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Family members can sometimes have a legal relationship that determines who can make personal decisions and/or have legal authority over another. 

 

Financial Power of Attorney

 

A financial Power of Attorney document is an important estate planning tool that allows an individual, commonly referred to as a Principal, to appoint another trustworthy person to control all financial decisions on their behalf, during their lifetime, and in the event they are unable to do so. 

 

The individual empowered to make these decisions is commonly referred to as an Agent under the document and will have only those powers that are specifically defined in the Power of Attorney document. Such powers might include dealing with real property, making banking transactions, filing taxes, making investments and others. 

  • The Agent has a duty to make decisions in compliance with the directives given in the document by the Principal.
  • The Agent has a duty to act based on the best interests of the individual, or else risks being removed or charged a penalty

 

These documents can either be drafted so they would go into effect as of the date of their execution or can be designed to spring into effect upon a doctor’s determination that the person is in a state of incapacitation. 

  • Incapacity describes a condition in which one or more doctors certifies that a person is unable to manage their own affairs, including financial affairs.  
  • Power of Attorney documents that go into effect immediately will empower an individual to act on the Principal’s behalf before they are deemed unable to do so
  • These documents can only be drafted during a time when the person has the capacity to do so. 
    • After they are deemed incapacitated, a support team might seek a court-appointed Guardian or Conservator

 

 

Guardians and Conservators

 

The definitions of a Guardian and Conservator vary from jurisdiction to jurisdiction. However, generally: 

  • A Guardian is a person or entity who is appointed by a Court to make all health and safety related decisions for an adult individual – often referred to as a Ward – who has been deemed to be an incapacitated person. 
  • A Conservator, similarly, is an individual who is appointed to make all financial decisions on behalf of the Ward.

 

(Note: A Custodian is a person who will manage the financial assets of a child until they reach adulthood.) 

 

Where an individual is incapacitated and is in need of a Guardian or Conservator, a loved one will need to petition a Court to make a legal determination that they are incapacitated and in need of the care of a Guardian or Conservator. 

 

A Conservator or Guardian will be appointed by a Court to fill the gaps where a Power of Attorney document does not empower an Agent to act on behalf of the Principal. 

  • This will create a situation where a Conservator is taking care of certain aspects of a person’s finances and an Agent under a Power of Attorney is taking care of others. This may cause confusion or a difference of opinion and should be avoided where possible.
  • A Guardian or Conservator should indicate in their own Will who will act as successor in the event that they die before the Ward. 

 

Conservators and Guardians must act in the best interests of the Ward, or else they may be removed or penalized for any actions that were against the Ward’s interests, assuming that is able to be proved in Court.

 

Trustee

 

A trust is an estate planning instrument that allows a person to provide for the financial care and support of a loved one for their lifetime - a person known as trust beneficiary. At the end of the life of the first beneficiary, the assets or property can be distributed to another person, known as the successor beneficiary. 

 

For example, a deceased spouse or parent will leave assets and property to be distributed to their children and spouse for their lifetime, and then, upon their death, will be distributed to another individual. 

 

1. A Trustee will only have the ability to make distributions to the beneficiaries under the strict guidelines set out in the trust.

    • Often, a trust will provide for the care and maintenance of an individual generally. However, other times, a trust will allow only for distributions under certain circumstances, such as where the individual completes college or reaches a certain age. 
    • Distributions of cash might be made to provide compensation to a person providing support or care services to the person that the trust is designed to benefit.

 

2. The Trustee must act in the best interests of the beneficiary and must make investments and distributions that are both prudent and reasonable under the circumstances. 

    • Like an Agent, Guardian or Conservator, a Trustee can be removed or surcharged for making investments or distributions that are not in the best interests of the beneficiary.

 

What Is The Difference Between Guardianship And Power Of Attorney?

  • Legal Guardianship is when a person is appointed by the Court to make all health and safety related decisions for an adult individual who has been deemed to be incapacitated.  
  • Financial Power of Attorney is an estate planning tool that allows an individual to appoint another person to control all financial or healthcare decisions on their behalf.

 

NOTE: An Elder Law attorney can help you determine which legal document you need, and help you through court proceedings, such as a Guardianship proceeding, to help you obtain legal rights. 

 

Does Guardianship Supercede Power Of Attorney?

If it is a minor then typically Guardianship supersede PoA, however if an adult is the ward, the guardian may have to take steps to terminate the power of attorney,