A power of attorney is a legal agreement between two people. The "principal" grants the power to act and the "agent" or "attorney-in-fact" is the receiver. The agent does not "take over," rather the principal remains in control and may terminate the grant at anytime. The power granted is the authority to act for the principal. The authority may be immediately effective or it may "spring" into effect upon occurrence of a condition such as a doctor's determination that the principal is incapacitated. Unless a power of attorney is "durable," the authority is suspended during the principal's incapacity.

The agent only has the specific authority granted in the legal document. If a given authority is not listed, the agent may not act. For example, a power of attorney may be general and list many acts the agent may perform. However it may not identify a particular type of transaction.

May the authority be implied? It may be if the transaction falls in the class of actions authorized. Authority will not be implied for exceptional matters such as making gifts, employing family members, making a will or trust and self dealing or benefitting from handling the principal's business.

There are two common forms of power of attorney – healthcare and general. The grant may include virtually all legal affairs of the principal. For example, the agent may make healthcare decisions, sign contracts, file applications, tax returns, appeal denial of benefits, pay or contest bills. There are other limited purpose powers such as a stock power, banking power or real estate power for a particular transaction.

A healthcare power of attorney may address all healthcare matters or it may be limited to end-of-life medical treatment. Agents working for aging parents should have a general healthcare power so that anything that comes up may be addressed. For example, a parent may have a question about a prescription, or a recommendation of surgery or wish to appeal a denial of coverage by Medicare or an insurance company.

While Michigan does not have a "living will" statute, it does have a law that grants authority to a "patient advocate" to follow an "advance directive" concerning end-of-life care. This is a special purpose power of attorney. Michigan law requires the "Designation of Patient Advocate" to include items such as the recognition that if the patient advocate followed the direction, death could ensue. The form must be signed in front of two witnesses who may not be close family members or employed by a healthcare facility where the patient is at the time of signing. Before the patient advocate may act, an acceptance with required information must be signed. Under the law the patient advocate may only speak for the principal/patient when the patient cannot participate in informed decision making.

A principal may sign a power of attorney even if suffering under some incapacity, such as being in a mid-stage of Alzheimer's disease. The principal need have sufficient mental capacity to be aware of who he wants to help him, and what he wants that person to do.

A power of attorney can avoid the need for a probate court to appoint a guardian or conservator. However, if the agent does not do the job or mishandles it, then the probate court is available. Agents who knowingly mishandle a principal's assets to the agent's own benefit will find themselves in a serious legal position, including criminal charges for abuse of a vulnerable adult.

Powers of attorney are wonderful documents if the agent is trustworthy. They can be very dangerous in the hands of the wrong person. Choose carefully and the rewards will be incalculable.

Article by Jim Schuster, Certified Elder Law Attorney