Power of attorney vs. Guardianship


The image shows a stack of legal documents lying on a table in a law firm. SmartAsset identifies the differences between power of attorney and guardianship.

Power of attorney and guardianship are forms of fiduciary relationships in which one person acts on behalf of another. These are tools you can use to appoint someone who can act for you if you become unable or unable to make specific financial decisions. Circumstances vary depending on your personal financial situation, which is why it may be helpful to speak one-on-one with a professional. Financial Advisor, but it’s always a good idea to take stock first.

In general, there are certain documents that someone can create in advance in order to appoint someone else to take charge of their affairs if they become unable to look after their affairs on their own. These include a power of attorney (often used for financial matters) and an advance healthcare directive (often used for medical decisions). If someone is incapacitated but has not prepared such documents beforehand, a family member will need to seek help through guardianship through court approval.

Definition of power of attorney

A power of attorney (POA) is a written document that authorizes another person to act on their behalf. The individual must have the legal capacity when signing it and must be able to understand that he is ceding the power to make certain decisions to that other person. A lasting power of attorney allows another person to act or an individual even if the individual loses the ability to understand the purpose of the durable power of attorney. A durable power of attorney can be used for financial or health decisions. These documents should be written by a lawyer or someone familiar with the laws surrounding them.

Trusteeship defined

Guardianship refers to a guardian or a person appointed by the court to make personal decisions for another person. Once the guardian has been chosen, the individual becomes a protected person, or ward, of that person, and loses many rights that he would otherwise have had. This is why a guardianship should generally be one of the final approaches that a person should consider in such matters, when a power of attorney is not feasible or achievable. The court must find that the person is incapacitated on the basis of the evidence, and only then will a guardian be appointed.

Unless limited by the court, the tutor has the same rights, powers and duties over his ward as parents have over their minor children. Guardianship and power of attorney are both different from a restaurateur, which receives by probate court the ability to make decisions related to the financial situation and property of the parish. It may in fact be the same person as the tutor.

Power of attorney or guardianship: differences

The image shows a document with text that reads as follows:

The image shows a document with text that reads: “Lasting Power of Attorney”.

These two types of documents differ in several respects:

  • Scope and timing. Proxies are usually made to prepare in advance. As such, you could usually bypass the guardianship process entirely by appointing someone to look after your affairs should you become incapable. In terms of scope, powers of attorney can be limited to a very specific transaction, or can extend to full power over all matters. Guardianship is generally always more holistic.

  • Control. A durable power of attorney allows the principal to choose the level of authority the agent has. Guardianship means that the court judge chooses or makes the appointment and level of authority available to the guardian. You might even have a judge appoint an independent professional such as a lawyer as a guardian, meaning someone you don’t actually know could potentially be made responsible for making financial decisions for you. Another important distinction is that you can also revoke the power of attorney at any time, as long as you have the mental capacity to do so. As a general rule, you should use a power of attorney if the person still has the capacity to understand and make decisions and has someone to help them do so. Proxies generally allow individuals to retain more decision-making power. Guardianship introduces many other limits to an individual’s ability to decide for himself and should generally be used when he is absolutely unable to do so.

  • Cost. Guardianship fees are relatively expensive and time consuming. They can take several months to be completely finalized, requiring a thorough medical examination and testimony as to the competence (or lack thereof) of the individual. A durable power of attorney takes a lot longer and costs a lot less.

  • Monitoring. Usually, there is no judicial review of a durable agent. However, there may be a significant judicial omission for a guardianship, which may also be in addition to the expenses mentioned above.

Final result

The image shows a document with text reading,

The image shows a document with the text “Family Estate Planning”.

A power of attorney and guardianship are relationships in which one person has the power to make certain decisions (financial or personal) on behalf of another person. Sometimes this is due to the inability of the main person to make their own decisions. It is important to reflect on these situations while one is still sane, so that they can think about various scenarios and consequences and make the right choice for themselves and those close to them.

Tips for estate planning

  • Determining your general estate planning needs is an important step in making sure your financial affairs are in order, especially if something happens to you that you are unable to make your own decisions. Use our comprehensive guide to estate planning to understand all the components of estate planning.

  • It’s never too late to start building an emergency fund – even retirees need it. Use our free budget calculator and notice on savings accounts to help you allocate and create one for yourself.

  • To research professional financial advice. You wouldn’t run a marathon without a trainer, would you? So why not apply the same logic to your long-term financial goals? Finding a financial advisor doesn’t have to be difficult. The free SmartAsset tool connects you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is best for you. If you’re ready to find an advisor who can help you reach your financial goals, start now.

Photo credit: © iStock.com / djedzura, © iStock.com / Piotrekswat, © iStock.com / Bill Oxford

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