The Big Three Frequently Misunderstood Legal Terms

I find that clients are often confused about the terms power-of-attorney, guardian, and personal representative.  Sometimes these three legal terms are used interchangeably when in fact they mean very different things. A proper understanding of these positions now can save you time and legal expenses.

A power-of-attorney or attorney-in-fact is a notarized document that allows you to appoint someone as an agent to act on your behalf during your lifetime.  The agent’s authority may trigger upon an event such as your incompetency or on a particular date.  An individual reserves the right to revoke a power-of-attorney providing that he/she is competent. The powers granted may be very specific, such as signing a deed, or may be broad and general, authorizing your agent to act to the fullest extent under the law as if you were present.  An individual must be competent to designate a power-of-attorney.

If a person lacks a power-of-attorney and becomes incompetent, family members may have to pursue a court appointed guardianship at significant time and expense to manage your financial affairs. Guardianship proceedings may lead to disagreement between family members and loved ones as to who should be appointed as guardian. Establishing a guardianship begins by filing a petition with the Court and serving notice on family members and other interested parties. It ends with the Court appointing a Guardian, but the Court continues to supervise the activities of the Guardian by requiring the submittal of regular accountings to the Court.  These are typically prepared by an attorney that represents the guardian. The expense and time involved in setting up a guardianship and fulfilling the fiduciary and legal obligations of a guardian can be avoided by granting a trusted family member or loved one a power-of-attorney.

While a power-of-attorney or guardian is authorized to act on your behalf during your lifetime, that authority terminates on death.  After you death, a personal representative or executor is appointed by the Court to windup your personal affairs, pay your last expenses and debts, and distribute your assets.  Through a will, you can designate an individual as your personal representative.  This person is responsible for following your last instructions as outlined in your will. If you die without a will, also called intestate, additional steps must be taken through the Court to select an executor and determine your heirs.   By creating a simple will now, you can save your estate significant legal expense and do much to provide clear and distinct direction as to your last wishes.  This can go a long way towards preventing disputes between family members and loved ones.

This spring I encourage you to take a little time to contemplate what would happen if you were suddenly unable to manage your financial affairs.  Who would you trust to act in your place?  Without a power-of-attorney, that decision will no longer be up to you and would likely require a court-appointed guardianship. If you do not have a will, this year may be the time to get one in place. Family members and loved ones will appreciate the time you took to plan ahead.

Michael T. Hotz
SPITZER HERRIMAN STEPHENSON
HOLDEREAD CONNER & PERSINGER, LLP
122 East Fourth Street
Marion, IN  46952
Telephone No. (765) 664-7307
E-mail: mhotz@shshlaw.com