Power of Attorney vs. Guardianship
Updated: Mar 3
A Power of Attorney and Guardianship are legal tools that help someone act on your behalf should you ever become incapacitated. With a power of attorney, you choose the person you want to act for you (presumably, someone you trust). With a guardianship, the court steps in and decides who is most suited to act on your behalf.
Power of Attorney
A power of attorney is an estate planning document that allows you to appoint a person who will act in your place for financial purposes when and if you become incapacitated. You may limit your power of attorney (or attorney-in-fact or agent) to a specific transaction or you may grant the person full power over all of your affairs.
A power of attorney may also be either current or "springing". Most powers of attorney take effect immediately upon execution of the document (current), even if the understanding is that they will not be used unless and until the grantor actually becomes incapacitated. However, the power of attorney document can be drafted in such a way that it does not become effective until such capacity occurs (springing). In cases of a springing power of attorney, it is important to define the standard for incapacity that would trigger to power of attorney.
However, attorneys report that their clients are experiencing increasing difficulty in getting banks or other financial institutions to recognize the authority of an agent under a durable power of attorney. A certain amount of caution on the part of financial institutions is understandable; when someone steps forward claiming to represent the account holder, the financial institution wants to verify that the attorney-in-fact indeed has the authority to act for the principal. Still, some institutions go overboard. For example, requiring that the attorney-in-fact indemnify or reimburse them for any loss. Many banks or other financial institutions have their own standard power of attorney forms. To avoid problems, you may want to execute such forms offered by the institutions with which you have accounts. In addition, many attorneys counsel their clients to create living trusts in part to avoid this sort of problem with powers of attorney.
While you should seriously consider executing a durable power of attorney, if you do not have someone you trust to appoint, it may be more appropriate to have the probate court looking over the shoulder of the person who is handling your affairs through a guardianship. In that case, you may execute a limited durable power of attorney simply nominating the person you want to serve as your conservator or guardian. Most states require the court to respect your nomination "except for good cause or disqualification."
If an adult becomes incapable of making responsible decisions due to a mental disability, the court may appoint a substitute decision maker, often called a "guardian". Guardianship is a legal relationship between the guardian and the person who, because of incapacity, is no longer able to take care of his or her own affairs (the "ward").
The guardian can be authorized to make legal, financial, and health care decisions for the ward. Depending on the terms of the guardianship and state practices, the guardian may or may not have to seek court approval for various decisions. Because guardianship involves a profound loss of freedom and dignity, state laws require that guardianship be imposed only when less restrictive alternatives, such as a power of attorney, have been tried and proven to be ineffective.
Some incapacitated individuals can make responsible decisions in some areas of their lives but not others. In such cases, the court may give the guardian decision making power over only those areas in which the incapacitated person is unable to make responsible decisions (a so-called "limited guardianship"). In other words, the guardian may exercise only those rights that have been removed from the ward and delegated to the guardian.
The standard under which a person is deemed to require a guardian differs from state to state. In some states the standards are different, depending on whether a complete guardianship or a guardian of the estate only is being sought. Generally a person is judged to be in need of guardianship when he or she shows a lack of capacity to make responsible decisions. A person cannot be declared incompetent simply because he or she makes irresponsible or foolish decisions, but only if the person is shown to lack the capacity to make sound decisions. For example, a person may not be declared incompetent simply because he spends money in ways that seem odd to someone else. Also, a developmental disability or mental illness is not, by itself, enough to declare a person incompetent.
In most states, anyone interested in the proposed ward's well-being can request a guardianship. An attorney is usually retained to file a petition for a hearing in the probate court in the proposed ward's county of residence. Protections for the proposed ward vary greatly from state to state, with some simply requiring that notice of the proceeding be provided and others requiring the proposed ward's presence at the hearing. The proposed ward is usually entitled to legal representation at the hearing, and the court will appoint an attorney if the allegedly incapacitated person cannot afford a lawyer.
At the hearing, the court attempts to determine if the proposed ward is incapacitated and, if so, to what extent the individual requires assistance. If the court determines that the proposed ward is indeed incapacitated, the court then decides if the person seeking the role of guardian will be a responsible guardian.
A guardian can be any competent adult -- the ward's spouse, another family member, a friend, a neighbor, or a professional guardian (an unrelated person who has received special training). A competent individual may nominate a proposed guardian through a durable power of attorney in case she ever needs a guardian.
The guardian need not be a person at all -- it can be a non-profit agency or a public or private corporation. If a person is found to be incapacitated and a suitable guardian cannot be found, courts in many states can appoint a public guardian, a publicly financed agency that serves this purpose. In naming someone to serve as a guardian, courts give first consideration to those who play a significant role in the ward's life -- people who are both aware of and sensitive to the ward's needs and preferences. If two individuals wish to share guardianship duties, courts can name co-guardians.
Because guardianship is considered a "last resort" option, most attorneys will help clients find alternatives to stripping rights away from a person. Some alternatives are power of attorney, qualifying as representative payee, guardian of the estate, or setting up a revocable "living" trust. The Law Office of Mike. D Casterlow can help you explore the differences in these options to help you decide what would be best for your particular situation.