A well-crafted power of attorney (POA) document is an essential part of a comprehensive estate plan. A POA allows you to choose a person you trust to make financial decisions for you if you become incapacitated. This guide will help you decide if a springing POA is right for your particular circumstances.
What is a POA?
A power of attorney is a legal contract between yourself and another party that allows the other person to take actions on your behalf. The POA transfers legal rights from yourself, the principal, to the other person, who is referred to as the attorney-in-fact. The other party does not need to be an actual lawyer but must act as a legal fiduciary of the principal. Typically, you will select a trusted family member, friend, or long-time business associate as your attorney-in-fact.
When drafting your POA, you can grant your agent only the powers you believe necessary. For example, you might choose to allow your agent to draw from your bank accounts to pay your bills but prohibit them from entering into new business agreements on your behalf.
Once a POA is in place, the attorney-in-fact can begin acting in the principal’s place as contemplated in the agreement. However, if you do not want to authorize someone else to make these decisions for you immediately, you may want to consider a springing POA instead.
Read more: How to choose an agent for your POA?
What is a Springing Power of Attorney?
In estate planning and other contexts, drafting a POA may be considered insurance if you become incapacitated in the future. Incapacity can arise at any time through a sudden illness or accident or by cognitive decline, and it is reassuring to know that someone who has your confidence would be in charge of your affairs. Designating your attorney-in-fact now can also help prevent familial conflict over who will control your finances when you become incapacitated.
A springing POA is a general power of attorney that only conveys legal authority to the attorney-in-fact once you become incapacitated. Once some event has occurred that leaves you unable to manage your own affairs, the POA “springs” into place. This prevents the attorney-in-fact from acting as your agent until they are genuinely needed.
Difference Between Springing and Durable POA?
There are two subsets of POA agreements intended to address a principal’s incapacitation: durable POAs and springing POAs. Here are a few essential considerations that will allow you to make an informed choice in your estate planning.
Effectiveness
A durable power of attorney can be either a general or limited contract that contemplates the attorney-in-fact continuing to handle business for the principal if they become unable to do so for themselves. The attorney-in-fact’s relationship is already in place, and they can act on your behalf in any authorized manner from the time the POA is signed. The powers previously granted survive your incapacity; therefore, they are durable.
On the other hand, a springing POA only comes into effect once the principal is incapacitated. You may agree to a springing POA years in advance, and it will not impact your affairs until you no longer can make decisions on your behalf. Your designated attorney-in-fact will not have any ability to act as your agent until you become incapacitated.
Importance of Incapacitated Definition
All springing POA documents will need to define what constitutes an incapacity that would allow the attorney-in-fact to act in your place. Clearly, some situations — such as a coma — will not require much debate. But, the definition of incapacity in your POA agreement needs to contemplate a variety of challenging scenarios, such as slow mental decline.
For example, a springing POA document will need to define:
- Who decides you are incapacitated?
- Do you want your agent to have power when you still have mostly good days, even though you are not yourself on bad days?
- What if your attorney-in-fact believes you are unable to manage your finances, but a doctor disagrees?
A durable power of attorney avoids some of these complications because you have already granted the attorney-in-fact power. For a springing POA to be useful for your needs, you must evaluate how you want to proceed under numerous potential scenarios.
Read more:
How to Choose the Right Type of Power of Attorney
How to Get a Power of Attorney for Someone Who Is Incapacitated
Emergency Power of Attorney
HIPAA and Compliance Issues
While the definition of incapacitated in your springing POA is essential, it still may not be enough to effectively protect your assets. The federal Health Insurance and Portability Act (HIPAA) limits what a doctor can disclose about your medical condition and to whom. You may have drawn the proper release forms to avoid HIPAA issues. Still, if not, your attorney-in-fact will need to prove to the hospital and doctors that they are authorized to receive information about your prognosis.
Outside of the medical system, companies will have their own ways to comply with their state and federal legal obligations. For example, banks require multiple levels of verification before they will grant your agent control over your accounts. The financial assets you hope to protect by using a springing power of attorney may be negatively impacted by the delays inherent in medical and corporate bureaucracy. By the time your attorney-in-fact is authorized to act in your place, you may have lost money or missed business opportunities.
Agreeing to allow another person to serve as your agent is a complicated task. While a springing POA will enable you to avoid granting authority before you need it, there are drawbacks. Using a durable POA will allow you to avoid these potential legal and regulatory issues.
Don’t leave your future up in the air! You can use our contract maker to create a durable power of attorney in a matter of minutes.
Helpful Resources:
Power of Attorney - ABA
POA for healthcare - ABA
Springing Durable POA - Cornell Law Scholl
A well-crafted power of attorney (POA) document is an essential part of a comprehensive estate plan. A POA allows you to choose a person you trust to make financial decisions for you if you become incapacitated. This guide will help you decide if a springing POA is right for your particular circumstances.
What is a POA?
A power of attorney is a legal contract between yourself and another party that allows the other person to take actions on your behalf. The POA transfers legal rights from yourself, the principal, to the other person, who is referred to as the attorney-in-fact. The other party does not need to be an actual lawyer but must act as a legal fiduciary of the principal. Typically, you will select a trusted family member, friend, or long-time business associate as your attorney-in-fact.
When drafting your POA, you can grant your agent only the powers you believe necessary. For example, you might choose to allow your agent to draw from your bank accounts to pay your bills but prohibit them from entering into new business agreements on your behalf.
Once a POA is in place, the attorney-in-fact can begin acting in the principal’s place as contemplated in the agreement. However, if you do not want to authorize someone else to make these decisions for you immediately, you may want to consider a springing POA instead.
Read more: How to choose an agent for your POA?
What is a Springing Power of Attorney?
In estate planning and other contexts, drafting a POA may be considered insurance if you become incapacitated in the future. Incapacity can arise at any time through a sudden illness or accident or by cognitive decline, and it is reassuring to know that someone who has your confidence would be in charge of your affairs. Designating your attorney-in-fact now can also help prevent familial conflict over who will control your finances when you become incapacitated.
A springing POA is a general power of attorney that only conveys legal authority to the attorney-in-fact once you become incapacitated. Once some event has occurred that leaves you unable to manage your own affairs, the POA “springs” into place. This prevents the attorney-in-fact from acting as your agent until they are genuinely needed.
Difference Between Springing and Durable POA?
There are two subsets of POA agreements intended to address a principal’s incapacitation: durable POAs and springing POAs. Here are a few essential considerations that will allow you to make an informed choice in your estate planning.
Effectiveness
A durable power of attorney can be either a general or limited contract that contemplates the attorney-in-fact continuing to handle business for the principal if they become unable to do so for themselves. The attorney-in-fact’s relationship is already in place, and they can act on your behalf in any authorized manner from the time the POA is signed. The powers previously granted survive your incapacity; therefore, they are durable.
On the other hand, a springing POA only comes into effect once the principal is incapacitated. You may agree to a springing POA years in advance, and it will not impact your affairs until you no longer can make decisions on your behalf. Your designated attorney-in-fact will not have any ability to act as your agent until you become incapacitated.
Importance of Incapacitated Definition
All springing POA documents will need to define what constitutes an incapacity that would allow the attorney-in-fact to act in your place. Clearly, some situations — such as a coma — will not require much debate. But, the definition of incapacity in your POA agreement needs to contemplate a variety of challenging scenarios, such as slow mental decline.
For example, a springing POA document will need to define:
- Who decides you are incapacitated?
- Do you want your agent to have power when you still have mostly good days, even though you are not yourself on bad days?
- What if your attorney-in-fact believes you are unable to manage your finances, but a doctor disagrees?
A durable power of attorney avoids some of these complications because you have already granted the attorney-in-fact power. For a springing POA to be useful for your needs, you must evaluate how you want to proceed under numerous potential scenarios.
Read more:
How to Choose the Right Type of Power of Attorney
How to Get a Power of Attorney for Someone Who Is Incapacitated
Emergency Power of Attorney
HIPAA and Compliance Issues
While the definition of incapacitated in your springing POA is essential, it still may not be enough to effectively protect your assets. The federal Health Insurance and Portability Act (HIPAA) limits what a doctor can disclose about your medical condition and to whom. You may have drawn the proper release forms to avoid HIPAA issues. Still, if not, your attorney-in-fact will need to prove to the hospital and doctors that they are authorized to receive information about your prognosis.
Outside of the medical system, companies will have their own ways to comply with their state and federal legal obligations. For example, banks require multiple levels of verification before they will grant your agent control over your accounts. The financial assets you hope to protect by using a springing power of attorney may be negatively impacted by the delays inherent in medical and corporate bureaucracy. By the time your attorney-in-fact is authorized to act in your place, you may have lost money or missed business opportunities.
Agreeing to allow another person to serve as your agent is a complicated task. While a springing POA will enable you to avoid granting authority before you need it, there are drawbacks. Using a durable POA will allow you to avoid these potential legal and regulatory issues.
Don’t leave your future up in the air! You can use our contract maker to create a durable power of attorney in a matter of minutes.
Helpful Resources:
Power of Attorney - ABA
POA for healthcare - ABA
Springing Durable POA - Cornell Law Scholl
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