What Is the Difference Between a Springing and Non-Springing Power of Attorney?

A power of attorney is a document that grants various powers and responsibilities to a trusted third party or “agent” who can act on your behalf. This document usually only allows an agent to make non-medical decisions on your behalf. A power of attorney can be a valuable planning tool that lets you decide in advance who will manage your affairs should you become unable to do so. It can also be a way to avoid expensive guardianship or conservatorship proceedings if you become disabled or incapacitated.

The way a power of attorney is formalized varies from state to state. Some states have particular requirements and wording that must be in a power of attorney for it to be valid and accepted. You may have heard of the terms “springing” and “non-springing” power of attorney and wonder what they mean.

Springing Power of Attorney

A springing power of attorney is a document executed now, but that does not take effect unless the principal becomes incapacitated or a particular event occurs. This type of power of attorney is contingent on something specific happening before it comes into force. If the event or incapacity never occurs, an agent will not be empowered to act on behalf of the principal.

Many people want a springing power of attorney because they feel more comfortable knowing their agent can only exercise powers if a triggering event occurs. This can alleviate any concern that the agent may try to misuse a power of attorney.

A springing power of attorney is not always easy to use. Depending on your jurisdiction, it may be necessary to have a medical professional such as a doctor certify that a triggering condition has occurred.

Let’s say you become medically incapacitated. Where required, the professional will likely have to complete an affidavit attesting to your condition or that certain events occurred. Often, a medical professional will not be comfortable signing an affidavit or may require their own attorney to advise them on how to proceed. This can cause delays that can frustrate an agent’s ability to act, especially in time-sensitive situations.

Additionally, financial institutions may be reluctant to accept this type of power of attorney because it is difficult for them to judge whether you truly are incapacitated or if a triggering event has in fact occurred. A certain amount of caution on the part of financial institutions is understandable: When someone steps forward claiming to represent the account holder, the financial institution wants to verify that the individual indeed has the authority to act for the principal.

Non-Springing Power of Attorney

With a non-springing power of attorney, the agent has the powers granted in the document the moment it is signed by you and the agent(s) you designate. So, even if you are capable of signing for yourself or handling certain transactions, your agent could still sign for you without your involvement.

How Some States Approach Powers of Attorney

Many states have taken steps to address some of these problems. New York, for example, implemented a statutory form in 2021 that, if filled out and executed correctly, financial and other institutions will be more likely to accept. In particular, it has a provision where the agent agrees to reimburse the third party for any claims that may arise against the third party because of reliance on a power of attorney.

To help limit the potential for abuse by an agent, New York’s form also allows a power of attorney to be narrowly tailored to a specific purpose.

The laws of each state will vary when it comes to powers of attorney. For guidance on a springing or non-springing power of attorney, consult a qualified attorney in your area.

What Not to Include in Your Will

If you are considering preparing a will, this is a great first step in planning for the future. After reflecting on the basics, such as whom you want to be in charge of administering your wishes, you may wonder if there’s anything you shouldn’t include in your will. The answer is yes. There are some things that you should avoid.

Personal Preferences or Desires

Sometimes it is best not to state personal or specific feelings in your will. To simplify the administration of your will, you should not make very specific requests or engage in discussions about your feelings.

For example, you may wish for a certain religious ceremony to be performed at your funeral or you want a celebration of life event. However, it is best not to address this in your will.

A will goes through a public and court-supervised probate process. This often occurs well after someone is laid to rest. An executor will not necessarily be able to implement these wishes after the fact.

A better option may be to provide your family with a letter of instruction containing these details. If you want your burial to be done in a certain way, you can prepurchase a burial plot and, in some areas, prepay for specific arrangements. Alternatively, you can create a fund for any event you would like, with a payable-on-death designation to someone you trust.

It is also probably best not to elaborate on personal feelings about others in your will, as this can set the tone for the administration of your estate. For example, your executor may feel some trepidation about being part of a situation where there appears to be hurt feelings or potential conflict from the outset.

Organ Donation

If you wish to be an organ donor, you should not use your will as a place to specify this wish. In most states, there are specific ways to document your desire, such as listing it on your driver’s license. By the time your will is reviewed, it will be too late to do anything about your organ donation wishes.

Health Care or End-of-Life Decisions

Your will is not the right place to document what you would like to happen if you have suffered a substantial and irreversible loss of mental capacity or have an incurable or irreversible condition. You should do this in a living will.

You should also have a separate health care proxy that designates an agent to be able to speak with your doctors and make health care decisions on your behalf should you temporarily become unable to do so.

Be Careful About Leaving Inheritance to a Person With Special Needs

If you wish to provide for a person who has special needs upon your death, it is not a good idea to leave them an outright bequest in your will.

This may disqualify them from critical health and other benefits they need to manage their day-to-day life. It can also put them in a situation where they are forced to place your generous gift in a special needs trust that goes to the government upon their death if not used up. Instead, consider creating a first-party supplemental or special needs trust now or through your will.

Non-Probate Property

Another consideration of what not to include in your will is “non-probate” property. This can encompass many things, but some of the most common examples are:

• Property held in a trust — The main point of placing property in a trust is often to avoid probate. If you have property in a trust, it doesn’t need to be in your will, as there is already a plan for handling it upon your death.

• Property that already has beneficiary designations — For example, including things like your 401(k), IRA, or life insurance in your will can make things unnecessarily complicated or slow things down when it comes to your beneficiaries getting the funds. The best thing to do is to confirm your beneficiary designations are up to date and in line with whom you want to receive the funds.

• Property that is jointly owned with right of survivorship — This property will pass naturally to the other person upon your death. An exception is where the other person is no longer living or has given up their rights to the property in a divorce or otherwise.

The above examples are not exhaustive. There may be more items pertaining to your situation that should not be in your will. Since every estate plan is unique, it is best to speak with your estate planning attorney.

3 Tips When Including Caregivers in Your Estate Planning

November will mark National Family Caregivers Month. You may have a caregiver in your life to whom you wish to bestow your gratitude by designating them as an heir in your estate plan. Whether your caregiver is your own child — or a niece, nephew, grandchild, godchild, stepchild, or even a caregiver who is not related to you — how can you ensure your wishes are fulfilled?

It is your prerogative to leave your property and assets to anyone you would like. Often, the best way to do this is through a will or estate planning. However, you should be aware that in many instances, money or assets left to a caregiver can be viewed with suspicion and potentially subject your planning to legal challenges. To avoid this, consider the following tips:

1. Make your family aware of your plans.

If you would like to leave a financial or other gift to a caregiver, inform your family of your wishes and reasons for your decision. This is especially important if your children or loved ones who don’t live close by cannot witness in person the impact a caregiver may have on your day-to-day life. Without this familiarity, they may be suspicious about a caretaker’s sway over you and believe that person improperly influenced your decisions.

In some states, there are laws that set forth that property exceeding a particular value left to a nonrelative caregiver is presumed to be fraudulent if a will or trust is challenged. If your family is unaware of your wishes, they may assume foul play. Your estate may be subject to an expensive and unnecessary will contest.

2. Don’t wait until the last minute to make changes to your will.

If you wish to give a financial gift to a caregiver who improved the quality of your life, it is best to make any changes or updates or prepare a will when you are not ill or in cognitive decline. Family members who may not be happy with your choice may try to object to your will and use these circumstances to argue you were not of sound mind or there was undue influence on your choices. The earlier in your estate planning journey you make any decisions regarding inheritance to caregivers, the better.

Another item to consider is getting a letter of competency from a physician that certifies you can make informed decisions about your health care, finances, and other matters. It is best to do so contemporaneously with the execution of a will, estate plan, or any revisions to existing documents.

3. Gift money or assets during your lifetime.

You may wish to consider gifting money or assets while you are alive if it would not negatively impact your needs or care. Currently, there is a federal gift and estate tax exclusion of $12.06 million ($24.12 million for married couples). A person can give away — during their lifetime or at death — up to this amount, tax-free. However, there are some items that you should consider before making any significant gifts.

One issue is that many states have their own gift tax rules. For example, New York does not have a gift tax, but it does have a three-year clawback rule. So, any gifts a person made three years before their passing could be “clawed back” and included in calculating the value of a person’s estate for purposes of estate taxes. This could financially affect heirs in your will.

Gifting or transferring assets may also affect your Medicaid eligibility for nursing home or at-home care. Some states allow certain assets to be transferred to caregivers who meet specific criteria without these transfers affecting eligibility. However, do not assume this is applicable in your state without consulting with an attorney.

If you are thinking about bestowing a gift or inheritance on a caregiver, consult with your estate planning attorney.

What Does It Mean to Be Estranged?

Estrangement refers to a breakdown in a relationship, such as a relationship with a spouse or family member, where there is no longer any communication, or communication has become hostile, and the individuals lead separate lives. Although estrangement can significantly impact individuals’ lives, it is not a legal term and, in many cases, might not have a legal effect.

Suppose a man is estranged from his son. They occasionally speak on the phone, but the conversation always ends in a fight. They no longer get together for holidays and do not feel close. However, the father does not have a will, and the son still has the legal right to inherit under his state’s intestacy law. For the father to disinherit his son, he must make a will.

Estate planning lawyers recommend explicitly disinheriting an estranged family member. In many cases, mere bad feelings and lack of contact likely are not sufficient to remove legal rights.

Estranged Spouses

Imagine a couple gets married, but after a few months are not getting along. Rather than getting divorced, one spouse moves away and stops contact. The spouses are estranged.

Estranged couples are still legally married. Although the romantic relationship may have ended, they remain married under the law. Two people could be estranged for decades but nevertheless be officially married. They might live separately and have limited to no communication, but are not divorced or in the process of dissolving the marriage.

If you and your spouse are estranged, you need to get a divorce before you can remarry, divide your marital assets, or disinherit your spouse. Estranged spouses may retain their rights under the marriage, such as inheriting from their spouse, making health care decisions for their spouse as next-of-kin, and having rights to marital assets.

In some states, couples can become legally separated. Under legal separation, a couple may live separately, yet keep the right to be on each other’s health care plans, make medical decisions, inherit property, and reconcile the marriage. In states that do not allow legal separation, spouses may elect estrangement without committing to divorce, thinking they might repair the relationship in the future.

In abandonment cases, one partner leaves the other and might cease all contact, or contact might be sporadic. Abandoned spouses might not dissolve the marriage because they cannot afford an attorney or do not understand the law and think they are already divorced.

Even if you cannot find your marital partner, you can get a divorce. Most jurisdictions require that you or your attorney attempt to locate your estranged spouse to notify them of the divorce filing.

For example, your attorney might research your spouse’s possible addresses and send letters to these addresses informing them of your divorce. If your spouse does not respond, your divorce will be uncontested, and the court can grant your divorce, particularly if you and your spouse do not share assets, which is common in cases where spouses haven’t been together in years.

To learn more about the legal effects of estrangement, speak to an attorney.

Don’t Yet Want Your Heirs to Know About Your Assets? Use a Quiet Trust in Your Estate Plan

Trusts are great tools for leaving assets to your heirs while maintaining control over their access to those assets. In many cases, you would tell your beneficiaries that you have made a trust for them. However, this is not always desirable — and this is where a “quiet” trust may be helpful.

A quiet trust is a trust created much like other trusts, but with little to no notice given to its beneficiaries. A person, called a grantor, places assets in a trust managed by someone who is appointed as a trustee.  

The trust document may provide that income will only be distributed to a beneficiary once specific conditions are met — for example, when the grantor passes away or the beneficiary reaches a certain age. It may further require that no information regarding the accounting of the trust, what the trust owns, or other details will be provided to a beneficiary until certain conditions or timeframes occur.

Advantages of a Quiet Trust

Many people turn to quiet trusts for their children or grandchildren. They want to avoid their heirs relying on these future resources and becoming complacent instead of developing themselves financially or professionally. The idea is that if the beneficiaries don’t know about the money, they will work harder to create their own wealth and develop good financial habits. Many trust grantors hope that this personal development will make it more likely that once their heirs receive income or assets in a trust, they will be better equipped to manage and preserve these resources.

In other situations, you may wish to keep a trust a secret as a matter of privacy. A quiet trust can control the number of people who know about the trust. This can prevent family disputes if one person will receive more than another. It can also prevent heirs from talking too much about what they may receive, misusing the information, or being taken advantage of. For example, some parents may be concerned about their children’s creditors or anyone trying to get close to them for the wrong reasons.

A quiet trust can shield your loved ones from these problems and help them overcome any disincentive to develop themselves to be the best they can be. In addition, just like an ordinary trust, a quiet trust can be used for estate tax planning and avoiding the lengthy and expensive probate process. Depending on how they are set up, quiet trusts can also delay when the assets are taxed as income.

When a Quiet Trust May Not Make Sense

However, there are situations where a quiet trust may not work for you or your family. For one, you may wish to involve your children in your financial planning or discussions about your assets.

Sometimes keeping information secret can also backfire. Your heirs may not be prepared for suddenly receiving large sums of money or investments if they are unaware of them. For example, if you leave them rental property and they have moved to another state by the time they receive it, they may not be able to manage the property easily.

The lack of disclosure may also create a certain amount of distrust or resentment.

Setting Up A Quiet Trust

How you set up a quiet trust will likely vary based on state law. The basic process involves drafting a trust agreement, transferring assets, and implementing the terms of the trust. You should ensure that the person you choose to manage your trust is someone on whom you can rely. The wrong person could mishandle assets, fail to keep proper accounting, or miss deadlines for filing tax returns.

This process is best overseen by an attorney and other professionals, such as a financial planner and CPA familiar with trusts.

For guidance on quiet trusts, consult your attorney.

Who Are Parties to an Estate?

When people pass away, their assets go through probate — a legal process that distributes the person’s assets after death. The parties to an estate are the people involved in the probate process.

Although not technically a party to the estate, the deceased person — called the testator or decedent — is essential. When people make wills, they can choose beneficiaries, selecting people who have an interest in their estate. In the case of those who die without having made a will, state law often dictates who inherits the estate and determines the parties involved.

Parties to an estate include:

• Beneficiaries. Beneficiaries are people named in a will. Testators — people making wills — can leave assets to specific beneficiaries, such as family members and friends. Anyone a testator chooses can be a beneficiary. When making wills, people can leave a beneficiary a portion of the total estate and make specific bequests to individuals, leaving them personal items of sentimental or monetary value.

• Heirs-at-law. State law also provides a framework for who should inherit an estate if a person dies without a will. The distributes or heirs-at-law are the people who have a right to inherit if the decedent died intestate (without a will).

• Fiduciaries. The fiduciary is the person tasked with carrying out the estate plan. If the decedent had a will in place, the fiduciary is the executor named in the will. An administrator will handle their affairs if a person dies without a will. Often, the administrator is a close family member, such as a surviving spouse or child.

• Creditors. Creditors are also parties to an estate. When a person dies with outstanding debt, creditors can receive money from the decedent’s estate.

In specific cases, there might be other parties to an estate:

• Trustees. Trustees become involved when a person establishes a testamentary trust — a trust created in a will.

• Guardians. A guardian may be a party to the estate when a person leaves behind minor children. Individuals can name guardians for underage children in their wills.

Learn more about the basics of estate administration.

No Will? You're Putting Your Kids at Risk

Many people delay the conversation or thoughts of having to prepare a will. Confronting the possibility of one’s death is not easy. However, as the recent death of Anne Heche shows us, not having a will can place a significant burden on your children and cause undesirable complications. Even if difficult, planning ahead may be a better solution than the alternative.

What Happened With Actress Anne Heche?

Anne Heche’s case is a good example of why a person may want to consider creating a will sooner rather than later. Heche was divorced with two children from different relationships when she passed away. Her eldest son is 20 years old, but her younger son is still a minor.

Although they are assumed to be her sole heirs, only her oldest son is of age to administer her estate. He has filed a petition for a guardian ad litem to be put in place to protect his younger brother’s interests. The guardian ad litem may be a financial burden to Heche’s estate, and the costs of securing this professional will potentially reduce the assets available to her sons.

Even though her eldest son is dealing with his mother’s estate, this is undoubtedly very difficult for a person to go through at such a young age. Heche’s eldest son likely will not be able to do this all on his own and will need the services of a probate attorney — likely further increasing the costs of administering her estate and depleting how much is left for her children.

It has also been reported that an inventory and appraisal of her estate is needed to determine its worth and what assets she had. This process requires further professional involvement and fees that her estate must pay. In addition, it is possible that the father of her youngest son may seek to intervene in the estate’s administration to ensure he is treated fairly. Litigation costs could rack up quickly if there is any disagreement related to this.

Preparing a will and other estate planning documents can make legal proceedings significantly less complex and expensive and keep your situation as private as possible. It can also make it easier for your loved ones to know exactly what you want to happen to your assets and possessions.

Who Inherits When You Die Without a Will?

Many people do not realize that if you pass away without a will, your local state laws on intestacy will determine who qualifies as your heirs and inherits your property.

For example, in many states, if a person passes away unmarried but with children, the children will inherit everything. But what if the person had a long-term partner or was engaged to be married? They may have wanted their significant other to inherit some of their assets, but a “default” state law may lead to a different result. Or, what if you have no living children, siblings, parents, or spouse? Your property may go to the government instead of friends, grandchildren, nieces, or nephews. Having a will prevents these scenarios from happening.

Choose a Guardian for Your Children

Another benefit parents should consider is their ability to choose a guardian for their children in advance.

This matters, for example, when the other parent is not living or cannot be located. If a person does not set forth their wishes ahead of time, multiple parties may step up after a person’s death and argue over who should care for any minor children.

A court may be tasked with making this decision, and it may not be what you would have wanted. This can be expensive, traumatic for all involved, and a long process. Courts will generally try to appoint the individual a person has selected if your wishes are in a will or other planning document.

The Bottom Line

The bottom line is that having estate planning documents in place makes your wishes more likely to be honored and less likely that a court will decide what happens. This is also true where you may be incapacitated and unable to voice your wishes. While Anne Heche’s situation is not unusual, it is avoidable.

For information on preparing a will or other estate planning documents, contact your attorney. 

Photo credit: Mingle Media TV