What happens to your finances when you are mentally incompetent to handle them yourself? Without proper planning, it is likely that the court will appoint someone, who does not necessarily have your best interests in mind, to make financial decisions for you. In such situations, as unfortunate as it is, it is becoming more and more common for people to be taken advantage of. Therefore, it is increasingly important to draft a Durable General Power of Attorney (POA).
A Durable POA is a legal document that allows you to name an individual that will make financial (and other important) decisions on your behalf should you one day become incapacitated. Your selected POA will be legally bound to act on your behalf with your best interests in mind as if you yourself were making the decisions.
In Michigan there are two types of Durable POAs: Springing and Immediate. A Springing POA, which is more commonly used, comes into effect when two doctors draft separate letters indicating that you are no longer competent to make your own decisions. Once these letters are received, only then does the POA have authority to control your finances. In contrast, an Immediate POA is established as soon as the documents are signed; therefore, there is no requirement of obtaining the letters from the doctor. It is very common for people to begin with a springing POA, and then once they reach a certain age, they make the change to an immediate POA, thus avoiding the headache of having to obtain the doctorsâ€™ letters.
Although a POA is vital to any estate plan, it is equally important to think carefully about who you appoint as your POA. Remember, you are appointing someone who will act and make decisions on your behalf; therefore, it is imperative that this individual is someone you completely trust because they will be the ones who will have access to your bank accounts, investments, stocks, mutual funds, and even real estate property. Make sure when you sit down with your attorney that you seek their advice on who you should appoint because sometimes family members, although loved, are not always the best option.
In the event you are declared incompetent, and you have failed to draft a POA, then your family members will be left with the burden of asking the court to appoint a guardian. This process will be stressful and time consuming and the costs will be unnecessarily burdensome. However, with a little bit of planning you can ensure that your family members will not only avoid the courts, but more importantly you will have selected a trust-worthy individual to control your finances. So take those steps to ensure that your money is being managed by the person you trust.
Next weekâ€™s topic: Medical Power of Attorney
Adil Daudi is an Attorney at Joseph, Kroll & Yagalla, P.C., focusing primarily on Estate Planning, Shariah Estate Planning, Asset Protection, Business Litigation, Corporate Formations, Physician Contracts, and Family Law. To contact him for any questions related to this article or other areas of law, he can be reached at email@example.com or (517) 381-2663.