Financial Powers of Attorney

To Spring or Not to Spring a Durable Power of Attorney

by Rania Combs

Every adult should have a durable power of attorney.

What is a Durable Power of Attorney?

A durable power of attorney is a document that will allow you to appoint someone you trust to engage in specified business, financial and legal transactions on your behalf. It is called “durable” because it does not terminate if you become incapacitated.

If you become incapacitated and do not have a durable power of attorney, a guardianship may be necessary to allow someone to manage your financial affairs.

To Spring or Not to Spring

Powers of attorney can become effective immediately or can spring into effect when you become incapacitated. In the case of a springing durable power of attorney, you may define the disability that would trigger the durable power of attorney to take effect. If the disability is not defined, then you would be considered disabled if a physician certifies in writing that you are incapable of managing your financial affairs.

The powers granted to the agent in a durable power of attorney are broad and sweeping. They would allow your agents to wreak havoc on your finances if they were not trustworthy. Your agents could sell your property and drain your bank accounts, so it is very important that you trust the person you have appointed.

Because durable powers of attorney are so powerful, clients are often concerned about the risks of granting the power to someone immediately, even though that is usually my recommendation. I recommend that the power of attorney be drafted to go into effect immediately rather than upon my clients’ incapacity for the following reasons:

  1. If powers of attorney are written to go into effect upon your incapacity, then the agent would be required to get an affidavit from a physician saying that you are mentally incapable of handling your financial affairs before being able to act. Having to jump through these hoops may cause delay and may also prevent the agent from helping you with your financial affairs before you have been officially diagnosed as disabled or incapacitated. Circumstances when it may be helpful for your agent handle financial matters for you before you are incapacitated are numerous. For example:
    • Spouses could purchase a vehicle if the other spouse is otherwise occupied, or handle banking transactions for one another if one of them is ill.
    • An adult child who is your agent could contact your credit card company for you to address a possible fraud on your account or ask questions about a bill you received.
  2. Another reason I recommend the power of attorney go into effect immediately is because they tend to be better accepted by financial institutions that way. Banks and other financial institution are more reluctant to accept springing powers of attorney because they are concerned about whether the triggering event has actually occurred. This can sometimes cause friction that could have been avoided if the power of attorney became effective immediately.

Tips for Minimizing Abuse

The best way to minimize the risk for abuse is to choose your agent wisely. The person you select as your power of attorney should be someone who you trust implicitly to do what is in your best interest. Remember that your agent could cause more damage when you are incapacitated than when you are capable of managing your financial affairs. So if the thought of giving that person immediate authority makes you uncomfortable, then chances are you should reconsider your choice.

As an added layer of protection, you should keep your power of attorney in a safe place, and simply tell your agent where the document is located. Your agent will not be able to act without having the document in hand; however, if you become incapacitated, they would be able to retrieve the power of attorney and act immediately without any hurdles.

Keeping it in a safe place rather than giving it to your agent would also allow you to revoke it easily. It’s always a good idea to reconsider your choices periodically. If the person you name as your agent has become estranged or acted in an untrustworthy manner, you should revoke your power of attorney and appoint someone new.

For more information about revoking a power of attorney, read: How Do I Revoke a Durable Power of Attorney in Texas.

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