Springing Vs. Nonspringing Power Of Attorney

Estate planning typically focuses on what happens to your children and your assets when you die. But it’s equally important (some might say even more important) to have a plan for making critical financial and medical decisions if you’re unable to make those decisions yourself.

A crucial component of this plan is the power of attorney (POA). A POA appoints a trusted representative to make medical or financial decisions on your behalf in the event an accident or illness renders you unconscious or mentally incapacitated. Without it, your loved ones would have to petition a court for guardianship or conservatorship, a costly process that can delay urgent decisions.

A question that people often struggle with is whether a POA should be springing, that is, effective when certain conditions are met or nonspringing, that is, effective immediately.

A POA defined

A POA is a document under which you, as “principal,” authorize a representative to be your “agent” or “attorney-in-fact,” to act on your behalf. Typically, separate POAs are executed for health care and property.

A POA for health care authorizes your agent — often, a spouse, an adult child or other family member — to make medical decisions on your behalf or consent to or discontinue medical treatment if you’re unable to do so. Depending on the state you live in, the document may also be known as a medical power of attorney or health care proxy.

A POA for property appoints an agent to manage your investments, pay your bills, file tax returns, continue making any annual charitable and family gifts, and otherwise handle your finances, subject to limitations you establish.

To spring or not to spring

Typically, springing powers take effect when the principal becomes mentally incapacitated, comatose, or otherwise unable to act for himself or herself.

Nonspringing POAs offer a few advantages over springing POAs:

• Because they’re effective immediately, nonspringing POAs allow your agent to act on your behalf for your convenience, not just when you’re incapacitated.
• They avoid the need for a determination that you’ve become incapacitated, which can result in delays, disputes or even litigation. This allows your agent to act quickly in an emergency, making critical medical decisions or handling urgent financial matters without having to wait, for example, for one or more treating physicians to examine you and certify that you’re incapacitated.

A potential disadvantage to a nonspringing POA — and the main reason some people opt for a springing POA — is the concern that your agent may be tempted to abuse his or her authority or commit fraud. But consider this: If you don’t trust your agent enough to give him or her a POA that takes effect immediately, how does delaying its effect until you’re deemed incapacitated solve the problem?

Given the advantages of a nonspringing POA, and the potential delays associated with a springing POA, it’s usually preferable to use a nonspringing POA and to make sure the person you name as agent is someone you trust unconditionally. If you’re still uncomfortable handing over a POA that takes effect immediately, consider signing a nonspringing POA but have your attorney or other trusted advisor hold it and deliver it to your agent when needed.

Contact us if you have additional questions regarding a springing or nonspringing POA.