What is the Difference Between a Guardianship and a Power of Attorney?

When a loved one becomes unable to make sound decisions or handle their own affairs without assistance, it is time to consider the best way to provide that assistance.  Both a guardianship and a power of attorney are ways to do that.  But there are some very important differences between these two tools which should be discussed with an Arkansas estate planning attorney before making the decision.

What is a Guardianship?

A guardianship is a legal relationship created through a formal court proceeding.  The court will first determine that the person in question is incompetent or incapacitated, and then will appoint someone to serve as his or her guardian.  That guardian will then have the authority and the duty to make decisions for the care of the “ward.”  Usually, a guardian is placed in control over the ward’s property, finances, and/or healthcare decisions.

It is the guardian’s responsibility to protect both the ward and his or her assets.  Still, there are certain important decisions that cannot be made without the guardian first obtaining written permission from the court, such as withholding medical care or terminating parental rights.  The guardian is also responsible for making an annual report to the court of the ward’s status and the status of his or her affairs.

What is a Power of Attorney?

A power of attorney is a legal document that is usually included in estate planning.  This document authorizes an “agent” or “attorney-in-fact” to take actions on behalf of the “principal.”  A power of attorney is commonly used to pay bills, manage bank accounts and make health care decisions.  When a power of attorney is created, the authority can be conveyed immediately or only when a certain event takes place.  One important benefit of a power of attorney is that it does not require the principal to give up the right to manage his or her own affairs.  Instead, it allows someone to act on your behalf whenever it becomes necessary.

How are the two different?

First, a guardianship is a public proceeding carried out and supervised by the court.  A power of attorney is a more private method, of which you maintain control.  Second, a power of attorney is less expensive than a guardianship, primarily because of the court supervision required with a guardianship.  A third difference is that, with a guardianship, you may not have any control over who is chosen as your guardian.  But, with a power of attorney, the choice is always yours.

One disadvantage of a power of attorney is that some third parties are often hesitant, or even refuse, to abide by the terms of power of attorney.  The reason being is that they are afraid of fraudulent use by agents.  On the other hand, a guardian is usually not questioned by third parties because the relationship was created by the courts.  Under Arkansas law, a power of attorney created as required by the Uniform Power of Attorney Act must be accepted, with some exceptions.