Power of Attorney Blog
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Liability Under MCL 700.5501:

Posted December 2, 2018

A third party is not liable to the principal or any other person because the third party has complied in good faith with instructions from an attorney-in-fact named in a durable power of attorney whether or not the attorney-in-fact has executed an acknowledgment that complies with subsection 4. A third party is not liable to the principal or any other person if the third party requires an attorney-in-fact named in a durable power of attorney to execute an acknowledgment that complies with subsection 4 before recognizing the durable power of attorney. An attorney-in-fact's failure to comply with subsection 4 does not affect the attorney-in-fact's authority to act for the principal as provided for in the durable power of attorney and does not affect the attorney-in-fact's responsibilities or potential liability to the principal.

Exceptions to this and MCL 700.5501 Subsections 2 through 6 are:

  • A durable power of attorney executed before October 1, 2012.
  • A delegation under section 5103 or a similar power of attorney created by a parent or guardian regarding the care, custody, or property of a minor child or ward.
  • A patient advocate designation or a similar power of attorney relating to the principal's health care.
  • A durable power of attorney that is coupled with an interest in the subject matter of the power.
  • A durable power of attorney that is contained in or is part of a loan agreement, security agreement, pledge agreement, escrow agreement, or other similar transaction.
  • A durable power of attorney in connection with a transaction with a joint venture, limited liability company, partnership, limited partnership, limited liability partnership, corporation, condominium, condominium association, condominium trust, or similar entity, including, without limitation, a voting agreement, voting trust, joint venture agreement, royalty agreement, license agreement, proxy, shareholder's agreement, operating agreement, partnership agreement, management agreement, subscription agreement, certification of incorporation, bylaws, or other agreement that primarily relates to such an entity.
  • A power of attorney given primarily for a business or a commercial purpose.
  • A power of attorney created on a form prescribed by a government or a governmental subdivision, agency, or instrumentality for a governmental purpose.

MCL 700.5501

 

Duties of Attorney in Fact under MCL 700.5501:

Posted November 12, 2018

An attorney-in-fact designated and acting under a durable power of attorney has the authority, rights, responsibilities, and limitations as provided by law with respect to a durable power of attorney, including, but not limited to, all of the following:

  • Except as provided in the durable power of attorney, the attorney-in-fact shall act in accordance with the standards of care applicable to fiduciaries exercising powers under a durable power of attorney.
  • The attorney-in-fact shall take reasonable steps to follow the instructions of the principal.
  • Upon request of the principal, the attorney-in-fact shall keep the principal informed of the attorney-in-fact's actions. The attorney-in-fact shall provide an accounting to the principal upon request of the principal, to a conservator or guardian appointed on behalf of the principal upon request of the guardian or conservator, or pursuant to judicial order.
  • The attorney-in-fact shall not make a gift of all or any part of the principal's assets, unless provided for in the durable power of attorney or by judicial order.
  • Unless provided in the durable power of attorney or by judicial order, the attorney-in-fact, while acting as attorney-in-fact, shall not create an account or other asset in joint tenancy between the principal and the attorney-in-fact.
  • The attorney-in-fact shall maintain records of the attorney-in-fact's actions on behalf of the principal, including transactions, receipts, disbursements, and investments.
  • The attorney-in-fact may be liable for any damage or loss to the principal, and may be subject to any other available remedy, for breach of fiduciary duty owed to the principal. In the durable power of attorney, the principal may exonerate the attorney-in-fact of any liability to the principal for breach of fiduciary duty except for actions committed by the attorney-in-fact in bad faith or with reckless indifference. An exoneration clause is not enforceable if inserted as the result of an abuse by the attorney-in-fact of a fiduciary or confidential relationship to the principal.
  • The attorney-in-fact may receive reasonable compensation for the attorney-in-fact's services if provided for in the durable power of attorney.

MCL 700.5501

 

Do I need a Durable Power of Attorney?

Posted October 5, 2018

Unlike conventional estate planning documents that deal with transfer of property to beneficiaries at the death of the client the durable power of attorney (DPOA) operates during the client’s lifetime and allows individuals chosen by the client to act on behalf of the client.

A general power of attorney, as developed by common law, allows a person to authorize another to act in his or her place. There are limitations. Powers that are considered personal to the principal and are outside the scope of agency law cannot be delegated to an agent. These powers are

  • the power to make a will;
  • the power of agent to represent principal in court; and
  • the power to maintain an action for divorce.

The relationship resulting from DPOAs is recognized as a type of consensual relationship that falls outside the common-law definition of agency. However, those relationships carry the consequences that one person’s acts are ascribed to another, similar to the agency function. The Restatement provides a starting point for legal analyses of the relationship.

When a principal delegates such authority to the agent, the agent may enter binding transactions on behalf of the principal as long as the agent acts within the scope of his or her authority. Under common law, the authority of the agent, acting pursuant to a power of attorney, terminates when the principal becomes incompetent or dies. Also, the Michigan Supreme Court recently affirmed that a minor cannot appoint an agent or attorney to act for him. Woodman v Kera LLC, 486 Mich 228, 785 NW2d 1 (2010).

MCL 700.5501, defines Durable Power of Attorney as: "A durable power of attorney is a power of attorney by which a principal designates another as the principal’s attorney in fact in a writing that contains the words “This power of attorney is not affected by the principal’s subsequent disability or incapacity, or by the lapse of time”, or “This power of attorney is effective upon the disability or incapacity of the principal”, or similar words showing the principal’s intent that the authority conferred is exercisable notwithstanding the principal’s subsequent disability or incapacity and, unless the power states a termination time, notwithstanding the lapse of time since the execution of the instrument"

 

 

 

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