Giving your agent a license to steal
Q: You wrote about the power of attorney for health care. I have a question about my power of attorney for finances. We have this document as part of the estate plan our attorney put together for us. The POA is, as our attorney calls it, “springing.” As she explains it, I would need to be deemed incapacitated by two physicians for my POA to be effective. My attorney says it is safer this way since the doctor's opinions will need to be presented, along with my POA document, and only then would banks be able to open my accounts to my agent.
While it makes sense, I always like to know why one legal document is chosen over another. A friend of mine has a POA that is immediately effective which he thinks will make things easier. I want to know the difference.
A: The reason we develop a relationship with our estate planning attorney is in hopes that they will give us the best possible advice for our unique situation. Your attorney has, no doubt, had you complete long questionnaires and has spoken with you in-depth about your personal situation, family members (or not), who you plan to appoint as your agent under your power of attorney, and who will be your trustee or executor >> which are usually the same person. Based on your personal circumstances, she has developed an estate plan and I defer to her judgment on whether a springing or immediately effective power of attorney is best for you.
The power of attorney documents we see most often in an estate plan are either springing or immediately effective. As you state, a springing POA has a trigger in the document that allows the agent to step in and assist, should you become incapacitated or otherwise be incapable of attending to your financial affairs. Your document provides that two physicians must agree that you are incapacitated and, presumably, should the time come, they would write a letter to that effect. Some documents provide for one physician's opinion and yet others provide for a “committee,” usually consisting of family members, to agree that you have lost capacity. The letters or statements of incapacity would be presented to financial institutions along with the POA and your agent would be able to step in.
In an immediately effective POA, no incapacity declaration by a doctor or others is needed. Your named agent has immediate powers as soon as you sign the document and, at any time, can help you (or themselves) to your finances. Some attorneys call this “a license to steal” and prefer a springing POA for this reason.
The bottom line is how do these documents work in real life? If a springing POA requires physician's statements, it will take time to get the statements. The physicians will need to see the patient, determine incapacity, and then prepare letters. If a