Power of Attorney Law in Estate Planning

A power of attorney (POA) is a legal document in which a person (the principal) designates and authorizes another person (the agent or attorney-in-fact) to transact business or make certain decisions on his or her behalf. When a power of attorney is in effect, the agent essentially steps into the shoes of the principal and makes decisions that are legally binding on the principal. Powers of attorney can grant broad, general authority (known as a general power of attorney) or they can limit the attorney-in-fact’s power to act on behalf of the principal to situations (known as a special power of attorney). A power of attorney can be helpful to older people and others who want to choose a trusted person to act on their behalf when they cannot. You can plan by creating a power of attorney to appoint a substitute decision-maker, also called an agent.

If you don’t create a power of attorney in advance, a friend or family member might have to go to court to have a guardian appointed if you become incapacitated and are no longer able to make decisions for yourself – and that process can be lengthy, expensive, and very public.

Whether you are a single parent or a married spouse, it is important to appoint someone you trust to make important decisions for you. Problems arise with aging issues for the elderly such as Alzheimer’s, dementia, and stroke. Anyone can have an auto accident that creates physical disabilities. Setting up a power of attorney can have tremendous benefits in such cases.

Durable Power of Attorney (DPOA) is a power of attorney that remains in effect when you are unable to make your own financial decisions (no longer competent). If you want your agent to have authority when you are unable to make your own financial decisions, your power of attorney document must be durable. This is done by adding a clause to the document that makes it clear that you intend for this power of attorney to remain effective after your subsequent disability, incapacity, or by the lapse of time.

How Does Michigan Law Define Durable Power of Attorney?

A durable power of attorney (DPOA) names an agent to represent your wishes in the event of your incapacity, such as after a major car accident or if you have dementia. Your DPOA can:

  • Access your finances
  • sign your checks
  • make deposits for you
  • pay your bills
  • contract for medical or other professional services
  • sell your property
  • get insurance for you
  • do all the things you do to manage your everyday affairs

You can give your agent authority to do anything you could do. Or, you can limit your agent’s authority to do only certain things, such as sell your home.

Michigan Power of Attorney law

The Michigan law relating to powers of attorney is found in Chapter 700 of the Michigan Compiled Laws, beginning with Section 700.5501. Provisions for a medical power of attorney begin with Section 700.5506.

Creating a power of attorney in Michigan for financial matters requires that it be dated, signed by either the principal or a notary public on behalf of the principal according to the requirements of the Michigan Notary Public Act, and either signed in the presence of two witnesses or acknowledged before a notary public. Both witnesses must also sign the documents, and neither can also be the attorney-in-fact.

Durable Power of Attorney for Health Care

The Durable Power of Attorney for Healthcare is usually referred to simply as a “Healthcare Power of Attorney.” If you are unable to communicate your health care choices to a doctor due to injury or illness, a Health Care Power of Attorney or Medical Directive may be helpful. The state of Michigan allows for the creation of a Health Care Power of Attorney document that designates an individual who will make key health care decisions if you are unable to communicate your wishes.

A medical directive (sometimes called a living will), is a bit different from a Health Care Power of Attorney in that it does not designate an individual who makes your health care decisions. Instead, the medical directive clearly communicates your wishes to doctors and other health care professionals in the event you are unable to communicate your wishes. The medical directive may communicate your wishes about life-support in the event you are in a vegetative state and may communicate your preference about other life-sustaining assistance that can often be the subject of conflict amongst family members if your wishes are not made clear.

Why Is This Important?

As we age the chances of contracting a serious disease or illness increase. Sudden changes to a person’s health like heart attacks, heart failure or stroke become all too common. It is important to be prepared. In those crucial moments of illness, it is important that you understand that your family cannot automatically make healthcare decisions for you. For these significant decisions to be made on your behalf you must have a Healthcare Power of Attorney.

Without this document, if you become ill the courts are the last resort for making your healthcare decisions. The court will appoint a guardian to make healthcare decisions for you.

Durable Power of Attorney for Finances

A Durable Power of Attorney for Finances is like a Durable Power of Attorney for Healthcare except that instead of dealing with health issues the advocate manages your money. Most clients will have these documents drafted at the same time.  

It is important to note, although they can be created at the same time the two must be separate documents by state law.  Basically, a durable power of attorney for health care allows you to name a representative that oversees making medical decisions on your behalf should you be unable to do so.  It is also important to note that naming a financial power of attorney does not mean that you do not have control over your finances – this need not be a permanent arrangement. You can always revoke a power of attorney!

There are two kinds of durable financial powers of attorney. One is effective immediately. The other is effective only upon the occurrence of an event named within the durable power of attorney such as someone’s disability. The financial durable power of attorney that is effective at a future time, such as disability, is also called a “springing” power of attorney.

A power of attorney is drawn up in the presence of an attorney and witnesses to formally determine who you wish to leave in charge of your finances and legal affairs when you are no longer fit to do so.

Why is This Important?

When it comes to financial affairs, it is important to have a plan in place for worst-case scenarios. Nobody can predict the future, and accidents can happen at any time, so it’s crucial to plan for the unexpected. Nobody likes to think about becoming incapacitated or incapable of making their own decisions, but it is a possibility we all need to consider.  If you are sick and become unable to manage your money, a well drafted Durable Power of Attorney for Finances will save you from going through probate court if you must do nursing home care or Medicaid planning. If you don’t have a Durable Power of Attorney for Finances and fall ill, the courts will appoint a conservator to manage your finances.

Why Do You Need a Separate DPOA for Medical Care and Finances?

You may wonder why you cannot cover health care matters and finances in just one power of attorney document. Technically, you could—but it isn’t a good idea. Making separate documents will keep life simpler for your agent and others.

For example, your health care documents are likely to be full of personal details, and perhaps feelings, that your financial broker doesn’t need to know. Likewise, your health care professionals don’t need to be burdened with the details of your finances.

That said, even though you should make separate power of attorney documents for health care and finances, it makes a good deal of sense to name the same agent under both documents. If not, you must be sure to name people who will work well together.

Why do I Need a DPOA if My Spouse and I Own Everything Jointly?

If you and your spouse own a bank account jointly, then your spouse can sign checks and withdraw money from your joint bank accounts whether you are able to or not. However, the same is not true about your jointly owned stock or home. Your spouse needs your consent and signature to make changes to the legal title of your jointly owned home or stock. Your spouse does not have legal authority to name or change a beneficiary on your life insurance or retirement benefits either. To provide your consent and signature to these legal transactions after your disability or incapacity, your spouse must be named as your agent under a durable power of attorney.

Parents with Children Over 18

Did you know that when your children turn 18 your rights as a parent stops to exist? This also applies to the parents of disabled children.

After they turn 18, you are no longer allowed to go to the bank and make any transactions for them, talk to their doctors, or even talk to their school regarding grades unless the child gives you permission. Few parents realize that even when it’s time for them to go to college, you do not have a voice even though you may be paying their way.

You may want to consider granting a POA for your children when they go away to college. This would come in handy in case of emergencies. You don’t want to be hundreds of miles away when something terrible happens, just to find out no one will tell you anything. Consider having them sign a health care power of attorney before they go away so you can talk to the doctors in case something terrible does happen.

What if I Move?

Generally, a power of attorney that is valid when you sign it will remain valid even if you change your state of residence. Although it should not be necessary to sign a new power of attorney merely because you have moved to a new state, it is a good idea to take the opportunity to update your power of attorney. The update ideally should be part of a review and update of your overall estate plan to be sure that nuances of the new state law (and any other changes in circumstances that have occurred since your existing documents were signed) are addressed.

Challenges to a Power of Attorney in Michigan

A family member or another close person is usually listed as the power of attorney. Sometimes, problems or conflict arise, leading to another family member disputing the POA. There are three possible ways to challenge a POA.

  1. The principal is mentally incompetent. The principal of the POA is the one who grants a power of attorney, and the principal gets to choose who that POA is. You may have evidence that the principal was already mentally incompetent at the time of signing the POA. Succeeding with this argument poses challenges because you will need testimony from medical experts to support your claim that the principal was not of sound of mind when executing the POA.
  2. Formalities were not followed. Because it is relatively easy to establish powers of attorney in Michigan, it is not unheard of for some documents to lack one or more of the formalities required to establish a binding POA. The agreement may be challenged if it lacks:
    1. Specific language required by Michigan law.
    2. Specific language authorizing the principal’s actions.
    3. Proper witnesses and signatures.
    4. Notarization.
  3. Agent abused authority. This alleges that the agent is making decisions or taking actions that are not in the principal’s best interest. Often the claim is that the agent is using the authority granted by the POA for their own gain or other unjust ends. Abuse of authority might include:
    1. Stealing from the principal’s assets
    2. Mismanaging the principal’s assets
    3. Breach of fiduciary duty, i.e., failure to keep adequate records
    4. Neglecting the principal’s needs
    5. Failure to fulfill duties specified by the POA.

Having an attorney to help you with the POA is one way to help prevent disputes in the future.

Contact Us

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. We always believe that our clients make better choices for themselves and their loved ones when they are well-informed and adequately prepared. Contact us directly at 877-886-1441 to schedule a free consultation.