When you think about estate planning, durable powers of attorney (DPOAs) probably are not the first documents that come to mind. Yet, they are an extremely important part of every estate plan. Your durable powers of attorney protect you and your family during your lifetime from contingencies that could occur at any time.
In a recent blog post, our BRMM estate planning attorneys talked about why DPOAs are especially important because of the risks presented by Covid-19. The fact is that durable powers of attorney are essential all the time for everyone.
A power of attorney is a written document in which the principal (the person creating the document) gives a named person (the agent or attorney-in-fact) legal authority to act on the principal’s behalf. A power of attorney may grant general authority, or it may limit the agent’s authority to acting only with regard to specific matters.
Unless a power of attorney meets specific requirements of Michigan law, the authority of an agent terminates if the principal becomes incapacitated. That means the agent can no longer act on behalf of the principal. However, if the document meets the statutory requirements for a “durable” power of attorney, the agent’s authority remains in place if the principal is incapacitated.
By including durable powers of attorney in your estate plan, you designate specific individuals (or a single individual) to act on your behalf with regard to essential matters in your life, in the event you become incapacitated temporarily or permanently, otherwise known as a springing power of attorney. It is important to understand that a durable power of attorney can also be designed so that it is effective immediately, as opposed to springing into effect upon one’s incapacity. This can be especially important between spouses and when dealing with aging parents. While it isn’t always easy to consider what might happen if incapacity occurs, planning for the possibility of incapacity is one of the essential purposes of creating an estate plan.
In Michigan, a complete estate plan has two types of durable powers of attorney. Your durable power of attorney for finances authorizes a person you choose to pay your bills and manage your finances if you become incapacitated temporarily or permanently. Your durable power of attorney for health care, which is also called a patient advocate designation or advance directive, authorizes a person you trust to make health care and medical decisions for you in the event of incapacity. You may also express your wishes about medical care in this document. Again, a durable health care power of attorney can be designed so that the person you appoint can have immediate authority when it comes to day to day medical decisions. However, it does not mean the person appointed can overrule one if they are competent. The immediate day to day medical decisions format is usually used between spouses and children and aging parents.
If you do not have these documents in place, no one — not even your spouse — can legally act on your behalf with regard to your finances and health care matters if you become incapacitated. To acquire the necessary authority, someone must petition the court for appointment as your guardian (for personal and health care matters) and conservator (for financial matters).
Guardianship and conservatorship court proceedings are referred to as living probate. If you do not plan for who will make your financial and medical decisions in the event of your incapacity, a judge will decide who has that responsibility. A judge might appoint a guardian and conservator who are not the people you would want to have those critical responsibilities.
The court proceedings consume valuable time and cause delays at a time when any delay could be detrimental to your health or financial security. Living probate also incurs court costs and attorney’s fees that can easily be avoided. The cost in time lost and money spent can grow substantially if family members disagree about your care and finances, which is not as unusual as you might think it is.
You can only create durable powers of attorney while you have the legal capacity to sign documents. If you suddenly become incapacitated due to an accident, unexpected health or medical emergency, or another reason, it’s too late to put durable powers of attorney in place. Your family’s only choice will be to ask a judge to appoint individuals to act on your behalf in guardianship and conservatorship proceedings.
Using a form or internet service for your durable powers of attorney — or any other estate plan document — is a significant mistake. If you take that approach, the documents may not even be valid, or they may not accomplish what you think they do. By the time your agents and family need to rely on them, it will be too late for you to fix the mistakes. One of the most common and devastating mistakes made by some attorneys and most do it yourself options is that they limit gifting. Gifting authority established correctly can be the cornerstone in protecting assets for the extraordinary cost of care. This is why it is important not only to work with an attorney who has expertise in estate planning but also elder law such as the BRMM lawyers.
Like all aspects of an estate plan, durable powers of attorney for finances and health care require assistance from an experienced estate planning attorney. Your lawyer explains what you accomplish with the documents and makes sure that your wishes and preferences are fully reflected in both documents.
Choosing the right people to take care of you and your finances is a critical part of creating a DPOA. Your lawyer helps you understand what responsibilities your agents will have, so you can make certain that you choose the right people to designate. If you have questions about naming agents, your attorney can address all your concerns before you sign the documents.
Your entire estate plan is as unique as you are, because it reflects your personal and financial circumstances. That is true of your durable powers of attorney too. Creating your DPOAs with the help of an experienced lawyer is the only way you can ensure that your documents are valid and that they reflect your wishes and situation.
Our BRMM lawyers are here to help with durable powers of attorney and other estate plan documents you may need to create or update. We provide a full range of services relating to estate planning and elder law.
We’ve been serving clients in Oakland County and beyond for more than 40 years. Our clients count on our commitment, experience, and credentials when they turn to us for their legal needs.
Call us today at (248) 494-4577 or use our online form to talk with our experienced attorneys.