A power of attorney (POA) is an estate planning tool where you appoint a person, known as the attorney-in-fact or agent, to manage your affairs. Typically, the agent is appointed to manage financial or medical matters when you cannot do so yourself because you are incapacitated by illness or injury.
People are often confused, however, as to when and which type of POA is needed. As an estate planning and elder law attorney, I, Andrew Byers, will review your estate and specific concerns and advise you if and which POA is best for you, your unique situation, and your estate plan. Contact me either online or at (248) 469-4261 to schedule a consultation to learn more about how and why a POA can complement your estate plan in Michigan.
What Constitutes a Power of Attorney in Metro Detroit?
A power of attorney is the legal authorization for one person, the agent, to act on behalf of another person, the principal. A POA is a common element of estate planning as they let a person who is concerned about losing their ability to manage their own affairs in the future choose someone they trust to make decisions for them then.
There are six types of POA, described below.
1. Durable POA
A durable POA takes effect immediately after your sign it unless the POA states otherwise and allows your agent to continue acting on your behalf even when you are incapacitated. A durable POA terminates only when you die or when a revocation of POA form is issued.
2. Non-durable POA
A non-durable POA also takes effect immediately after you sign it unless the POA states otherwise. It does not allow your agent to continue acting on your behalf when you become incapacitated. In the latter scenario, it may be necessary to have a court appoint a guardian or conservator to make decisions on your behalf.
3. Medical POA
A medical POA is now referred to a Patient Advocate Designation in Michigan though this type of POA is sometimes referred to as an advance directive or health care power of attorney because it allows you to appoint a health care agent ("patient advocate") to make medical decisions for you when you cannot do so. It is limited by your specific medical preferences and any other directive you may have as part of your estate plan, like a living will or a Do Not Resuscitate (DNR) form.
4. General POA
A general POA allocates broad powers to the agent to act on financial, business, real estate, and legal matters. This POA is limited only by the terms set out in the POA or by any relevant state statute. A general POA is often also a Durable POA.
5. Limited (Special) POA
A limited (Special) POA allows the agent to act for a specific purpose and once that purpose is accomplished, the POA expires. For example, if you own a business, you may appoint one of your employees as an agent to handle specific transactions on behalf of the business so that you do not have to attend every meeting and sign every document generated in your business. A limited POA is often also a non-durable POA.
6. Springing POA
A springing POA takes effect if/when a certain event or medical condition occurs as specified in the POA. It ends at a specified time as outlined in the POA or if/when you become incapacitated or die.
When is a Power of Attorney Necessary in Michigan?
A power of attorney is a useful tool as part of a comprehensive estate plan including a Last Will and Testament and/or Living Trust. By operation of Michigan law, the POA ceases to have any effect upon the moment of death, which is why it may also be necessary to have a Will and/or Trust. POAs are used in the event of your incapacity. In the general durable power of attorney, you appoint an agent to pay your bills, use your money to take care of you, and otherwise handle your finances in the event that you cannot do so in the future. In the patient advocate designation, you appoint a patient advocate to make medical decisions for you if you cannot. Though you can appoint the same person as financial agent and patient advocate, the standard of practice in Michigan now is to have two separate documents, one of which is a financial POA and one of which is the Patient Advocate Designation. That way, the medical and care providers will not be confused by all the financial powers contained in the financial POA and the bank and other financial institutions your agent deals with will not be confused by all the medical directives in the Patient Advocate Designation.
By giving an agent the power to make those decisions, a principal can rest assured that someone is taking care of them. An agent appointed under a financial POA and a patient advocate appointed under the Patient Advocate Designation typically start to act on the principal's behalf, using the authority granted to the agent/advocate, in the following situations:
- The principal is suffering from a worsening medical condition that impacts their mental capacity, like Alzheimer's or dementia
- The principal is physically disabled and cannot sign important documents or it is difficult for them to get around the community to take care of errands like banking
- The principal wants to give someone else the power to make specific decisions on their behalf
There are, of course, other reasons why you may need or want a power of attorney created. Speaking to an estate planning attorney in Michigan is the best way for you to identify and determine what will work best for you.
How is a Power of Attorney Created in Metro Detroit?
Each state has its own requirements for creating a power of attorney, though most are based on the parties and witnesses signing a written legal instrument. Because having the power to make financial and medical decisions for someone else is such a serious matter, each state incorporates formalities that must be followed to:
- Ensure the power of attorney is legitimate; and
- Confirm the person signing the POA is doing it knowingly and voluntarily. This is referred to as legal capacity.
Many states require a witness along with notarization. In Michigan, the POA and Patient Advocate Designation should be witnessed and notarized. Though both are not required, other people, like at the clerk at the bank, may think a POA must be both witnessed and notarized so I find it works best to have my clients sign these legal instruments in front of two witnesses and a notary. I often act as the notary and one of the witnesses which is allowed under Michigan law.
While POAs are not one-size-fits all forms, they are often treated as such. By this I mean people will sometimes get a form off the internet that does not contain all the powers that may be needed in the future. For example, if you want your agent to have the authority to legally restructure your finances in order to protect them from the costs of long-term care in a nursing home, there needs to be a specific grant of authority in the POA describing that power. The reason for this is the agent can only do what you specifically authorized them to do in the doctor. Unfortunately, attorneys also sometimes produce POAs that do not meet their client's needs. I see lots of elderly people with modest estates who have expansive tax and business planning powers in their POA, because it was produced by a tax or business planning attorney (or that attorney's secretary), but the elderly person never had the type of estate that requires tax or business planning. They do often have adult children living out-of-state, so we would like the POA to include the specific authority to create online financial accounts to handle things from afar, but that power is often lacking. In order to be effective, the POA must be clear, comprehensive, and tailored to the client's needs now and the situations they are likely to encounter in the future.
Contact an Estate Planning Lawyer in Michigan when You Need a Power of Attorney
Powers of attorney are powerful tools to make sure your finances and other business or personal matters are properly managed while you are incapacitated or otherwise unable to oversee them yourself. You can speak to me, estate planning and elder law attorney Andrew Byers, to discuss estate planning generally and powers of attorney as part of the estate plan specifically. I believe that my clients in Troy and the rest of Metro Detroit make better choices for themselves and their loved ones when they are well-informed and adequately prepared. Contact me directly at (248) 469-4261 or online today if you have questions or to schedule a consultation.