direct the withdrawal for the support and education of the ward or the funeral cost of a parent or other person if the estate of that person is insufficient. Similar withdrawal rules are found in regard to infant settlements and guardians under Mental Hygiene Law Article 81.

     A detailed list of factors the court should consider is set forth at 22 NYCRR Section 202.67(f). If the guardian is the ward's parent, the court must consider the parent's obligation to support his or her child. The court considers the amount of the parent's income and assets available and whether there are other children to be supported. Support has been defined as anything "requisite to the housing, feeding, clothing, health, proper recreation, vacation, traveling expenses or other proper cognate purposes." If the parent is the ward's guardian, and the parent has sufficient resources to pay for the ward's support and education, the court is likely to deny or limit a request for withdrawal from the ward's funds.

     The financial implications of the withdrawal are an essential consideration in all instances. The court must consider the purpose for the withdrawal and the reasonable cost of the item or service. Further, the court will consider the amount of funds in the guardianship account and to what extent the funds would be diminished by the withdrawal. In addition, any specific future award to be received by the ward, such as a structured settlement that includes payment of college expenses or lump sum payments when the infant becomes an adult, will be considered at the time of a request for withdrawal.

(footnotes omitted)

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