Estate Planning & Probate Avoidance by Your Estate Attorneys, Lawyers delivering peace of mind to clients through education and preparation from a Christian perspective
POWERS OF ATTORNEY
OVERVIEW
A power of attorney is used for situations where an individual cannot be present, but that individual has entrusted someone to do the job in their place. When someone holds "a power of attorney," they are able to enter into contracts, negotiate, and settle matters as if they were that other person.
The power of attorney typically expires when a grantor becomes incompetent or passes away. The theory is that if the principal couldn't do it on their own, then the agent shouldn't be able to do it either. This makes sense in many financial and commercial situations, but makes little sense when dealing with elderly issues.
- General Power of Attorney: Grants general power to a person to make decisions about all aspects of the person's life.
- Limited Power of Attorney: Limits a person's power to make decisions to specific areas.
- Healthcare/Medical Power of Attorney: Grants someone the ability to make decisions about medical treatment and end of life care.
- Financial Power of Attorney: Provides the individual with the authority to make decisions about financial affairs.
If you fail to grant someone a power of attorney, the State of Michigan will appoint a guardian or conservator to make these decisions. However, the person appointed by the state may not be the person you would have selected. Thus, it is important to remain in control of these important decisions regarding guardianship.
Before our firm drafts any power of attorney, we will sit down and learn more about your specific circumstances. In fact, after careful consultation, people sometimes determine that they do not wish to grant this type of authority to anyone. If you do decide to create a power of attorney, we will determine whether it becomes effective immediately, or only at the time of your incapacitation. Only after learning these things, can we draft the most appropriate power of attorney for your situation.
WHAT YOU SHOULD KNOW
What is a power of attorney?
A power of attorney is a document that allows you to designate someone to make financial and other decisions on your behalf. A power of attorney is a document signed by a competent person giving another person the authority to manage some or all of his or her personal and financial affairs. The document must be signed a notary and at least one witness. A power of attorney is "durable" if it remains effective even after the grantor become mentally or physically incapacitated. A durable power of attorney is one method by which a person may avoid having a conservator appointed on his or her behalf.
What is a durable power?
A Durable Power of Attorney can act on a person's behalf even while that person is still alive. People suffering from dementia or senility, who are no longer competent to make their own decisions, need to continue to make financial and medical transactions long after they have the capacity to do so. A Durable Power of Attorney allows them to do that. Setting up a Durable Power of Attorney is as easy as signing a single legal document, naming who you would like to appoint as your agent. There are no hearings or court proceedings to go through.
What happens if you do suffer from dementia or are incapacitated, and have not signed a Durable Power of Attorney? If you have not named an agent to act on your behalf, you can only hope that someone will become a Conservator for you.
Conservatorship is a lengthy and expensive court procedure requiring someone to volunteer to become your Conservator. Finding a volunteer, whom you trust with your affairs, to suddenly appear and want to be your Conservator is rare. In many cases, it is also unreasonable to expect there will be enough money and time to go through the court proceedings necessary to establish the conservatorship.
Individuals granted Power of Attorney must, by law, act in good faith at all times on behalf of the grantor. Suppose an elderly man is declared incompetent, but had given his adult child a Durable Power of Attorney. The son cannot turn around and put his father's house in the child's name, or sell off assets for his own use. The law maintains agents have a fiduciary duty to the grantor, and cannot take advantage of his or her position.
Why do I need a financial power of attorney?
It can remain in effect while you are incapacitated, also known as a durable power. This document will avoid petitioning the probate court for the appointment of a conservator. You can give your power of attorney agent as general or specific powers as you choose.
What is a medical directive?
A medical power of attorney with an advance health care directive lets your doctor, family members and other interested parties to know your healthcare preferences, including special treatments you may want or do not want at the end of your life. This document also allows you to appoint a patient advocate to stand in your shoes to access your medical information, discuss healthcare issues with your doctors, and make medical treatment decisions, surgical decisions, life support, DNR orders and organ transplants.
Accidents and illness can strike at any time and at any age. Michigan law protects your right to make decisions about your medical care. Advance medical directives give you a way to leave instructions regarding your health care after you become unable to communicate with medical care personnel. In your advance directive you will name a patient advocate to speak for you and make medical care decisions on your behalf. Some advance directives speak to mental health issues and can include the “do not resuscitate” and “pull the plug” language.
A Medical Power of Attorney (also known as a Durable Power of Attorney for Health Care) is so critical, because it allows a trusted agent to make healthcare decisions on your behalf. Few hospitals wish to take on the responsibility of determining your healthcare decisions for you, especially in this litigious society.
The Medical Power of Attorney helps your doctors determine when life-supporting measures should be stopped. If your wish is to not use life-sustaining measurer, you can convey this to the person you've named, and they will be able to fulfill your wishes on your behalf. A Medical Power of Attorney only has this responsibility to you for healthcare decisions, and cannot make financial or other decisions on your behalf (unless, of course, you've granted both Powers of Attorney to the same person).
What If I Become Unable to Care for myself and I do not have a medical directive or a medical POA?
If you do not make any arrangement in advance, a court-supervised conservatorship or guardianship proceedings may be required if you become incapacitated. Conservatorships are proceedings which allow the court to appoint the person responsible for your care and for the management of your financial estate if you are unable to do so yourself. Guardianships are proceedings which allow the court to appoint the person responsible for your personal care if you are unable to do so yourself. Durable Powers of Attorney and Advanced Health Care Directives may avoid the need for these types of court proceedings.
You should, therefore, select the person or persons you wish to care for you and your estate in the event that you become incapable of managing your assets or providing for your own care, and designate them in a power of attorney and advanced health care directive.
With respect to the management of your assets, the trustee of your living trust will provide the necessary management of those assets held in trust. However, to deal with assets which may not have been transferred to your living trust prior to your incapacity or which you may receive after incapacity, a durable power of attorney for property management should be considered. In such a power, you appoint another individual (the "attorney-in-fact") to make property management decisions on your behalf. The attorney-in-fact manages your assets and function, but without court supervision. The authority of the attorney-in-fact to manage your assets ceases at your death.
An advanced health care directive/durable power of attorney for health care allows your attorney-in-fact to make health care decisions for you when you can no longer make them yourself. It may also contain statements concerning such matters as life sustaining treatment and other health care issues and instructions concerning organ donations, disposition of remains, and your funeral.
In some circumstances, planning ahead for the payment of long term care and/or government assistance may be indicated. With advance planning, there are many legitimate ways to accomplish these goals.
Be Careful With the Power Of Attorney
When most people hear the term "estate planning" they think of a Last Will and Testament. After all, the Will is typically the cornerstone of one's estate plan. However, for most of us, it is statistically more likely that we suffer a disability than die. Therefore, to deal with the problem of disability, many look to another cornerstone of the estate plan: the durable power of attorney.
To put the problem in focus, consider the typical married couple. Suppose the husband is stricken with Alzheimer's disease or severely injured in an auto accident. Because of the illness, it may be necessary to sell the real estate or some of the other assets. Since it will be necessary to have both spouses join in the sale of any jointly-owned real estate and since only the husband can deal with his individually owned assets, it may be necessary to have the court appoint a guardian to represent the disabled spouse. As with most court procedures, a guardianship proceeding takes time, it is costly and adds to the problem already being endured by the family.
A simple way to prevent such a situation is to execute a durable power of attorney. The power of attorney is a fairly simple document that allows one person to empower another (technically known as the attorney-in-fact) to act on his or her behalf. The powers given to the attorney-in-fact can be as broad or specific as you wish and can last until death or some earlier point in time.
There are no restrictions on who you can name as your attorney-in-fact. Typically, however, spouses will name each other and then a child or children as successors in the event the spouse dies or is unable to act. When it comes to granting powers to your children, it may be best to name at least two of them and require that they make decisions jointly. By requiring joint action, you can prevent situations where one child could abuse his or her powers.
In the estate planning context, the power of attorney is often executed as a precautionary measure, long before the onset of a disability. Accordingly, when the document is prepared, the powers given to the attorney-in-fact should be broad enough to cover just about anything that can be expected. One area that seems to create a number of problems is the power to make gifts. For example, in a recent case, a mother had appointed her son as her attorney-in-fact and she later became disabled. In acting for his mother, the son desired to make gifts of her property to himself and his brothers and sisters in order to reduce the estate taxes on his mother's death. Unfortunately, however, although the power of attorney gave the son general powers to act for his mother, the power of attorney did not specifically confer the power to make gifts. As such, this tax-saving option was not available to the family.
In another recent case, however, giving the power to make gifts created problems. In that case, father granted general powers to his daughter. As the father's health worsened, the daughter decided to put the father's home in her own name. When the father later died, his will named his three children as equal beneficiaries. However, since the house was no longer part of the father's estate, two of the children received very little. Feeling slighted, they ended up suing their sister claiming that it was not proper for her to make a gift of the house to herself. The court reviewed the power of attorney, found that it permitted such gifts, and therefore approved the daughter's actions. Once again, not enough thought was given to the exact authority being granted. In this case, the problem could have been avoided if the power of attorney included a provision requiring that any gifts to children be made in equal shares.
HOW WE CAN HELP
Powers of attorney are a useful estate planning tools which protect a person and their property in the event they become unable to make decisions. A power of attorney grants a designated individual the ability to help the grantor with decisions. When a durable power of attorney is given, the designated individual may not only help the grantor with current decisions, they may also make decisions for the grantor on their own, should he or she become incompetent or otherwise incapacitated. Powers of attorney are not appropriate for everyone. In fact, we encourage you to speak with an attorney about the costs and benefits associated with granting someone power of attorney.
A complete estate plan includes durable powers of attorney for financial and healthcare. These are the essential documents that protect you, your family, and your property at critical stages of your life. Only an experienced attorney specializing in estate planning can properly help you make the correct choices that best meet with your individual goals. We help educate, organize and prepare which ultimately results in the client’s peace of mind.