Insight

What’s the difference between the two types of power of attorney?

When drafting your estate plan, you and your attorney must account for what happens to your children and your assets after you die. But your plan must also spell out your wishes for making financial and medical decisions if you’re unable to make those decisions yourself. A crucial component of this plan is the power of attorney (POA).

ABCs of a POA

A POA appoints a trusted representative to make medical or financial decisions on your behalf in the event an accident or illness renders you unconscious or mentally incapacitated. Without it, your loved ones would have to petition a court for guardianship or conservatorship, a costly process that can delay urgent decisions.

POAs in action

A POA is a document under which you, as “principal,” authorize a representative to be your “agent” or “attorney-in-fact,” to act on your behalf. Typically, separate POAs are executed for health care and finances.

A health care POA authorizes your agent — often, a spouse, child or other family member — to make medical decisions on your behalf or consent to or discontinue medical treatment when you’re unable to do so. Depending on the state you live in, the document may also be known as a medical power of attorney or health care proxy. Be aware that a POA for health care is distinguishable from a “living will.”

A POA for property appoints an agent to manage your investments, pay your bills, file tax returns, continue your practice of making annual charitable and family gifts, and otherwise handle your finances, subject to limitations you establish.

To spring or not to spring

Generally, POAs come in two forms: nonspringing, or “durable” — that is, effective immediately — and springing; that is, effective on the occurrence of specified conditions. Typically, springing powers take effect when the principal becomes mentally incapacitated, comatose, or otherwise unable to act for himself or herself.

Nonspringing POAs offer several advantages. Because they’re effective immediately, they allow your agent to act on your behalf for your convenience, not just if you become incapacitated. Also, they avoid the need to make a determination that you’ve become incapacitated, which can result in delays, disputes or even litigation.

A potential disadvantage to a nonspringing POA is the concern that your agent may be tempted to abuse his or her authority or commit fraud.

Given the advantages of a nonspringing POA, and the potential delays associated with a springing POA, it’s usually preferable to use the nonspringing type and to make sure the person you name as agent is someone you trust unconditionally.

If you’re still uncomfortable handing over a POA that takes effect immediately, consider signing a nonspringing POA but have your attorney hold it and deliver it to your agent when needed. Contact us with questions.

© 2019

Related Insights

Exploring business entities: Is an S corporation the right choice? | business consulting services in alexandria va | Weyrich, Cronin & Sorra

Management Advisory Services & Business Consulting

Exploring business entities: Is an S corporation the right choice?

Are you starting a business with partners and deciding on the right entity? An S corporation might be the best choice for your new venture. One…
Nonprofit board members: Watch for financial warning signs | accounting firm in baltimore county md | weyrich, cronin and sorra

Non-Profits

Nonprofit board members: Watch for financial warning signs

In addition to widespread federal funding cuts, many not-for-profit leaders are concerned about a possible economic downturn. If you’re a on…
Questions about taxes and tips? Here are some answers for employers | tax accountants in cecil county | Weyrich, Cronin & Sorra

Tax Prep, Planning & Strategy

Questions about taxes and tips? Here are some answers for employers

Businesses in certain industries employ service workers who receive tips as a large part of their compensation. These businesses include restaurants,…

Connect with us

Use the form below to send us an email. WCS responds directly to all inquiries and general questions within 24 hours of posting.

This contact form is deactivated because you refused to accept Google reCaptcha service which is necessary to validate any messages sent by the form.