The difference between a Durable Power of Attorney and a Guardianship is easy to explain, but there are many differences.

Durable Power Of Attorney

A Durable Power of Attorney is a legal document whereby you appoint someone to take care of your financial matters if you cannot.  The most common use would be when one has become incapacitated and has lost their ability to understand financial matters. The person you have appointed would then be able to act on your behalf.  This person is called your “agent”. Of course, the Durable Power of Attorney must be prepared and signed by the individual before they have lost capacity, otherwise it is of no effect.  Typically, your agent will be able to sign checks, open and close bank accounts, buy and sell real estate, sign your tax returns, and handle other financial matters.


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Power of Attorney gives you control

A Guardianship is a legal relationship, caused by a court. A complaint for guardianship is filed requesting that the court find an individual to have lost capacity and appoint a guardian for his or her care. The court will take evidence from two physicians who have personally examined the individual and who have found him or her to be incapacitated. The Court will also appoint an attorney to represent the “Alleged Incapacitated Person” to investigate and ensure that the evidence presented is trustworthy and to otherwise represent the interests of the Alleged Incapacitated Person.  The Court will adjudicate the matter and rule on the issue of capacity.  If a judge has found that the person lacks capacity, a guardian will be appointed.

Differences Between a Power of Attorney and a Guardianship

One of the biggest differences between a Power of Attorney and a Guardianship matter, is the cost.  Having a Power of Attorney drafted for you is far less expensive than a Guardianship proceeding, which involves two doctors and at least two lawyers. Another big difference is that if you execute a Power of Attorney, you will be able to choose the person who will be handling your financial matters.  Under a Guardianship proceeding, the guardian is chosen by the judge. In addition, a Power of Attorney can be drafted in many different ways, giving you the ability to limit your agent to certain assets or even time.

In New Jersey, there is a guardianship monitoring program over guardians.   There is no monitoring over agents under a Power of Attorney.   There is some minor training of guardians in the form of a court required video which must be watched by guardians.  There is no training for agents, so you must be sure of the integrity and qualifications of the person you name as your agent.

Problems With a Power of Attorney

Many banks are not recognizing Powers of Attorney which are more than ten years old.  This is not the law, but bank policy.  The path of least resistance is to be sure that you draft a new document after ten years, otherwise, your family may be forced to file for guardianship. Another big issue is adding your agent as a joint owner of your accounts. For safety reasons, it is recommended that your agent only be listed as “POA” after his or her name. Without this listing, your money may be involved in your agent’s legal issues, such as divorce. They may also steal the money in your account because they are a joint owner, without the POA designation.

Powers of Attorney are very useful and should be part of any estate plan.