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As we age, the thought of a future where illness or cognitive decline might rob us of the ability to make our own healthcare decisions can be a source of untold anxiety. This is particularly true for individuals facing the possibility of dementia or other mental health challenges. Without advance planning, critical choices about medical treatment, life support options, and long-term care arrangements could be left up to well-meaning but potentially uninformed family members or even strangers thrust into the role of decision-maker by circumstance. 

This guide provides a comprehensive overview of incapacity planning, covering types of decision-making authority, capacity assessment standards, and the steps to establish guardianship or conservatorship. We'll also explore alternatives to these legal arrangements, aiming to equip you with the knowledge to safeguard your loved ones' well-being and assets through proactive planning.

Planning for Incapacity with Advance Directives and Powers of Attorney. 

Advance directives and POAs are proactive legal tools that allow individuals to make their wishes known and appoint trusted decision-makers before they become incapacitated. As we will see below, they differ from guardianships and conservatorships in that they are: 

  • Voluntary: The individual creates these documents of their own free will.
  • Proactive: They are put in place before incapacity occurs, allowing individuals to make decisions about their future care and management of affairs.
  • Customizable: Advance directives and POAs can be tailored to the individual's specific wishes, preferences, and needs.
  • Revocable: The individual can generally revoke or modify these documents as long as they maintain the mental capacity to do so.

Advance Directives: An advance directive is a legal document specifying your healthcare preferences if you cannot communicate them yourself. They include:

  • Living Wills: A living will is a type of advance directive that outlines your wishes regarding life-sustaining treatments and other healthcare decisions if you cannot communicate these wishes yourself. It is strictly limited to healthcare decisions and becomes effective only under specific medical circumstances, such as terminal illness or permanent unconsciousness.
  • Healthcare Proxies: Healthcare proxies (also referred to as medical POAs) empower one’s agent to make healthcare decisions on their behalf if they cannot. Unlike a living will, a healthcare proxy is not limited to terminal conditions; it covers any situation where you cannot make medical decisions.

Powers of Attorney: POAs are legal documents that authorize another person to act on your behalf in specified or all legal or financial matters. They include:

  • Financial POAs: This type of POA grants an agent the authority to handle your financial affairs, including paying bills, managing investments, and handling day-to-day expenses. The authority can be designed to take effect immediately or set as a springing POA, which only becomes active upon your incapacity.
  • Durable POAs: As a mainstay of incapacity planning, a durable power of attorney remains in effect even if you become incapacitated. It is designed to ensure that your chosen agent can continue to handle essential tasks without interruption, whether financial, medical, or both, depending on how it is drafted.
  • Springing POAs: This POA is designed to “spring” into action only if and when you are deemed incapacitated. This arrangement adds a layer of protection by ensuring that the agent has authority only when absolutely necessary, based on specific criteria outlined in the document.

Guardianships and Conservatorships 

Unlike the advance directives and POAs discussed above, which can be considered “proactive” in that they're established when an individual still retains decision-making capacity, guardianships and conservatorships are legal arrangements established through court proceedings when they have already lost the capacity to make decisions themselves. Guardianships and conservatorships are similar in that they are:

  • Court-supervised: These arrangements are established through a legal process overseen by the court.
  • Involuntary: The incapacitated person does not choose to have a guardian or conservator; instead, the court appoints one based on evidence of incapacity.
  • Reactive: Guardianships and conservatorships are typically established after an individual has already lost the capacity to make decisions.
  • Restrictive: These arrangements involve a significant loss of autonomy for the incapacitated person, as the guardian or conservator has the authority to make decisions on their behalf.

A Guardianship is a legal arrangement that assigns a guardian to make decisions for an incapacitated individual (the “ward”). The purpose of guardianship is to ensure the ward's well-being in various personal aspects, such as living arrangements, medical care, social choices, and possibly financial aspects if the guardian is also responsible for the estate. To establish guardianship, a court process is required to determine the need for a guardian and to evaluate the suitability of the proposed guardian.

A conservatorship is where a court appoints someone (a “conservator”) to manage the financial affairs of an incapacitated person (the “conservatee”). The conservator's primary responsibility is to ensure the conservatee's economic well-being. This can involve various tasks, such as paying bills, managing income and expenses, investing assets, and filing tax returns. The conservator must also act in the conservatee's best interests and keep accurate financial records.

It's important to note that terminology and processes around guardianship and conservatorship can vary by state. In some jurisdictions, the terms are used distinctly. For instance, a conservatorship might be designated for financial matters only, while a guardianship would encompass broader personal and medical decision-making. Other states might use "conservatorship" as the umbrella term, with different types of conservatorships (e.g., limited conservatorship, full conservatorship) depending on the scope of authority. Regardless of the specific terms used, both guardianship and conservatorship involve a court process to establish the need for intervention and to assess the suitability of the proposed guardian or conservator. The court may also impose reporting requirements or require the guardian/conservator to post a bond to protect the incapacitated person's assets.

Legal Criteria for Assessing Capacity in Incapacity Planning

Now that we have distinguished between voluntary/proactive instruments such as advance directives and Powers of Attorney and involuntary/reactive measures like guardianships and conservatorships, we will explore how courts assess capacity to determine whether a guardianship or conservatorship is warranted.

Definition of Legal Capacity: Legal capacity is a critical component of incapacity planning, as it determines whether an individual is capable of making informed decisions about their personal, financial, and healthcare-related affairs. In this context, legal capacity is defined as the ability to understand the nature and consequences of one's actions and to make rational decisions. It’s important to note that legal capacity is situational and decision-specific. An individual may be capable of making certain decisions but lack the capacity to make others. For example, an individual may be able to consent to basic medical procedures yet lack the capacity to manage complex finances (in which case the appointment of a conservator might be warranted). On the other hand, if someone is clearly capable of managing their daily expenses, yet cannot understand the risks of a complex investment, then a limited financial POA might be warranted instead.

Role of Medical and Psychological Evaluations: Medical and psychological evaluations are indispensable in legal proceedings related to incapacity, such as those for establishing guardianship or conservatorship. These evaluations offer objective evidence about an individual’s cognitive abilities and functional skills, aiding the court in making an informed decision about the person’s capacity. During these evaluations, a physician or psychologist typically employs a combination of clinical interviews, cognitive tests, and functional assessments.

Cognitive and Functional Aspects of Capacity Assessments: Capacity assessments look into both cognitive abilities and functional skills to determine an individual's decision-making capacity:

  • Cognitive Aspects: These include evaluations of memory, attention, language skills, reasoning, and judgment. Assessors often use standardized cognitive tests like the Mini-Mental State Exam (MMSE) or the Montreal Cognitive Assessment (MoCA) to measure these abilities objectively.
  • Functional Aspects: These assessments focus on an individual’s ability to perform activities of daily living (ADLs) such as bathing, dressing, and grooming, as well as instrumental activities of daily living (IADLs), which include tasks like managing finances, taking medications, and using transportation. 

Note that legal standards for proving lack of capacity vary significantly across jurisdictions. For example, some states require a "preponderance of the evidence" to determine incapacity, meaning it must be more likely than not that the individual lacks capacity. Others demand a higher standard of "clear and convincing evidence." Other jurisdictional variations may include differences in the procedures for filing petitions, the rights afforded to the allegedly incapacitated person during proceedings, and the types of evidence considered admissible in court.

Alternatives to Guardianships and Conservatorships

While guardianships and conservatorships are traditional ways to safeguard an incapacitated person, they involve significant restrictions on individual autonomy. Fortunately, there are alternatives that offer support and protection while allowing the individual to retain more decision-making power.

  • Supported Decision-Making Agreements (SDMAs): SDMAs are voluntary arrangements in which a person with a disability or cognitive impairment selects trusted individuals (supporters) to help them make and communicate choices. Supporters can be anyone the person trusts – family, friends, or professionals- who provide information, explain options, and assist in expressing the individual's decisions. 
  • Representative Payee Programs: Offered by agencies like the Social Security Administration (SSA), these programs appoint a designated representative to receive and manage an individual's public benefits if they cannot do so themselves. The representative must use these benefits (SSDI, SSI, VA, etc.) for the beneficiary's basic needs (food, shelter, medical care, etc.). They must keep meticulous records and report to the governing agency.
  • Informal Family Arrangements: Families may opt for informal structures like joint bank accounts or family agreements to help a loved one who is struggling. These offer simplicity and avoid court costs. That said, for all their benefits, informal arrangements lack the legal protections of court-sanctioned options. There's less oversight to ensure the individual's needs are fully met and that assets are being handled responsibly. 

The following table compares decision-making arrangements ranging from those chosen proactively by the individual to those implemented by the court in cases of incapacity.

Decision-Making Option Definition Advantages Disadvantages When Preferred
Advance Directives
Living Will A document specifying healthcare wishes in case of incapacity Provides clarity on your end-of-life preferences Limited to medical decisions When you have strong preferences regarding life-support, etc.
Healthcare Proxy (Medical POA) A document that designates an agent to make medical decisions on your behalf Ensures preferences are followed; 

Agent advocates for you

Requires trust in the agent When you have a trusted person to make choices OR complex medical situations are expected.
Powers of Attorney (Proactive; often overlaps with advance directives)
Durable POA Gives an agent broad authority to act, even with incapacity Proactive planning, Seamless transition if needed Potential for agent abuse When you have complex affairs or anticipate a decline in capacity
Springing POA Agent's power takes effect only upon declared incapacity Safeguards autonomy Requires a formal incapacity determination When you're concerned about undue influence but want contingency plans
Financial POA Authority over finances (bills, investments, etc.) Protects financial assets Potential for financial misuse When managing finances becomes difficult
Court Interventions
Guardianship Court-appointed decision-maker for personal and financial affairs Comprehensive decision-making in the best interest of the ward; 

Court supervision provides a layer of protection

Removes individual's autonomy;

Court oversight can be burdensome

When a person is fully incapacitated and lacks POA/advance directives
Conservatorship Court-appointed to manage finances only Focused on financial management, which can be less intrusive on personal life; Provides legal authority to manage complex financial situations. Removes financial control from the individual When POA is insufficient for the person's financial situation
Other Options
Supported Decision-Making Agreement (SDMA) Individual retains decision-making and has trusted supporters for guidance Maximizes autonomy; Supporters offer assistance Legal recognition varies by state When the person still has some capacity, needs help understanding choices
Representative Payee Program The designated person manages government benefits for the recipient Ensures funds are used for necessities Limited scope (only benefits) When the individual cannot manage benefits alone
Informal Family Arrangements Family helps with affairs without legal process Simple, low-cost No legal protections, Potential for disagreement or abuse When needs are minor, and  family members are in full agreement

It's important to note that the best approach often involves a combination of these options, tailoring the plan to the individual's specific circumstances and needs. For instance, an individual might have an SDMA for major life decisions, such as choosing a nursing home or selling a property, while a representative payee program can ensure essential government benefits are used appropriately for their care. Informal family support can be invaluable for day-to-day tasks like grocery shopping or medication management.

As you can see, making decisions about incapacity can be emotional and overwhelming, especially when they involve the well-being and autonomy of a loved one. Fortunately, AAL's directory can help you connect with skilled attorneys with extensive experience in elder law who can guide you through the process of creating advance directives and powers of attorney, ensuring that your wishes are clearly documented and your interests are protected. Additionally, they can provide invaluable assistance if guardianship or conservatorship proceedings become necessary.

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