(MONEY Magazine) – It is an article of faith in America -- and an explicit mandate of the Bill of Rights -- that no citizen may be deprived of life, liberty or property without due process of law. But consider the following: -- When a 68-year-old Missouri man was hospitalized in 1986 with a liver ailment, his sister petitioned the court to declare him incompetent to manage his own affairs. A judge agreed and appointed two guardians, the sister to make personal decisions regarding his medical care and housing and a public administrator to manage his money. During the man's six-month recuperation in a nursing home, the administrator sold the man's house and car to pay his health-care bills -- even though he had enough cash in the bank to cover them. After the man recovered, he won back his independence, but his house and car were gone forever. -- A month after a 76-year-old Mississippi woman suffered a stroke in April 1987, she was temporarily declared incompetent at an emergency court hearing initiated by her sister that the woman was too ill to attend. She did appear in June 1987 when a judge made her conservatorship permanent, but she was not allowed to testify. Just three months later, the woman recovered sufficiently to hire a legal services attorney and petitioned the court to restore her right to manage all her affairs except her finances. But the judge pointed out that she was legally incompetent and, as a result, questioned her ability to engage a lawyer. The hearing was adjourned for four months while the woman appealed to the Mississippi Supreme Court. In January, the court affirmed her right to choose her own counsel and sent the case back to the lower court for a full hearing on her original petition. -- Terminally ill and living in a nursing home, Mary Duddy of Ridgefield Park, N.J. never discovered what her cousin, attorney Dion F. Ryle, was doing with her money. Neither did the judge who appointed him her guardian, until after Duddy died at the age of 79 in 1984. A year later, the co-executor of her estate obtained a court order forcing Ryle to make an accounting. It showed that he had misappropriated more than $100,000 of Duddy's $266,000 in savings. Ryle pleaded guilty to theft last October, agreed to pay $100,000 in restitution and is now serving five years of probation. These are only three examples of the many victims of the U.S. guardianship system, which is supposed to safeguard people who are mentally or physically incapacitated and therefore unable to manage their finances or make decisions affecting their well-being. Today an estimated 500,000 Americans, most of them elderly, are wards of the courts. They have generally lost the right to marry or divorce, travel or decide where to live, sign contracts, vote or even drive cars. As wards, their every move is subject to close supervision by legal keepers called guardians in most states but known in others as committees, conservators, curators, fiduciaries or tutors. Says Elias Cohen, a Philadelphia attorney and gerontologist: ''Outside of execution, guardianship is the most radical legal remedy we have.'' No one questions that most wards need guardians. But after a four-month investigation by MONEY in which we reviewed hundreds of pages of legal documents and interviewed dozens of attorneys, judges, court officers, elderly persons and social workers, this conclusion is inescapable: the system often badly serves people who are among the least able to protect themselves against abuse. With rare exceptions, such as San Mateo County, Calif., where the courts do an exemplary job, judges all too often perfunctorily strip individuals of their civil rights and turn them over to guardians who are loosely supervised at best by the overburdened courts. Our investigation found that the guardianship system has three major failings: First, the judicial hearings at which people are judged to be incompetent are frequently one-sided and superficial. In fact, proposed wards are generally afforded fewer legal rights than criminal defendants. Says Hofstra University law professor John J. Regan, an expert on guardianship: ''Many courts treat the appointment of a guardian and the deprivation of a ward's rights about as seriously as getting a driver's license.'' Second, archaic or vague state laws -- and, even more vexing, progressive statutes enacted in the past decade in many states but not enforced -- make it all too easy for a judge to find someone incompetent, often on the scantiest of evidence. ''In most states, even a foot doctor can scratch a few sentences on a note pad and get a person declared incompetent,'' says Dr. George T. Grossberg, a geriatric psychiatrist who heads the Center for the Study and Assessment of Guardianship and the Elderly at St. Louis University Medical Center. Third, supervision of guardians by the courts is often lax even in those states that require periodic accountings. Indeed, financial reports were missing or incomplete in nearly half of the 2,200 guardianship cases across the country reviewed by the Associated Press in 1987. ''Courts say they don't have the funds for in-depth scrutiny,'' says Regan. ''But the question of accountability must be addressed.'' The system's defenders argue that most wards are too incapacitated to use the due-process rights they have. Says James R. Kaspar, supervising court investigator for San Mateo County: ''People who aren't in the trenches complain that the courts deprive people of their rights, but most wards that I see are so deeply incapacitated that not much can be done for them.'' And even the system's harshest critics agree that guardianship is appropriate for people who cannot make or communicate decisions because of mental or physical impairments. The critics contend, however, that many of the elderly who are of sound mind but have trouble paying bills or maintaining their homes are pushed into guardianship because less draconian alternatives -- such as the ones described in the box on page 144 -- are rarely available. But without true reforms, abuses in the guardianship system are bound to grow as the percentage of Americans age 65 or older swells from 12% of the population today to an estimated 22% by the year 2050. The process of placing an elderly person under guardianship usually begins when a relative, friend or neighbor files a petition with a court stating why he or she feels that guardianship is necessary. Only 14 states and the District of Columbia demand that the proposed wards appear at the court hearings that determine incompetency (see the state-by-state rundown on page 146). And as a ground for guardianship, 24 states recognize senility or advanced age, which is left for judges to define; 26 states do not require medical evidence of incompetency to be submitted to the courts. The subjects of most competency hearings rarely show up at them. Some people ignore the hearing notices because they do not understand them. Still others are excused by judges from attending because the people petitioning for guardianship get physicians to certify that going to court would greatly upset the proposed wards. Typically, a guardianship hearing lasts only a few minutes. In some cases, a judge names a guardian ad liteum (meaning for the lawsuit) to recommend to the court what is best for the person. Sometimes a guardian ad liteum is asked to serve indefinitely as consultant to the court on the case. After a person is declared incompetent, courts appoint two guardians, one to make personal decisions such as those regarding housing and medical care, and another, often called a conservator, to manage the ward's assets. A conservator alone may be appointed if an individual is considered competent to make personal decisions but incapable of managing money. Both jobs usually go to the relative or friend who initiated the guardianship proceeding, though attorneys, bank trust departments and even for-profit guardianship agencies may be named if the judge decides that family members or friends are unsuitable. Guardians, guardians ad liteum and conservators are paid from their wards' assets. Their fees, set by the courts, usually are based on the number of hours they devote to a case. Professional guardians are typically paid $35 to $125 an hour. Conservators' compensation, also subject to court approval, is often based on a percentage of the money spent on the ward's care. For example, a conservator who spends $24,000 a year on a nursing home for a ward might be entitled to 5% of that amount, or $1,200. Appointments frequently go to politically well-connected lawyers. In New York City, for example, a number of attorneys who have contributed to elected judges' campaigns have recently garnered multiple appointments. To cite one example picked at random, a donor has earned more than $61,000 during the past two years for serving as a guardian ad liteum or conservator on seven cases. Once imposed, a guardianship rarely ends before the ward's death. That's true even though most states allow anyone, including wards, to petition the court for a hearing to determine whether competency should be restored. The problem is, wards who have not been permitted to choose their housing or pay their bills often have a difficult time proving that they can manage their own affairs. ''Wards are often unaware of their right to petition the courts or unable to obtain legal assistance, especially if they are institutionalized or isolated,'' says Neal Dudovitz, an attorney with the National Senior Citizens Law Center in Los Angeles and author of Representing Older Persons: An Advocate's Manual. Although guardianships are supposed to be ordered for the good of wards, such paternalism often ends abruptly once a guardian is appointed. About half of the states do not require guardians to report to the courts on their wards' health and living conditions; four states (Maine, New Jersey, North Dakota and Pennsylvania) do not even demand periodic financial accountings from conservators. And states that do have strict laws requiring financial reporting do not always enforce them. Though courts generally require conservators to post bonds to insure against losses from their negligence or misconduct, the bonds do not necessarily cover the full value of an estate. For example, Dion Ryle was required to post only a $50,000 bond even though his cousin Mary Duddy's assets were worth more than five times that amount. The bond's $260 annual premium came out of Duddy's funds, which is typical. In most jurisdictions, guardians are not trained or held to written standards. A few courts, including those in Dade County, Fla., require guardians to watch videotapes that explain their duties. Michigan is the only state with formal standards for guardians. They stipulate that guardians must visit their wards and avoid conflicts of interest in borrowing or lending their wards' funds. But Michigan has no mechanism for enforcing the standards. During the past two decades, public-interest lawyers who specialize in the legal problems of the elderly and disabled have successfully lobbied in many states to revamp guardianship laws. In general, the new laws give people a better opportunity to defend themselves against charges of incompetency. Yet these laws are often not enforced. First, many judges and attorneys are indifferent or hostile to reform of guardianship laws. Most probate lawyers, who specialize in trust and estate law, oppose the notion that guardianship hearings should be adversarial -- meaning that both sides have legal counsel and an opportunity to dispute each other's case. At a hearing last August on a guardianship bill then pending in the Pennsylvania legislature, Leonard J. Cooper, a prominent Philadelphia probate attorney, dismissed court appointment of legal counsel for proposed wards as an unnecessary expense in the typical case. ''In my experience, probate judges are very sensitive to the rights of the alleged incompetent and would appoint counsel if necessary,'' he said. Says Ingo Keilitz, director of the Institute on Mental Disability and the Law at the National Center for State Courts, a nonprofit organization dedicated to improving court operations: ''The bottom line is that there's not a lot of interest in guardianship. Big civil and criminal cases, not mental health and disability law, top the list of judges' priorities.'' Some judges object to the cost of reform in money and manpower. ''It would take more time to review guardians' activities regularly, and some judges feel that they're already overworked,'' says V. Robert Payant, a former Michigan judge who is now a consultant to the National Judicial College in Reno and an active campaigner for guardianship reform. Second, many progressive statutes are weakened by niggardly funding. For instance, at least 34 states have laws permitting public guardians to be named for impoverished wards who do not have relatives or friends willing to serve in that capacity. Yet only a tiny handful of public guardians are available. In Florida, for example, a 1988 study by the state's Department of Health and Rehabilitative Services estimated that it would cost $7 million to $9 million a year to provide guardians for the state's estimated 26,000 severely and chronically disabled adults. But Florida spends less than $375,000 a year on programs in which seven social workers oversee about 280 wards in Broward and Leon counties. In other states, public guardians shoulder crushing caseloads of 150 to 200 wards. Winsor C. Schmidt, a political science professor at Memphis State University who has studied public guardianship for 10 years, recommends that a public guardian handle 30 wards at most. He observes: ''Public guardianship programs have a great capacity for doing more harm than good when they are | underfunded and understaffed.'' Attorneys, judges and advocates for the aged have identified three key changes that would make the guardianship system more responsive to the rights and needs of the elderly: 1. Proposed wards must be given a fair chance to defend themselves against charges of incompetency. Ideally, court representatives should visit proposed wards before hearings to explain what guardianship entails and find out if they object to it. In California, for example, court investigators since 1977 have visited proposed wards who cannot attend their hearings. When a conservatorship -- the term in California for guardianship of an adult -- ends, the state recoups the $157 average cost of the visits from the estates of deceased wards. In addition, courts should appoint lawyers, on a pro bono basis if necessary, for proposed wards who cannot hire or pay for their own attorneys. Finally, eccentricity or a medical diagnosis alone should not determine incompetency. Instead, judges should weigh evidence from physicians, psychiatrists and social workers about a person's ability to make decisions, handle money, shop and carry out other daily activities. These safeguards as well as others would be mandated in all states under the National Guardianship Rights Act that Democratic Representative Claude Pepper of Florida is sponsoring in Congress. Republican Representative Olympia J. Snowe of Maine is sponsoring a bill, called the Guardianship Rights and Responsibilities Act, that would bar states from participating in the Medicaid program unless they assured proposed wards due process. The bill also calls for a $5 million, two-year demonstration grant that would pay for guardianship advocates to inform proposed wards of their rights and review reports that guardians submit to the courts. 2. Full guardianship of a person and his or her property should be imposed only as a last resort. Many courts now strip civil rights from someone who lives independently but can no longer manage his or her assets. A better solution would be limited or partial guardianship. For example, a guardian might be appointed to manage the ward's real estate holdings, but the ward might retain the right to handle money needed for household expenses. Most states provide for limited guardianships, but judges rarely order them. The reason, according to experts on the subject: judges often presume that limited guardianship is inappropriate for elderly people whose disabilities may become worse. In some cases, even limited guardianship may be legal overkill. Consider the case of a person who is capable of making day-to-day decisions about spending or saving but who cannot go to the bank or keep track of bills. He or she can manage without a guardian by giving a power of attorney to a trusted family member or friend. (For more on ways to avoid guardianship, see the box below.) People without relatives or friends who can help should be able to get basic assistance in managing their money from public or private social service agencies. Today there are nearly 70 such programs nationwide, but the 33 sponsored by the American Association of Retired Persons (AARP) provide only limited services. In those programs, AARP volunteers receive and manage Social Security or veterans' benefits for mostly low-income beneficiaries. Explains Wayne Moore, director of the AARP's Legal Counsel for the Elderly: ''Our volunteers control only their government checks, not other assets. These people can still vote, enter into contracts and marry.'' 3. Once appointed, guardians should be closely monitored by the courts. Guardians should be required to report to the courts on their wards' health and living conditions at least annually. Conservators of wards' assets should periodically submit detailed accountings. Most important, someone at the court should carefully read such reports to determine whether guardians and conservators are acting in their wards' best interests. In addition, judges must have the power to dismiss or fine guardians and conservators who fail to file reports on time or to care adequately for their wards. If a court lacks the staff to examine the reports, it should recruit and train volunteers to do the job. AARP's Legal Counsel for the Elderly is planning pilot programs that would do just that in Atlanta, Denver and Houston, employing AARP members as volunteer overseers of guardians. To accomplish these goals, reformers who have until now concentrated on rewriting laws must also ensure their enforcement by lobbying for funds. Says Paul S. Nathanson, director of the Institute of Public Law at the University of New Mexico Law School: ''A statute may look fine on the books, but we have to follow through with a decent budget to make it work.''

For more information about these reforms, write to your U.S. representative or senator, your state legislator, AARP's Legal Counsel for the Elderly (c/o Dacosta Mason, 1331 H St. N.W., Washington, D.C. 20005) or local agencies on aging, which are listed in telephone directories.

BOX: For the Record Guardianship: What the laws say in all 50 states

Your rights if someone petitions a court to appoint a guardian for you depend on the laws of the state where you live. In the table at right, the first three columns show your legal rights at judicial hearings in the 50 states and the District of Columbia. The last two columns list criteria the court may use in deciding whether you are incompetent; state laws leave the definition of ''advanced age'' up to judges. Indiana's provisions take effect in July. Michigan's rules become law next month.

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