A general power of attorney is no longer effective when the principal becomes incompetent. However, a general durable power of attorney will remain in effect.
FedWeek’s recent article entitled “When a Durable Power of Attorney Might Be Preferred” explains that many states allow powers of attorney to be “springing.” These powers are executed today but don’t become effective until later, when some specified event occurs, like when the principal’s physician states in writing that the principal has become incapacitated.
Springing powers add an additional level of uncertainty at a time when clarity will be needed. some doctors also won’t want to go on record that someone is incapacitated, because of their potential liability.
When the principal goes in and out of incapacity also raises questions about the application of a springing power.
After you have a one drawn up, signed, and witnessed, you should file copies with the financial institutions where you do business.
Make certain that your bank or brokerage firm will accept it. If there’s a problem, and you know in advance, you can work with the institution to make sure that the document will be honored.
Many financial institutions also have their own power of attorney forms they prefer to be used. They may not accept one drafted by your estate planning attorney.
A power of attorney technically lasts forever. However, in reality, if the document looks to be stale, a financial institution may have issues with it.
As a result, review it every five years or so with an experienced estate planning attorney.
If there’s been a change in your circumstances, you may want to modify the document.
Reference: FedWeek (April 15, 2021) “When a Durable Power of Attorney Might Be Preferred”