What’s a Springing Power of Attorney? When Should I Use One?
What is a power of attorney?
A power of attorney allows you to grant or give another person powers over you and/or your property. In Masschusetts, if you see a “durable power of attorney,” then it is almost always referring to a financial power of attorney. Whereas in other states, like New Hampshire, theyhave two separate powers of attorney - one called a health care power of attorney for medicaldecision-making and one called financial power of attorney for financial decision-making).
What is a durable power of attorney?
The word “durable” in durable power of attorney is generally referring to the fact that the power of attorney continues to be effective regardless of a person’s incapacity or mental state. If you are thinking - “isn’t the whole point of a power of attorney? Isn’t it only supposed to be used to make decisions for a person after they become incapacitated?” - and the answer to that question is generally, yes, but if you don’t specify that it is durable (especially in Massachusetts), then you could run into trouble actually using the document, so do yourself a favor and specify that is is durable in the document.
So what is a springing power of attorney?
Most financial powers of attorney clearly specify when the power of attorney is activated. States vary on this, but in Massachusetts, we tend to be very clear on whether a power of attorney is springing or effective immediately at the very beginning of the document.
A springing power of attorney refers to a financial power of attorney that is activated only after a doctor or other qualified professional (as may be defined and specified further in your document) certifies that you are indeed incapacitated or no longer of sound mind. Only after the test of your incapacity has been validated can the agent acting under a springing power of attorney then act on your behalf in accordance with your financial power of attorney.
Wait, so why would you make a financial power of attorney “effective immediately” if it’s only intended to be used if / when a person becomes incapacitated?
In practice, if the document only becomes effective when a person is deemed incapacitated, it could cause delay or confusion as to when the agent named in the document can actually act on your behalf. In other words, if you go to a bank and try to use a power of attorney that doesn’t specify if it is effective immediately, then the bank won’t allow your Agent to use the document unless there is proof that has has been activated. While that’s a great safeguard in certain scenarios, it may completely defeat the whole purpose of the document, which is to allow a trusted person to be able to act on your behalf in case of an emergency. If your agent has to wait around for a doctor’s certification or has to otherwise prove your incapacity before being able to act on your behalf, then that may place both you and your agent in a tough spot.
This is especially true for clients who are in the beginning phases of dementia or Alzheimer’s because it is a gray area in terms of when you would actually be incapacitated for purposes of the document. If you care for aging parents, then you are probably well aware of the possibility that a person’s mental state can change day by day or even based on the time of day (also known as sundowning).
Therefore, if you want the financial power to be able to work as it was intended to, then it’s often much better to specify that is effective immediately rather than deal with the ambiguity of springing power of attorney.
On another practical note: if you are hesitant about naming someone as an agent on your power of attorney, then do not name that person as your agent. You should only name someone that you trust 100% to serve as your agent on your power of attorney, otherwise, the document can do more harm than good.
So when would you advise using a springing power of attorney?
In the context of financial powers, I would only recommend using the springing power in scenarios where you do not have a close family member (e.g., a spouse or a child) who you would like to name as your financial power of attorney.
For example, for my unmarried clients that don’t have children, they may be naming a close lifelong friend as their power of attorney because they don’t have anyone else within their family who they can name. In that situation, where you have a person that you trust 99.95% - then that would be a scenario where I believe it would make sense to name them as your springing power of attorney rather than give that person financial powers effectively immediately.
In other words, if you are naming someone other than your spouse, child, or parent to serve as your financial power of attorney, then you may want to make it a springing power of attorney. Otherwise, if you trust them 100%, then I generally advise making your financial power of attorney effective immediately.
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Joseph M. Lento, J.D.
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www.PerennialEstatePlanning.com
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