A Springing Power of Attorneyis a legal document that allows someone you appoint as your agent to manage your financial affairs, but only when a specific condition is met—typically, your incapacitation. Unlike a typical Power of Attorney, which takes effect upon signing, a Springing Power of Attorney “springs” to life when you (“the principal”) become unable to handle your own financial matters.
How to Create a Springing Power of Attorney in New Jersey
To create a valid Springing Power of Attorney in New Jersey, be mindful of the following:
- State Clearly that it is Springing: The Power of Attorney should clearly state that it is springing and specify the triggering event, usually incapacitation. The document should also outline how incapacity is determined. In New Jersey, this often requires written certification from two licensed physicians confirming that the principal is unable to manage their affairs.
- Appoint a Trusted Agent: Choose a responsible individual who will act in the your best interest and handle your financial matters effectively.
- Choose Alternates: It is highly recommended that you choose alternate agents in case your first choice is unwilling or unavailable to serve.
- Include Specific Powers: The document should explicitly list the powers granted to the agent, as powers not listed are often not recognized, especially by banks and other financial institutions.
- Meet Legal Requirements: New Jersey law requires the Power of Attorney to be signed before a notary public or an attorney. Because other states may require two witnesses as well, it is recommended that you also sign it before two witnesses. Any person you are designating as an agent should not serve as a witness.
- Distribute Copies: Provide copies to the appointed agent, financial institutions, and any relevant parties who may need to recognize the Power of Attorney when the time comes. Keep the original in a safe place that is accessible by your agent.
Why Choose a Springing Power of Attorney?
A Springing Power of Attorney offers additional protections over an immediate Power of Attorney. Reasons people may choose a Springing Power of Attorney often include:
- Discomfort with Relinquishing Control: Since the agent’s authority only activates upon incapacity, the principal retains sole control of their financial affairs while competent. With an immediate Power of Attorney, your agent may act right away, which may not be desirable if you are uncomfortable with the idea of an immediate Power of Attorney.
- No Close Relatives or Friends Available: Individuals often appoint their spouse, children or a close friend as agent. If you don’t anyone close to you who can serve as your agent, you may want to opt for a Springing Power of Attorney.
- Trust Issues: Perhaps you don’t completely trust your designated agent but still want to appoint the person in case something happens to you. A Springing Power of Attorney may be the appropriate solution in these circumstances.
Ultimately, aSpringing Power of Attorney provides a safeguard against financial mismanagement, as no one can act on the principal’s behalf unless they truly become incapacitated. However, there are potential downsides. Proving incapacity can be challenging, as physicians may be hesitant to certify incompetency, and financial institutions may require additional proof before recognizing the agent’s authority. After all one of the purposes of having a Power of Attorney is to make your life and your loved one’s lives easier often during a difficult time. A Springing Power of Attorney may add extra hurdles and stress.
When Does a Springing Power of Attorney Go Into Effect?
A Springing Power of Attorney becomes effective upon the happening of a condition specified in the document — most commonly when the principal is deemed incapacitated. Typically, this means:
- Two physicians certify in writing that the principal is mentally or physically unable to manage their own affairs.
- The agent presents these certifications along with the Power of Attorney document to banks and financial institutions.
- The entity accepting the Power of Attorney determines that the incapacity provisions have been satisfied.
Because banks and other financial institutions may have their own standards for verifying incapacity, the agent might face hurdles in getting the Power of Attorney recognized. To avoid complications, you should inquire about any such issues with your financial institutions ahead of time and consider opting for an immediate Power of Attorney.
Is a Springing Power of Attorney Different from a Durable Power of Attorney?
No is the short answer. A Durable Power of Attorney remains valid even after the principal becomes incapacitated. However, a Durable Power of Attorney can be either immediate (effective upon signing) or springing (effective upon incapacity). All springing Powers of Attorney must be durable; otherwise, they would become invalid when the principal loses capacity, defeating their purpose.
Conclusion
A Springing Power of Attorney in New Jersey can be a valuable tool for those who wish to retain sole control over their finances while they are capable but ensure that someone can manage their affairs if needed. When drafting a Springing Power of Attorney, it is crucial to carefully define the terms of incapacity and ensure that the document meets all legal requirements to avoid delays or challenges in enforcement. Consulting an estate planning attorney can help tailor a Power of Attorney to fit individual needs and ensure it aligns with New Jersey law.