We have presented several articles about the various options at your disposal when considering how your estate and assets can be handled in the event of your death or becoming incapacitated. We have also outlined several of the choices you have when preparing for the future of a loved one. In a previous article we provided a basic overview of legal guardianship. Today, we’d like to focus on the key differences between a legal guardianship and power of attorney.
Legal guardianship and power of attorney perform similar functions in most cases and states. Each is designed to provide the means and power for a trusted individual to act on behalf of another party. However, it is important to understand that here are several crucial differences between the two.
- Legal guardianship is a determination made by a court judge that a person lacks the ability to control his or her own affairs and should allow another trusted individual to control his or her affairs.
- The individual whom the court has ruled as incapacitated is referred to as a Ward. The person approved and appointed by the court is the “Guardian” over the Ward’s health, financial matters, or of his/her estate.
- The Ward must somehow be incapacitated or unable to make effective decisions about his/her own welfare, otherwise guardianship cannot be established. Guardianship may be terminated if the Ward regains capacity.
- Expenses on behalf of the Guardian are typically paid out of the Ward’s estate.
Power of Attorney
- Power of Attorney is a document which grants an individual the authority to act on behalf of another in financial or medical matters. Durable Power of Attorney will endure in the event that an individual becomes incapacitated.
- The person has permission to act on another’s behalf is designated as the Agent.
- Power of Attorney is granted to the Agent by the Principal.
- In order for the Power of Attorney to be valid, the Principal must have the capacity to understand that he/she is granting that authority to another.
- The Agent can act on behalf of the Principal in the event of incapacitation if the Power of Attorney is durable.
- The Principal (and sometimes the Agent) utilizes personal assets and finances.
- The Principal can revoke Power of Attorney at any time.
As you can see, there are distinct differences between legal guardianship and Power of Attorney. There are also advantages and disadvantages to both.
Advantages of Legal Guardianship
- Court oversight can go a long ways towards preventing the exploitation of the Ward.
- One individual is authorized to make decisions, making it easier for third-parties to identify the correct person to receive instruction from.
Disadvantages of Legal Guardianship
- The process can be expensive.
- The Guardian is appointed by the courts.
- Only the court can revoke the guardianship.
Advantages of Power of Attorney
- The process is relatively inexpensive (depending on certain variables).
- Power of Attorney does not require court oversight.
- The Principal remains in control of his or her estate (unless otherwise incapacitated).
Disadvantages of Power of Attorney
- No direct oversight allows for potential mistakes or fraud to occur.
- Third-parties such a banks might not recognize the Agent’s authority.
- If revoked, you must inform all third-parties that the Agent has been working with, otherwise your former Agent may be able to continue to have control over those assets.
Estate planning and establishing wills and trusts can be an overwhelming process if you don’t have someone you can trust to help guide you through. Lyons | Sullivan can help. If you have questions about legal guardianship, Power of Attorney, or about the probate process in general, contact us today!