Choosing Between a Springing or Durable Power of Attorney Document
A proper estate plan includes a Financial Power of Attorney (POA) document that dictates who will manage your finances on your behalf in the event you are unable to do so. While these documents typically come into play toward the end of life when a person’s physical and mental capacity diminishes, these are occasionally used in other circumstances like sudden disability or when traveling with limited access to the internet.
However, not all POAs are the same. There are two main types -
#1 Springing Power of Attorney: A springing power of attorney, as the name suggests, "springs" into effect under specific circumstances outlined in the document. Typically, these circumstances involve the principal becoming mentally or physically incapacitated and unable to make decisions for themselves. Until those conditions are met, the agent has no authority to act on the principal's behalf.
Key benefit: This document is much more restrictive as certain circumstances have to be met in order for someone to act on your behalf. This can provide a sense of added privacy and security.
Key drawback: Because there are circumstances that have to be met, oftentimes this requires getting a professional diagnosis as well as notarized documents signed, which can cause delays in acting. Sometimes the diagnosis is difficult to prove, which can lead to someone not getting help when it’s needed.
Use case: I have seen these used most often in situations when having complete privacy as long as possible is desired or for people who do not have a trusted family member to name as the agent.
#2 Durable Power of Attorney: In contrast, a durable power of attorney takes effect immediately upon signing the document. It remains in effect even if the principal becomes incapacitated. This type of POA offers continuity in decision-making, ensuring that someone can manage the principal's affairs without the need for court intervention.
Key benefit: This document provides simplicity since your agent can immediately start acting on your behalf whenever it becomes necessary.
Key drawback: Because they can act immediately, there is the potential for more fraud and lack of privacy.
Use case: For people who have a trusted family member to name, this document is most often used because of the ease with which an agent can begin acting.
From personal experience, most people who have a trusted spouse and child lean toward the durable power of attorney because of its flexibility. As one attorney once told me “If you don’t trust them enough to name them now while you are in your right mind, why would you trust them once you become completely incapacitated?” It's a fair point that should be considered even if you decide a springing document is best for you.
Choosing the right option depends on your specific needs and comfort level with immediate versus conditional decision-making authority. You should discuss these options with a qualified attorney who can walk you through your situation and the most appropriate option.
Happy Planning,
Alex
This blog post is not advice. Please read disclaimers.