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Issue Alert - MCL 700.5501 – Durable Power of Attorney Acknowledgement of Attorney-in-Fact’s Responsibilities

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Date:

Oct 02, 2012

Program Area:

Powers of Attorney

Issue Summary:

Pursuant to MCL 700.5501, as of October 1, 2012, before exercising authority under a durable power of attorney, an attorney-in-fact must execute an acknowledgment of the attorney-in-fact's responsibilities that contains all of the substantive statements in substantially the same form as set forth in the statute. The amended statute also establishes requirements for executing the durable power of attorney.

Persons Affected:

All individuals executing a durable power of attorney

For More Information:

Alison Hirschel Michigan Poverty Law Program 3490 Belle Chase Way, Suite 50 Lansing, MI 48911 517-394-2985 x 231 hirschel@lsscm.org


Background

The Estates and Protected Individuals Code (EPIC) was amended in May, 2012 to add an additional requirement that attorneys-in-fact named in durable powers of attorney execute an acknowledgement before exercising their authority.  The new provision is effective October 1, 2012.  The provision  responds to concerns about financial exploitation by attorneys-in-fact named in powers of attorney.  It is designed to advise individuals who are to serve as attorneys-in-fact of their rights, responsibilities, and limitations as fiduciaries including those regarding communication, accounting, and following the directions of the principal.  In addition, the provision notifies attorneys-in-fact of the criminal and civil consequences if they violate their fiduciary duty.   The amendments also set forth the requirements for execution of a durable power of attorney.

What's Happening?

Pursuant to the new provision, as of October 1, 2012, all attorneys-in-fact must sign and date  an acknowledgement substantially similar to the statutory form before exercising their authority under a durable power of attorney.  The form puts the attorney-in-fact on notice that: he or she:

(a) must act in accordance with the standards of care applicable to fiduciaries appointed pursuant to a durable power of attorney;

(b) must take reasonable steps to follow the instructions of the principal;

(c) must, upon request of the principal, keep the principal informed of  his or her actions.  He or she  must provide an accounting to the principal upon request of the principal, to a guardian or conservator appointed on behalf of the principal upon the request of that guardian or conservator, or pursuant to judicial order;

(d) cannot make a gift from the principal's property, unless provided for in the durable power of attorney or by judicial order;

(e) unless provided in the durable power of attorney or by judicial order, while acting as attorney-in-fact, shall not create an account or other asset in joint tenancy between the principal and himself or herself;

(f) must maintain records of transactions as attorney-in-fact, including receipts, disbursements, and investments;

(g) 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 in bad faith or with reckless indifference. An exoneration clause is not enforceable if inserted as the result of  the attorney-in-fact’s abuse of a fiduciary or confidential relationship to the principal;

(h)  may be subject to civil or criminal penalties if  he or she  violates his or her duties to the principal. 

The statute also clarifies the attorney-in-facts ‘ rights, responsibilities and limitations and states that attorneys-in-fact may receive reasonable compensation for their services if payment is authorized in the document.

In addition, the amendment  mandates that a durable power of attorney must be signed voluntarily by the principal or by a notary public on the principal’s behalf pursuant to section 33 of the Michigan notary public act, 2003 PA 238, MCL 55.293. The durable power of attorney must be signed in the presence of 2 witnesses, neither of whom is the attorney-in-fact and both of whom also sign the document ,  In addition or in the alternative (either or both methods of execution are sufficient), the document may be  acknowledged by the principal before a notary public.  The notary must endorse a certificate on the durable power of attorney that the principal has acknowledged the document and the date of that acknowledgement.

These provisions do not apply to a durable power of attorney executed before October 1, 2012;  any form of health care advance directive;  a durable power of attorney that is coupled with an interest in the subject matter of the power;  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 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 power of attorney for various, specified commercial or business purposes; or a power of attorney created on a form prescribed by a governmental entity.  However, if advocates drafted powers of attorney for clients before October 1, 2012, it may be wise to advise them to have the attorney-in-fact execute an acknowledgement to ensure there is no question of their validity.

What Should Advocates Do?

Ensure that each durable power of attorney executed on or after October 1, 2012 is executed consistent with the statutory requirements and attach an acknowledgment executed by the attorney-in-fact in a form substantially similar to the statutory form.  See MCL  700.5501 for the form of acknowledgement required by the statute.  A suitable form is also attached to this issue alert. DOWNLOAD FORM

Finding Help

Most legal aid and legal services offices handle these types of cases, and they do not charge a fee. You can locate various sources of legal and related services, including the free legal aid office that serves your county, at MichiganLegalAid.org. You can also look in the yellow pages under “attorneys” or call the toll-free lawyer referral number, (800) 968-0738.