What’s the difference between guardianship and power of attorney?
Most of us do not want to look into the future and find that we are unable to care for ourselves, or manage our day-to-day affairs. However, planning for this possibility is a necessity you should seriously consider.
Preparation of a Power of Attorney is key in preparing for the possibility of your disability or incapacity. Several types of Power of Attorney are as follows:
General Durable Power of Attorney. This Power of Attorney is comprehensive and gives your agent all the powers and rights that you have yourself. For example, you can give your agent the right to sign legal documents, pay your bills, and conduct financial and healthcare matters on your behalf. This Power of Attorney continues in effect until you revoke it or you die. A Power of Attorney designated as “durable” remains effective after you become incapacitated or disabled. In Pennsylvania, all Powers of Attorney are durable unless specified otherwise in the document.
Healthcare Power of Attorney. This Power of Attorney, which is also usually durable, permits your agent to act on your behalf in all healthcare related matters if you become disabled or incapacitated.
Limited Power of Attorney. This Power of Attorney gives your agent the power to act on your behalf for a limited purpose. For example, if you are selling your home and cannot attend settlement, you could prepare a limited Power of Attorney authorizing your agent to sign the settlement documents on your behalf. The authority of the agent to act under a limited Power of Attorney usually ends at a specific time or upon the completion of a specific event, as set forth in the document.
Springing Power of Attorney. This Power of Attorney gives your agent the power to act in your behalf only when you become disabled or incapacitated. Unlike a General Durable Power of Attorney, your agent cannot act under this document solely for your convenience if you are not disabled or incapacitated. If you choose to prepare a Springing Power of Attorney, it is important that the trigger used to determine your disability and/or incapacity be set forth clearly in the document.
You must have the requisite legal capacity to prepare a Power of Attorney. If you become disabled or incapacitated and have not taken the time to prepare a Power of Attorney, it is too late to prepare one. At that point, a spouse, relative, or friend will need to petition the court to be appointed your Guardian.
This procedure is called a Guardianship action. While the appointment of a Guardian may seem similar to the appointment of an agent on a Power of Attorney, the two are quite different. With a Power of Attorney, you (the principal) can still make all of your own decisions until you become disabled or incapacitated. Also, you can revoke the Power of Attorney at any time.
In a Guardianship, however, the Guardian is appointed by the court, and all of the incapacitated person’s legal rights are terminated, unless stated otherwise in the court decree, and the Guardian is empowered to make all decisions regarding the incapacitated person’s care and financial management.
A Guardian can be appointed as Guardian of the person or Guardian of the estate for the incapacitated person. The Guardian of the person is responsible for the incapacitated person’s housing, safety, and healthcare decisions, while the Guardian of the estate is responsible for the incapacitated person’s finances.
In most situations, the Guardian of the estate is permitted to spend the incapacitated person’s income for their required needs. However, the Guardian is not permitted to spend the incapacitated person’s principal assets without court approval. For example, if the incapacitated person is admitted to a nursing home and their monthly income does not cover the nursing home costs, the Guardian would be required to obtain court approval before using the incapacitated person’s principal assets to pay the nursing home bill.
Additionally, both the Guardian of the person and the Guardian of the estate are required to file annual reports with the court regarding the status of the Guardianship. Also, a final report is required to be filed with the court upon the death of the incapacitated person.
Unlike a Power of Attorney in which you can revoke your agent’s power to act as long as you have the requisite mental capacity, a Guardianship can usually only be terminated if the incapacitated person regains capacity or he or she dies.
As can be seen above, a Guardianship is a more restrictive tool in dealing with disability and/or incapacity than a Power of Attorney. A Power of Attorney gives you more flexibility, and usually there is no involvement by the court.
A situation which has surfaced frequently in our practice is when a client requires admission to a nursing home. In this situation, it is essential that the client have a valid Power of Attorney which gives the agent the power to make unlimited gifts to family members. This way, the agent will be able to engage in Medicaid planning with a qualified elder law attorney to protect at least a portion of the principal’s assets for their family. The nature and amount of the assets which can be protected depend on the specific facts of each case.
If there is no Power of Attorney in place and a Guardian is appointed, in most cases the court would not permit the Guardian to make gifts of the incapacitated person’s assets to family members, to qualify for Medicaid benefits. In such a case, all of the incapacitated person’s assets would have to be spent down to pay for their care.
This is an overview of the differences between a Power of Attorney and a Guardianship; it is not all inclusive. Each situation is different. Therefore, it is important that you plan now while you are healthy and able to do so.
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