Prudent estate planning incudes drafting documents and planning for unexpected events besides distribution of property after a person dies. A power of attorney is recommended for the time when a person cannot make financial or medical decisions for themselves. Knowing what this document can do, however, is an important part of this planning.
First, there is no one standard power of attorney document. Michigan and other states have different requirements. Some states do not recognize a power of attorney from outside their jurisdiction. Because a power of attorney is a contract granting important decision-making powers to another person, the principal executing the document must have sufficient mental capacity. A power of attorney cannot be used instead of a guardianship if the person does not have mental capacity.
For these reasons, the importance of these documents is not restricted to senior citizens. Anyone at any age may be stricken suddenly by an accident, illness or unexpected circumstance that can diminish their ability to make decisions. A spouse may not have the ability to make important decisions when this occurs. A power of attorney is insurance that eases the burden of families during a stressful time.
Different power of attorney documents are also required for financial and health care decisions. One power of attorney grants limited or general decision-making authority over assets. Limited power can restrict the time and scope of asserts, while a general power of attorney is relatively unlimited. A medical power of attorney grants the agent the authority to make health care decisions on the principal’s behalf.
Finally, a power of attorney is not a mechanism for handling an estate when a person dies or for avoiding probate. The authority granted to the agent named in the document dies with the principal who executed it. Letters testamentary may be needed even if the agent is named as an estate executor in the power of attorney.