A major fight is shaping up over state guardianship laws.

These laws -- which spell out what should happen to a person's business or other property if he or she is unable to make key decisions -- typically lay out anachronistic procedures that were originally developed in old English law to handle problems of the insane.

But the conditions that may incapacitate can range from being held hostage by foreign terrorists to losing a long bout with the bottle. And when those things happen, somehow the legal authority to do everything from writing checks to responding to merger offers has to shift to someone who can consider the alternatives and authorize action.

Part of the trouble comes from the an- cient tie of guardianship to mental incompetence. In most jurisdictions, a judge has to bend the rules to even appoint a guardian when the problem is physical rather than mental; when, for instance, a stroke victim is aware but cannot communicate. And the judge has little flexibility to devise a remedy taking into account strengths and weaknesses of the individual ward.

But at the same time that the guardianship laws are tying the hands of a judge who has a compassionate understanding of the limits of the coping ability of the person whose guardianship is being considered, they are making it relatively easy for grasping relatives to gain control of the assets of property owners who may not be in need of a conservator. It is difficult for the courts to differentiate between senility and the odd but not irrational actions of a person who has simply decided that he wants to do something different with his business or money.

Last month, the National Conference of Commissioners on Uniform State Laws took a major step towards correcting both problems. The group adopted a model state guardianship law that both provides more protection for those subject to a guardianship hearing and allows for more leeway in setting out the terms of the guardianship.

The most dramatic change suggested is allowing courts to set up what are called "limited guardianships." The device will be particularly helpful for those elderly who can still make some decisions for themselves, but not others. The court could for instance, leave a man in control of his per sonal checkbook, but have a guardian take over key decisions in a business he owns.

Over the past five years, 17 states have changed their laws to allow limited guardianships; Maryland, Virginia, West Virginia, New York, and Illinois are on the list.

But the model law seems headed for trouble in another part of its attempt to introduce more flexibility. It lists a wide variety of triggering causes that a court can use to take away from a person control of his or her property, including "advanced age." That "is absolutely outrageous," argues George J. Alexander, dean of the University of Santa Clara law school and long-time advocate of guardianship reform.

Alexander talked the ABA's Commission on Legal Problems of the Elderly into op posing the bill when it comes before the association's House of Delegates.The battle should come this February, and its outcome may determine just how easy it will be in the future to take over the property of persons still alive but not all they once were.