Yes, it does. In this context mental incapacity is the only kind that matters. A physical disability won’t prevent you from validly granting a power of attorney, but a mental disablity which leaves you unable to grasp the nature of the action will.
Can only comment for Australia (Queensland) position, but I suspect it will be something similar in the US.
To make an enduring power of attorney in Queensland you need to understand the nature and effect of the document.
Capacity is a legal concept rather than a medical concept, and the presence of mental illness or disability won’t necessarily mean someone lacks capacity to make a decision about something - capacity about a specific matter means the person is capable of -
[ul]
[li]understanding the nature and effect of decisions about the matter[/li][li]freely and voluntarily making decisions about the matter[/li][li] communicating the decision in some way[/li][/ul]
So people may have capacity to make certain decisions, but not others.
That being said, it seems unlikely that someone with a mental age of 8-12 would be able to necessarily understand the nature and effect of an enduring power of attorney.
If she’s already the legal guardian, it’s not clear what additional authority a power of attorney would convey.
And – get a power of attorney because of whose age? Your cousin’s or your aunt’s? Is the social worker’s concern that your aunt needs to make plans for who will care for your cousin after your aunt passes away or becomes too enfeebled to care for her daughter?
It may be that the social worker is saying that your aunt should prepare a power of attorney delegating her guardianship authority so that someone else can make decisions for your cousin. I am not sure that a power of attorney would be effective in that situation; guardianship is something established by a court, and the guardian does not necessarily have the authority to pass along her powers to someone else without court approval.
Basically, I don’t think you have enough information to understand what the social worker’s concern is, or to figure out how to address it.
Disclaimer: Not legal advice. Not an attorney-client relationship.