It is a good idea for everyone to have a power of attorney. A power of attorney allows another person to act in your place in the event that you are temporarily or permanently disabled and cannot act for yourself. It is critical to note that a power of attorney is a very powerful document and, in the wrong hands, can be used to commit fraud.
Many times, the person appointed in the power of attorney (the “attorney-in-fact”) is not informed that he was named for this role and is never given any instructions on how to be an attorney-in-fact. Instead, some emergency occurs and the attorney-in-fact does the best he can. Accordingly, the Michigan Legislature recently enacted, and gave immediate effect to, a law to help an attorney-in-fact understand his job.
Under the new law, the attorney-in-fact must sign an acknowledgment that states that he understands that he:
- must follow the instructions of the person who appointed him (the “principal”).
- must keep the principal informed of any activity and must provide an accounting to the principal (or to the principal’s guardian or conservator, or to a court).
- cannot make any gifts unless the power of attorney (or a court) explicitly allows it.
- cannot add his name to an account with the principal unless the power of attorney (or a court) specifically allows it.
- may be liable for damages if he breaches the duties owed to the principal, acts in bad faith or acts with reckless indifference.
Even if the attorney-in-fact never signs the acknowledgement, if he acts under the power of attorney, he is obligated to act only for the principal and may be liable if he breaches that duty. If you have been named as the attorney-in-fact in a power of attorney, it is absolutely imperative that you understand your duties to the principal. If you are considering signing a power of attorney, it is imperative that you thoroughly understand what power you are delegating and what rights you have.