The Importance of a Durable Power of Attorney
A durable power of attorney allows you to appoint another person to make decisions for you if you lose the mental capacity to make decisions on your own. Choosing someone who will act as your power of attorney is an important decision that should only be made after careful consideration and a thorough discussion about the duties and responsibilities that must be followed when the time occurs.
A power of attorney (POA) is an important part of an estate plan that can be used to plan for your future and protect your assets and can be tailored to meet your specific needs.
To have a power of attorney drafted or ensure that it complies with Michigan’s durable power of attorney law that went into effect in May 2012, you should speak with estate planning attorney Bill Ager.
What Is a Durable Power of Attorney?
A power of attorney is a powerful legal document that allows you to appoint someone else to handle your business, financial, and legal affairs and to make healthcare decisions on your behalf. The principal (the person making the document) appoints an agent or attorney-in-fact to act for them. The principal can appoint an attorney-in-fact to make all decisions for them or can choose to limit the type of actions the attorney-in-fact can take on their behalf.
A durable power of attorney remains in effect even if the principal becomes disabled or incapacitated, and remains in effect despite the passage of time. To qualify as a durable power of attorney, the document must state that “This power of attorney is not affected by the principal’s subsequent disability or incapacity, or by the lapse of time,” that “This power of attorney is effective upon the disability or incapacity of the principal,” or other words “showing the principal’s intent that the authority conferred is exercisable notwithstanding the principal’s subsequent disability or incapacity and, unless the power states a termination time, notwithstanding the lapse of time since the execution of the instrument.”
Because a POA is such a powerful document, you must choose your agent carefully. Before designating an attorney-in-fact, you should think carefully about who you want to act as your agent. You should also have a thoughtful conversation with your proposed attorney-in-fact about what their duties and responsibilities will be.
What Can a POA Be Used For?
A POA allows the agent to act in accordance with the powers granted to them under the terms of the document. The attorney-in-fact can act without court supervision, and businesses and other people can rely on the document as proof of the authority of the attorney-in-fact.
When executing a POA, the principal can choose the scope of the agent’s authority and have it set forth in the terms of the document. By signing a POA, the principal gives the attorney-in-fact the power to perform certain actions on their behalf.
A power of attorney can be used to:
- Make financial decisions
- Buy or sell real estate
- Make decisions about the sale of personal property
- Make gifts of money or property
- Make healthcare or mental health decisions
Kinds of Powers of Attorney
Michigan recognizes different kinds of powers of attorney depending on the scope of the agent’s authority and the needs of the principal.
General Power of Attorney
A general POA authorizes the attorney-in-fact to perform any action on behalf of the principal. This may include buying or selling real property or personal property, handling tax and other financial matters, entering into contracts, and settling claims. Even though a general power of attorney confers broad powers upon the attorney-in-fact, it is wise to specifically articulate the types of transactions that fall within the scope of authority of the attorney-in-fact.
Limited Power of Attorney
A limited POA authorizes the attorney-in-fact to perform specific actions as authorized by the principal. A limited power of attorney may only be effective for certain types of transactions, or even a single transaction, or might only be valid for a limited period of time. Limited powers of attorney are often used for managing financial affairs, or for performing transactions at a particular bank or financial institution. Other limited powers of attorney allow the attorney-in-fact to buy, sell, or transfer land.
Springing Power of Attorney
A springing power of attorney, also known as a conditional POA, only becomes effective when certain conditions are met. A common condition is a determination by two doctors that the principal is unable to manage their own affairs. A springing POA is often used by estate planning attorneys for people who are in good health and have no current or anticipated need for an agent, or for people who are in the military and are preparing for the possibility of deployment.
Unlike a durable POA, which takes effect immediately upon being signed and can be used by the attorney-in-fact whether the principal is cognizant or incapacitated, a springing POA only takes effect when the principal becomes incapacitated.
If you are considering using a springing POA as part of your estate plan, it is wise to give some thought to what you consider “incapacitated” to mean, and the conditions under which you would wish for the POA to take effect. If it is unclear whether the principal has met the conditions set forth in the springing POA, a family can waste precious time going to court to determine whether the principal has met the conditions for incompetency identified in the document.
Healthcare Power of Attorney
The ability to make healthcare decisions on behalf of a principal is treated differently than other limited powers of attorney. A healthcare power of attorney, also known as a Patient Advocate Designation, is a specific kind of power of attorney that allows the attorney-in-fact to make decisions regarding the medical or psychological care and treatment of the principal. The attorney-in-fact has the authority to make decisions about the care, custody, medical, and mental health treatment of the principal. Like other powers of attorney, the scope of the agent’s authority is outlined in the document.
In Michigan, the authority of the attorney-in-fact is suspended if the patient / principal regains the ability to make their own decisions about their mental or healthcare treatment. The power of attorney is reactivated if the patient is later found to be unable to participate in their own care and treatment.
Limits of a Durable Power of Attorney
Once signed, a durable power of attorney remains in effect until it is revoked by the principal or until the principal’s death.
While the authority of an agent to act under a POA can be quite broad, there are limits to what an agent acting under it can do.
A POA cannot be used to:
- Change Last Will and Testament of the principal
- Violate the fiduciary duty an attorney-in-fact owes to the principal
- Make decisions for the principal after the principal’s death
- Transfer a POA to someone else
Why You Need a Power of Attorney as Part of Your Estate Plan
A power of attorney for financial and healthcare decisions should be included as part of any estate plan. It is wise to draft a POA now, so you have it in place if an emergency arises. It can be used if someone in the military is deploying overseas and needs a spouse or another loved one to be able to make decisions on their behalf. It can also be used to grant someone the power to act on your behalf if you become unable to act on your own due to injury, mental illness, or during a long-term health crisis.
If you are considering a power of attorney or an estate plan, an experienced estate planning attorney can help. Bill Ager offers reasonable flat fees for estate planning services. To speak with Bill about your POA or updating your estate plan, call (734) 649-0784, email firstname.lastname@example.org, or use our online contact form.