Making sure you have the right people in place to make decisions for you when you are not able to is one of the most fundamental reasons for having an estate plan. Here’s what you should know about setting up a power of attorney or guardianship for your loved ones.
What Is a Power of Attorney?
A power of attorney (POA) is a legal estate planning document that gives a person (agent) authority to make decisions on behalf of an individual (principal) who becomes unable to manage financial, legal, or healthcare tasks themselves. There are different types of powers of attorneys—differing in their scope of power (general, limited, financial, healthcare) and when it goes into effect (durable, springing, or immediate). POAs help you name who will carry out your wishes when you cannot and are not a substitute for having a will before you die.
What Is Guardianship?
Guardianship—also known as conservatorship in some states—is a court-appointed legal arrangement that grants a person or entity authority to make decisions for someone who has been deemed legally incapable of managing their own affairs. Unlike a power of attorney, which you proactively establish yourself, guardianship is typically initiated through court proceedings when someone is already incapacitated and hasn’t designated decision-making authority in advance.
Key Differences Between Guardianships and Powers of Attorney
- A guardianship or medical power of attorney is used to make healthcare decisions. A medical POA can only be used when the principal is not able to make any health decisions.
- A conservatorship or financial power of attorney is used to make financial decisions. A financial POA can often be used even if the principal is competent.
When Should You Set Up a Power of Attorney?
It’s important to discuss powers of attorney (POA) with an elderly parent while they are still mentally competent and able to make their own decisions. Many seniors in their 70s and 80s have not yet established a POA, which can lead to confusion or conflict among family members if urgent decisions are needed.
A conversation about POA should ideally take place before any health concerns or cognitive decline arise. Common situations that prompt this discussion include retirement, diagnosis of a chronic illness, or significant life changes such as the loss of a spouse. Addressing these matters proactively makes sure that the parent’s wishes are clearly documented and reduces the likelihood of family disagreements.
It is also important to approach the topic with sensitivity, emphasizing that the purpose of a POA is to protect their autonomy and provide guidance for trusted individuals if they are ever unable to make decisions themselves.
And even after you appoint a POA, it’s important that the primary agent is aware of and considering other family members’ opinions to avoid conflict.
Ultimately, remember, a POA doesn’t replace the decision-making of the principal unless they are truly incompetent, so agents should not assume their parents in their 80s or 90s no longer have a voice.
How to Choose the Right Power of Attorney
Selecting the right agent is essential to ensure that decisions are made in the principal’s best interests. This is typically someone close to the principal, such as a sibling, parent, spouse, adult child, trusted friend, or even a financial institution.
Key considerations include:
- Agent’s proximity, which affects how quickly they can act if needed.
- Agent’s financial competence, such as their ability to make sound decisions, understand the principal’s finances, and manage taxes, investments, and spending.
- Agent’s healthcare competence, including the ability to make informed medical decisions and understand complex medical matters.
- Agent’s reliability, including their ability to maintain accurate records and communicate effectively with family members or advisors.
Careful consideration of these factors helps minimize conflicts and ensures that the principal’s wishes are respected.
How to Set Up a Conservatorship
There are times when it is better to have the court involved through guardianship or conservatorship, but that is rare. Having the court involved limits the liability of those making decisions for the other person but also makes the decision-making process more involved and generally more expensive.
How to Safely Store and Protect POA Documents
Powers of attorney should be in a secure but accessible location. Copies should be provided to individuals named as agents under the POA, to primary care physicians for medical POAs, and to other key family members or advisors who may need to act on the principal’s behalf. Ensuring proper distribution allows the documents to be accessed efficiently when decisions need to be made, reducing delays and preventing confusion.
Need more beginner-friendly estate planning tips or need help establishing a POA or guardianship? The experienced elder law and estate planning attorneys at The Orr Law Group are here to help! Schedule your consultation today.