Estate Planning Archives | Gold & Associates, P.C.

Durable and Springing Power of Attorney

Contemplating a debilitating illness or injury is unpleasant, but by planning ahead, you can take some of the burden off your loved ones should tragedy strike. By creating a power of attorney before you need it, you make sure your wishes are known should you become disabled.

A power of attorney is a legal document through which you choose a representative to manage your medical care and financial dealings in the event of your temporary or permanent disability. The individual who acts on your behalf is known as your “attorney in fact” or “agent.”

What Is Durable Power of Attorney?

If you suffer mental incapacitation at some point in your life, you can benefit from having a “durable” power of attorney in place for handling your medical and financial decisions. A durable power of attorney becomes effective as soon as you sign it, and it continues indefinitely if you become unable to handle your own affairs due to incapacitation. A nondurable power of attorney, on the other hand, ends automatically if the individual who put the power of attorney in place becomes incapacitated.

A legally executed durable power of attorney enables your designated representative — who should be someone you trust — to handle all of your important affairs, such as overseeing your investments, paying bills or making medical decisions for you if you cannot do so on your own.

If you become incapacitated without a valid power of attorney document in place, your family members may have a difficult time getting authority to manage your affairs — and securing authority may require going to court to obtain a guardianship and or conservatorship. To provide for oversight of all your personal affairs, you should have two documents in place: a medical power of attorney and a financial power of attorney.

A medical power of attorney, sometimes referred to as a durable power of attorney for health care, or patient advocate agreement, names a trusted surrogate who makes your medical decisions should you lose the ability to do so.

With a financial power of attorney, your designated representative has authority to oversee your financial matters. In some cases, a financial power of attorney can be used for a short time or for only one transaction, such as finalizing a real estate deal. A durable financial power of attorney, though, allows an individual you name to handle your financial affairs indefinitely in the event of your incapacitation.

Michigan Requirements for Durable Powers of Attorney

In Michigan, both financial and medical durable powers of attorney are recognized under state law. In both cases, the designated representative — referred to as an advocate for medical purposes and an agent for financial purposes — can participate in actions on behalf of the creator of the power of attorney.

Financial powers of attorney typically are durable unless the document explicitly states an end date. Medical powers of attorney go into effect when the creator of the document becomes incapacitated.

An individual wishing to create a legal power of attorney document in Michigan must be at least 18 years old and must be mentally competent. A qualified estate planning attorney can assist you with preparing the documents to ensure that you meet all state requirements.

What Is Springing Power of Attorney?

A springing power of attorney — as opposed to a durable power of attorney — takes effect only when the creator of the document becomes incompetent. Either a court or a doctor can declare that individuals are no longer able to manage their own finances. A representative named in a springing power of attorney has no legal right to manage the document creator’s finances until that individual is officially deemed mentally incapacitated.

Create Separate Documents

To keep your affairs as simple as possible and to meet state law requirements, separate documents for financial and medical powers of attorney are best. While it is possible to combine the two, separation into two documents provides several advantages. For instance, your medical records may include personal information that you want to keep private from financial professionals, and medical professionals treating you do not need to know the details of your finances.

If you decide to create two separate powers of attorney, however, you may want the same individual representing you for both areas. If you want different representatives for medical and financial matters, make sure that the two individuals can work together effectively. For a consultation with an experienced estate planning attorney, please contact Gold & Associates, P.C.

What is a Power of Attorney?

A power of attorney is a legal authorization that allows someone else to act in your place in matters related to finances, personal affairs and health care. If you ever become mentally unsound and unable to handle your own affairs, a durable power of attorney can stay in effect indefinitely.

With a valid power of attorney declaration in place, a trusted individual of your choosing — designated as your “agent” or “attorney-in-fact” — can legally oversee important matters in your life such as managing investments, paying bills, signing checks, making deposits, obtaining insurance, contracting for professional services, and making decisions about your health care if you cannot do so. The authority you grant to your agent can be as broad or narrow as you wish.

A power of attorney should be in writing, and you should sign it so your agent has proof of authority to act on your behalf. Power of attorney often is executed as a formal legal document that can be recorded with the local register of deeds in case your agent needs to use the authority regarding a real estate transaction.

Types of Power of Attorney

You can choose among several different types of power of attorney to meet your specific needs.

With a special power of attorney, you can grant specific powers to your designated agent. You may choose a special power of attorney if you’re unable to handle some of your affairs due to medical reasons or other commitments. Powers granted can include selling personal property, managing or selling real estate, overseeing business transactions and collecting debts.
A financial power of attorney allows your agent to oversee your financial affairs on your behalf. You can use a financial power of attorney for single transactions like closing a real estate agreement, or you can sign a durable financial power of attorney that allows your agent to manage all your financial affairs if you become unable.
A healthcare power of attorney allows your designated agent to make medical decisions for you if you become mentally incompetent or cannot make decisions for yourself.

Selecting the Right Person

You should have significant trust in the person you select for power of attorney authority. Whether the individual is an attorney, organization, business associate, loved one or friend, you’ll be trusting your power of attorney designee to act in your best interests and honor your wishes.

Your power of attorney agent should keep detailed records of any actions taken on your behalf and update you periodically so you stay informed. If you cannot review updates, you should ask your agent to provide the information to a third party such as a family member or a trusted attorney.

An agent acting under a power of attorney has legal liability for decisions made in the event of intentional misconduct. However, power of attorney documents typically protect agents who make a mistake with no ill intent. Agents with power of attorney usually are not paid.

Granting Power of Attorney in Michigan

Michigan law requires that power of attorney agreements be in writing and signed on a voluntary basis. The signer must be mentally competent at the time of signing.

If you wish to give someone else the authority to act on your behalf, you’ll need to sign a power of attorney form that specifies the authority you grant to your agent. Your estate planning attorney can advise you on the proper forms.

For a power of attorney declaration to be considered valid, you must be in a mentally competent state at the time of signing. If you are concerned that your mental capacity might be called into question, you may need to have your doctor sign a statement attesting to your competency. Your attorney can assist you in compiling appropriate documentation.

Work with an Experienced Estate Planning Attorney

Choosing the right person as your power of attorney agent is one of the most important decisions you’ll make in life, and it’s critical to meet all legal requirements to ensure that your wishes are honored. To speak with an experienced estate planning attorney in the Plymouth area, please contact Gold & Associates, P.C.

What is a Living Trust?

A living trust is a legal document that allows you to explain exactly how you want your assets handled, appoint heirs and to name a trustee, who will fulfill the role of an executor upon your death. The living element of a living trust allows you to do all this while you are still living. The big benefit of a living trust is the fact that it allows your estate to bypass probate upon your death, because the trust passes on to your successor and allows them to then execute your wishes for your estate. A living trust also allows you to appoint someone to oversee your affairs, such as your financial assets, your legal affairs and your health care needs, if you become incapacitated while still alive. This is the biggest difference between a will and a living trust. A will only becomes effective when you die, while a living trust is active while you remain alive.

What is The Difference Between a Living Trust And A Regular Trust?

We have talked about the difference between a will and a living trust, but we haven’t yet covered how a living trust differs from a regular trust. Before answering that, it’s a good idea to define a regular trust. A regular trust or testamentary trust is a trust that only goes into effect after a person’s death. The trust creator will name beneficiaries who will then be allowed access to assets and the like after the individual’s death. Conversely, with a living trust, which is of course set up during a person’s lifetime, the person who sets up the trust is usually both the trustee (or the person who runs the trust) and the beneficiary (or the person who benefits from the trust property or assets). Of course, once the person who creates a living trust dies, it then transfers to the successor trustee to manage or distribute the assets to the beneficiaries.

Types of Living Trusts

There are two main types of living trusts. These are referred to as revocable and irrevocable living trusts. Read below to learn more:

Revocable Living Trust

This type of living trust allows a person to transfer their assets into the ownership of a trust. They still retain all control of their assets, because they are named the trustee of their revocable living trust. At any point in time, a person who creates a revocable living trust can change or “revoke” their living trust, thus its name. The assets within the trust will pass directly to the beneficiaries listed upon that person’s death, without having to go through the process of probate.

Irrevocable Living Trust

The other type of living trust, irrevocable is, as you may have guessed from the name, permanent. It allows a person to give away their assets during their lifetime. These assets, once given, are no longer in the trust creator’s control. This means the assets are no longer considered part of the trust creator’s estate. The benefit of this is the fact that because the assets are no longer part of the estate, they are not subject to estate taxes. Irrevocable trusts are rare, because it usually is only beneficial if a person has so much money, they could not hope to spend it all in one lifetime and they want to ensure their beneficiaries are not taxed at a high rate.

Other Reasons a Person Might Consider a Living Trust

Aside from easing the tax burden on beneficiaries, the following are some additional reasons a person might consider creating a living trust:

Minor Children/Beneficiaries

When children are young, creating a living trust is a way to safeguard their inheritance from them, allowed it to managed for them, by an appointed person, until they are old enough to responsibly handle the assets. It also allows the creator to set certain criteria for the inheritance, ensuring any assets given to a child are used responsibly.

Allows Property Management Before Death

As we mentioned above, one can set up a living trust so that their affairs are handled even if they are still living. Therefore, they won’t have to worry about bills being paid or being taken care of in their old age if they have a living trust. This is a huge benefit of a living trust with so many people living longer in today’s society.

Avoids a Contested Will

In general, wills are contested much more often than a living trust. Therefore, to ensure wishes are followed without contention, having a living trust is a good idea.

Keeps The Process Private

The probate process is public, so a will that is probated cannot be that private. By contrast, a living trust, since it avoids the probate process, remains more private.

To learn even more about a living trust and how it can benefit you, contact us today.