You may have heard of “springing” powers of attorney – that is, powers of attorney that “spring” into effect when you become incapacitated. Many people like the idea of these documents, because cause they're uncomfortable with making their power of attorney effective while they can still manage their own affairs. However, in practice, using a springing power of attorney can cause more problems than it solves. For example:
- Delay. Instead of being able to use the power of attorney as soon as the need arises, the agent must get a “determination” of your incapacity before using the document. In other words, someone – usually a doctor – must certify that you can no longer make your own decisions. This could take days or weeks and disrupt the handling of your finances.
- HIPAA/Privacy issues. State and federal laws, including the Health Insurance and Portability Act (HIPAA), protect your right to keep medical information private. This means that doctors can release information about your medical condition only under very limited conditions. To certify your incapacity, your agent will need to provide proof that the doctor may legally release information about you to your agent. You may be able to resolve this issue by completing a release form before you become incapacitated. However your agent could still run into problems caused by bureaucracy or by the doctor’s confusion about what is legally required. Navigating these issues could cause serious headaches and delays for your agent.
- Definition of incapacity. To state the obvious, if your power of attorney requires you to be incapacitated, then you’ll have to be incapacitated before your agent can help you manage your finances. But what does “incapacity” mean, and to whom? If you make a springing power of attorney, your document will have to define incapacity. Then, when it comes time for the determination, your doctor will have to agree that you meet that definition. But how do you know now what health changes will cause you to need help managing your finances? What if you want help before you become incapacitated as defined by your document? What if you have some good days and some bad days? What if your agent or your lawyer believes you no longer have capacity, but your doctor disagrees? These gray areas may make it difficult, if not impossible, for your agent to help you when you need it.
You can avoid all of these problems by making a durable power of attorney that takes effect as soon as you sign it. Just make sure your agent understands exactly when and how you want the document to be used. This degree of trust is a basic requirement for naming an agent. If you don’t trust your agent to handle the power of attorney exactly as you intend, you should choose someone else to handle your finances.If you still feel that you want a springing power, see a lawyer for help. An experienced lawyer can draft a power of attorney that is more closely tailored to your specific situation and concerns.
Read more about Powers of Attorney for Finances.