If you’re considering designating power of attorney, you may have heard there are several different kinds. In particular, a big division exists between springing power of attorney and durable power of attorney. A springing power of attorney is called that because it “springs” into action if you become incapacitated. Durable power of attorney becomes effective as soon as you sign the document, and continues to be effective if you are incapacitated.
Giving someone power of attorney is a big deal. They have control over all your financial assets (separately, you can give someone medical power of attorney, empowering them to make healthcare choices for you). That control means they could empty your bank account, manage and spend your investments and assets, among other powers. While having one is a good idea and part of responsible estate planning, think carefully about what kind is right for you. Some power of attorney agreements are general, granting broad powers to the designee, while others are limited, with spelled-out powers.
State laws differ on the particulars of power of attorney, and some financial institutions may require their own versions. If you do choose a springing power of attorney, you should be sure to define exactly what kind of event and incapacitation means the power of attorney goes into effect. Otherwise the process might have to be slowed down by court procedures to determine if the power of attorney has been triggered.
Given the serious nature and broad-ranging scope of a power of attorney designation, you may be thinking you’d rather pick the springing option, to limit your power of attorney designee’s reach. It may seem less scary to hand off that power only when you are actually in trouble. But in reality most abuses of power of attorney status occur when the principal is incapacitated and can’t monitor their designee effectively. Giving someone power of attorney is such a huge responsibility that you shouldn’t choose a springing option based on a lack of trust. If you have doubts about your designee’s trustworthiness, you shouldn’t be handing off power of attorney to them at all.
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