Serving as a guardian often involves significant time, responsibility, and financial oversight. Because of this, guardians may be entitled to reasonable compensation for their services, subject to court approval and legal guidelines. Understanding how guardian compensation works can help families avoid disputes and ensure transparency.
Being a guardian is hard work. A guardian is responsible for another human being. He must handle the ward’s financial affairs. He must establish the ward’s living arrangements. He must make all healthcare decisions for the ward.
In addition, the guardian owes the ward the utmost duty of care. A person is free to make good or bad decisions when it comes to his own affairs, but a guardian must always make the correct decision when handling his ward’s affairs. If a guardian makes a mistake, he can be held liable for that mistake. Given this fact, being a guardian involves a tremendous amount of liability.
Because of the work involved and because of the liability that the guardian assumes, he is entitled to a commission. A commission is essentially payment for services rendered to the ward and compensation for the liability that the guardian assumes in performing that work.
Various statutes establish a guardian’s commission. Essentially, a guardian is entitled to three different types of commission—a commission based upon the value of the assets the ward owns, a commission based upon the income the ward receives, and a commission based upon the money the guardian pays out on behalf of the ward.
The commission that the guardian receives on the value of the assets that the ward owns is called a “corpus commission.” The guardian is entitled to an annual corpus commission. The methodology for calculating this commission is $5 per thousand dollars of principal up to $400,000 in assets and $3 per thousand for every thousand dollars of principal in excess of $400,000.
So, for instance, if Mr. Smith is the guardian for Mr. Ward and Mr. Ward owes assets worth $500,000, then Mr. Smith is entitled to an annual corpus commission of $2,300 ($5 * 400 = $2,000 plus $3 * 100 = $300). Assuming Mr. Ward’s assets remained the same—something that would never happen in real life—Mr. Smith would be entitled to an annual corpus commission of $2,300.
Mr. Smith is also entitled to an income commission on the value of the income that Mr. Ward receives. The income commission is 6% of all income that Mr. Ward receives and can be taken on an annual basis. So, for instance, if Mr. Ward receives $20,000 in Social Security income, $10,000 in pension income, and $5,000 in investment income, then Mr. Smith, as his guardian, would be entitled to an income commission of $2,100 ($20,000 + $10,000 + $5,000 = $35,000 * 6% = $2,100). Assuming Mr. Ward’s income remained the same—which, once again, would never happen in real life—Mr. Smith would be entitled to this same commission every year.
Finally, a guardian is entitled to a distribution/termination commission based upon the value of the money the guardian pays out on behalf of the ward and based upon the value of the assets the ward dies owning. So, for instance, if Mr. Smith pays out $100,000 for Mr. Ward’s care in a nursing home, then Mr. Smith is entitled to a 2% distribution commission on those payments, or $2,000. If Mr. Ward dies owning $400,000 in assets, then Mr. Smith is entitled to a termination commission of $8,000, which is 2% of the $400,000 that Mr. Ward died owning.
Guardian compensation should reflect the work performed while remaining fair to the individual under guardianship. Clear documentation and court oversight help protect all parties involved.
Serving as a guardian often involves significant responsibility, time, and emotional commitment. Determining whether compensation is appropriate requires balancing the needs of the incapacitated person with the duties being performed on their behalf.