Have you ever considered what would happen to your finances and medical decisions if you were unable to make them for yourself? What if you needed to take care of a family member such as an elderly parent? These situations are why the legal instruments power of attorney and guardianship were designed. While they sound similar, they serve distinct purposes and have important differences. Estate planning can be challenging, especially when someone is unable to make decisions for themselves.
At Clear Counsel Law Group, estate planning attorneys work with clients to create documents that server their immediate needs and help them plan for a future. This extends to legal tools that give you control even when incapacitated or otherwise unable to make those decisions in the moment.
The Role of Power of Attorney
Power of Attorney is a legal document that allows you to appoint someone (known as your agent) to handle your affairs if you’re unable to do so yourself. Incapacity could be due to illness, injury, or other reasons. Being incapacitated isn’t a requirement for all powers of attorney. It can also be assigned if you are expecting to be absent for an extended period of time or simply don’t want to deal with certain aspects of your estate. The key aspect of the power of attorney is that it must be set up before you become incapacitated.
There are two types of power of attorney: Durable power of attorney for finances and healthcare power of attorney. Each serves a different role but establishing them is quite similar. The financial version empowers your agent to handle your financial affairs, including paying bills, managing investments, and making other financial decisions. The healthcare version allows your agent to make medical decisions on your behalf.
Setting Up Power of Attorney
- Preparation Timing: It’s crucial to prepare this document while you still have full mental capacity.
- Designating an Agent: Choosing who will act on your behalf and make decisions about your finances and healthcare. This is an important decision not to be taken lightly.
- Ease of Setup: Contrary to common belief, power of attorney documents are straightforward to prepare, can be done quickly and come at a minimal cost.
Benefits of Power of Attorney
- Immediate Access: Your designated agent can immediately handle tasks like paying bills or managing bank and brokerage accounts.
- Personal Choice: You have the freedom to choose who will make decisions on your behalf, ensuring your affairs are managed according to your preferences.
The Role of Guardianship
Guardianship comes into play if no power of attorney is set up prior to an individual becoming incapacitated. It involves petitioning the court to appoint someone (often a family member) as the guardian of the person’s estate and/or person.
Guardianship of the Estate: The guardian manages the individual’s finances, property, and payments for expenses like medical bills and mortgages.
Guardianship of the Person: The guardian makes healthcare decisions, including treatment options and end-of-life care.
Issues with Guardianship
Time-Consuming Process: Obtaining a guardianship requires a court order and the process of obtaining a court order can be time-consuming and expensive.
Lack of Control: The court order often places a close family member to act as guardian. This is not always in line with your wishes.
Comparing Power of Attorney and Guardianship
The main difference between these two options lies in their timing and control:
- Power of Attorney: Set up in advance, giving you control over who makes decisions on your behalf. Activates immediately as requested or upon incapacitation.
- Guardianship: Initiated after incapacity has occurred, often resulting in a court deciding who will manage your affairs. Goes into effect after a sizable gap in time.
Whether setting up a power of attorney or, if necessary, going through the guardianship process, it’s essential to understand these options and their implications. Clear Counsel Law Group provides guidance in executing both, providing assistance in quickly and cost-effectively setting up documents. Planning ahead with these tools can ensure that your affairs are handled according to your wishes, giving you peace of mind and reducing potential burdens on your loved ones.