Why a Springing Power of Attorney Is a Bad Idea – and What to Do Instead
The springing power of attorney (POA) looks like a great idea at first glance: The POA “springs” into effect if and when the principal becomes incapacitated. Only then does the agent have legal authority to act on behalf of the principal according to the terms of the POA.
A springing power of attorney (only used for financial POAs, not health care POAs) addresses a real concern many people have, which is abuse. What’s to stop an unscrupulous agent from abusing their powers under a regular durable POA while the principal is still mentally sound? A springing POA ensures this can’t happen. Read more about different kinds of POAs.
But we do not use springing POAs in our practice here at the Gem McDowell Law Group. Here are some of the problems we’ve seen with springing POAs, and what we use instead.
Problems with Springing POAs
The word “springing” makes people think the POA will come into effect quickly and easily after the principal becomes incapacitated. But medical incapacity and legal incapacity are not the same thing. In practice, the process often takes a couple weeks even in the best of circumstances; in challenging circumstances, it can take much longer. Here’s why.
It takes longer than people expect to have incapacity declared.
Springing POAs commonly require one or two physicians to declare the incapacity of the principal before it goes into effect. Just getting on the schedule of the physician(s) for an evaluation and completing required testing can take days or weeks, even in the best of circumstances. Until incapacity is declared, the POA is useless.
That’s for incapacity for cognitive causes like dementia or brain injury. South Carolina law also provides for incapacity due to physical absence, if someone is missing, detained, incarcerated, or out of the country and unable to return. Getting the right paperwork to have incapacity declared in these circumstances often takes even longer.
Identifying “incapacity” is challenging, and a physician may refuse to do so.
When does someone cross the line into “incapacity”? South Carolina Code § 62-8-109 defines it as the “inability of an individual to manage property or business affairs.” Incapacity due to cognitive decline from dementia or brain damage can be difficult to pin down; it’s common for people with cognitive decline to have good days and bad days, which makes the physician’s job challenging.
A physician may also refuse to declare a patient incapacitated over concerns of financial abuse or to limit his or her own liability. In this case, the agent must turn to the court to have the principal declared incapacitated. This adds even more time, and substantially more stress, to the process.
Third parties may refuse to honor the POA.
In the best of circumstances, it will take just a few days for a bank or other financial institution to complete its own internal compliance process to verify the legitimacy of the POA and the physician letter(s).
But they can and will refuse to honor a POA if its validity has not been proven to their satisfaction. Under SC Code § 62-8-120, a person may initially refuse to accept a POA and require a certification from counsel that the POA is valid, which can add a delay of two weeks or more.
It often costs money.
Paying for the medical evaluation(s) and testing often costs money out of pocket, and in some circumstances, additional attorney’s fees or court fees may be required, too. This factor is regularly overlooked by proponents of springing POAs.
Alternative to the Springing POA
Springing POAs have been falling out of favor as more people realize their challenges and limitations. As stated above, we do not draft springing POAs for our clients in our law firm.
Instead, we draft a durable POA – a power of attorney that’s in effect whether the principal is incapacitated or not – but hold it until needed. The document stays here in our office safe until the principal (or an authorized agent designated by the principal) tells us it’s needed. This may happen when the principal is sickly, elderly, or feeble, or it can occur earlier, if the principal feels more comfortable with that.
At that point, we file it with the county. Recording electronically typically takes just one business day. The POA immediately goes in effect once recorded; no doctor visits, no tests, no additional time required.
Do you need a new financial POA as part of your estate plan, or do you have a POA that needs reviewing to ensure it’s up to date? Give us a call here at the Gem McDowell Law Group. We serve individuals, families, and businesses here in South Carolina from our offices in Myrtle Beach and Mt, Pleasant. Call today to schedule your free, no-obligation consultation at 843-284-1021.
