Why You Need a Power of Attorney Before You Need It

You can spend decades planning for your retirement and how you will pass on your legacy, but are you planning for who would make decisions for you if you couldn’t?

As uncomfortable as it may be to imagine these “what if” scenarios, putting your wishes in writing and naming people to carry them out can spare your loved ones even more stress later.

In this blog post, we will discuss the role of a power of attorney and why it is such an important part of your estate plan.

Key Takeaways:

• A power of attorney grants an agent legal authority to make financial or medical decisions for you if you can’t.
• Without a POA document in place, your loved ones may have to go through probate court to get that authority, which can be slow, costly, and stressful.
• Choosing the right person, and talking openly with them about your wishes before you sign, matters just as much as having the document itself.

What Is a Power of Attorney?

Power of attorney (POA) is a written document that allows one person (the agent or attorney in fact) to make decisions and act on behalf of another person (the principal), either immediately or upon their incapacity. Even after signing a POA, the principal can change or cancel it, as long as they’re mentally competent.

Duties may vary depending on the type of POA and the principal’s health. A durable POA remains in effect even if the principal becomes physically or mentally incapacitated.

Here are a few of the different types of POA:

• Durable Medical Power of Attorney: Your agent is granted the ability to make medical decisions on your behalf. In Michigan, this is formally called a Patient Advocate Designation, and it only takes effect once your doctors determine you can’t make your own decisions. Other states may use names like health care proxy. Pairing a medical POA with a living will, which spells out your wishes in writing, gives your agent clear direction.
• Durable Financial Power of Attorney: Your agent is granted legal authority to handle financial matters, like paying bills or managing accounts, either right away or only if you become unable to. In Michigan, a financial POA signed on or after July 1, 2024, is durable automatically unless the document says otherwise, as long as it’s properly notarized or witnessed. If your POA is older, or you live in another state, the rules may be different, so it’s worth having an attorney take a look.
• Limited Power of Attorney: Your agent is granted the authority to act on your behalf for a specific purpose and for a specified time. This type of POA ends once the specific purpose is completed or after the specific date.

The authority granted to all types of POA ends immediately upon the principal’s death. From there, a successor trustee manages anything held in a trust, and the personal representative (executor) handles the rest once the probate court appoints them.

Why Is a Power of Attorney So Important?

If you fall into a situation where you are unable to make medical or financial decisions for yourself, and you have not already designated a POA, your family may need to ask the probate court to appoint a guardian for medical and personal decisions and/or a conservator for finances, which can be a time-consuming, expensive, and stressful process for all involved.

Depending on the attorney you work with, and which state you live in, drafting power of attorney documents could be a few hundred dollars. By comparison, in Michigan, just filing for guardianship and conservatorship costs $350 in court fees, before attorney fees, guardian ad litem fees, and the yearly accounting a conservator must file with the court.

Without a POA, a judge decides who makes decisions for you, and it may not be the person you would have picked. If family members disagree about who that should be, the process gets slower and harder on everyone.

Establishing a POA in advance can help prevent unnecessary hardship and legal action, as well as help ensure your wishes are followed.

Considerations When Selecting Your Power of Attorney Agent

Choosing your agent is as important as having the document itself, and a decision that should not be taken lightly.

You can have different people appointed to different types of POAs, or you can have one person hold many POA roles. It really depends on your situation and your relationship with those individuals.

Once you have an idea of who you’d like to appoint, have an open conversation about your wishes, along with the responsibilities and implications that come with being an agent. If you find during those conversations that someone isn’t willing or able to fulfill those responsibilities, find someone else who will.

Naming a power of attorney agent is just one of the key roles that you can put in place in an estate plan. Learn about all the key roles in an estate plan and how to pick the right people in this blog post.

Bottom Line

Planning for a situation in which you are unable to make decisions for yourself can be difficult and emotional. But it pales in comparison to the stress that your friends or family would feel if those plans weren’t put in place.

Designating power of attorney agents as part of your estate plan is one of the most important gifts that you could give your loved ones during a difficult time. It should not be viewed as losing your own independence, but rather as adding protection in a time of crisis.

As critical as it is, establishing your power of attorney roles is just one component of creating a comprehensive estate plan. To help get you started, watch our on-demand webinar: Cover Your Assets: How to Safeguard Your Legacy Through Smart Estate Planning.

This is general education, not legal advice. An estate planning attorney can help you draft documents that fit your state’s requirements.