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A Durable (Financial) Power of Attorney (”FPOA”) (a/k/a a Durable Power of Attorney) is a document in which you (the “principal”) empower someone (the “agent” or “attorney-in-fact”)to handle your financial affairs during your lifetime, but does not specify how the affairs are to be handled like a Living Trust does. You can modify or revoke a FPOA if you are still competent. The FPOA can help avoid the need to initiate Conservatorship probate proceedings.
A significant amendment to Michigan law was signed into law as of May 22, 2012 but only applies to powers of attorney executed on or after October 1, 2012. Here are some of the more significant provisions of that law.
A FPOA can be drafted to become effective upon your incapacity (called a spring power of attorney) or upon signing, whichever you choose. The law leaves unchanged the language requirements in order to create a “springing” FPOA.
In order to be valid, the new law requires the FPOA to be signed in thepresence of two witnesses, neither of whom is the attorney-in-fact, and both of whom also sign the durable power of attorney; or acknowledged by the principal 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.
The law also imposes certain responsibilities and places certain limitations of powers upon the agent, including, but not limited to, all of the following:
(a) Except as provided in the durable power of attorney, agent required to act according to fiduciary standards of care applicable when exercising powers under a durable power of attorney.
(b) The attorney-in-fact shall take reasonable steps to follow the instructions of the principal.
(c) Agent to keep the principal informed of the agent’s actions, and upon request provide an accounting to the principal, and a conservator or guardian appointed on behalf of the principal, or pursuant to judicial order.
(d) Cannot make gifts, unless provided for in the durable power of attorney or by judicial order. This restriction is not limited to gifts to the agent.
(e) Cannot place assets into joint tenancy with the principal, unless provided in the durable power of attorney or by judicial order.
(f) Agent must maintain records of the attorney-in-fact’s actions on behalf of the principal, including transactions, receipts, disbursements, and investments.
(g) The attorney-in-fact may be liable for any damage or loss to the principal, and may be subject to any other available remedy, for breach of fiduciary duty owed to the principal. This is merely a restatement of prior law. In the durable power of attorney, the principal may exonerate the attorney-in-fact of any liability to the principal for breach of fiduciary duty except for actions committed by the attorney-in-fact in bad faith or with reckless indifference. An exoneration clause is not enforceable if inserted as the result of an abuse by the attorney-in-fact of a fiduciary or confidential relationship to the principal.
(h) The attorney-in-fact may receive reasonable compensation for the attorney-in-fact’s services if provided for in the durable power of attorney.
The agent must sign an acknowledgment (worded a very specific way) before exercising authority as agent under the power of attorney. Having said that, failure to sign does not affect the agent’s authority to act, nor does it affect the agent’s responsibilities or potential liability to the principal. It is therefore unclear what protections this requirement affords the principal. Under prior and new law, the fact that an agent has acted under the power of attorney constitutes acceptance. There are no special signing requirements for the acceptance, but it probably should be notarized and otherwise in recordable form.
Third parties (i.e. – a bank) who act in good faith are exonerated from liability.A third party can require the agent to sign the (above-mentioned) statutory acknowledgment, without liability, before recognizing the power of attorney.Although uncertain from the wording of the law, it appears that a third party cannot require anything else, or at least that it could be liable for requiring more.
The new act does not apply to documents executed before October 1, 2012. It also does not apply to several types of documents that can be characterized as powers of attorney (i.e. – health care powers of attorney, etc).