At some point in your life, you may be unable to manage your own affairs. When that happens, a power of attorney designation can appoint someone else to do that work for you. Understanding the different types of powers of attorney in Michigan, and when to use them, can help you avoid losing control of your financial, medical, and child-related decisions.

General Power of Attorney

A power of attorney is a written delegation of your decision-making authority to someone else. As the “principal”, you authorize a specific person, called an “attorney-in-fact”, to act in your place as your agent. It does not replace your own authority, but it allows them to act when you can't.

A general power of attorney authorizes the attorney-in-fact to take any action on behalf of the principal, regarding any of the principal's affairs for as long as the principle has that ability him or herself. This includes buying and selling property, managing financial transactions, entering contracts, and settling lawsuits.

However, a general power of attorney is not typically “durable.” That means, without meeting special requirements, it will end if and when you become disabled or incapacitated. It will also terminate automatically upon your death. That is why even a general power of attorney is not a replacement for a complete estate plan.

Most commonly, a general power of attorney may be used in an estate planning context between a parent as principle and a child as attorney-in-fact when it is no longer convenient for the parent to manage their own financial affairs. For example, they may be helpful when “snowbirds” are out of the state for an extended period, or when mobility issues make getting to the bank challenging.

Specific, Limited, or Restricted Power of Attorney

How long and how broad your attorney-in-fact's authority will be depends on the terms of the Power of Attorney you sign. When that document contains specific instructions, or places limits on what the attorney-in-fact can do, it may be called a specific, limited, or restricted power of attorney.

A restricted power of attorney may have an effective date or set duration. It may also have limiting language to prevent mishandling of your affairs or an abuse of power.

A limited power of attorney grants less than all your authority, usually by subject matter. For example, a Financial Power of Attorney can allow your loved one to talk to your financial institutions and manage your accounts.

A specific power of attorney is a designation of your authority to perform a specific act, usually with instructions to do so. For example, it could allow a family member complete a real property transaction in your absence.

Springing Power of Attorney

Unless the document says otherwise, a power of attorney takes effect as soon as it is signed. This is called an immediate power of attorney. However, your estate planning attorney can also help you prepare a “springing” power of attorney, which only becomes effective when a certain thing happens. In the context of estate planning, the most common “springing” event is when the principle becomes disabled or incapacitated. These documents are designed to spring into effect on the moment of incapacity, to prevent any gaps in decision making while your family goes to court to obtain a guardianship.

Patient Advocate Designation

Michigan law allows adults “of sound mind” to designate a patient advocate to make healthcare treatment decisions on their behalf (with certain limitations). The document may include instructions about your desire for care and treatment, such as a “Do not resuscitate” order, a preference for hospice care, or a desire to make an anatomical gift. Unlike other powers of attorney, this designation persists after you are disabled or incapacitated.

A patient advocate designation must be in writing, signed, and witnessed, executed voluntarily, and made part of the patient's medical record. It must be sent to the proposed advocate (and any successor patient advocates) who must sign an acceptance before it can go into effect. Authority to make decisions under a patient advocate designation goes into effect “only when the patient is unable to participate in medical or mental health treatment” or mental health care decisions. It continues until:

• The patient revokes the authority,
• The patient advocate resigns,
• The probate court removes them, or
• The patient dies.  

Other Power of Attorney Designations

There are also other reasons why you might sign a power of attorney (usually limited or restricted):

Delegation of Parental Authority

If you have children and are unable to provide for them for any reason, you may designate a third party to do so on your behalf. This is a less formal process than the appointment of a guardian and may be appropriate when you are:

• In need of in-patient medical care,
• Temporarily unhoused,
• Working out-of-state,
• Serving a jail or prison sentence.

Signing a power of attorney to delegate your parental authority can prevent a Child Protective Services investigation for parental neglect.

Power of Attorney for Active Duty Servicemembers

Active duty servicemembers often are reassigned or deployed and unable to wind up their affairs before relocating. They may also find themselves subject to lawsuits (including divorce) and unable to execute documents to plead their case. In those cases, the federal Servicemembers Civil Relief Act (SCRA) allows a servicemember to authorize his or her lawyer to act as his or her attorney-in-fact to sign documents and negotiate settlements in the case.

Accountants and Tax Preparers (Power of Attorney for IRS Representation)

If you get help filing your taxes, you likely have signed a power of attorney for IRS representation. This form, which is included in your tax filings, allows your CPA, accountant, or tax prepare to act as your attorney-in-fact when talking to the IRS, and to file your tax returns on your behalf.

Funeral Representatives

Another Michigan statute allows you to designate a funeral representative to make decisions related to your funeral and burial, cremation, or other handling of your body after your death.

Financial Advisors

If your family works with a financial advisor, you may have completed a limited power of attorney, giving that person authority manage your investments and trade stocks. However, this power of attorney usually prevents the advisor from withdrawing funds or changing the beneficiaries on your account. It is best to only sign such a document if your financial advisor is a fiduciary, meaning they have a legal duty to act in your best interests.

Find Out What Types of Powers of Attorney are Right for You

There are many types of powers of attorney in Michigan. Which one (or ones) are right for you will depend on your situation, your financial and personal goals, and your health care needs. At Bebout, Potere, Cox & Bennion, P.C., we care about you and your family. We help individuals and families in Rochester Hills, Rochester, Troy, Lake Orion, Oxford, Oakland County, Macomb County and throughout Southeast Michigan. We can help you understand your estate planning options and decide if you need a Power of Attorney. Call us at 248-651-4114 or contact us here to speak to an attorney.