Pennsylvania Court Adds Another Reason Why "Springing" Powers Should Rarely Be Used

"Springing" powers of attorney are often advocated by those who seek to reduce the dangers of a broader General Durable Power of Attorney instrument. In a "springing" power of attorney, the authority conferred to the agent only “springs” into place upon incompetency or incapacity. 

Personally, I rarely utilize springing powers. I recently wrote that these instruments: 

"can present a challenge to orderly succession of decision-making because dementia and cognitive impairment are not “bright line” determinations.  The uncertainty regarding whether the conditions have been satisfied can leave the family powerless to effectively protect assets [for or] from a vulnerable senior, particularly given the prevalence of fraud and financial abuse by third parties. Remember these documents are largely reliant upon third parties accepting them, and if they are rejected, our only real alternative may be court and much more invasive and expensive guardianship/conservatorship.  

Attorney Betsy Simmons Hannibal outlined the disadvantages of "springing" powers writing for NOLO.com:

• Delay. Instead of being able to use the power of attorney as soon as the need arises, the agent must get a “determination” of your incapacity before using the document. In other words, someone – usually a doctor – must certify that you can no longer make your own decisions. This could take days or weeks and disrupt the handling of your finances.
• HIPAA/Privacy issues. State and federal laws, including the Health Insurance and Portability Act (HIPAA), protect your right to keep medical information private. This means that doctors can release information about your medical condition only under very limited conditions. To certify your incapacity, your agent will need to provide proof that the doctor may legally release information about you to your agent. You may be able to resolve this issue by completing a release form before you become incapacitated. However your agent could still run into problems caused by bureaucracy or by the doctor’s confusion about what is legally required. Navigating these issues could cause serious headaches and delays for your agent.
• Definition of incapacity. To state the obvious, if your power of attorney requires you to be incapacitated, then you’ll have to be incapacitated before your agent can help you manage your finances. But what does “incapacity” mean, and to whom? If you make a springing power of attorney, your document will have to define incapacity. Then, when it comes time for the determination, your doctor will have to agree that you meet that definition. But how do you know now what health changes will cause you to need help managing your finances? What if you want help before you become incapacitated as defined by your document? What if you have some good days and some bad days? What if your agent or your lawyer believes you no longer have capacity, but your doctor disagrees? These gray areas may make it difficult, if not impossible, for your agent to help you when you need it. 

A Pennsylvania appeals court has added one more significant concern regarding these instruments; a court may utterly ignore the "springing" limitation and confer authority to an agent even when there is no incompetency or incapacity,  based upon the "circumstances" in a particular case.  The court  ruled that an agent may act on behalf of a principal under a springing power of attorney, even if the principal has not been declared incompetent if the parties intended to enter into a general power of attorney as supported by the evidence.   Stecker, et al v. v. Goosley, et al. (Pa. Super. Ct., No. 1266 EDA 2020, April 15, 2021).

Mercedes R. Goosley was the owner of a residential property in Pennsylvania. In 2013, she gave one of her six children, Joseph, power of attorney using a boilerplate form that Joseph downloaded from the internet.  Unbeknownst to Joseph, the power of attorney required Mercedes to be declared incompetent for Joseph to act as her agent. In 2015, Mercedes moved into Joseph’s home and lived with him for two years under his care. In 2017, at the age of 90, she entered a nursing home.

Without a declaration of Mercedes’ incompetency, Joseph then listed her home for sale and accepted a purchase offer from the Santos family as agent for his mother under the power of attorney. At the time, Joseph’s brother, William, was living in the home. Joseph instructed William to move out prior to the settlement date of March 15, 2018. On February 27, however, William obtained the deed for the residence from Mercedes and refused to proceed with the sale. On March 28, the Santos family filed a complaint in equity against Mercedes, Joseph and William.

Following a trial in January 2020, the court declared the conveyance from Mercedes to William null and void and granted specific performance to the Santos family. Mercedes died shortly after the trial. Judgment in favor of the Santos family was entered and William appealed, arguing that Joseph lacked the authority to act as his mother’s agent and that William needed to protect his interest in the home under Medicaid’s caregiver exemption.

The Superior Court of Pennsylvania affirmed the judgment. The court found that Joseph had the authority to enter into a sales agreement on behalf of Mercedes even without a declaration of her incompetency. The court determined that the parties had intended to execute a general power of attorney as evidenced by the fact that Joseph had held himself out as Mercedes’ agent since 2013 and routinely conducted affairs on her behalf without Mercedes restricting or objecting to his agency. Further, after learning that the 2013 document was not a general power of attorney, Mercedes and Joseph executed a new, general power of attorney and Joseph continued to act as her agent.

The court further rejected William’s contention that he was justified in interfering with the sales agreement to protect his legal interest in the home under the caregiver exemption, finding that he did not care for his mother while living in her home.

At first glance, this decision appears reasonable.  Careful consideration, nonetheless, raises questions.  How, for example, was the court able to determine that there wasn't a  "creep" in the agent's use of authority corresponding with the principal's declining capabilities?  What prevents every agent from simply expanding their authority incrementally until the principal is incapable of objecting or protesting?  How did the court determine that the agent was acting under the conferral of authority in the earliest days after execution of the instrument, and not acting with the expressed consent of the principal who was independently able to ratify decisions to third parties?  What did the court make of the fact that the agent selected the instrument conferring authority, which might have caused the principal comfort in conferring authority to the agent while the  principal was still healthy and able to make decisions?  For example, in a contractual relationship, the instrument is construed against the drafting party.  

Simply, "springing" powers don't provide the safety or protections sought, and present the parties and the estate other challenges.  The better strategy in most cases is to confer authority to a person in whom the principal has trust and confidence.