A super powered financial plan should include a safety net in case you become incapacitated unexpectedly– Someone you trust should be able to step into your shoes and handle your legal and financial affairs. You, too, can have that “super power” through a durable power of attorney. It won’t help you run faster than a speeding bullet or leap tall buildings in a single bound, but a plan that includes a durable power of attorney will enhance your financial security so you can live your best life with one less thing to worry about.
Under Michigan law, a person, called the principal, can delegate certain powers to an agent of his or her choosing to handle various matters, like financial transactions and legal affairs. A power of attorney is called durable when it lasts despite the passage of time and despite the principal’s illness or injury.
The agent, usually a spouse, adult child, or close friend, has to exercise the granted authority for the principal’s benefit. These powers may include paying bills, refinancing real estate, entering into contracts, collecting debts, and more.
The principal may designate that the power of attorney is either “springing” or immediately effective. A springing power is usually effective only when two physicians certify that the principal is disabled or incapacitated, or else the principal may “self spring” the power into effect by signing a particular provision written into the document. Michigan law gives folks broad discretion to determine how to structure this arrangement. That’s why it’s important to talk with an attorney who can guide you through this process.
Many people never consider what a power of attorney might be needed for. Imagine being struck by a car and landing in a temporary coma or being severely injured in a workplace accident. Would anyone be able to step up and access your bank account if needed? Who would manage your brokerage and investment accounts or retirement accounts? What if you were in the process of selling your home? Would anyone be able to sign closing paperwork for you? What about your bills– can someone sign a check on your behalf?
Many people think that spouses have these powers by default. That’s simply not true. If there is no power of attorney in place, then your loved one’s remedy is to go to probate court to convince a judge to appoint a conservator. As you can imagine, this process may be lengthy and expensive. On the other hand, having a valid power of attorney may save that cost, expense, and emotional toll of going to court. Plus, it can be implemented quickly.
Financial planning is all about preparing for the future, which can include many unknowns. If you want a super powered financial plan, then you need to think long and hard about designating an agent to act as your durable power of attorney. It’s better to have a power of attorney in place and never need it than it is to need one and not have it. You’re already being smart and planning for the future, why not take this one extra step to really lock in your security?