Q. I recently heard the term “Springing” Power of Attorney, but I am not sure what that is. Can you shed any light on this?
A.. Sure. Broadly speaking, there are two general categories of financial Powers of Attorney: (1) those that are immediately effective upon signing by the principal, and (2) those that are only effective upon the happening of a future event, typically the incapacity of the principal. Attorneys generally call the latter a “Springing” Power Of Attorney, because they do not become effective, or “spring into life,” until the happening of that future event. Which form a client might choose will depend upon the client’s circumstances.
Typically, a client who is healthy and younger would usually prefer a power of attorney that only springs into life in the future, when, and if, he or she is no longer able to manage his or her own financial affairs. Until that event, the client – whom we often call the “principal”— calls his own shots and only he, himself, can enter into transactions that legally bind him.
By contrast, a principal who is up in years and/or sees illness or incapacity on the near horizon, may opt to sign a Power of Attorney (“POA”) that is immediately effective, so as to dispense with the procedural requirement and corresponding delay necessary to establish the requisite incapacity that would make the POA effective, and thereby empower the designated Agent to act for the Principal.
How is incapacity determined? Many Springing POA’s recite that incapacity is determined when two (2) physicians who have examined the principal write a letter reciting that the principal is incapable of managing his or her own financial affairs, usually due to cognitive decline, dementia or similar maladies. Note: Notwithstanding that common requirement, I prefer to recite in POA’s that I prepare that only one (1) physician need so opine, and here’s why: Very often the need to establish incapacity in this context arises when the principal is residing in a nursing home. Typically, in the nursing home setting, only one physician makes the rounds to check on each patient. To secure an evaluation and letter by a second physician in those circumstances can be difficult.
Another option for some clients is to begin with a Springing POA, but as the years pass and they decide they no longer wish to manage their own financial affairs, to sign a simple form reciting that the POA is now immediately effective. That signed form would then be kept together with the POA and handled as a single document, so that it is apparent to all who review it that the principal has opted to make the POA immediately effective. The other alternative, of course, is to rewrite the POA entirely so as to render it immediately effective going forward.
Know that, whichever form you choose initially, you are not forever bound by that decision. So long as you are competent, you can always revoke and revise your POA to make it fit your changing life circumstances.