FAQ: General Durable Power of Attorney

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Jim Schuster, Certified Elder Law Attorney

copyright 2017

Member of the National Academy of Elder Law Attorneys

24330 Lahser, Southfield, MI 48034

248.356.3500 – www.JimSchuster.com

QUESTIONS FOR THE GRANTOR

What is a power of attorney?

A power of attorney is the grant of legal powers by a person, the “principal,” to another, the “agent” or “attorney-in-fact.” The term often refers to the document itself, which itself is a “license” or “grant.”  The grant may be limited such as a “real estate power” or a “banking power.”   When the grant is of a general power then it typically grants the power to act for the principal on personal, financial, business and legal matters.

What can the agent do?

Only what the principal has authorized, nothing more. The document spells out the powers given to the Agent and any power not stated is not granted.

When does the power of attorney take effect?
Unless the power of attorney is “springing,” it takes effect as soon as it is signed by the principal. A “springing” power of attorney takes effect only when the event described in the instrument itself takes place. Typically, this is the incapacity of the principal as certified by one or more physicians.  Getting written statements by two doctors can be all but impossible when there is an emergency.
Does the power of attorney take away my rights?
No, absolutely not. Only a court can take away your rights in a conservatorship or guardianship proceeding. Your attorney-in-fact simply has the power to act for you.  He or she simply has the power to act for you, to do what you want.
You may terminated the grant at anytime.

Can I  appoint more than one attorney-in-fact?
In general, you should appoint a successor in case your first Agent is not available when needed. You can give more than one family member or friend the power to act on your behalf. In most cases, they are given the right to act independently of one another. This can work well where the Agents will fully cooperate with each other.  Where you have questions about their ability to cooperate, you can also require them both to agree to any actions, but this can be cumbersome in practice.  However, having more than one active Agent can make for a problem with some financial institutions. A way to avoid the foregoing problems is to name one or more alternates in case your original Agent can no longer act.

Can I change my mind?
Certainly. You may revoke your power of attorney at any time. All you need to do is inform you Agent. From the moment they receive the notice, an Agent can no longer act under the power of attorney. It is best to follow up the call with a letter to your Agent or attorneys-in-fact telling them that their appointment has been revoked.

Does a durable power of attorney help me avoid probate?

Yes. The purpose of a power of is to name a trusted person to handle your matters so you do not have to do it yourself. If the grant is “durable” then your Agent can help you even if you are incapacitated, which means you cannot supervise your Agent. When you have a trusted Agent to help you in time of your need, you are then protected.

The purpose of lifetime probate is to protect a legally incapacitated person. If the probate court finds that a person needs protection for his or her own safety it will act. It will appoint a Guardian to make the personal decisions, such as where to live, what medical treatment to pursue and so on. A Conservator is appointed to manage all the property.

What happens to my power of attorney if a guardian is appointed?

One of the purposes of a power of attorney is to avoid the need for the appointment of a guardian or conservator. However, depending on the circumstances, one may still be appointed. In most cases, the court will designate your Agent to be your conservator or guardian if such appointment ever does become necessary.
Please note that your nomination of an Agent is not absolutely binding, on the probate court. It should be followed by the court unless convincing evidence is presented that would not be in your best interest. Even after the appointment of a guardian or conservator, your power of attorney will continue in effect unless the person appointed takes the affirmative step of revoking the power of attorney.

How do I get a power of attorney that expresses my wishes?
See an experienced elder law attorney who knows how to individualize your documents so you will meet your life plan goals and have your wishes followed exactly.

QUESTIONS FOR THE AGENT

Is there a difference between an Agent and an  attorney-in-fact?
No.

What are my duties as an agent?
You have been appointed to represent the “principal” with respect to his or her general business affairs. In effect, you can step into his or her shoes and take whatever banking, insurance, investment and spending measures the principal would take himself or herself.  You can exercise your principal’s rights under contracts.  Unless limitations have been placed in the power of attorney itself, you can open bank accounts, withdraw funds from bank accounts, trade stock, pay bills, cash checks. All steps you take must be consistent with your role as a “fiduciary.”

What does it mean to be a “fiduciary”?
This means that you will be held to the highest standards of good faith, fair dealing, and undivided loyalty with respect to the principal. You must always act in his or her best interest and keep his or her goals and wishes in mind in making any discretionary decision. However, you do not have the same responsibility as a trustee or executor, who has total control over the estate or trust assets since you share control with the principal himself or herself. Your duty only covers the level of care you take in your own actions as attorney-in-fact.

Can I be held liable for my actions as attorney-in-fact?
Yes, but only if you act with willful misconduct or gross negligence. If you do your best and keep the principal’s interests in mind as the basis of your actions, you should not incur any liability.

When does the power of attorney take effect?
Unless the power of attorney is “springing,” it takes effect as soon as it is signed by the principal. A “springing” power of attorney takes effect only when the event described in the instrument itself takes place. Typically, this is the incapacity of the principal as certified by one or more physicians. Section III of your power of attorney indicates whether it is effective immediately or is springing. In most cases, even when the power of attorney is immediately effective, the principal does not intend for it to be used until he or she becomes incapacitated. You should discuss this with the principal so that you know and can carry out his or her wishes.

What if there is more than one attorney-in-fact?
Depending on the wording of the power of attorney, you may or may not have to act together on all transactions. In most cases, when there are multiple attorneys-in-fact they are appointed “severally,” meaning that they can each act independently of one another. Nevertheless, it is important for them to communicate with one another to make certain that their actions are consistent.

Can I be fired?
Certainly. The principal may revoke the power of attorney at any time. All he or she needs to do is send you a letter to this effect. The appointment of a conservator or guardian does not immediately revoke the power of attorney. But the conservator or guardian, like the principal, has the power to revoke the power of attorney.

What kind of records should I keep?
It is very important that you keep good records of your actions under the power of attorney. That is the best way to be able to answer any questions anyone may raise. The most important rule to keep in mind is not to commingle the funds you are managing with your own money. Keep the accounts separate. The easiest way to keep records is to run all funds through a checking account. The checks will act as receipts and the checkbook register as a running account.

Can I be compensated for my work as attorney-in-fact?
Yes, if the principal has agreed to pay you. In general, the attorney-in-fact is entitled to “reasonable” compensation for his or her services. However, in most cases, the attorney-in-fact is a family member and does not expect to be paid. If you would like to be paid, it is best that you discuss this with the principal, agree on a reasonable rate of payment, and put that agreement in writing. That is the only way to avoid misunderstandings in the future.

Is there a criminal law I should know about?

Certainly. Under Michigan law a person who uses their power to abuse a “vulnerable adult” may be guilty of a felony with a penalty of up to 10 years in prison. Abuse means that the agent obtained or attempted use the vulnerable adult’s money or property to directly or indirectly benefit the agent.
To be covered under the law the agent must have been entrusted with or assumed the responsibility of handling a vulnerable adults money or property. The agent must have then used the vulnerable adult’s money or property to directly or indirectly benefit the agent. The law includes persons such as caregivers or family members who have assumed management of the adult’s money or property.

What if I have other questions?

Give us a call, make an appointment and come on in.  We’ll be happy to help you.