The Importance of a Power of Attorney
In previous bog posts, I have emphasized the importance of having a power of attorney. Without a comprehensive power of attorney, many people are unable to handle the financial affairs of their loved ones, nor make health care decisions without court intervention (conservatorship and guardianship). Unfortunately, it continues to be our experience that many people, including financial advisors, accountants and even some attorneys do not understand what exactly is a power of attorney and why it is so important to have one. Clients often come into our office assuming that, just because they are married or are a joint owner of assets, they are able to sell or transfer assets. In fact, a current client is unable to sell his mother’s home because she never signed a durable power of attorney.
What is a Power of Attorney?
A power of attorney is a legal document where one person (the principal) authorizes another (the agent) to act on their behalf. There are durable powers of attorney which authorize your agent to make decisions for you regarding financial matters and healthcare powers of attorney which permit your agent to make decisions regarding your healthcare needs. Your power of attorney can be broad in scope, giving your agent the ability to make any and all financial decisions for you (a General Durable Power of Attorney) or you can limit your agents authority by specifying the types of financial decisions you will permit them to make (a Limited Durable Power of Attorney). You may also prefer to give your agent the immediate authority to make decisions on your behalf (a Durable Power of Attorney) or you can limit your agents authority to act only when you become incompetent (a Springing Power of Attorney).
What is a Guardianship and Conservatorship?
Guardianship is a legal relationship where the court gives a person (the guardian) authority to make personal decisions (medical, housing, etc.) for another (the ward). A proceeding is initiated by filing a petition in the probate court. A written statement by a doctor may be necessary to establish the ward’s incapacity. The court then determines whether a guardian is needed due to the ward lacking the necessary mental capacity to make personal decisions. Unless limited by the court, the guardian has the same rights as parents have over their minor children. The guardian is required to report annually to the court regarding the condition of the ward.
Conservatorship is a legal relationship whereby the probate court gives a person (the conservator) the power to make financial decisions for another. The court proceedings are similar to those of a guardianship except the court is determining whether the person has the capacity to manage his or her financial affairs. A conservator is also required to file an annual accounting documenting (with verification) all of the income and expenses incurred each year. A surety bond (an insurance policy) is often required by the court to protect against the conservator engaging in any improper use of the person’s assets.
A power of attorney is nearly always preferred over a guardian or conservator. It does not cost nearly as much and it allows you to choose who will be your agent. If you do not have a power attorney and you suffer a stroke or debilitating disease, your loved ones will likely have to face expensive and time consuming court proceedings to handle your affairs.
This blog post is written by Brett A. Howell, Certified Elder Law Attorney. The blog is written as a service of The Elder and Estate Planning Law Firm, P.L.L.C. This information is for general informational purposes only and does not constitute legal advice. For a consultation to address specific questions, please call (810) 953-3846.