Many families assume a conservatorship is the standard next step when a loved one's health declines.
In Maine, a guardianship usually covers personal matters like living arrangements; court-ordered financial management is known as a “conservatorship” (aka “financial guardianship” in some states). It's usually a last resort for someone who can no longer manage their assets.
What Can Happen Without an Agent Under Power of Attorney
If you haven't named someone to manage your finances under a power of attorney, your loved ones might not be able to protect your assets or pay for your care. In some cases, a court-appointed full or limited conservatorship limits the protected person's authority to make decisions within the scope of the court order.
Less Restrictive Alternatives to Conservatorship
- Self-directed options: power of attorney (financial and medical), trusts, or supportive decision-making.
A durable power of attorney (POA) lets you name someone (an agent or attorney-in-fact) to manage your finances for you (as the principal) if you can't make decisions. Unlike a conservatorship, a power of attorney is easier to change if the arrangement doesn't work. As long as the person still has capacity, they may revoke it or appoint someone new without going to court.
Under a financial POA, you authorize the agent to handle your financial matters and specify their duties to ensure they follow your plans. Your POA also details when the agent can act: either when it's signed or when a doctor certifies that you've lost capacity.
The default powers granted include management of:
- Real estate
- Tangible personal property
- Financial accounts
- Business operations
- Insurance or annuities
- Claims or litigation
“Enhanced” powers like gifting, trusts, beneficiaries, or transfer-on-death designations must be granted separately.
Trusts: When someone can't name an agent under a power of attorney, certain types of trusts may help.
- A revocable living trust (RLT): A trustee, often a trust company, may be appointed to manage financial affairs when someone is incapable.
- A special needs trust (SNT): A trustee handles funds to enhance the quality of life for a person with disabilities without affecting their eligibility for benefits like MaineCare (Medicaid) or supplemental security income (SSI)
Supported decision making: The protected person names a trusted person or team to help with financial decisions when needed. They keep their decision-making power and remain independent. Supported decision-making may be used informally or included in planning documents.
2. Limited court orders
- Single transaction authority: Another person may take a single action or course of action.
- Protective arrangements: Someone is granted restricted access to the protected person or their property (these aren't general personal protection orders).
3. Federal administrative tools: If someone's sole income is from Social Security or Veterans Affairs benefits, a costly court conservatorship is usually unnecessary. These federal agencies can appoint a loved one as the person's representative payee or VA fiduciary, avoiding the state probate court.
Why It's Important to Set Up a POA Before You Need One
Not every power of attorney document is or should be the same. State laws vary, and our needs, desires, and situations all differ. Some financial institutions also have their own POA rules.
Fraud prevention: Seniors and other vulnerable people are at risk for financial exploitation, including hidden transactions and identity theft. Despite the risks, empowering someone you trust to perform certain financial duties for you could be helpful. They also have a fiduciary duty, a high legal standard of care, to act in your best interest.
Durability: A power of attorney gives an agent authority, but you don't give up your ability to act. The powers continue as long as the document says they do. A “durable power of attorney” document remains in effect until a stated end date or event or the principal dies.
A comprehensive durable power of attorney covers not just finances but allows the agent to access someone's health-care records. Health-care decision-making authority is better addressed in a separate document called a health care power of attorney oran advance directive for health-care.
When you name someone to handle your legal, financial, and health care decisions and review your POAs regularly, you feel more confident about your future.
A power of attorney must use the right wording to ensure it's effective. An experienced elder law or estate planning attorney can draft a legally valid document for you. For advice, contact us online or call (207) 377-3966.
