There are several misconceptions we encounter that are inherent in the creation of general powers of attorney. In Part I of this article we discussed misconceptions related to when the power of attorney you have granted terminates and whether your agent is able to conduct trustee functions on your behalf. Another misconception often encountered, is that your power of attorney will not become effective until you have become incapacitated. This misconception is a result of confusion between what is called a “springing power of attorney” (defined under California Probate Code Section 4030) and a non-springing power.
What is a springing power of attorney? California Probate Code Section 4030 defines it as a “power of attorney that by its terms becomes effective at a specified future time or on the occurrence of a specified future event or contingency, including, but not limited to, the subsequent incapacity of the principal.” Thus, such a power “springs” into effect once the specified event or contingency has occurred. For example, you could create a power of attorney that does not become effective until you take your next vacation or business trip to a foreign country.
Although almost any condition could be used as a triggering event, springing powers are most typically used in the context of the principal’s incapacity, meaning that the agent’s power will not take effect until a determination of such incapacity has been made. Keep in mind that a third-party being requested to rely on such a power will require proof of such a determination. Having to obtain proof of your incapacity from a physician stating in writing that you have become incapacitated can be an exhaustive and time-consuming procedure for your agent.
A Uniform Statutory Form Power of Attorney created under Code Section 4401 is, unless modified, in the form of a non-springing power. It is effective immediately, meaning that once you sign it, your agent can begin acting on your behalf right away. This could be dangerous, of course, if you do not completely trust your agent. One way to handle this situation would be to tell your agent not to use your power until you instruct him or her to do so.
If you are interested in creating a power of attorney which would not become effective unless you have become incapacitated, you must add specific language to this effect in your power of attorney document. Code Section 4124 provides the following model language to accomplish this purpose: “This power of attorney shall become effective upon the incapacity of the principal.” Therefore, you could take a Uniform Statutory Form Power of Attorney from Code Section 4401, eliminate the phrase stating the power is “effective immediately,” and add the above sentence to create for yourself a springing power of attorney.
Whether you create a springing or non-springing power of attorney is a decision that should be made according to your individual needs and circumstances. If you feel comfortable with your desired agent, such as your spouse, having the ability to act immediately on your behalf, then you could create a non-springing power (that is, one that becomes effective immediately). On the other hand, if you are designating someone you work with to act as your agent only when you travel, then a springing power of attorney might make more sense for you. It really all comes down to your needs and how well you trust your agent.
A power of attorney is a key element in a comprehensive estate plan. We are here to help you understand and develop such an estate plan to benefit your loved ones.
The above statements are generalizations only and are not to be taken as legal advice for the reader’s particular situation.