Unfortunately, it’s inevitable for bad things to happen. Fortunately, it’s possible to take precautions to make bad situations easier to manage. If something happens that leaves you unable to make or communicate decisions for yourself, a durable power of attorney is a tool that can help ensure that someone you trust will be empowered to manage your financial and health care decisions.
Broadly speaking, a power of attorney (POA) is a written instrument that gives legal authority to a third party (known as the agent or attorney-in-fact) to act on the behalf of someone else (known as the principal).
In estate and incapacity planning, the most common type of power of attorney is the durable power of attorney. A durable power of attorney contains specific language that ensures your agent can act even if you become incapacitated, while keeping the power in your hands for as long you can make decisions for yourself. For the purposes of estate and incapacity planning, there are a few different types of durable powers of attorney to consider, including:
- Durable power of attorney for health care. This durable POA gives someone of the principal’s choosing the right to handle health care decisions in they event that the principal becomes incapacitated. This might include seeking treatments and making end-of-life decisions.
- Durable power of attorney for financial matters. This type of durable POA gives the agent the right to handle the principal’s financial affairs and transactions should they become incapacitated, including transferring assets into a trust, pursuing claims or actions on their behalf, managing business affairs, selling property, and more.
While no one wants to think about the possibility of suffering from an accident or succumbing to an illness, taking steps to put a power of attorney in place can help make sure that your wishes are respected and carried out. In addition to keeping you in control, this can make a difficult time easier to navigate for your loved ones — protecting their privacy while helping them avoid the costly and time-intensive living probate system. On a personal level, taking time to think about a power of attorney can help you attain your goals — and gain some well-deserved peace of mind.
With that said, there are many important considerations to factor in when contemplating a power of attorney — including the potential for power of attorney abuse.
What Is Power of Attorney Abuse?
We know that the reasons why someone would might to ensure they have an agent ready with durable power of attorney are scary. And it can be just as scary to think about what would happen if your agent or attorney-in-fact were to take advantage of their status.
In a writing, the National Center on Elder Abuse (NCEA) describes power of attorney abuse as
the misuse by the agent of the authority granted by the principal. It means making a decision or taking an action that is not in the principal’s best interest.
Under Michigan law, agents designated and acting under a durable power of attorney are subject to certain rights, restrictions, and responsibilities. First and foremost, agents are expected to act in accordance with the standards of care applicable to fiduciaries — meaning broadly that they are obligated to act in good faith, and put the best interests of the principal and the estate above their own.
The agent is expected to take reasonable steps to follow the instructions of the principal, and to be able to provide an accounting to the principal (or a court-appointed guardian or conservator) upon request. Agents are also expected to maintain records of their actions taken on behalf of the principal, including documenting transactions, receipts, disbursements, and investments.
Unless provided for in the power of attorney or by judicial order, the agent or attorney-in-fact cannot make a gift of all or any part of the principal’s assets. They are also barred from creating an account or other asset in joint tenancy with the principal, unless ordered to do so by the court or the POA.
Actions that constitute an abuse of power of attorney might include making decisions that are decidedly not in the principal’s best interest. For instance, an agent might take advantage of their position to spend the principal’s money for their own benefit — such as buying him- or herself expensive goods or supporting their private business interests, rather than using funds for the principal’s care. Similarly, the agent may attempt to give away some of the principal’s property as gifts, without having the proper authority to do so.
In other situations, power of attorney abuse may occur if the POA itself is created through fraud, forgery, or coercion.
The reality is that agents and advocates can and do sometimes steal and attempt to take advantage of the principal. Part of the reason why, as the NCEA explains, is that powers of attorney:
usually are not subject to oversight by a court or third party. If the principal becomes incapacitated and can no longer monitor the agent’s actions, this lack of oversight for a broadly written legal document makes it very easy for an agent to abuse the authority granted by the principal.
For this reason, some cynical observers have been known to call powers of attorney “a license to steal.”
However, there are also remedies and solutions that can help protect the principal and their assets. As the Michigan Bar has put it in a writing, if an agent abuses their authority, anyone involved in the principal’s welfare
can ask the probate court to get involved, cancel the durable power of attorney, and either appoint a conservator to handle [the principal’s] affairs or enter some other protective order on [the principal’s] behalf.”
An experienced attorney can help you understand the specifics of your circumstances and consider appropriate action. This might include pursuing litigation against the agent for breach of fiduciary duty, including holding the agent liable for any damage or loss to the principal. Families or other interested parties faced with an abuse of power of attorney might also pursue other types of civil lawsuits, as well. A knowledgeable local attorney can also help you to understand if the matter constitutes elder abuse under Michigan law.
Depending on the circumstances, individuals may also be able to pursue criminal charges if the agent violated state or federal laws by committing crimes such as forgery, fraud, exploitation, or embezzlement, as the NCEA explains.
How Can You Avoid Abuse of Power of Attorney?
A Michigan estates and probate attorney can help you choose the tools and solutions that will be best suited for your individual circumstances. As you sit down with your legal professional, here are a few ideas to discuss that may help minimize the likelihood that someone will be able to abuse or take advantage of a power of attorney:
Be extremely selective when choosing an agent.
As when choosing a personal representative or trustee, it is important to be selective of who you entrust with the important responsibility of acting on your behalf as an agent or attorney-in-fact. Consider the character of the agent, and how well they fit with the responsibility you are giving them.
Do you trust them completely to make decisions in your place? Are they fiscally responsible, so as to be able to handle your financial or personal affairs appropriately? Are they responsive and capable? Do you trust them to communicate effectively with other members of your family, local financial institutions, or the courts? Remember, this process is not about making people feel equal. It is about ensuring your wishes are respected and carried out when you no longer have a say in the matter.
Take action to limit or restrict the agent’s powers.
The powers granted to an agent or attorney-in-fact can be quite broad, or fairly narrow. If you are a principal, an experienced and knowledgeable attorney can help you tailor a power of attorney that will suit your needs and goals. For example, you could grant your chosen agent the ability to make only certain financial transactions, such as paying bills. You can also use your power of attorney to impose certain requirements on your chosen agent — for instance, a requirement to provide regular accountings, or to stay in communication with your family.
Consider nominating co-agents.
When in doubt, you may wish to consider splitting up responsibilities. You can always grant powers of attorney to more than one individual; this can help provide a system of checks and balances, and help ensure that one person cannot take action alone.
Actively review your estate and incapacity planning documents on a regular basis.
Broadly speaking, a principal can revoke or replace a power of attorney at any time, as long as they have capacity and follow all proper protocols to do so. It is generally a good practice to review your estate and incapacity planning documents with your attorney every few years, in order to make sure that your plans still fully and accurately reflect your wishes.
Keep the Discussion Going with Metro Detroit’s Probate and Estates Attorneys
Interested in learning more about powers of attorney in Michigan? Ready to start preparing for the future, and take control over who will make important decisions in the event that you become incapacitated?
For all these important matters and more, it’s wise to have an intelligent and experienced lawyer at your side, fighting for your rights and the well-being of your loved ones.
Our skilled law firm is here and ready to assist with all of your incapacity and estate planning needs, including guardianships, conservatorships, and powers of attorney.
If you require further legal advice or if you are looking for representation as you navigate Michigan’s tricky court system, don’t hesitate to call our Southfield, Michigan office at (833) 469-4897 to set up your consultation initial consultation. You may also click here to get in touch online.
At the Patrick & Associates, PLLC., we will work hard to accomplish your goals, while handling your matter with professionalism and expertise. Mr. Patrick can help you navigate through all the legalities and formalities, so that you can rest assured that you and your loved ones will be taken care of, whatever life brings.
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