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My mother has Parkinson’s and dementia. During a recent hospitalization Dr.’s filled out a form declaring her incompetent and medical decisions fell to POA (my sister). Is this entirely separate from activating the financial POA? It seems to me that if a person can’t make their own medical decisions they certainly can’t make financial ones. Is there a formal procedure for this, like filing somewhere? We are about to sell my mom's house and I am wondering how we handle that. Does she sign papers or POA?

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This "springing" is new to me. My Moms POAs read when she became incompetent. No one ever asked me to prove her incompetence. I am in NJ. So I guess you need to read you POA.

I would say that the doctors letter would include her financial too.
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If they're both springing DPOAs then it would seem logical to assume that if one springs then so does the other...

If your mother created these with the help of a family lawyer, I'd give the lawyer a quick call and ask what to do.

If you can't do that, go online and look up something like "DPOA registration requirements in [your state]."

If you're not sure what sort of financial POA you have, read through the document itself carefully and see if it gives you any guidance.
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Does someone have financial POA? You will need that to sell the home. Is mom competent to sign it? Or now that doc's have declared her incompetent a court ordered conservatorship may be necessary.
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