Power of Attorney and Legal Guardianship: An Overview
Power of attorney (POA) and legal guardianship are two important concepts in the world of estate planning. Both relate to powers of a person to act on behalf of another person regarding legal matters. However, while related, these two concepts have different implications and serve different purposes in estate planning.
A power of attorney is a legal document or instrument which names someone as an agent to carry out various actions with respect to property. Unlike a guardian, this agent does not act under the day-to-day supervision or control of a judge. Instead, the agent is elected by the declarant, on the basis that this individual will act responsibly and in their best interest. A POA can even be created which permits the named agent to act during the declarant’s incapacity, called a "durable" POA.
A guardian, on the other hand, is appointed by a court, or a judicial body, when the Declarant is no longer able to competently act with respect to their property or legal affairs . Once appointed by the court, the guardian is responsible for actions affecting the assets of the Declarant. The guardian is subject to oversight and discretion by the court, whereas the responsibility of the POA is to the Declarant, not the court.
POAs are often used in situations where the Declarant is traveling or too busy to sign documents. Often there are also issues of physical or mental incapacity where a guardian appointment is pending. In these instances, immediate needs can be met through the use of a POA. However, if the Declarant will not be able to reverse the grant of the POA, than the appointment of a guardian becomes necessary.
Any person with capacity may create a POA. Guardianship, however, requires the appointment of a court, or a judicial officer. The court will make decisions and impose safeguards for the Declarant who is perceived to lack the necessary degree of competency to make their own decisions.
When to Apply Power of Attorney in Legal Guardianship
Understanding Power of Attorney for Legal Guardianship, when you would need a power of attorney in the framework of legal guardianship, providing real-life examples and on the relative ease of the power of attorney;
A power of attorney is a written document that gives another person, called an "attorney-in-fact" or "agent," the power to act for someone else, called a "principal." When the principal signs a power of attorney for finances, he or she grants the agent the power to handle all of his or her money matters. Ohio permits a wide spectrum in the authority it gives to an agent, ranging from narrow powers over the principal’s assets and property to a broad grant of power over property, including disbursing funds for health care.
In all cases, the Ohio form of a power of attorney for financial run by default through the Ohio Department of Job and Family Services (ODJFS), with the standard convenient resolution of questions or disputes involving the validity of the document being run through normal administrative channels. A key protection of the ODJFS application of the power of attorney is the presumption of the validity of the power of attorney. The presumption of validity makes it more difficult than it might otherwise be to challenge the validity of the agent’s exercise of power.
There are many different types of situations in which a power of attorney for financial may be needed under the auspices of a guardianship. One type of situation is the disabled person receiving inheritance money from a relative who recently passed away. The disabled person receives cash or a check as an inheritance payment, but cannot cash the check because he or she can no longer sign his or her name as he or she had done in the past. If the person has executed a power of attorney for financial, the recipient of the inheritance money can have the agent for financial handle the receipt of the cash or check for the disabled person. The agent for financial can negotiate the check and receive the funds into a newly created guardianship account for the disabled person.
Another example of when a power of attorney may be needed is when the disabled person is involved in a lawsuit. The disabled person may need to receive a settlement in the suit, and the settlement money will have to be deposited into an account controlled by the guardian. Disability settlement proceeds can be deposited directly into the guardianship account like inheritance funds. However, if the disabled person is winning a pre-existing lawsuit, absent a power of attorney for financial, the funds cannot be accepted by the guardian for the disabled person. Once the disabled person has a power of attorney in place, he or she can then instruct the attorney handling the suit to direct settlement proceeds into the guardianship account without delay. Without the power of attorney, the disabled person must bring the suit to a close and open the guardianship account before the settlement can be deposited.
Types of Power of Attorney in Legal Guardianship
There are several distinct types of power of attorney, and the relevant ones for our discussion of guardianship include durable, medical, and financial powers of attorney.
Durable Power of Attorney
A durable power of attorney designates a specific individual as a named agent who is authorized to act on your behalf. This person will manage your affairs if you become unable to do so yourself. Assuming that the power of attorney is drafted correctly, a durable power of attorney will be effective upon execution.
Medical and Financial Power of Attorney
A medical power of attorney provides an authority allowing the agent to make decisions related to medical needs only, while a financial power of attorney gives the agent authority over your finances. In general, a medical power of attorney is only effective if a physician determines that you lack the ability to manage your own health care decisions.
Any type of power of attorney you execute terminates when you pass away. A durable power of attorney ends a durable portion of the agreement, medical power of attorney ends a medical portion of an agreement, and financial power of attorney ends the financial portion of an agreement.
Legal Process for Power of Attorney in Legal Guardianship
There are several different legal steps that must be done to provide a power of attorney for your child. The guidelines are almost identical as the ones that must be followed if you were granted guardianship of a more mature child.
If the child will be over 18 when the power of attorney is needed, the following steps must be followed:
- Contact your local Office of Parent Help Line and ask them for advice on your situation. They may refer you to a lawyer who handles these situations.
- Once you are clear on the legalities involved, you should see a lawyer to have the power of attorney drawn up. The paperwork, including a list of organizations that will need a copy of the notice and the power of attorney you have completed, must be sent in to the Department of Health and Social Services for approval.
- After you have received word from DHSS that the power of attorney is approved, then a copy must be filed with the parent’s (legal guardian) lawyer.
- Three copies of the power of attorney must be kept in your home and, if your child has special needs, one copy should also be kept with any social security case worker, Medicaid caseworker or other third party who may be involved in the child’s life.
What It Means for You
The individual designated with power of attorney is under a legal, fiduciary responsibility to act in the best interest of the ward. This means that the person with power of attorney should be privy to all of the medical and financial information regarding the ward’s treatment. This is usually done in a manner and to the extent that has been discussed and agreed upon beforehand by the ward and the person with power of attorney. While the individual has more access to information than most due to their close contact with the ward, they also have a responsibility to be transparent. Obvious conflicts of interest, for example, would be instantly reportable, as would inappropriate actions if the ward is unable to act in their own best interests. This includes anything such as fraudulent or deceptive actions made to the benefit of the agent or any third parties. Another area of responsibility is keeping track of the actual expenses involved in the day-to-day care of the individual to ensure that the money is being spent in the best interests of the individual. However , there is a fine line between offering assistance and taking away a person’s rights. If the individual with power of attorney believes that the ward is able to take care of themselves and is therefore able to decide for themselves, the person with power of attorney can simply step back and allow the ward to do so. Another aspect of the appointment of a power of attorney is that the agent will often be placed on access and information access. This means that they should be notified and included in all things such as financial decisions, medical timing and treatment and any recreational activities, by law. In this sense, their responsibilities are equal to their limitations. In some ways, they are more of a silent partner who is named in case of an emergency situation, but is not actively part of a decision-making process.
Revocation and Termination of Power of Attorney
In the absence of a guardian, the Powers of Attorney and Health Care Powers of Attorney are the primary vehicle for making critical life decisions if the principal is unable to make such decisions. However, there are circumstances in which it may become necessary to terminate or revoke a Power of Attorney. Power granted under a Power of Attorney may be revoked if the principal has competence and knowingly terminates the appointment before a court appoints a guardian. This can be accomplished orally, or through a management intern, or using a form provided by the company that gave the authority to the Agent. A Power of Attorney may also be terminated or revoked if the principal becomes incompetent. A Guardianship action is required if the principal is incompetent and revocation cannot be accomplished. The guardianship proceeding will effectively terminate the POA. A guardian also has the authority to terminate a Power of Attorney or revoke the authority of the Agent. However, if the Power of Attorney requires the ability to act only upon the incapacity of the principal, a Court order may be necessary to revoke the authority of the Agent. If the POA did not restrict the Agent’s ability to act upon the incapacity of the principal, the guardian may immediately revoke or terminate the Power of Attorney. The termination or revocation of a Power of Attorney or Health Care Power of Attorney does not generally terminate the appointment of a guardian. However, a Probate Court can order the termination or revocation of the Power of Attorney or Health Care Power of Attorney as part of the Guardianship proceedings or as a result of a separate Court action.
Common Problems Associated with Power of Attorney in Legal Guardianship
Common challenges are unfortunately all too prevalent in power of attorney situations relating to legal guardianship. While some of these issues have been addressed and solved, others are still being explored and litigated.
If it appears that the attorney in fact is using the principal’s assets for his or her own interests, then a letter should be sent to the other institutions with a copy of the power of attorney and enquiring whether the attorney in fact has made withdrawals from the principal’s account for the attorney in fact’s benefit. It may be useful for the principal to open a new account and either appoint a different attorney in fact to manage it, or to allow two signatures on the account for that purpose.
A problem which often goes undiscovered for a long while is when the agent purchases assets in his or her name and refuses to title them in the principal’s name. As an example, a son might purchase a car for his mother and register the car in his name but intend it as a gift or use the proceeds for some other purpose to benefit his mother. The son may incorrectly believe he is acting as his mother’s attorney. If the principal loses capacity, the agent/son will have the right to possess the vehicle and it may not be readily apparent that the vehicle belongs to the principal. The solution is to use a bill of sale, which should be placed in the safe deposit box or stored with other important documents. The bill of sale should provide that the transfer is being done by the attorney in fact and must give his or her power of attorney.
Another common problem arises with banks. Agents find that the bank will not recognize their status because it is not specified in the power of attorney. A new document or a rider should be prepared to address that, simply granting authority to the agent to act on behalf of the principal for banking purposes.
Some older power of attorney expressly state that the agent is not authorized to make a gift. This limitation may be impossible to overcome depending on the particular facts and circumstances. For instance, if the principal is capable of making a gift to a child of $14,000 per year without triggering gift tax, the attorney in fact can make the gift instead. In other cases, an application may need to be filed with the court, or the support and maintenance provisions of the power of attorney may be used.
The duration of the power of attorney is another frequent issue. While earlier laws provided for a power of attorney which had to become effective on the signing, the more recent laws tend to provide that the power of attorney is effective on the date of signing. The only exception is an immediate springing power of attorney, currently permitted in New York. Such a document states that the power of attorney is effective immediately, and then becomes subject to a certification that the principal is incapacitated. The certification is made by the physician or other designated healthcare provider.
Frequently Asked Questions
FAQs Regarding Power of Attorney for Legal Guardianship
Q: What is a Power of Attorney for Legal Guardianship?
A: This is a legal document that gives someone you trust the authority to make healthcare decisions on your behalf if you are ever in a situation where you can no longer make those decisions for yourself. It’s basically a way of ensuring that your specific choices are honored by an appointed agent (the "guardian") when you can’t speak for yourself.
Q: Is a Power of Attorney for Legal Guardianship different from a regular power of attorney?
A: Yes. Essentially, a regular power of attorney gives someone the authority to act on your behalf in any way you could legally act if you were personally making those decisions. A power of attorney for legal guardianship specifies healthcare decisions—usually by making choices related to consent for medical treatment, the use of medical services , and the release of confidential medical information. It’s specific to healthcare, whereas a general power of attorney covers a wide range of powers.
Q: Why would I need a Power of Attorney for Legal Guardianship?
A: Sometimes accidents happen that leave us unable to communicate our healthcare wishes. A Power of Attorney for Legal Guardianship ensures that those wishes are carried out by giving a selected person (the agent/guardian) the ability to speak on your behalf.
Q: Does everyone need a Power of Attorney for Legal Guardianship?
A: While a Power of Attorney for Legal Guardianship isn’t necessary for everyone, it can be very useful for a range of situations. Consider having one drafted if:
If none of these situations applies to you, there may still be a range of reasons why a Power of Attorney for Legal Guardianship would be a good idea. Talk to your loved ones, and consider speaking with an estate planning attorney to get the advice you need.