What Is the Test for Diminished Capacity That Is Used For a Power of Attorney to Take Over?

A durable power of attorney is a legal document prepared by a competent adult -- the "principal" -- who wants to name a trusted person to act for her when she cannot or does not wish to act for herself. Some powers of attorney, termed springing, only become effective when the principal is incapacitated. Since no clear test exists to determine incapacity, springing powers of attorney are increasingly out of favor.

A power of attorney is a document any competent adult can use to appoint an agent to act on her behalf. Although the procedure and rules vary among jurisdictions, many states offer fill-in power-of-attorney forms, and similar products are available from online legal service providers. Essentially, you must use the form to identify the person you are choosing as an agent and to describe the scope of the authority you are conferring.

Most powers of attorney confer authority to make financial decisions or medical care decisions. Some do both, although the practice is forbidden in some states and the American Bar Association recommends against it. While a normal power of attorney is only valid as long as the principal is mentally competent, a durable power of attorney continues in force after the principal becomes mentally incapacitated, and a springing power of attorney becomes effective only if the principal becomes mentally incompetent.

Determining when a principal is mentally incompetent can be difficult. If a principal falls into a coma, all are in accord as that she is no longer mentally competent to make her own decisions. The call is more difficult in cases of dementia -- it's hard to determine exactly at what point the person is no longer competent. It's also difficult in cases in which the principal's mental alertness fluctuates, such as a poorly controlled mental illness. No standard test for competency exists. Sometimes language in the power of attorney specifies the test; for example, the document may provide that a springing power of attorney will be effective at such time as a determination of the principal's incapacity is made by the principal's doctor. Otherwise, in disputed matters, the decision is generally left to the court who relies on both medical and lay testimony.

Read More: Can a Power of Attorney Be Revoked by a Mentally Incompetent Principal?

Banks and financial institutions don't like springing powers of attorney, since a determination of competence can be difficult and the subject of extended litigation. Recognizing these issues, some states discourage springing powers of attorney and they are now forbidden under the Uniform Power of Attorney Act, enacted by 13 states and introduced in several more as of 2013. The states enacting the uniform act do not invalidate those springing powers of attorney made before enactment; instead, the legislation makes them effective when the principal's primary care physician signs an affidavit stating that the principal lacks capacity to manage his property.