A general power of attorney (also known as a “financial power of attorney”) is an essential part of estate planning. It guarantees that if you become unable to handle your finances, whether it be managing your investments or just paying your bills, someone else will have the legal authority to handle them for you. That person is called your “agent.”
There are two basic types of financial powers of attorney: “durable” and “springing.” The difference between the two is the time when the power of attorney becomes effective–in other words, the time when the agent actually has the authority to handle your finances.
A durable power of attorney goes into effect as soon as the agent signs an acknowledgement form that is attached to the power of attorney, acknowledging his or her appointment as agent and the powers that come with it. The default rule in Pennsylvania is that if a power of attorney is not labeled as durable or springing, it is treated as durable. This is so because the durable option easily allows the agent to act as soon as is necessary (for example, if you suddenly became ill or were in an accident).
A springing power of attorney, on the other hand, goes into effect only once you become incapacitated or otherwise unable to handle your own affairs. Sounds better, right? But a springing power of attorney can be cumbersome, because it usually requires the agent to show a doctor’s certification to the bank or other institution involved in any financial transactions. This can take time, and also be awkward if the reason for incapacity is dementia or memory loss. Thus, I usually recommend durable powers of attorney. However, a springing power of attorney is an option if you want to be certain of preventing your agent from abusing his or her powers.
The decision between the two types is personal. In any case, it is always wise to appoint an agent whom you trust, as well as an alternate agent in case the first choice is unable to serve.