A power of attorney is an important estate planning document in Michigan. But, it has limitations and may not always be implemented quickly.
The person granting authority, known as the principal, names one or more agents to act on their behalf in accordance with the powers and restrictions set forth in a power of attorney. These are important because the principal needs a trusted person to manage their assets, pay bills and make important decisions if there is an incapacity. These avoid the situation where a court declares the person as being incompetent and appoint someone to handle their affairs.
There are many challenges, however, for successful use of a POA. These can delay its smooth and quick implementation and an agent from taking over the principal’s financial and personal affairs.
First, financial institutions are not required to accept them and rely on their own standards. These include requiring use of their own forms, having the principal reaffirm it in writing from time to time and mandating specific language.
Some banks will not accept a POA that was not executed within the previous six months. Other institutions delay acting on it until their attorneys or other specialists review and accept the document.
Once a firm accepts a POA, an agent must prove that they are the person named in that document. A photocopy of a driver’s license is usually accepted as proof. Until recently, institutions accepted a letter or a telephone call from the estate planning attorney to meet this burden.
However, some institutions still delay acceptance of these verifications to avoid the risk of being involved in identity theft or elder financial abuse. An agent can overcome this by seeking a court order requiring the institution to accept the POA. However, this costs time and money and courts are more likely to rule in the institution’s favor if it makes an argument that it acted reasonably. The agent may also have to pay the institution’s legal fees if the agent loses this legal action.
An attorney can help draft a legally-effective POA, take other steps to assure that their affairs can be handled appropriately and quickly and eliminate obstacles placed in front of the POA’s agents. They can also assist with its implementation after it is needed.
Source: Forbes, “7 big estate planning mistakes-The power of attorney trap,” By Bob Carlson, Feb. 23, 2018