Posts Tagged ‘surviving power of attorney’

Durable Powers of Attorney: “Springing” or “Surviving”?

NOVEMBER 7, 2016 VOLUME 23 NUMBER 42
For over four decades, Arizona law has permitted residents to create powers of attorney that continue to be valid even after the signer becomes incapacitated. That simple concept, once thought to be radical, has become widespread: all U.S. states now permit powers of attorney to be “durable.”

To make a power of attorney “durable” under Arizona law, it should include language that indicates the signer intends it to either:

  • Continue in effect even if the signer becomes incapacitated, OR
  • Become effective only if/when the signer becomes incapacitated.

You can read the law in question, Arizona Revised Statutes sections 14-5501 and those following, to see how durable powers of attorney work in Arizona. There is even a basic form for what the signature block might look like.

But what is the difference between the two kinds of durable powers of attorney? Lawyers often refer to them as “surviving” or “springing” powers — the former exist and are operative as soon as signed (they “survive” the later incapacity), while the latter become effective (they “spring” into existence) upon the later incapacity of the signer.

Which is better? Of course that depends on what the signer prefers, but there are some practical considerations that you might not have thought about.

Many of our clients feel uncomfortable about giving their agent(s) the power to handle financial matters immediately. While they completely trust the person they name as agent, those clients think it might be tempting fate to give authority to someone else. They don’t really expect their agent to act unless and until they are unable to take care of things themselves, and prefer to make their powers of attorney the “springing” type.

There are problems with this approach, however. Those problems can include:

  1. How to prove incapacity? How, exactly, will your agent prove that you have become incapacitated? Will it require a letter from your attending physician? Or two letters from two different physicians? Or your consent? How protective do you think you should be? Of course, one of the reasons you are signing a power of attorney is so that we won’t have to initiate legal proceedings to permit your agent to take over your finances. By making the proof of incapacity difficult, you might be reducing the value of the very document itself.
  2. Is there a doctor in the house? Perhaps you have considered the problem described above, and you’re willing to let any doctor (not necessarily your attending physician) certify your incapacity — and you are not planning on requiring a second opinion. Still, it can be quite a challenge to get any medical person to sign a letter saying you’re incapacitated. It might be that your medical care isn’t even being provided by a physician — maybe you’ll be evaluated by a nurse practitioner, or a psychologist. Can we write the document so that your chiropractor could make the decision? And have you tried to get a letter signed by any medical provider in the modern era of HIPAA?
  3. “I’ll be the first to know when I need it.” No, tragically, you won’t. In fact, you’ll probably benefit from assistance for a period of time when you are still capable of doing things yourself. The law has a quaint notion — people are fully competent until some future instant when they suddenly, and demonstrably, become incapacitated. That isn’t actually how it happens. You are much more likely to slowly decline, needing help with some large decisions (perhaps investment management, or organizing assets) long before you absolutely need help with smaller decisions (like signing checks). Consider the importance of letting your agent take over gradually, leaving you in control of as much as you can (and wish to) manage for as long as possible.
  4. Planning on leaving Arizona (even for visits)? Some states (notably Florida) don’t even permit “springing” powers of attorney. Maybe you think it unlikely that you will relocate to Florida, but we are a pretty mobile society. You might well end up in a state where the “springing” power of attorney is problematic — and possibly at a time when you are unable to sign new documents.
  5. Really? You don’t trust your agent? Giving someone a power of attorney is, literally, giving them the tools to misuse your assets. Of course they are not supposed to commingle assets, take your funds or make decisions in their own interest. Some do. You need to make your selection very, very carefully — your agent needs to be completely trustworthy. And if you trust them when you’re incapacitated (when you don’t have the mental acuity to protect yourself), why wouldn’t you trust them right now, when you are able to monitor their actions closely?

As you can probably tell, we are inclined to recommend that people sign “surviving” durable powers of attorney, rather than “springing” powers. That said, clients frequently are just uncomfortable giving immediate authority, and we will respect your decision. Don’t be surprised if we try to convince you to reconsider, though.

Incidentally, the same considerations apply when we consider health care powers of attorney — but there is a different practical reality. Since you will necessarily be present when health care procedures are undertaken, and since medical personnel are almost certainly involved, it is much easier to assess whether you are able to make your own decisions. A good agent will involve you in the decision-making process to the extent that you are able to participate. A good medical provider will do the same.

Making Your Power of Attorney More Useable — and Useful

MAY 26, 2014 VOLUME 21 NUMBER 19

If you have had your estate plan prepared or reviewed by one of the lawyers at Fleming & Curti, PLC, you almost certainly have signed a durable power of attorney. You may have signed a document prepared by another lawyer, or even found one online or in a document kit. Regardless of where you got your power of attorney, it is probably the single most important document in your estate plan. It is the Rodney Dangerfield of legal documents — it seldom gets the respect or attention it deserves.

Why is the power of attorney so important? Because there is a high likelihood that you will experience a period of diminished capacity before your death, and a high likelihood that no probate proceedings will be required when you do die. Your will is an important document, but it has no usefulness while you are still alive. Your health care power of attorney is an important document, but it is less likely to be pivotal in handling your personal affairs at the end of your life. Your trust is important, but even if you transfer all of your assets to the trust’s name there is the possibility that assets will slip out of the trust over the years — making your power of attorney essential to get assets retitled after your capacity diminishes but before your death.

No doubt about it — your financial power of attorney is a central component of your estate plan. It is also probably the single most dangerous document you will ever sign. Think about the power you are giving to the agent you name in your power of attorney: it is a literal license to steal. Of course you can trust your family and close friends — but you should know that when exploitation of vulnerable seniors does occur, it is almost always involves misappropriations using a power of attorney.

So if this document is critically important, and terribly dangerous, what should you consider before signing it? There are number of pieces of advice we can give you about your financial power of attorney:

  1. Sign one. Yes, it is dangerous — but it is important to have one in place. Arizona lawyers will tell you that the Arizona probate process is not as complicated, expensive or time-consuming as people think it is — but the similar process for getting control of living people’s financial affairs (called “conservatorship”) is everything people think they should hate about probate. No power of attorney in place when you become incapacitated? Your spouse can not handle your finances automatically. Your will provides no assistance. Your finances are likely headed to probate court.
  2. Consider opting for a “surviving” power of attorney rather than a “springing” power. Many of our clients are uncomfortable signing a power that could be used while they are still competent to manage their own affairs. They say (and reasonably so) that they want to handle everything themselves so long as they are able to — and there’s no reason to expose their assets to problems unless they become incapable. Fair enough, but if you do not trust your named agent to behave properly while you are still able to watch, why would you ever put them in charge of your affairs precisely when you are most vulnerable? Do you realize that by making the power effective only upon your incapacity, you are forcing us to get some kind of certification that you have become incapacitated? And what about the time when you are just making slightly foolish decisions, or have just become somewhat inattentive — do you really mean to prevent your agent from acting during those times? Nationwide, the trend is toward powers of attorney that “survive” your incapacity, rather than “springing” into existence when you become incapacitated.
  3. Sign your bank’s power of attorney form, too. The powers of attorney we prepare are works of art. They cover countless items that you would never think of, and even your bank’s lawyers would never think of. They are beautifully crafted, and they are worth every penny you pay for them. But your bank is stuck on this odd notion that their two-paragraph form is better, and they will keep trying to get you to sign it. We say: give up. Just sign their form AND the beautifully-crafted power of attorney we prepare. It will make your agent’s job easier. The same thing goes for your brokerage house, too — let’s get their form and get it signed. Let us help you get the right form, too, since the bank teller or brokerage house clerk you talk to will often hand you the wrong form, and you’ll end up creating a joint tenancy account with your agent rather than giving them a power of attorney.
  4. Learn the language. Impress your neighbors, friends, and bankers. The person named in your power of attorney to handle your affairs is called your “agent” (or, if you want to be more old-fashioned, your “attorney-in-fact”). They are not your power of attorney — that term is just for the document itself. So when your agent signs documents for you, they can sign as something like: “John Doe, as agent for Janet Rose” or “Janet Rose, by her agent John Doe.” This, of course, assumes that your name is Janet Rose, and your agent’s name is John Doe. You might need to make appropriate changes.
  5. Make sure your agent knows where to find the document. You don’t have to give any of your estate planning documents to your family while you’re still alive. Some people prefer privacy. Some do like to hand out copies, and that is also fine. But whether you actually give a copy of the power of attorney to your agent or not, we do urge you to let him or her know that it will be his or her job to get the document and take charge if something should happen to you. That means you have to keep the document somewhere it can be located, and update your information as you update the document.
  6. Update your power of attorney. Speaking of keeping things current, we do think it is a good idea to sign a new power of attorney every five years or so — even if you are not making any changes. Our beautiful form (see above) changes gradually over time as we add new items (our latest additions to the language of most powers of attorney: provisions for pets, and for your online accounts). The law changes gradually, and old documents are usually grandfathered in when there are changes. But it just makes sense to try to have a document that was signed in the same decade (or so) as it is being used.

We hope those tips help. Let us know if they trigger anything that makes you think you need to update your documents.

 

Pondering Your Power of Attorney

SEPTEMBER 16, 2013 VOLUME 20 NUMBER 35

Do you have a power of attorney? If so, do you know how it works? Is a “springing” power of attorney the best way for you to keep authority over your health care and financial decisions until a transition is needed? Many people have powers of attorney but do not understand how they work.

The power of attorney gives authority to an individual (the “agent” or “attorney in fact”) to make financial or medical decisions for another person (the “principal”) in the event of incapacity. Although sometimes health care powers of attorney are incorporated into general durable power of attorney, most people prefer to separate the two kinds of documents. A health care power of attorney gives an agent duties to make medical-related decisions and a durable power of attorney authorizes an agent to handle financial matters. While some states may give your health care agent the power to authority an autopsy, organ donation or burial arrangements, no American jurisdiction recognizes a power of attorney after the death of the principal. If you want to refresher on the basics, you might want to look at this white paper written by Slade V. Dukes.

One of the most important things to understand about your durable or health care power of attorney is whether it is a springing power or surviving power. A springing power of attorney is not immediately effective when you, the principal, sign it. Instead, the power can only become effective and “spring” into action when a specified event occurs like your incapacity or disability. A surviving power of attorney is effective the moment you sign it and survives even if you become disabled or incapacitated.

So, is it dangerous to have a surviving power of attorney and give your agent immediate authority to act on your behalf? Does it make more sense to create a springing power of attorney that only gives your agent authority to act when you really need the help? Now that you’re digging through your desk door in a panic, trying to decipher if your powers of attorney are springing or surviving — relax. The answer is that it depends.

Although Arizona recognizes springing powers of attorney, we see a general trend away from the use of springing powers. Legal standards of capacity are different then medical standards of capacity, so not all doctor’s letters are created equal. Even with a notarized doctor’s letter, it is not uncommon for a financial institution to object that a springing power of attorney has not, well, sprung. There is at least one state, Florida, that does not recognize springing powers of attorney in any form. A general consensus among practitioners seems to be that though springing powers can be used in some circumstances, they should not be the default.

Our office drafts both springing and surviving powers of attorney for our clients. And before we draft a power of attorney, it helps to learn about our clients’ health and family relationships. Making a thoughtful decision about selection of your agent is a critical part of preparing a power of attorney that will serve you well. In some cases, where there is a history of family conflict or a client has complex business or financial arrangements, there may be good reasons to create a springing power of attorney. In other cases, springing powers of attorney can be problematic and create hurdles that may make it difficult for an agent to act when the call for help comes.

So which is the right answer for you? Here’s a quick question for you to consider: do you completely and implicitly trust the person you are naming as agent? If your answer is “yes,” then it should not cause any problem to give them immediate authority to act. If the answer is “no,” then we need to talk about your choice of agent. Think about it: if you do not trust them enough to give them immediate authority, then perhaps they are not the right agent for you.

It’s easy to be glib, however, and a lot harder to actually live your life. Sometimes there are not good choices. Sometimes people may simply not be comfortable with an immediately effective power of attorney. When we prepare your estate plan, you should talk through your concerns and preferences — the point of signing a power of attorney is to give you peace of mind, not to make you more anxious.

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