The types of powers of attorney available in Michigan can be confusing. What are the distinguishing features, and how do you determine which type is most suited to your needs? This post aims to provide a summary of the most common kinds.
Powers of attorney in Michigan are primarily governed by common law (i.e., the body of law developed through court decisions), but certain aspects are governed by Michigan statutes, some of which were changed within the past several years. As such, it is important to ensure that your power of attorney meets the applicable legal standards so that it will be valid for your intended purposes and intended duration. Please contact an attorney to discuss the specific legal requirements that may apply in your situation.
OVERVIEW OF POWERS OF ATTORNEY
A power of attorney is a written document that authorizes another person (the “attorney-in-fact”) to act in the place of the person granting the power (the “principal”). This type of relationship is called an “agency relationship” because the power of attorney authorizes the attorney-in-fact to act as the principal’s agent. The attorney-in-fact can act in accordance with the terms of the power of attorney without court supervision, relying on the document itself as proof of the attorney-in-fact’s authority.
The scope and duration of the attorney-in-fact’s power to act on behalf of the principal are established through the terms of the power of attorney document. A power of attorney is typically classified by the types of powers given to the attorney-in-fact and the conditions under which the power of attorney is activated or terminated. The most common distinguishing factors are discussed next.
DISTINCTION #1: GENERAL VS. SPECIFIC/LIMITED POWERS OF ATTORNEY
1) General Power of Attorney
A general power of attorney (sometimes referred to as a “common law power of attorney”) authorizes the attorney-in-fact to take any action on behalf of the principal with regard to all of the principal’s affairs. In essence, this type of power of attorney gives the attorney-in-fact all of powers and rights that the principal holds himself or herself (e.g., buying and selling personal property; buying, selling, or managing real estate; handling financial transactions; entering into contracts; and settling claims, among other things).
Even if a power of attorney states that the principal is granting the attorney-in-fact general, broad authority to act on the principal’s behalf, it is prudent to specifically describe in the document the common types of transactions that will fall within the scope of general authority. Likewise, considering the nuances of state and federal law, Michigan attorneys generally recommend that a power of attorney expressly state that the attorney-in-fact has the power to create trusts and make gifts on behalf of the principal—even if the power of attorney is general in nature—in cases where the principal wants the attorney-in-fact to have those powers.
A general power of attorney is not durable automatically and will terminate upon the disability or incapacity of the principal unless it includes the necessary language to make it durable, which is discussed below. (A durable power of attorney remains in effect until the principal’s death unless the principal rescinds it prior to becoming incapacitated or disabled.)
2) Specific, Limited, or Restricted Power of Attorney
A specific, limited, or restricted power of attorney authorizes the attorney-in-fact to take action on behalf of the principal only with regard to specific matters or for limited purposes. This type of power of attorney also may include other restrictions on the attorney-in-fact’s ability to act. For example, a restricted power of attorney may provide that the power of attorney is effective only during a certain period of time or is only effective on a particular date. Other restrictions may include limitations intended to prevent an abuse of power.
Limited powers of attorney are routinely granted for the management of the principal’s financial affairs or accounts (sometimes referred to as a “financial power of attorney”). In addition, many financial institutions have their own power of attorney forms that an individual may use to grant an attorney-in-fact authority to act with regard to a particular bank account, etc.
Another common type of limited power of attorney is a power of attorney for buying, selling, or transferring land. It is necessary to consider acknowledgment and recordation requirements (i.e., specific requirements regarding how the power of attorney must be executed and how it may be recorded with the register of deeds) if you are considering a power of attorney that involves these land-related powers.[1]
Please note that Michigan law includes specific requirements for a health care power of attorney (also known as a “designation of a patient advocate” in Michigan), which are discussed later in this post.
DISTINCTION #2: IMMEDIATE VS. SPRINGING POWERS OF ATTORNEY
1) Immediate Power of Attorney
An immediate power of attorney is one that becomes effective immediately after the power of attorney document is executed. This type is more common than a springing power of attorney.
2) Springing Power of Attorney
A springing power of attorney is one that becomes effective upon the occurrence of a specific event (e.g., when the principal becomes incapacitated or disabled). In cases where a springing power of attorney is preferred, it is important that the instrument specifically describe the event that will activate the power of attorney as well as any standards that are necessary for determining whether the triggering event has been satisfied (e.g., the standard or process that will be used to determine whether the principal is incapacitated or disabled). Notably, in Michigan, the statutory definition of “durable power of attorney” (discussed further next) encompasses a springing power of attorney that is “effective upon the disability or incapacity of the principal . . . .” [2]
DISTINCTION #3: DURABLE VS. NON-DURABLE POWERS OF ATTORNEY
1) Durable Power of Attorney
A durable power of attorney is one that (1) remains in effect even when the principal becomes disabled or incapacitated, and (2) remains in effect regardless of the passage of time.[3] The applicable statute[4] provides that the power of attorney document must include the following language in order to qualify as a durable power of attorney: (1) “This power of attorney is not affected by the principal’s subsequent disability or incapacity, or by the lapse of time,” or (2) “This power of attorney is effective upon the disability or incapacity of the principal.” Alternatively, the power of attorney document must include “similar words showing the principal’s intent that the authority conferred is exercisable notwithstanding the principal’s subsequent disability or incapacity and, unless the power states a termination time, notwithstanding the lapse of time since the execution of the instrument.” More simply stated, a durable power of attorney must expressly state that the principal intends for the attorney-in-fact to exercise the authority granted under the instrument even if the principal becomes disabled or incapacitated, and intends for the attorney-in-fact to continue to exercise the authority granted regardless of the amount of time that has passed since the power of attorney was executed.
2) Non-Durable Power of Attorney
A non-durable power of attorney is one that terminates when the principal becomes disabled or incapacitated. However, the principal’s disability or incapacity does not revoke or terminate the agency relationship established by the power of attorney until the attorney-in-fact has actual knowledge of the principal’s disability or incapacity.[5] The same is true with regard to all powers of attorney (whether durable or non-durable) upon the death of a principal. The agency relationship is not revoked or terminated until the attorney-in-fact has actual knowledge of the principal’s death.[6]
OTHER COMMON TYPES OF POWERS OF ATTORNEY (WHICH ALSO MAY QUALIFY UNDER ONE OR MORE OF THE CLASSIFICATIONS LISTED ABOVE)
1) Patient Advocate Designation (Sometimes Called a Durable Power of Attorney for Health and/or Mental Health Care or a Health Care Power of Attorney)
A patient advocate designation is a document through which an individual (called the “patient”) designates an adult (called the “patient advocate”) to make decisions regarding the patient’s medical or mental health treatment when the patient is unable to make such decisions himself or herself. This type of agency relationship is governed by statute in Michigan, and the applicable statute includes specific requirements for the designation.[7] Like other powers of attorney, the designation document defines the scope of the designation and the patient advocate’s powers regarding the care, custody, and medical or mental health treatment of the patient.
Importantly, Michigan law provides that the designation is suspended in the event that the patient regains the ability to participate in decisions regarding his or her medical or mental health treatment.[8] The suspension ceases, and the patient advocate designation is reactivated, if the patient is subsequently found to be unable to participate in decisions regarding his or her medical treatment or mental health treatment.[9]
Further information about patient advocate designations and a standardized patient advocate designation form (DCH-3916) are available here. Frequently asked questions about the designation are also answered here. However, please keep in mind that, despite these resources, a custom durable power of attorney for health and/or mental health care may be better suited for your needs and personal wishes.
2) Delegation of Powers by a Parent or Guardian
By statute,[10] (1) a parent or guardian of a minor or (2) a guardian of a legally incapacitated individual may execute a durable power of attorney that delegates the parent’s or guardian’s powers regarding the care, custody, or property of the minor child or legally incapacitated individual (except the parent’s or guardian’s power to consent to the marriage or adoption of a minor ward or to release the minor ward for adoption).
The applicable statute specifically prohibits a parent from knowingly and intentionally delegating his or her powers regarding the care and custody of a minor child for more than 180 days with the purpose of permanently transferring custody of the child. Consequently, this type of delegation generally cannot last longer than six months. However, if the parent or guardian granting the delegation is in the military and deployed to a foreign nation, the power of attorney may provide that the delegation of power is effective until the 31st day after the deployment ends.
3) Appointment of Funeral Representative
By statute,[11] an individual may designate an adult to serve as his or her funeral representative and make decisions regarding funeral arrangements and the handling, disposition, or disinterment of the individual’s body. This type of designation must be in writing and fulfill the other requirements set forth in the statute.
4) Power of Attorney for IRS Representation
The Internal Revenue Service (“IRS”) permits a taxpayer to designate an attorney-in-fact to represent the principal before the IRS. The IRS provides a power of attorney form for this purpose, which is available here. In general, the attorney-in-fact must be eligible to practice before the IRS in order for the designation to be valid. (See IRS Publication 947 for further information.) Notably, the form permits the taxpayer to modify the acts that the attorney-in-fact is permitted to perform on behalf of the taxpayer. Other forms are also available if a taxpayer wishes to authorize an individual or organization to make other types of requests or inspections on his or her behalf.
ADDITIONAL INFORMATION
The Michigan Legislative Service Bureau and the State Bar of Michigan have put together a publication called “Planning for Your…Peace of Mind: A Guide to Medical and Legal Decisions,” available here. However, preparing a power of attorney that meets your specific purposes can be complex. It is advisable to consult a lawyer to determine the best type of power of attorney for your needs. If you have questions regarding the power of attorney that is best for your situation, please call us to discuss what options may be available to you.
This post has been prepared for informational purposes only. As such, it does not constitute legal advice and does not establish an attorney-client relationship. This blog should not be used as a substitute for legal advice from a competent attorney licensed in Michigan.
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[1] See MCL 565.36; MCL 565.37.
[2] MCL 700.5501.
[3]An incapacitated individual is defined as “an individual who is impaired by reason of mental illness, mental deficiency, physical illness or disability, chronic use of drugs, chronic intoxication, or other cause, not including minority, to the extent of lacking sufficient understanding or capacity to make or communicate informed decisions.” MCL 700.1105(a).
[4] MCL 700.5501.
[5] MCL 700.5504.
[6] MCL 700.5504.
[7] See MCL 700.5506-700.5520.
[8] MCL 700.5509(2).
[9] See MCL 700.5508; MCL 700.5509(2); MCL 700.5515.
[10] MCL 700.5103.
[11] MCL 700.3206.
