One of the biggest advantages of estate planning is its flexibility. Everyone’s needs are different, and estate planning can provide you with the tools to match your unique situation. But with so many options—trusts, wills, powers of attorney, guardianships—it can get confusing fast.
Sometimes estate planning involves the discussion of taking care of an incapacitated individual. Situations like this arise frequently: maybe you are an adult child looking to take care of your parent who is diagnosed with dementia, or maybe you are a parent with a child who is over 18 and cannot care for themselves due to a disability.
When it comes to taking care of someone else in situations as these, understanding the difference between a Power of Attorney and a Guardianship is vital. While a Power of Attorney and a Guardianship seem similar because both grant someone the ability to act on another individual’s behalf, they each function in very different ways.
What is a Power of Attorney?
A Power of Attorney (or “POA” for short) is a document that grants a trusted individual (the “Agent”) the ability to act on your behalf if you become mentally or physically incapacitated. You can only make a Power of Attorney if you are of sound mind.
POAs can be very specific or broad in scope; a POA can grant your agent the ability to only perform certain financial transactions or to perform certain acts on your behalf after a specific event. A Power of Attorney can be customized to fit anyone’s needs.
For example: A mother wants to create her estate plan and has full mental and physical capacity. However, she knows that there is a chance she may need someone to care for her in her later years. Therefore, in her estate plan she includes a POA naming her son as her Agent and giving him the ability to care for her financial affairs if she were to ever become mentally or physically incapacitated.
She is later diagnosed with dementia and begins making double payments, misplaces bills, and accrues debts. As a result, the POA is triggered, and her son takes on the responsibility of handling her financial affairs.
What is a Guardianship?
A Guardianship is a court proceeding in which you petition the court to grant you the authority to make decisions on behalf of an Alleged Incapacitated Person (or “AIP”).
A person who is granted this authority is called a Guardian and is permitted to handle decisions related to legal, medical, and financial matters for the individual under their care.
For example: A father has a daughter who has been disabled since birth. He knows that she will need someone to always care for her. However, she is legally an adult (18 years of age or older) and therefore her father is no longer considered her legal guardian. As such, he petitions the court to grant him legal guardianship over his daughter so that he can continue caring for her. After the court reviews the petition, her father may assume guardianship of his daughter if the court deems it appropriate.
What is the Difference?
The main differences between a Power of Attorney and a Guardianship how they are created and who creates them.
A POA must be established by an individual that has mental capacity. When you create a POA you are in control —you have the decision to select your agent and the extent to which they can make decisions on your behalf.
By contrast, a guardianship can only be established after a court declares an individual incapacitated and unfit to govern themselves their affairs. The AIP cannot apply for a Guardianship themselves—someone other than the AIP must make it on their behalf—and while the AIP can express their preference on who they would like to be their Guardian, only the court can make the final decision on who is appointed as guardian and the extent to which that person can make decisions on the AIP’s behalf.
Because Guardianships come with the caveat of court intervention and less individual freedom to decide who is appointed Guardian and what authority they have, Guardianships are typically established only when less restrictive alternatives, namely POAs, are deemed insufficient.
In the example of the mother: she had full capacity when creating her estate plan and was allowed to create her POA. As a result, she could designate exactly who she wanted as her agent and what authority her agent may have.
However, if she was deemed to not have mental capacity (e.g. she has severe dementia) she would be unable to draft a POA. In this scenario, if her son noticed her financial distress he would petition the court for Guardianship. As a result, the court has to decide if her son is worthy of guardianship, and only then will he be granted the responsibility. She may tell the court who she prefers to be her guardian, but this decision is not hers to make.
When the Right Document Makes All the Difference
Caring for a loved one is no small feat. It is a role that demands patience, clarity, and a deep sense of responsibility. Whether planning ahead, or stepping up to the plate, an experienced attorney—like ours at Giro and Associates, LLC—can help you navigate the legal process with clarity and compassion, so you can focus on what matters most.
To designate a Power of Attorney or petition for Guardianship today, call our River Edge, New Jersey Law Office at 201-502-7834, or send us a message with a brief description of your situation, and we will get back to you right away