4 Key Differences Between Power of Attorney and Guardianship
The tricky world of personal finance sometimes gets so involved that the legal system comes knocking. If you’re someone who doesn’t have a lot of experience in finance, you might already be used to consulting a financial advisor for important things.
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However, there are cases where you may want someone else to be legally authorized to make decisions on your behalf. In this situation, you would make use of a power of attorney, which is a legal document that allows them to do so.
What Is a Power of Attorney?
POAs are particularly useful when a cognitive impairment prevents the original individual from making sound decisions. Naturally, you wouldn’t want a loved one selling property or paying taxes without the requisite understanding of what they’re doing. This is where one of the types of POAs is important — the durable POA. The durable POA’s authorization is maintained should the appointer (principal) become incapacitated. Regular POAs would lose that authorization if the principal were to become incapacitated.
Power of attorney is closely related to a similar term, “attorney-in-fact,” which could possibly cause you to be unsure of the distinction. It’s actually a simple dynamic: when you appoint someone power of attorney, they become your attorney-in-fact — a technical term typically substituted with “agent.” This individual does not need to be an attorney for any of this, though you should still be selective with your attorney-in-fact as they will be making substantial decisions on your behalf or that of someone close to you. Therefore, they should be someone you trust implicitly.
What Is Guardianship?
With an understanding of power of attorney, we come to the term it’s often confused with, which is guardianship. This refers to a situation where an individual (guardian) is appointed by the court to make decisions for someone else, who then becomes the guardian’s ward. Here are the key ways that power of attorney and guardianship differ:
Guardianship often occurs as a result of not having previously appointed an agent before a situation occurred that necessitated court involvement.
The principal decides the extent of authorization their agent has (e.g., durable POA), whereas, in guardianship, it’s the judge’s decision. Moreover, the judge may select a professional you don’t know, which can be unsettling.
You can revoke POA as long as you are competent to do so. In cases of guardianship, it’s up to the court.
Guardianship is costly and arduous, including medical exams and medical testimony. The court has no involvement when simply selecting an agent.
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This article originally appeared on GOBankingRates.com: 4 Key Differences Between Power of Attorney and Guardianship
