Estate Planning & Elder Law Blog

DEAR JONATHAN: I am elderly, not married and have no children. Becoming increasingly aware of my own mortality, I have decided to engage in estate planning for the first time in my life. Interestingly, I am more concerned with those documents whose purpose is to protect me during my lifetime, such as financial and health care durable powers of attorney, than I am with those documents that direct where my estate assets go when I die, such as a will and/or trust.

More specifically, I understand the importance of having financial and health care durable powers of attorney, but I am not the most trusting person in the world and am admittedly a bit of a control freak. Consequently, I don’t want anyone acting for me unless I no longer have the mental faculties to act for myself. Is it possible that these documents can be drafted in such a way?

JONATHAN: Yes.

A health care durable power of attorney, also known in Michigan as a patient advocate designation, generally does not become effective until you are no longer able to participate in medical treatment decisions or are otherwise unable to make informed decisions regarding your care. Until that time, you retain the authority to make your own medical decisions.

A financial durable power of attorney comes in two varieties, a “non-springing” and a “springing” durable power of attorney.

A non-springing durable power of attorney becomes effective immediately upon execution, which means that your agent can act for you even if you still have legal capacity.

A springing durable power of attorney, on the other hand, only becomes effective upon a determination that you are legally incapacitated. In other words, the agent's authority does not "spring" into existence until it has been determined that you are no longer able to manage your own affairs.

Because many individuals share your concern about giving another person immediate authority over their financial affairs, springing durable powers of attorney can initially seem very attractive. However, they are not without disadvantages.

Some of those disadvantages include:

1. Reduced Flexibility. A springing durable power of attorney is substantially less flexible than a non-springing durable power of attorney because it cannot be used unless and until you become legally incapacitated. As a result, your agent cannot assist you with financial matters simply because you are traveling, unavailable, physically unable to handle a task, or would prefer that someone else handle a transaction on your behalf. The agent's authority arises only after the document's incapacity requirements have been satisfied.
2. Proving Incapacity Can Cause Delays. Before an agent may act under a springing durable power of attorney, he or she must typically provide evidence that you have been determined to be legally incapacitated and that you are no longer able to manage your own affairs. Most springing durable powers of attorney require written certification from one or more physicians, or other evidence specified in the document, establishing that the individual is unable to manage his or her financial affairs. Obtaining the necessary certifications can sometimes take time, particularly if physicians are unavailable, reluctant to provide written opinions, or require examinations before rendering a determination. Those delays can become problematic when immediate action is required.
3. Third Parties May Hesitate to Accept the Durable Power of Attorney. Even after an agent obtains the documentation necessary to establish that you are legally incapacitated, the agent may still encounter resistance from banks, brokerage firms, title companies, and other third parties.

Many institutions are more comfortable accepting a non-springing durable power of attorney because the agent's authority is immediately apparent from the document itself. By contrast, a springing durable power of attorney requires the institution to review and evaluate the evidence of incapacity before determining whether the agent has authority to act.

As a result, institutions may require additional documentation, refer the matter to their legal department for review, or otherwise delay the transaction. While these concerns are understandable, they can create additional expense, uncertainty, and inconvenience at a time when prompt action may be necessary.

For these reasons, many estate planning attorneys recommend a non-springing durable power of attorney. Although the agent technically has the authority to act immediately upon the document’s execution most agents do not begin acting unless requested to do so by the principal or circumstances require it.

Perhaps more importantly, executing a non-springing durable power of attorney does not mean that you surrender control of your finances. You retain full authority to manage your own affairs, continue making your own financial decisions, and may revoke the power of attorney at any time so long as you remain legally competent. The document simply ensures that a trusted individual can step in and assist you without unnecessary delay if assistance becomes necessary.

Ultimately, whether a springing or non-springing durable power of attorney is appropriate depends upon your specific circumstances and comfort level.

I recommend meeting with an experienced estate planning attorney to discuss your concerns and objectives. That attorney can explain the advantages and disadvantages of each approach and help you select the option that best balances your desire for control with the practical need for effective planning.

Jonathan J. David is a shareholder with Foster Swift Collins & Smith, PC and has extensive experience preparing a wide variety of lifetime and estate planning documents such as wills, trusts, durable powers of attorney for both financial and health care matters and living wills. Jonathan practices in the firm's Grand Rapids office:

Office - 1700 East Beltline, N.E., Suite 200 Grand Rapids, MI 49525
Phone - 616.726.2243
Email - jdavid@fosterswift.com 

THE INFORMATION CONTAINED IN THIS ARTICLE IS NOT TO BE CONSTRUED AS LEGAL OR TAX ADVICE OR LEGAL OR TAX REPRESENTATION AND SHOULD NOT BE RELIED UPON AS SUCH. FURTHER, THE INFORMATION PROVIDED IS NOT STATE SPECIFIC AND CERTAIN LAWS AND CUSTOMARY PRACTICES WILL VARY FROM STATE TO STATE. IF LEGAL OR TAX ADVICE OR LEGAL OR TAX REPRESENTATION IS DESIRED, PLEASE CONSULT WITH AN ATTORNEY.