Although most Michigan residents probably do not want to think about worst-case scenarios where they will have to rely on the care or decision-making capacity of someone else, it is still very important to plan for this potential occurrence before the need arises. Creating a power of attorney when in sound mind and good health can give people the ability to protect themselves and retain control over the lives, healthcare or finances even when they may be physically unable to exercise it themselves in the future.
A power of attorney is a legal document that gives someone else, an agent, the legal authority to act on your behalf. Powers of attorney can relate to finances, healthcare and other issues. When discussing power of attorney in relation to financial matters, the agent designated by the power of attorney to exercise control in the event of incapacity is recognized as a fiduciary under the law. Understanding the legal duties a fiduciary will be held to can help you make a better decision about who is qualified or trustworthy enough to handle the important role and responsibility.
At the root of it, a fiduciary and agent under a power of attorney must be honest and trustworthy and must always act in good faith. In addition to those basic principles, there are four specific legal duties of anyone acting as a fiduciary. The first duty is to only act in your best interest. This means that the fiduciary and agent should be willing and able to make decision based on what would most benefit you, regardless of any effect-positive or negative-on the agent. The second duty requires that the fiduciary manage the money and property for which he or she is responsible with care. In connection with this, the third and fourth duties require that the money being managed by the fiduciary must be kept separate and not intermingled with the fiduciary’s own funds and that the agent must keep careful records of the money and how it is being used.
Designating an agent with power of attorney is an important decision that can have serious effects on a person’s future. In many cases, people may only need an agent to manage their money for a short time while incapacitated temporarily due to illness or injury. If a bad choice is made regarding who can exercise the power of attorney, people may later attempt to resume control over their own affairs only to realize that the agent improperly used funds or did not adequately protect their interests.
Source: Consumer Financial Protection Bureau, “Managing Someone Else’s Money: Help for agents under a power of attorney,” last accessed Sept. 13, 2014