Jay didn’t have a power of attorney (POA) as part of his estate plan when a car accident left him in a coma and on life support. The result was that Jay’s family had to petition a court to make medical decisions on his behalf. If Jay had had a POA, his family would have been able to forgo the court petition and make medical decisions immediately. If a POA isn’t part of your estate plan, it’s time to learn more about it.

POA in action

In a nutshell, a POA appoints a trusted representative to make medical or financial decisions on your behalf in the event an accident or illness renders you unconscious or mentally incapacitated. Without it, your loved ones would have to petition a court for guardianship or conservatorship, a costly process that can delay urgent decisions.

A POA is a document under which you, as “principal,” authorize a representative to be your “agent” or “attorney-in-fact,” to act on your behalf. Typically, separate POAs are executed for health care and property.

A POA for health care authorizes your agent — often, a spouse, child or other family member — to make medical decisions on your behalf or consent to or discontinue medical treatment when you’re unable to do so. Depending on the state you live in, the document may also be known as a medical power of attorney or health care proxy.

A POA for property appoints an agent to manage your investments, pay your bills, file tax returns, continue your practice of making annual charitable and family gifts, and otherwise handle your finances, subject to limitations you establish.

Nonspringing advantages

Generally, POAs come in two forms: nonspringing, or “durable” — that is, effective immediately — and springing; that is, effective on the occurrence of specified conditions. Typically, springing powers take effect when the principal becomes mentally incapacitated, comatose, or otherwise unable to act for himself or herself.

Nonspringing POAs offer several advantages:

• Because they’re effective immediately, they allow your agent to act on your behalf for your convenience, not just when you’re incapacitated. For example, if you sign a durable POA for property, you might ask your agent to conduct a business or real estate transaction in your place while you’re traveling abroad.
• They avoid the need for a determination that you’ve become incapacitated, which can result in delays, disputes or even litigation. This allows your agents to act quickly in an emergency, making critical medical decisions or handling urgent financial matters without having to wait, for example, for one or more treating physicians to examine you and certify that you’re incapacitated.

A potential disadvantage to a nonspringing POA — and the main reason some people opt for a springing POA — is the concern that your agent may be tempted to abuse his or her authority or commit fraud. But consider this: If you don’t trust your agent enough to give him or her a POA that takes effect immediately, how does delaying its effect until you’re deemed incapacitated solve the problem? Arguably, the risk of fraud or abuse is even greater at that time because you’re unable to protect yourself.

Given the advantages of a nonspringing POA, and the potential delays associated with a springing POA, it’s usually preferable to use a nonspringing POA and to make sure the person you name as agent is someone you trust unconditionally.

Take action sooner rather than later

It’s important to prepare and sign a POA as soon as possible because you don’t know when you might need it. And because some health care providers and financial institutions may not honor POAs that were executed years earlier, sign new documents every few years.