Legal Affairs: Drafting Powers of Attorney discussed Attorney is former chair of probate section

By Roberta M. Gubbins

Legal News

"A power of attorney (POA) creates an agency agreement between a principal (person granting the power) and an agent (person receiving the power)," said Nancy Little, speaking to a large group of attorneys enjoying lunch and learning at the Probate Section Meeting held on March 15 at the Michael Franck Building in Lansing.

"Powers of attorney are governed by common law rules of agency and statutory provisions. In Michigan, there is a general POA that relates to the management of financial assets and a health care POA."

"A general POA can be 'springing,' which means it comes into operation at some point in the future or it can have immediate effect. It can also be a durable POA that remains valid even though the principal becomes incompetent at some point in the future and continues until it is revoked on its terms or by the death of the principal."

"A non-durable POA loses effect when the person becomes incompetent. And the reason most of us have a POA is to prevent such an occurrence. Generally, unless there is a compelling reason why you don't want the POA to continue indefinitely, the POA should be durable."

The POA for health care is a springing POA that becomes effective when two doctors have certified that the principal is incompetent and is durable until the person is able to re-take control of health care decisions."

Other POAs can be used to provide for the care of a minor or for representation before the IRS. The Social Security Administration has its own forms, which must be used. More information can be found at www.socialsecurity.gov.

General Powers of Attorney

"When we talk about making this POA durable, we want language to assure it will continue in the event of incapacity of the principal."

"An agent is a pretty important person who should be competent. Part of your role is to counsel your client to select the right person. It is possible to name two persons who could act in concert or alone."

"POAs are strictly construed which means if a power is not specifically included it will not be implied. This becomes a problem when making gifts. The IRS takes the position that if you do not include language that allows the agent to make a gift, it can't be done. This can come up, she explained, when the gift will reduce the estate to avoid filing a federal estate tax return. If the principal wants the agent to be able to give gifts to himself, the power must be specifically given in the document.

If the agent has the power to make gifts, it is considered a general power of appointment and if they die with that power, that property could become part of their taxable estate. She cautioned that practitioners should be careful in counseling clients on the issue of gifts.

Little recommended that all POAs be notarized and witnessed to avoid any issues.

Durable Powers of Attorney for Health Care

"If the person intends to grant the patient advocate or agent the power to make mental health decisions, the POA should specify both medical and mental health care. It is possible to appoint more than one person to act as agent."

"The agent must sign an acceptance form. I attach the acceptance form to the POA," she said. It must be witnessed and the list of people who cannot witness is long." Little recommended taking your own witness and notary if called to the hospital to sign a POA to avoid conflict.

"A health care POA is strictly construed meaning that the power to withhold treatment and under what terms or conditions must be clearly stated in the document. And it must be stated that withdrawal could cause death. If you want the agent to make anatomical gifts, it must be stated."

Nancy Little, attorney with Bernick, Omer, Radner and Ouellette, is the former chair of State Bar of Michigan Probate and Estate Planning section and the Editor of the Probate Journal.

Published: Fri, Apr 1, 2011

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