As we discussed in the previous blog, a power of attorney is the legal vehicle through which a person is able to appoint an attorney-in-fact (or agent) of their choice who will have the authority to make financial or medical decisions on their behalf. The creation of a power of attorney must take place while the principal (the grantor of the power) is legally capable of consenting to it, it cannot take place if the principal has already been incapacitated.
When is a Power of Attorney effective?
Because the power of attorney is created while you – as the principal, are still physically and mentally capable, it may be that you do not want to grant an authorization to another person to make decisions for you until and unless you become incapable of doing so. Or perhaps you would rather that your attorney-in-fact is able to immediately exercise the authority.
There is a paragraph within the power of attorney that allows you to specify when you would like it to become effective. Depending on your personal wishes your power of attorney may be drafted to be either:
- Effective immediately – POA will be effective immediately upon signing; OR
- Springing – POA will become effective only if and when you become incapacitated
Which option is better for me?
The answer to this question is different for each individual and depends on your personal preferences and circumstance. There are benefits and disadvantages to each option.
One major benefit of a power of attorney that is immediately effective is that there is no question about when the attorney-in-fact will be able to begin to exercise decision-making power. When dealing with powers of attorney that are springing only upon incapacitation, courts often require that it must be proven that the principal is indeed incapacitated. This can be an expensive hassle; one that can be eliminated with a POA that is immediately effective.
However, especially for younger clients, there is a disadvantage to an immediate power of attorney. A power of attorney gives an extensive range of power to the chosen attorney-in-fact. This is good because it ensures that you have control over who will be making important decisions for you, and allows them to make those decisions. However, it also gives your attorney-in-fact access to your property and potentially the ability to transfer assets out from underneath you if they have bad intentions. If you are concerned about this possibility, a springing power of attorney can avoid the problem by limiting the attorney-in-fact’s power. It is clearly very important to take time and to carefully consider your selection for your attorney-in-fact.