Unless Congress acts quickly, taxes are going up! Although major tax law changes are set to…
No Springing in Spring
You may have heard of a “springing” powers of attorney (POA), which is a POA that “springs” into effect when you become incapacitated. This type of POA literally “springs” to life when it’s needed. Many people like the idea of this type of document because they are uncomfortable with making their POA effective while they can still manage their own affairs.
In general, a POA is a document that allows you to appoint an agent to transact business on your behalf. The agent does not have to be an attorney, it can be a trusted friend or relative.
However, in practice, especially during a pandemic like COVID-19, we have found that using a springing POA can cause more problems than it solves. For example:
- Delay. Instead of being able to use the POA 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. Some attorneys include language in the document to provide that a springing POA only becomes effective if two physicians sign it. Most doctors will not make a home visit at this time and this could take days or weeks and disrupt the handling of your finances.
- HIPAA/Privacy issues. Another complication can arise because doctors are bound by the Health Insurance and Portability Act (HIPAA). They may not be able to provide some health information regarding HIPAA’s privacy constraints unless the agent can provide authorization to do so. 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 POA requires you to lack capacity to become effective. But what does “incapacity” mean, and to whom? If you make a springing POA, your document should specifically define incapacity. What if you or your family believe you no longer have capacity, but your doctor disagrees? What if you want help before you become incapacitated as defined by your document? What if you have periods of lucidity and times of confusion. (COVID-19 reportedly has some good days and bad days)? These gray areas may make it difficult, for your agent to quickly help you when you need it.
- Compliance Issues. A bank might not accept the agent’s authority without confirmation that the signatures of the physicians are genuine and some reassurance that the physicians have made the correct diagnosis. Some banks have also been known to refuse to accept POAs unless they are on the bank’s own forms.
You can avoid all of these problems by making a durable non-springing POA that is literally effective immediately. The agent can exercise the powers in the document as soon as it is signed.
An experienced lawyer can draft a POA that is more closely tailored to your specific situation and concerns. For many years, our law office has drafted durable non-springing POA for most clients. Especially in light of the COVID-19 pandemic, we strongly recommend reviewing your POA document to make sure it is a durable non-springing POA that does require “springing”.