Should I Get a Durable or a Springing Financial Power of Attorney?

A financial power of attorney (FPOA) is important to have. It gives someone else the authority to handle your financial affairs. If you have the capacity to make financial decisions, the agent that you choose can still act at your direction, without you giving up the power to act on your own behalf. If you want to get a FPOA and you only want it to last for as long as you have the capacity to manage the agent, then you should get a general power of attorney. A general power of attorney has many uses, but it is not useful as part of your incapacity plan. If you are planning for incapacity (and you should), then you need a durable power of attorney. The reason that this type of power is durable is because it survives your incapacity. A durable power can either take effect when it is signed (we will call this a durable FPOA), or when criteria set forth in the document are satisfied (we will call this a springing FPOA). In this article we will look at these two types of durable financial powers of attorney and help you decide what is right for you.

A FPOA that continues after you become incapacitated is an insurance policy that everyone over the age of 18 needs. This document will go a long way in protecting you should you become unable to manage your financial affairs. For example, if rent an apartment, and get into a car accident that incapacitates you for several months, with a FPOA, your agent will be able to make sure your rent is paid on time, so that, when you are ready to come home, you will still have an apartment. This also goes for credit cards, mortgages, government benefits and any other financial affairs that you choose to entrust to your agent to handle. The decision that you have to make is when to grant your agent the power to manage those affairs. Keep in mind that an agent has a fiduciary responsibility to you as the principal; to act in good faith as you would want them to. Still, many are wary of giving anyone else this degree of authority over their financial affairs. Many also fear that once they give an agent authority to act on their behalf, they are no longer able to act for themselves, but this is not the case.

If you do not want anyone to be able to act for you while you are still able to act for yourself, then you want a Springing FPOA. Generally, a person who gets a Springing FPOA will make it a criterion of the document that the agent does not have the ability to handle the principal’s financial affairs until the principal is incapacitated. You can then define what qualifies as incapacity and give specifics about how it is to be determined. For example you can specify that multiple doctors must formally declare that you are incapacitated, or even give the name of a trusted doctor who must make such a determination. For this reason, the springing FPOA is a very flexible document. The springing FPOA is not without its problems however. If the criteria are not written very carefully, there could be ambiguity about when the FPOA goes into effect. There can be a great deal of gray area when it comes to incapacity. A person could have good and bad days; their facilities could diminish but not to the point where a doctor finds them incapacitated, etc. For this reason, a springing FPOA can be delayed from going into effect. In this circumstance, the agent will be unable to assist until the formal declaration is made. With a standard durable FPOA, this is not a problem. The agent has the ability to help from the time the FPOA is signed. No further action is required before the agent can handle the principal’s financial affairs.

In conclusion,

  • A springing FPOA is a flexible document, which also carries with it the risk of delay and ambiguity.

  • A standard durable FPOA does not have the flexibility or the risk of the springing FPOA, but it also gives your agent the ability to manage your affairs before you might actually want them to have that ability.

  • Both are valuable tools, but both also have flaws. Which one you choose to use often comes down to what you value, your risk of incapacity and your age.

Talk to a qualified attorney, like Matthew Medaglia at the Law Offices of Matthew F Medaglia, who can assist you in weighing your options and choosing what is right for you.

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