The differences between a power of attorney (or POA) and adult guardianship are largely invisible to the people not directly involved. Yet the POA is perhaps the most important document you can have for ensuring quality of life and flexibility of planning for older adults.
Both the POA and guardianship are about appointing someone else to act for the elder if they become temporarily or permanently unable to do so. The single biggest difference between a POA and guardianship is who does the appointing. With a POA, the elder selects who will have authority, and what that person is allowed to do. With guardianship, a judge decides who will have authority and how much.
A POA is private and not generally subject to court supervision. It can permit as many or as few powers as the principal wishes, but usually includes authority to manage bank and investment accounts, pay bills, buy and sell real estate and personal property as appropriate, take IRA distributions, and so forth.
The POA Should Change with Age
The powers granted for a younger person should be different than what an older person should include. And POA’s for seniors should include certain powers that provide their agent with sufficient authority to take all actions in their best interest, including steps to preserve assets from long-term care costs. The POA is typically the first thing an elder law attorney will want to see when meeting a client for “crisis” long-term care planning.
Guardianship Means Ongoing Court Involvement
A guardianship, on the other hand, is created by and remains under the supervision of a judge. It is permitted by state law as a means to provide for the care of a disabled person. The court proceeding is “adversarial” which means that the person requesting guardianship and the elder subject to guardianship will each have an attorney. Guardianship can be contested by anyone with an interest in the outcome.
Once guardianship is granted, the judge will oversee all actions of the guardian and must approve of certain actions in advance. One place this can be particularly harmful for seniors is in the area of long-term care planning. Some techniques used regularly by elder law attorneys to preserve the assets of a senior needing long-term care are not approved by judges.
A guardian must account to the court for all money spent. While an agent under a POA is expected to act in the elder’s best interest, a guardian must act to preserve the status quo and avoid any loss or disposition of assets, even if doing so makes sense in the circumstances.
In summary, a POA allows you to appoint a trusted family member or friend to act in your best interests. It costs less than guardianship, it’s private, and if it is correctly drafted for the elder’s situation and desires, it leaves open many planning options not available under a guardianship.
Just remember, a POA can only be executed when the elder is legally competent. Wait too long and guardianship becomes the only choice. Unfortunately, in many cases, that makes asset preservation difficult or even impossible.