What is a “Springing” Power?
Several recent posts have explained the functions of various estate planning tools that are known by their acronyms, such as QTIP and ILIT. This last posting in our series will cover the term ”springing”. A springing power is given to an attorney-in-fact or a trustee when a certain specific event occurs. Springing powers are most commonly found in the estate planning documents that are drawn up to prepare for possible incapacity or mental incompetence. Good examples are durable powers of attorney for financial affairs and/or medical affairs. These instruments appoint someone to handle the financial or medical affairs of another individual. However, the attorney-in-fact who is named in these documents does not receive the power immediately. Rather, the authority and power to make the financial or medical decision “springs” into being when the principal (who executed the document) is declared incompetent or unable to make such decisions for themselves.
Generally, the springing event will be clearly defined with verbiage such as “the power shall become effective only upon the disability or incapacity of the principal, as determined by his/her health care provider and one other licensed physician.” Likewise, it is prudent to name a second individual as a successor attorney-in-fact if for some reason, the primary attorney-in-fact is unable or unwilling to serve.
If you would like to learn more about these and other wise financial planning moves, please contact us through our Level 5 Financial LLC website or via phone at 719-323-1240. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.