What is a “Springing” Power of Attorney?

We have previously written about health care powers of attorney and financial powers of attorney.

For a health care power of attorney (an advance directive), a health care surrogate’s authority does not vest until medical providers are satisfied that the principal (the person nominating the surrogate) can no longer meaningfully communicate or make decisions.

Unlike a health care power of attorney, the authority of an agent nominated within a financial power of attorney can take effect immediately.  Or the financial power of attorney can lie dormant until a later date when the principal (the person nominating the agent) is unable to manage their own affairs.  The former is often called an “immediate” financial power of attorney.  The latter is often called a “springing” financial power of attorney.

There are pros and cons to each approach.

Unquestionably, the agent nominated in a financial power of attorney has incredibly broad authority.  If misused, the actions by an agent under a financial power of attorney could be devastating.  Therefore, some clients feel strongly that they wish to place a check on their agent’s authority by requiring the agent to prove the principal’s incapacity.  They select the “springing” option.  Proof of incapacity typically is written certification by a treating physician that the principal cannot manage their own affairs.

Why would folks elect not to go with the “springing” option and to permit their principal to act immediately without proof of incapacity?  Here are a few reasons:

1. For clients who have been married for many, many years, oftentimes the vast majority of a couple’s financial holdings are joint.  Therefore, these clients reason, each spouse already has access to the marital nest egg and they’d like to avoid the inconvenience down the road of needing to obtain a doctor’s note.
2. As folks age, capacity can be a moving target.  People have good days and bad days.  The bad decisions made by the principal on a bad day could be financially devastating.  But if the principal is seen by a physician on a good day, there may be no reason to diagnose the principal as unable to manage their own affairs.  Many clients, therefore, take this insight and opt for an immediate power of attorney for their own protection.

Of course, the “springing” option may be more appropriate for certain clients.  This is particularly true for younger clients and/or clients who are appointing more distant relatives as their financial agents.

Whether to elect an immediate or a springing financial power of attorney requires consideration of many issues, including your relationship to those who you are nominating as your financial agent and your medical condition.  Bulman Dunie estate planning attorneys Jeremy Rachlin and Jared Sands regularly have these discussions as part of our client consultations. Please call us at (301) 656-1177, or feel free to e-mail Jeremy at jrachlin@bulmandunie.com or Jared at jsands@bulmandunie.com. We’re here to help.