Estate planning typically focuses on what happens to your assets when you die. But it’s equally important (some might say more important) to have a plan for making critical financial and medical decisions if you’re unable to make those decisions yourself.
SmolenPlevy Principals Jason Smolen and Dan Ruttenberg say that’s where the power of attorney (POA) comes in.
What is a power of attorney (POA)?
A POA appoints a trusted representative (the “agent”) who can make medical or financial decisions on your behalf in the event an accident or illness renders you unconscious or mentally incapacitated. Typically, separate POAs are executed for health care and property. Without them, your loved ones would have to petition a court for guardianship or conservatorship, a costly process that can delay urgent decisions.
“Depending on the state you live in,” says Ruttenberg, “the health care POA document may also be known as a ‘medical power of attorney’ or ‘health care proxy.’”
Should I have a springing or non-springing power of attorney?
A question that people often struggle with is whether a POA should be springing or non-springing.
To spring or not to spring? A springing POA is effective on the occurrence of specified conditions; a non-springing, or “durable,” POA is effective immediately. Typically, springing powers would take effect if you were to become mentally incapacitated, comatose or otherwise unable to act for yourself.
A non-springing power of attorney offers two advantages:
It allows your agent to act on your behalf for your convenience, not just when you’re incapacitated. “For example, if you’re traveling out of the country for an extended period of time, your POA for property agent could pay bills and handle other financial matters for you in your absence,” explains Smolen.
It avoids the need for a determination that you’ve become incapacitated, which can result in delays, disputes or even litigation. This allows your agent to act quickly in an emergency, making critical medical decisions or handling urgent financial matters without having to wait, for example, for one or more treating physicians to examine you and certify that you’re incapacitated.
A disadvantage to a non-springing power of attorney
A potential disadvantage to a non-springing POA — and a common reason people opt for a springing POA — is the concern that the agent may be tempted to commit fraud or otherwise abuse his or her authority.
“If you don’t trust your agent enough to give him or her a POA that takes effect immediately, how does delaying its effect until you’re incapacitated solve the problem?” asks Ruttenberg. 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.
Which one should I choose?
What to do? Given the advantages of a non-springing POA, and the potential delays associated with a springing POA, a non-springing POA is generally preferable. Just make sure the person you name as an agent is someone you trust unconditionally. Contact Jason Smolen at jdsmolen@smolenplevy.com and Dan Ruttenberg at dhruttenberg@smolenplevy.com with any questions regarding POAs.
About the Authors
Jason Smolen
Jason Smolen is a founding principal of SmolenPlevy. Smolen’s knowledge of complex estate and business issues has drawn the attention of ABC News, USA Today, E! Online, Realty Times and the Bank of America Small Business Online Community. Mr. Smolen is a graduate of the City College of the City University of New York and the George Mason University School of Law. Smolen also serves as a board member of a local citizens association and recently co-authored an article titled Why You Should Think About Spousal Limited Access Trusts (SLATS).
Daniel H. Ruttenberg
Daniel H. Ruttenberg, JD, CPA, LLM is a principal with the firm. Mr. Ruttenberg received his Bachelor of Science degree with a double major in Accounting and Finance from the University of Maryland. He earned his Juris Doctor with Honors from George Mason University School of Law and his Master of Laws in Taxation with Distinction from Georgetown University Law Center. Mr. Ruttenberg also served as the Director of the Fairfax Bar Association (FBA) for seven years. During this period, he was also elected president – the youngest in FBA history and served as a member of the Board of Directors for the Fairfax Law Foundation.
