Durable vs. Springing Power of Attorney

Most people likely believe that estate planning is just preparing a will or trust that directs how your affairs should be handled after death. However, an effective estate plan should also contemplate a plan for what happens if you were to be incapacitated. Consider what would happen to your financial affairs if you were to be taken ill or incapacitated for a long period of time. A power of attorney is a document that can direct exactly how your affairs should be managed in such a case.

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A power of attorney is a document in which you (the principal) appoint another person (the agent) to act on your behalf in financial matters. In Michigan, there are generally two types of financial powers of attorney: durable and springing.
 
A durable power of attorney (DPOA) is one that is effective upon execution and remains effective even if the principal later becomes incapacitated or ill. This means that an agent will not have to get special permission from a doctor, court or other authority to act on your behalf at any time. Furthermore, an agent can act under the authority of a DPOA even when the principal is not incapacitated. For example, if you had some business that needed to be taken care of at a bank while you were out of town, your agent would be able to assist with your business at the bank under the power granted by your power of attorney.
 
Conversely, a springing power of attorney is one that is not effective until the principal becomes incapacitated or is unable to manage his or her own affairs. Usually, a doctor must certify that the principal is incapacitated before the agent will be able to act for the principal. In rare circumstances, if a doctor cannot or will not prove incapacity of the principal, the agent will then need to get a court involved through a guardianship proceeding, which can often be lengthy and time-consuming.
 
So, what are the pros and cons of each type of power of attorney?

Durable Power of Attorney
Pros:

• Immediately effective: no waiting period or need for doctor intervention before the agent can act.
• Allows your agent to act for your convenience not just upon your incapacity.

Cons:

• Potential for agent to act improperly by committing fraud against the principal.

Springing Power of Attorney
Pros:

• Document becomes effective only when the principal is incapacitated and needs assistance.
• Lessens chance of fraud being committed by agent.

Cons:

• Agent must get a doctor to certify the principal's incapacity.
• If incapacity cannot be proven or certified, agent may need to get a court to intervene by way of a guardianship proceeding.

Arguably, one of the biggest concerns that causes some people to prefer a springing power of attorney is the potential for an untrustworthy agent to commit fraud against the principal by mismanaging the principal’s assets. Make sure that the person you are appointing as agent is someone that you trust completely to handle your affairs properly and in the way that you direct. Consider: In the event you are incapacitated, do you trust that the person you are appointing to act on your behalf will act with honor, trustworthiness and without abuse of his or her authority? If the answer is no, you should reconsider who you are appointing as agent. As a fellow attorney out of California writes, “consider this: If you don’t trust your agent enough to give him or her a DPOA that takes effect immediately, how does delaying its effect until you’re incapacitated solve the problem? Arguably, the risk of fraud or abuse would be even greater at that time because you’d be unable to monitor what the agent is doing.”[1]
 
            Regardless of which type of power of attorney is best suited for your needs, a power of attorney is always revocable as long as the principal continues to have legal capacity and remains free from any undue influence or outside persuasion. This means that as circumstances change, relationships evolve and assets grow or dwindle, a power of attorney can always be updated to reflect the new state of your affairs.
 
            To explore which options may be best for you or for answers to any questions you may have, please contact my office.



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[1] Wilkerson, Jennifer L. “Durable Power of Attorney: Springing vs. Non-Springing.” Jennifer L. Wilkerson, a Professional Corporation, Attorney at Law, February 5, 2018, www.jwilkerson.net/durable-power-of-attorney-springing-vs-non-springing/.