What is Power of Attorney?
A power of attorney (POA) is a legal document that allows one person to act on behalf of another person. With a POA, an individual can designate someone to handle financial or legal matters in their stead. If something happens to the principal or the individual creating the POA, then the agent may have the authority to step in and take over the person’s handling of their affairs.
A power of attorney is a specific type of agency. Agency laws, outlined in the California Civil Code ยง2300-2932, describe how a person’s actions can bind another person . For example, under agency laws, when you ask your neighbor to pick up your mail when you’re out of town, you have given them agency or the authority to act on your behalf.
In the context of trusts, either a success trustor or a successor trustee can act as an agent for the trustor(s) and can act when the trustors become incapacitated. In the case of a medical POA, such a medical agent can make medical decisions for the trustor. A financial agent can manage the trust property for the trustor and make investments or pay bills.
What is Legal Guardian?
A legal guardian is a person appointed by a "court to have legal custody and control of a person or property or both." (Webster’s New World Dictionary.) It is a remedy in certain circumstances where a power of attorney would not suffice (e.g. death) or a remedy where there is no prior power of attorney.
A guardian has many of the same powers as an attorney-in-fact. However, those powers must be granted specifically to the guardian by the court. By statute, some powers of a guardian are as follows: To act for the ward or have control over property belonging to the ward which is in any way in the possession or under the control of the guardian; To receive and manage any wages, money, or other personal property subject to the guardian’s control; To pay all sums necessary for the ward’s care, support, and education or for carrying on the ward’s business; To execute any release, deed, contract, or other instrument requiring execution in the ward’s name; To prosecute or defend an action at law or in equity in behalf of the ward; To have the care and custody of the ward and provide for the ward’s physical needs for nourishment, clothing, shelter, safety, care, comfort, and medical care; To do any other act concerning the person of the ward or the ward’s estate that a reasonable and prudent person would do in behalf of the ward; To apply to the court for approval of anything that could be done by the guardian without court approval; To petition the court to require the guardian to account for the property and funds in the guardian’s possession or control; And other powers as may be listed in the statute.
A guardian does not, however, have the power to make a will or codicil for the ward.
The court appoints the person who will become the guardian. The court must first determine, as required by Tennessee law, that "it is in the best interest of the respondent" that the person be appointed. Guardianship matters are generally filed in General Sessions Court. The guardianship may deal with the person, the property, or both and the appointment may be limited to a specific time, or limited in some other fashion.
Differences Between Power of Attorney and Legal Guardian
The key differences between a power of attorney and a legal guardian can be understood primarily in the context of the scope of their authority, their decision-making powers, and the circumstances in which they are invoked.
A power of attorney is a widely used estate planning tool and can be thought of as a contract formed between the principal (the person making the power of attorney) and its agent (the individual or institution or group to whom the authority is delegated). In most states, a power of attorney is typically used to designate an agent for the principal who can make various decisions regarding health care, financial matters, and property management. The agent cannot be someone who is unfit to manage these affairs. Such a designation may come about in estate planning documents like a will or a living trust. The authority granted to the agent will depend on the wording of the power of attorney but it is key to note that, upon death of the principal, the authority of the agent terminates. At that point, the executor takes over.
A legal guardian is not a contractual arrangement and it is a designation made by the court for a person to make decisions during the lifetime of the principal who has become incapacitated or incompetent. Legal guardianship can last only as long as the incapacity lasts or until the incompetent regains competency. Depending on the jurisdiction, a legal guardian will be required to provide periodic accounts to the courts. If the ward dies, the guardianship also terminates.
Although a power of attorney and a legal guardian are both tools for managing a person’s affairs, there are circumstances when a power of attorney is not sufficient to serve a person’s needs but a legal guardian is not necessary, such as in the case of a person who is temporarily incapacitated. An agent under a power of attorney does not need court approval to make decisions but a legal guardian does.
When to Use Power of Attorney
A common scenario in which a power of attorney is most appropriate, is when an elderly person anticipates possible physical incapacity and wants someone else to step in should that occur. By naming an agent under a power of attorney, the Elderly person can choose someone who they trust to take care of their financial and medical needs.
It is important that the principle gives careful thought to the name of their agent before naming them in the power of attorney and an educated decision is made when choosing. In most cases, an agent is a family member, often an adult child. There are also situations where it would be appropriate to name a family friend or a professional you would like to oversee your affairs. Being able to appoint a knowledgeable person as your agent is one of the great advantages to a power of attorney over having a guardian appointed.
Another typical use for a power of attorney is in the event a person plans an extended trip to a different state or country or may be away from home for an extended period of time, but does not want to move their primary residence. While a guardian may also be appointed for these circumstances, a power of attorney often serves the purpose without the time and expense of getting court approval.
As long as you are able to manage your own financial and medical needs, a power of attorney is helpful in letting you travel to perform these duties.
When to Use Legal Guardian
Under certain circumstances, a legal guardian may be appointed for a person with diminished capacity. When the person’s condition or circumstance places that person in legal or economic jeopardy, and a power of attorney is not available, the court may have to step in and legally appoint a person to take care of the person’s medical and financial needs.
The legal standard for appointing a guardian is high. Under New Jersey law, when the alleged incapacitated person has the ability to obtain legal representation, the appropriate person to represent him/her should petition for the appointment . If the incapacitated person has a guardian of the person or property or has a power of attorney, the powerholder or guardian can file the legal action to appoint a successor guardian. Conversely, if the incapacitated person does not have a guardian, power of attorney, or has insufficient ability to hire an attorney for himself/herself, a person who is suitable, has no conflict of interest, and understands the nature and consequences of the appointment should apply for appointment.
Court Processes for Establishing Both
Establishing a power of attorney is, for the most part, a simple matter. In fact, in some states, a simple piece of paper may be all that’s required – notary stamps and/or signatures of witnesses may not be necessary. Of course, every state has different requirements, so it’s important to check with the laws in your state. However, in general, once the power of attorney is created, it is legally effective as soon as it is signed, which means your appointed agent can act on your behalf without court intervention.
An appointed agent is granted specific powers to act on your behalf, which must be stated in the document. Two of the most common power of attorney designations are:
To rescind or terminate a power of attorney, all you have to do is draft a revocation document. This revocation will be effective immediately, so if you want to give the agent a chance to wind up business affairs, it can be done. If you’ve named several agents, you must notify each one of them of the rescission.
If you want to appoint a guardian for yourself, then legally, you can’t have a power of attorney. A petition to establish a guardianship must be filed in court, along with an application that includes, among other things, information about your personal assets, how you currently care for yourself, and if you are married or have relatives. The court will then appoint an investigator to look into your affairs and hold a hearing to determine if a guardian is needed and if so, who that guardian should be. The court will appoint someone to represent you in the hearing if you are unable to care for yourself due to incapacity.
Typical Myths and FAQs
One common misconception is that a durable power of attorney absolves the need for a legal guardianship. While both serve as a means of decision-making on behalf of someone unable to do so, they are separate processes with their own purposes. Powers of attorney are effective only during the principal’s lifetime; guardianships exist both during the lifetime and after the death of the ward. A power of attorney falls under the auspices of state laws regarding agency law and trusts and estates, while guardianships are governed by state mental health laws. Since these areas of law overlap only slightly, there are few avenues of cross-referencing between the two.
Another misconception is that a guardian can make health care decisions on behalf of an incapacitated individual. In fact, the guardian may only make health care decisions based upon the prior decisions of the ward, who may have executed a "health care directive" or other written document. Even then, health care decisions are made by the surrogate or proxy designated in the health care directive to receive them from the health care providers. The role of the guardian, fellow health care decision-makers , and the physicians are to carry out the wishes of the ward. Although a guardian will meet with the physicians and health care providers to understand the nature of the ward’s health status, the ultimate decisions are those made by the ward or surrogate/proxy.
The following are additional frequently asked questions:
Q: Can my power of attorney be used to establish guardianship if I become incapacitated and did not execute a guardian nomination prior to incapacity?
A: No. A power of attorney is personal to you. Your attorney-in-fact lacks the authority to nominate a guardian or make any decision once you become incapacitated.
Q: If I have a general durable power of attorney in effect that grants my agent the authority to deal with all of my property, including real estate, why do I need to establish a guardianship?
A: The family may wish to prevent the agent in the power of attorney from selling your assets during your incapacity, by creating a guardianship.
Q: If I have a health care directive, which has the legal effect of delegating health care decision-making to another person, why do I need a guardianship?
A: The guardianship may be established to ensure that your power of attorney is handled in the manner that you have anticipated.