What is a Durable Power of Attorney?
A long accepted practice for many individuals is to execute a Durable Power of Attorney designating another person to handle their personal and business transactions should they be absent, for instance on vacation in a foreign country, or become incapacitated due to age, injury or illness. The form and content of documents are usually defined by state statute as they are in Michigan through MCL 700.5501. Allowing Another to Act in Your Behalf If you execute a durable power of attorney you’re designating another person to act on your behalf as your attorney-in-fact. Typically a durable power of attorney will include language similar to the following:
- This power of attorney is not affected by the principal’s subsequent disability or incapacity, or by the lapse of time, or
- This power of attorney is effective upon the disability or incapacity of the principal.
It is essential to show whether your intent is to confer authority on another, immediately or only after you may become disabled or incapacitated. Once the power is effective, unless the document specifies a termination date, the power of attorney remains in place until your death, unless you affirmatively terminate it. As with any legal document, an appointment of an Attorney in Fact in a Durable Power of Attorney should be dated and signed voluntarily, witnessed and acknowledged before a notary public. Michigan law is specific on these matters. A durable power of attorney should be handled by one or both methods listed below:
- Signed in the presence of two witnesses, neither of whom is the attorney-in-fact, and both of whom also sign the durable power of attorney.
- Acknowledged by the individual who is seeking the durable power of attorney before a notary public who endorses on the durable power of attorney a certificate of that acknowledgment and the true date of taking the acknowledgment.
Spelling Out the Authority A durable power of attorney will usually spell out in some detail the scope of the powers being conveyed to the attorney-in-fact such as the authority to purchase or sell a specific parcel of real estate or to handle affairs of the individual when he or she is out of the country or in a hospital. Occasionally an individual, having designated one person as their attorney-in-fact, decides to terminate that position and designate someone else. Problems may arise when (a) the first designee does not want to be replaced or (b) when a third party has been acting pursuant to instructions from the first designee and refuses to comply with instructions from the successor designee. There may be claims that the decision by the principal to discharge the first designee was void because the principal was not competent due to dementia or the like. Such claims would potentially lead to complex and expensive litigation. An individual or an institution faced with competing durable powers of attorney where either it or the former attorney-in-fact contends that the second durable power is void due to the incompetence of the individual must decide whose instructions to follow, creating potential liability if it chooses wrongly.
Three Key Points to Remember As you can imagine, we could fill and entire issue of Hogwash! with detail on durable power of attorney, what it does and the potential pitfalls in changing one. Instead, let us leave you with three key principles to keep in mind;
- The fact that a person may be mentally ill and require treatment, even if such treatment is authorized by a court, such authorization does not mean that the individual is incompetent to make important decisions including who he chooses to be his attorney-in-fact. (MCL 330.1489, the Michigan Mental Health Code)
- The principal who executed the second durable power of attorney, as a matter of law, is presumed to have been competent do have done so.
- The burden of showing that an individual is incompetent is upon the person seeking to set aside or ignore the second durable power of attorney.
Should the question of battling powers of attorney arise, we recommend that you promptly seek legal counsel. The result of choosing the wrong attorney-in-fact may have serious legal and financial consequences.