Life is unpredictable, and you can never anticipate when you will need assistance managing your affairs. Should you become incapacitated, help overseeing your affairs is indispensable. When the time comes, establishing a proxy is critical to your well-being and that of those you care about most. Still, understanding the difference between a conservatorship vs. a power of attorney is difficult. Here is a seasoned fiduciary financial advisor’s guide from Marcia Campbell, CPA.
What is a Power of Attorney?
Granting a power of attorney (POA) is a voluntary act, which is essential to consider when evaluating the difference between a conservatorship vs. power of attorney.
Essentially, a POA is a document that legally authorizes someone to act on behalf of the person creating it. We refer to the person acting on behalf of someone else as an ‘agent’ or ‘attorney-in-fact.’
If the person creating the POA can no longer act, the agent they appoint can do so for them and even enter transactions as a proxy. There are several kinds of POAs, each with unique responsibilities and benefits.
A POA grants an agent the same access and authority that the individual under care would have. One cannot assign a POA if one cannot make legally binding decisions due to medication, general incompetence, medical conditions (such as dementia and other neurological diseases), or other reasons.
POA responsibility requires managing finances, which is complicated, comes with a host of challenges, and is impossible to perform without the expertise of a CPA or fiduciary financial advisor.
Related Article: How to Get a Financial Power of Attorney for a Parent
What is a Conservatorship?
When assessing the difference between a conservatorship vs. power of attorney, one must understand they share a significant similarity: they are both legal relationships. However, court orders establish a conservatorship.
Essentially, obtaining a conservatorship requires filing a petition and undergoing a formal court proceeding. Because of this, there are more steps to creating a conservatorship, and there is a significant burden of proof that a person is incapacitated.
The person appointed to oversee this care is called a conservator. The scope of responsibility can vary depending on the circumstances, and it can even include making financial decisions and living arrangements for the benefit of the conservatee.
A conservator must file annual accountings and manage a conservatee’s finances, investments, and even real estate portfolios, all of which require an expert fiduciary financial advisor to execute their obligations correctly.
Related Article: The Powers and Responsibilities of A Conservator
Key Differences: Conservatorships vs. Powers of Attorney
There are several key differences between a conservatorship vs. a power of attorney that are essential to be aware of. What distinguishes a POA:
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- It can be revoked at any time.
- It is voluntary.
- There is no formal process to assign a power of attorney except for signing the POA form.
- POAs require little to no costs.
- It can only be set up before a grantor is incapacitated.
Similarly, a conservatorship also has several distinguishing features. These differentiating features include:
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- It is a legal order the judge makes.
- Establishing one is much more expensive.
- Establishing it requires filing a formal petition and going to court.
- It strips away legal rights from someone and assigns their rights to a third party.
- It offers broader authority.
- A conservatee cannot override or contradict decisions made by a conservator.
- The conservatee cannot revoke a conservatorship; this requires a court order.
- It is established after a conservatee is incapacitated.
Still, they do have some similarities. Most notably, the scope of their responsibilities can be tailored to managing specific aspects of one’s life. Ultimately, understanding the complex financial obligations associated with both requires a specialized CPA.
Related Article: How Soon Should I Set Up a Power of Attorney in California?
Get Expert Financial Assistance Managing a Conservatorship or Power of Attorney
Understanding the difference between a conservatorship vs. power of attorney is integral to understanding your recourse should someone become incapacitated. Still, without the help of an expert fiduciary financial advisor, navigating the complex landscape is nearly impossible to execute correctly.
Fortunately, with Marcia L. Campbell, we provide seasoned CPA services to help you and your incapacitated loved one. Ultimately, managing the financial aspect of both can detract from the care you can provide. Our passion is lightening the load so you can focus on what matters most. Contact us to get started.