As a significant portion of the world’s population begins to age, estate planning tools have become even more relevant. Although there are many tools to aid with estate planning, powers of attorney and guardianships are two important mechanisms that can be useful in determining an individual to act in the author’s stead if he/she becomes incapacitated for a number of reasons. Even though there are many differences between the two, the main one is that with a power of attorney, the author chooses specifically who they want to act; with a guardianship, the court chooses who will act as the guardian. Ultimately, the two share a common goal, but involve different proceedings and results.
A power of attorney is an estate planning document that allows an appointed person to act in the place of the author for financial purposes when and if he/she ever becomes incapacitated. When drafting, the individual can limit a power of attorney to one or a set of specific transactions; alternatively, that individual can also grant full powers over all affairs. A power of attorney may, therefore, be limited or general; limited gives the appointee the power to do a specific task, while general gives the appointee the power to do all the tasks at their complete discretion. In either case, the appointed person will then be able to step in and handle the named financial affairs as a way to aid the incapacitated person. Without a finalized version of this important document prior to incapacitation, no one can represent the individual for important matters unless the court steps in and appoints a conservator or guardian. Not only is this court process avoidable, it also generally involves a great deal of time, money, and uncertainty. Additionally, allowing the court to appoint a guardian opens up the possibility that the preferred individual will not be chosen. A power of attorney may also be current or springing. While most powers of attorney take effect immediately upon execution, some documents can be written so that it does not become effective until such incapacity occurs; in these drafting situations, it is extremely important to outline the type of incapacity that could potentially trigger the power of attorney as to avoid confusion in such a situation. Although useful, some clients have recently reported increased difficulty in convincing some financial institutions to authorize an agent’s authority. Ultimately, most experts claim that for many people, a power of attorney is the most important estate planning instrument available because of its overall flexibility.
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If an adult becomes incapable of making life decisions due to a mental disability, the court may appoint another individual to make decisions in the incapacitated adult’s shoes, referred to as a guardian or conservator. A guardianship is a legal relationship between a guardian and an incapacitated person who is no longer capable of making decisions for themselves or any dependents. The appointed guardian is afterwards authorized to make legal, financial, and health care decisions for the ward. Unlike a power of attorney, a guardianship may require court approval for various decisions. Since guardianships are imposed and not chosen, many state laws require guardianships be delegated only when less restrictive alternatives, like a power of attorney, have been tried first.
Estate planning is an essential part of designating one’s assets and preparing for the future. While wills and trusts are commonly discussed, powers of attorney and guardianships are equally important to building a successful estate plan. Both tools have different advantages and disadvantages so, as a result, a potential client should thoroughly research all the options available before making such a life-altering decision.
If you have questions about estate planning, contact an estate planning lawyer like the ones at Brandy Austin Law Firm, PLLC.
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