What is the Difference Between Durable and Springing Power of Attorney?
Estate planning is something many people put off, but addressing this complex matter can bring peace of mind to you and your heirs. Knowing a plan is in place should anything happen to you makes managing and passing on your assets infinitely easier. One of the most important parts of estate planning is the power of attorney (POA). This document gives the person you name as your ‘attorney-in-fact’ the authority to act on your behalf with regards to your medical and/or financial matters. The authority you give them can be as broad or narrow as you wish, and there are different options for drawing up a POA. This article will discuss the differences between a durable and springing power of attorney.
Durable Power of Attorney
As soon as a durable power of attorney is executed and you have named an agent to serve as your attorney-in-fact, the document is effective immediately. Think of it as the document being active once it is in place. Therefore, the person you appoint immediately has the legal authority given to them in the document and retains this authority until your death. Whether or not you ever become incapacitated is irrelevant in a durable power of attorney.
Springing Power of Attorney
In contrast, the springing power of attorney is conditional and does not “spring” into effect until conditions outlined in the document are met. In this way the power of attorney is “inactive” until when it is needed as defined by you in the document. Essentially you are naming in advance who can act on your behalf should you become incapacitated.
However, unless your power of attorney is exceedingly clear about exactly what defines your incapacitation, it could take a court decision to make the determination. This could be a distinct disadvantage for your family if they are trying to get you medical care or manage your assets for you after you have fallen ill. Very often a springing power of attorney requires more than one doctor to certify lack of mental incompetency, but this can also waste precious time in an emergency.
Pros and Cons: Durable vs. Springing Power of Attorney
The biggest advantage of a durable power of attorney is also what worries most people about it: the fact that it is immediately effective. The named agent has instant authority and access to your assets. What happens if they abuse that power? Obviously, your agent has to be someone you would trust with your life, and if you are questioning the trust you can put in them, that person should not be named as your attorney-in-fact. It should be noted that your agent has a fiduciary duty to use assets on your behalf and not for their own enrichment.
A durable power of attorney can bring you peace of mind knowing that there is no question who will be acting on your behalf should you need them and that they can do that for you at any time.
A springing power of attorney is less often recommended because of the uncertainties involved in activating the document. Assuming that you prefer this type of document over a durable power of attorney, it is probably because you only want it to be active in an emergency situation where you are incompetent to make your own decisions. Even if you specify that two doctors’ certifications are needed to determine your incapacitation, some doctors are hesitant to do so because of health privacy concerns. If so, your agent will be forced to turn to the court to use the power of attorney which defeats the purpose of them being able to help you in an emergency.
An option for those hesitant to create a durable power of attorney is to name your agent and tell them of your decision, but not give them the document. Instead keep it safe and let the person know you have it at home or stored with your attorney-in-law. A power of attorney should never be stored in a bank safe deposit box because only the owner of the box can access it.
How Should I Choose an Agent for my Power of Attorney?
Naming someone as your agent on a power of attorney is an important decision that requires careful consideration. It should be someone who is comfortable and experienced in making financial decisions. It could be your spouse or an adult child, but many people choose a trusted longtime advisor who is their attorney or accountant. It may be also possible to name two people who serve together as your attorney-in-fact. They would both need to sign off on any transactions made on your behalf. Consult with an estate lawyer to see if that is an option for you if naming more than one person as your attorney-in-fact is your preference.
Changing and Updating your Power of Attorney
If your power of attorney was executed many years ago then now might be a good time to revisit and review it. Many financial institutions prefer a document that was recently signed and you do not want your agent to run into trouble should they be called upon to act as your attorney-in-fact. You may also have life circumstances that have changed since you first executed your power of attorney and it may need to be updated to reflect them.
Remember that you can revoke a power of attorney at any time as long as you are still competent. Otherwise, a valid durable power of attorney remains in effect until your passing, resignation of the agent, or termination or suspension of the agent’s authority by a court.
Plainfield Wills, Trusts, and Estates Lawyers at Herold Law Assist Clients with Estate Planning
If you have questions about the different types of power of attorney, speak with a trusted Plainfield wills, trusts, and estates lawyer at Herold Law P.A. Call us at 908-647-1022 or contact us online. From our offices in Warren, New Jersey we assist clients in Plainfield and throughout the surrounding areas.