Guardianship vs. Power of Attorney in New Jersey

Learn more about the distinction between guardianship and power of attorney in New Jersey, as well as which one might be best for you or your loved one.

Estate planning is an important process that many people go through to ensure that their finances can be maintained in the future, particularly if they ever become incapacitated or are otherwise incapable of managing their financial affairs. Certain estate planning options, such as a guardianship, can have such an extreme effect on a person’s control over their finances; however, that the state imposes restrictions on exactly who is allowed to be named a guardian.

Other estate planning options, like durable power of attorney, have fewer limitations because the person ceding control of their estate decides exactly who will be given power of attorney. Of course, there are a number of differences between a guardianship and power of attorney in NJ, and it is crucial that anyone deciding whether to seek one or the other has a solid understanding of these differences.

At Chamlin, Uliano & Walsh, our talented estate planning lawyers have been assisting clients with determining and carrying out their wishes and preserving their interests for decades. We are committed to helping you and your family plan for and successfully transition into the future with peace of mind. If you would like to discuss guardianship or power of attorney, or other estate planning concerns in Howell, Wall, Red Bank, and across Monmouth and Ocean Counties, contact us for a free consultation today at 888-328-9131.

Understanding the Concept of Guardianship in New Jersey

A guardianship is basically a court order that allows an individual to make legally binding decisions for someone who has been declared incapacitated. When someone you love is incapable of making important decisions for themselves, it may become necessary for you to file a complaint for guardianship with a New Jersey court. This is done for the benefit of the incapacitated individual. After a complaint is filed, the court will require at least two (2) physicians to conduct examinations of the person in question, and those doctors will then submit their recommendations to the court about the individual’s mental and physical capacity. A court-appointed lawyer will also be required to scrutinize the evidence in the case and make sure that the interests of the person being examined are considered at all times.

If your request for guardianship is granted, the court will then appoint someone to be a guardian for the named person’s care. This person will be tasked with handling the individual’s finances and other affairs going forward. Although this might seem extreme, the reality is that sometimes a guardianship request is necessary to protect an elderly person who might be at risk of draining their bank accounts either through their own mistakes or as a result of someone else’s financial exploitation.

What is Power of Attorney in NJ?

When you need to make sure that someone has the legal authority to take care of your most important decisions – financial matters, medical decisions, health care planning, etc. (if and when you are incapable of doing so on your own), a durable power of attorney may be the best option. For example, what will happen if you are ever involved in an accident and become incapacitated? Who is going to manage your bank accounts, ensure that your bills are paid, take care of your taxes, and sell your house, if necessary?

A power of attorney is technically a legal document in which you officially appoint someone to handle your affairs in these unanticipated situations. The person to whom you grant power of attorney is known as your agent, and they will be legally authorized to make decisions on your behalf.

One of the important limitations on power of attorney is that you must sign the document prior to losing mental or physical capacity. Only a person who is deemed to be of sound mind is allowed to grant power of attorney to another individual. If you are already legally incapacitated, then the authority to manage your financial affairs will need to be granted through another mechanism like a guardianship. To maintain control of such significant decision-making, you need to be proactive and take early action to sign a power of attorney while it is still possible.

What Are the Main Differences Between Guardianship and Power of Attorney?

Although there is some overlap between guardianship and power of attorney in New Jersey, there are also some key distinctions. These are some of the main differences between a guardianship and a durable power of attorney:

You don’t choose the person in charge of a guardianship.

When it comes to who will be in control of your financial matters in the event that you become incapacitated, you only get to choose this person when executing a power of attorney. This could be your spouse, another relative, a close friend, or someone else who you trust to take care of your financial and other affairs at some point in the future. If a guardianship hearing is required, however, then the person in charge will ultimately be chosen by the court. This means that if you want to have any say over who actually makes financial decisions on your behalf in the future, you may want to consider setting up a durable power of attorney now.

Power of attorney allows for more flexibility than a guardianship.

Just as you can’t choose who will administer your financial affairs when a guardianship is established, you also can’t set any parameters or place any limitations on what that person will do once they have power. In other words, you could be completely at the mercy of someone whose appointment you had no say in. This is very different from power of attorney, which allows you to place any number of limitations on the types of actions the authorized agent is allowed to take, including the amount of money they may transfer and the kinds of assets they can make decisions about.

Power of attorney is more cost-effective than a guardianship.

When it comes to the financial costs, there really is no comparison, as durable power of attorney is substantially less costly than a guardianship. That’s because obtaining power of attorney merely requires you to hire a lawyer who can draft the necessary legal document. By contrast, obtaining a guardianship involves a legal proceeding, which will also necessitate full examinations of the individual in question by at least two (2) medical doctors.

There is oversight of a guardianship.

Since a guardian is appointed by the court, the state also has an obligation to oversee the guardianship and confirm that it is being carried out effectively. In New Jersey, something known as a “guardianship monitoring program” has been put in place to provide official oversight of court-appointed guardianships. When a problem arises and/or the financial decisions made under a particular guardianship are deemed questionable, the monitoring program is tasked with catching these issues and allow the state to intervene. Similarly, guardians also receive training before they are appointed; by contrast, agents granted power of attorney are not required to receive any kind of training.

Why You Should Have a Lawyer Assisting You with Durable Power of Attorney and Guardianship

When it comes to estate planning, you can benefit greatly from having a knowledgeable and proven lawyer assisting you. This is true whether you were seeking to obtain a durable power of attorney or a guardianship. A lawyer who frequently handles wills, trusts, and estate matters can help you determine the right thing to do in your situation, as well as ensure that durable power of attorney or guardianship are done correctly.

For example, a lawyer might be needed if the bank through which you do most of your financial transactions is not willing to recognize an “older” power of attorney. These days, many banks only accept a power of attorney that is less than 10 years old. If your power of attorney was set up more than a decade ago, you may need to have a lawyer help you with drafting a new document. Additionally, a lawyer can make sure that both your power of attorney document and your bank accounts are set up in a way that protects you against mistakes or fraud. One frequent and detrimental instance of this occurs when the financial institution fails to list “POA” after the agent’s name on the account so that the agent’s personal affairs are not conflated with your financial affairs.

Retain an Estate Planning Lawyer to Assist with Determining the Best Option for You in Monmouth County, NJ

Ultimately, your future hinges on many of the important life decisions that you make now. Likewise, the well-being and future care of someone you love may require your involvement today, tomorrow, and in the years to come. Our lawyers at Chamlin, Uliano & Walsh know this and are thoroughly prepared to help with all of your estate planning concerns. Our local Monmouth County law firm serves in Rumson, Freehold, Little Silver, Colts Neck, Long Branch, and elsewhere in South Jersey. Just call 732-440-3950 or toll-free at 888-328-9131 or contact us online for your free consultation.