Part 3 of a series breaking down the process of helping clients set up Powers of Attorney for finances by breaking the issues down into smaller, individual topics, enabling the adviser and client to take the necessary steps, and get the plan moving.
Once a client has decided that the time is right to get a power of attorney, there is a threshold question: should it be an immediate power or a springing power? What’s the difference?
With an immediate power, the principal authorizes his/her attorney-in-fact to act… well… immediately. Keep in mind, the granting of a power of attorney does not strip the principal of the ability to act on his or her own. It just means that the attorney-in-fact can also act on his or her behalf right away. That can be important, since one does not usually know in advance that an emergency that will take the principal out of circulation is looming right around the corner. And remember, just because the attorney-in-fact has the POWER to act immediately, does not mean she or he MUST act immediately. In that sense, even an immediate power can be on “stand-by” mode.
On the other hand, a springing power of attorney only becomes effective when the principal becomes incompetent. Consider, however, as we discussed earlier in the series on Wills, a person should only be giving power of attorney to an individual that is implicitly trusted. If there is any doubt that the proposed attorney-in-fact will not properly handle the principal’s affairs, then that is the wrong selection of whom to appoint.
In addition, with a springing power, the trustworthiness of the attorney-in-fact remains an unknown. Remember, the principal has to be incompetent for it to “spring” into effect. If the attorney-in-fact is abusing the power, the principal will not be competent to know or understand what is happening.
One of the benefits of a power of attorney is that it serves as a substitute for a guardianship or conservatorship. As such, there would not be any need for a public hearing to determine one’s competence. It remains a private matter. With a springing power, the principal’s incompetence has to be established before the attorney-in-fact can even do anything. That means delay, possible expense and embarrassment for the principal, and potential disputes within the family.
While there are certainly proponents of the use of a springing power of attorney, the use of an immediate power is generally the safer route. Either way, the original message remains paramount: Only give power of attorney to a person you trust implicitly.
You can view the first series of Wills and Probate Administration here and reach out to Dan with any questions. Our attorneys are always ready, willing, and able to meet and discuss any questions, help you articulate your plan and goals, determine the best plan to accomplish them, and then implement it. You will find that, by taking those small steps, the problem that used to lead to procrastination and uncertainty has been addressed and resolved. Learn more about Mansour Gavin’s Estate Planning & Probate group or contact us today.
Our next series will cover trusts.