Conservatory vs. Power of Attorney
Elderly woman signing a conservatory document
In certain circumstances, individuals need to make decisions for themselves. Sometimes that’s because the person is unavailable or incapacitated. Sometimes the person is unable to make their own decisions, a situation that sometimes occurs with older parents. In this case, the two most common solutions are the law firms known as Power of Attorney and the Conservatory. With the power of attorney, you voluntarily grant the power of attorney to a third party. You release it, define its limits and can revoke it at any time. A conservatory is involuntary. It is assigned by the court and can only be revoked through a formal hearing. This is how they work.
Making arrangements for a loved one whose skills may be impaired should be with the expert help of a financial advisor.
What is a power of attorney?
The power of attorney is a legal assignment that you can make. It lets a third party step into your position to make legally binding or legally protected decisions. Suppose you give someone a financial power of attorney. This means they can access your bank accounts, pay your bills, manage your debt, check your creditworthiness, and otherwise act on your behalf in financial matters.
When someone has your power of attorney, third parties grant them the same powers and access rights as you personally.
This is a completely voluntary task. You can issue a power of attorney of your choice and revoke it at any time. You can also determine the scope of a power of attorney.
A general power of attorney means that someone is authorized to act on your behalf in virtually all matters. You can sign contracts on your behalf, make financial decisions, and act as your proxies in almost any situation. For this reason, a general power of attorney is relatively rare. Instead, most people will give specific powers of attorney.
A specific power of attorney means that someone is authorized to act on your behalf in a specific area, on a specific topic, for a specific time or generally under other conditions you specify. For example, you can give someone power of attorney to negotiate a specific contract for you. That means they can sign a contract that binds you for this negotiation, but generally doesn’t have access to your bank accounts. Or you issue a power of attorney during your trip that cannot be reached, but an assignment that ends automatically on the day you return.
The story goes on
The most common types of powers of attorney are financial powers (assignments that deal with specific financial matters or that give the agent general access to your banking and financial affairs) and medical powers (assignments that allow someone to make medical decisions about you) in general while you are unconscious or otherwise incapacitated).
A proxy cannot contradict or override your own decisions, but they can change your decisions as they see fit. For this reason, it rarely (if ever) makes sense to give power of attorney to someone when you are available to make your own decisions. At best, this can lead to confusing, contradicting authorities.
No formal procedure is required for granting a power of attorney. In most cases, all you have to do is sign a deed of assignment and have it officially recorded by a notary. However, you cannot issue a power of attorney if you are unable to make legally binding decisions. For example, someone who is heavily drugged may be seen as incapable of understanding their own actions. In this case, a court can cancel any power of attorney given by the person as invalid.
You cannot revoke a power of attorney if you are mentally incapable at the time, as you will then again have no way of legally binding action. In practice, however, courts are generally less strict about the terms under which a power of attorney can be revoked than an assignment.
What is Conservatory?
Signing of the Conservatory documents
A conservatory is a legal task that a judge or hearing officer will undertake. In a restoration, the court removes certain legal rights from a person known as a “ward” and transfers them to a third person known as a “restorer”. Like a power of attorney, a restoration includes the authority to make legally binding decisions. However, a restoration can be much more extensive. A restorer assumes the power to make personal, financial, or medical decisions for his or her ward. For example, a restorer can take over the authority to manage their community’s finances, sell their property, and even tell their community where to live.
Courts can assign either a general or a specific conservatorship. In a general restoration, the restorer can make virtually any decision affecting the station’s personal, medical, and financial life. For this reason, general conservatories are rarer, but not as rare as general powers of attorney. For a particular restoration, the court gives the restorer authority over certain aspects of the ward’s life. For example, the court might assign a financial conservatory, where the curator makes decisions about the ward’s money and assets, but not about its medical or personal decisions. In any case, the restorer has a fiduciary duty to the community.
Unlike a power of attorney, a ward cannot override the restorer’s decisions. In most cases, the church loses all authority to make these decisions at all. For example, in a financial conservatory, only the restorer would have access to the community’s money and financial decisions. The municipality would have no authority in these matters and would have to sign off any withdrawals, loans, payments or other transactions from the restorer.
Judges will assign a conservatorship if they believe the community is no longer able to make its own decisions. Often times the judge also has to prove that this incompetence makes the ward a threat to himself or to others. In this case, “incompetence” has a specific legal context. It means that the individual cannot understand the nature and quality of his actions. For example, an elderly person with dementia or a person with a severe mental illness may be considered incapable of doing business. It is not enough for someone to make decisions that appear (or even are) wrong in the opinion of third parties.
A church cannot overturn a restoration. It can only be ended by a court order, which means that the ward has to submit a formal application for contestation with an oral hearing. The ward must prove at the hearing that the circumstances have changed and that they are no longer incapable of acting. Without this proof, the restoration will last indefinitely.
A restoration invalidates the power of attorney if and when they collide.
The bottom line
Son holds his sick father
A power of attorney is when you voluntarily grant someone the right to make legally binding decisions on your behalf. A restoration is when the court grants someone the right to make those decisions for you. While you can revoke the power of attorney at any time, a restoration can only be lifted by a court order.
Estate planning tips
Anyone can use help from time to time to make good decisions, and that is especially true in the complex financial world. This is where a financial advisor comes in. Finding one doesn’t have to be difficult. SmartAsset’s matching tool helps you find a financial advisor near you who can help you make the best possible decisions regarding money, planning, and more. If you’re ready, go ahead now.
If you’d prefer to go it alone, use SmartAsset’s Asset Allocation Calculator to determine how best to split your money between stocks, bonds, and cash. The calculator bases its recommendation on your risk profile and provides a breakdown of each asset class.
Photo credits: © iStock.com / Daisy-Daisy, © iStock.com / 10255185_880, © iStock.com / KatarzynaBialasiewicz
The post Conservatorship vs. Power of Attorney first appeared on the SmartAsset Blog.