The Importance of A Power of Attorney
A Power of Attorney is one of the most important legal documents a person can have. Without a comprehensive power of attorney, many people are neither able to handle their loved ones financial matters nor make health care decisions without seeking court intervention (Guardianship and/or Conservatorship). We often have clients come into our office assuming that, just because their assets are titled jointly with their spouse, parent or partner, they are able to liquidate accounts to pay bills, hire attorneys, sell their jointly titled real estate, etc. Unfortunately, that isn’t the case. In fact, we recently had a client come into our office who had a jointly titled investment account with his wife who had just entered a nursing home. He did not have a power of attorney for his wife and he was thus unable to transfer the assets into his name to do some Medicaid planning. Instead, he had to petition the court to become his wife’s Guardian and spent tens of thousands of dollars on her nursing home care when he could have, had she had a proper power of attorney, transferred the account into his name, alone, purchased an annuity for himself and qualified her for Medicaid immediately.
What is a Power of Attorney?
A power of attorney is a legal document where one person (the principal) authorizes another (the agent) to act on their behalf. There are financial powers of attorney which allow your agent to make decisions regarding your property and healthcare powers of attorney which allow your agent to make decisions regarding your health care needs.
Your power of attorney can be broad in scope, giving your agent the ability to make any and all financial and personal decisions for you (a General Power of Attorney) or you can limit your agents authority by specifying the types of decisions you would like them to make on your behalf (a Limited Power of Attorney).
You also have a choice whether you would like your agent to have the ability to make decisions both now and if you become incompetent (a Durable Power of Attorney) or your agent can be limited to make decisions only when you become incompetent (a Springing Power of Attorney).
What is a Guardianship?
In North Carolina a Guardianship of the Person is a legal relationship whereby the Court gives a person (the guardian of the person) the power to make personal * decisions for another (the ward). A family member or friend initiates the proceedings by filing a petition in the Circuit Court in the county where the individual resides. A medical examination by a licensed physician is necessary to establish the condition of the individual. A Court of law then determines the individual is unable to meet the essential requirements for his or her health and safety and appoints a guardian to make personal decisions for the individual. Unless limited by the court, the guardian has the same rights, powers and duties over his ward as parents have over their minor children. The guardian is required to report to the court on an annual basis.
*A Guardianship of the Estate is a legal relationship whereby the Court gives a person (the guardian of the estate) the power to make financial decisions for another. The Court proceedings are very similar to those of a Guardianship of the Person except the Clerk of Court determines an individual lacks the capacity to manage his or her financial affairs and appoints a guardian to make financial decisions for the individual. Often the court appoints the same person to act as both guardians for the individual. This person would then be a General Guardian.
The Differences
A power of attorney is a relatively low cost and private way to decide which family member or trusted friend will have the legal authority to carry out your wishes if you can no longer speak or act for yourself. If you do not have a power or attorney or if your power of attorney is not drafted properly, and something happens that results in your inability to make decisions, your family/friends may later face court proceedings and court supervised Guardianship. A court proceeding is not only costly, but the person appointed as your Guardian may not be the person whom you would have chosen yourself. And, as stated above, not having a properly drafted power of attorney could significantly limit financial and/or Medicaid planning that could be done on behalf of the principal.