Future Business Leaders of America (FBLA) Agribusiness Practice Test

What key event triggers a springing power of attorney to become active?

1. Immediate signing by the grantor

2. A significant life event, such as incapacity

3. A financial transaction undertaken by the grantor

4. The end of a specified time period

The correct answer is: A significant life event, such as incapacity

A springing power of attorney is designed to become effective only upon the occurrence of a specific event, typically a significant life event, such as the incapacity of the grantor. This means that the authority given to the designated agent is not immediately activated upon the signing of the document but is instead contingent upon a defined circumstance. The purpose of such a structure is to ensure that the agent can only act on behalf of the grantor when that individual is unable to manage their own affairs due to incapacitation, thereby providing a safeguard for the grantor’s interests. In contrast, immediate signing would activate a regular power of attorney immediately, a financial transaction on its own would not necessarily trigger this specific type of power, and a time period elapsing typically applies to more durable or limited powers of attorney, rather than springing ones. Thus, the occurrence of incapacity is the key factor that distinctly empowers the agent under a springing power of attorney arrangement.