A power of attorney is someone you name to act on your behalf should you become unable to handle your finances or make your own decisions. If you do not have a power of attorney, then someone will be named to act in your behalf but perhaps someone you wouldn’t name, according to the Delco Times in “What’s the difference between guardianship and power of attorney?” There are also instances when a power of attorney is used when the principal is unable to conduct their own affairs because they are traveling or are deployed overseas.
Related documents are the health care proxy and the durable power of attorney. A durable financial power of attorney is a document where the principal designates the powers that the agent may exercise over their finances. The powers granted by this document can be used by the agent, regardless of the principal’s capacity or disability.
The principal has the option to grant very broad authority to their agent. For instance, the principal could give their agent the authority to gift all their assets while they are still living. That’s why it is very important for the specific provisions in the power of attorney to be carefully reviewed and tailored to the principal’s wishes. There are risks in naming an agent, since they are able to exercise complete control over the principal’s assets. The agent must be 100% trustworthy.
A health care proxy allows an agent to make decisions about the principal’s health. Note that this document is operative only when a copy is provided to the attending physician, and the physician determines that the principal is incompetent or unable to communicate his/her wishes as pertain to health care decisions.
Both a health care proxy and financial power of attorney may be revoked by the principal at any time and for any reason.
If the principal has not had these documents prepared in advance and then becomes incompetent by reason of injury, illness, or mental health issues, they may not have the legal right to sign the power of attorney. When this happens, it is necessary for a guardianship proceeding to occur so that other people may be named to take charge of the person’s financial and health affairs. Advance planning is always preferred.
If an individual is born with a disability that impacts their capacity and, upon attaining legal age, does not have the capacity to sign a power of attorney, then a guardianship proceeding will be necessary. The court must determine if the person is truly incapacitated and if there might be an alternative to appointing a guardian. Once the guardian is appointed, the principal no longer has the legal right to make decisions on their own behalf.
A guardianship is a much more restrictive tool than a power of attorney. For one thing, the power of attorney generally does not need the involvement of the court. There is always the possibility that a guardian is appointed who does not know the family or the individual. A durable power of attorney allows a person to appoint someone they know and trust to help them and their family, if and when they become incapacitated.
An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and advise you on naming a power of attorney and a health care proxy.
Reference: Delco Times (May 8, 2019) “What’s the difference between guardianship and power of attorney?”