It is important that you grant authority to trusted friends and family to act on your behalf in the event you become incompetent. Generally called advance directives, such grants of authority take the form of durable powers of attorney and do-not-resuscitate orders. Armed with the authority to make your personal, financial, and health decisions, your chosen advocates, working on your behalf, can access your funds, enter into contracts, apply for government benefits, and appeal the denial of benefits. At a minimum, we recommend that all of our clients create a Will, a general durable power of attorney, a general power of attorney for health care, and a revocable trust (See The Michigan Estate Planning Guide 2nd Edition, Collinwood Press 2002). We also recommend a special Medicaid general durable power of attorney where an extended nursing home stay is anticipated.

Absent powers of attorney, your loved ones must obtain authority to act on your behalf by petitioning the probate court for guardianship or conservatorship. As you might expect, obtaining authority from the probate court is much more difficult, time consuming, and expensive than simply signing powers of attorney while you are competent. To make matters worse, your family is put in the awkward position of having to declare you incompetent, an essential prerequisite to any guardianship or conservatorship action.

Timing is extremely important: only a competent individual may execute a power of attorney. Despite our best efforts, there are those who fail to plan for the day when they can no longer care for themselves. Whether due to denial, distrust, or plain old neglect, they simply don’t get around to it. In those situations, the family is forced to obtain authority from the probate court.

Whether acting under an advance directive such as a power of attorney, or with the authority of the probate court, your substitute decision maker must act in your best interest. Failure to do so may subject your substitute decision maker to personal liability. On the other hand, since the appointed person is acting in what is called a fiduciary capacity, he or she does not become personally liabe under the various agreements executed in his or her appointed capacity. To avoid confusion, agents, guardians and conservators are advised to add words such as “under power of attorney dated ______,” or “as guardian,” on all contracts and agreements they execute on behalf of the incapacitated person they represent.

GENERAL DURABLE POWER OF ATTORNEY UNDER MICHIGAN LAW

A general durable power of attorney allows you, the maker (principal), to appoint another individual (agent) to act on your behalf. As principal, you can delegate to your chosen agent any power you possess personally.

The term durable signifies that the power being granted continues to be effective despite the disability of the principal. The term general indicates that the power covers a broad spectrum of powers - including banking, preparation and filing of tax returns, and sale of real estate and motor vehicles – permitting the agent to act in your place and stead as if you were present. Depending on the level of trust you have in your agent, your durable power of attorney can be effective either upon execution (signing) or upon your disability (a springing power). Naturally, there is a much greater potential for misuse where the durable power of attorney is effective upon signing. For this reason we typically recommend springing durable powers of attorney. However, we recommend that when using Medicaid powers of attorney, discussed below, you grant immediate authority to the agent in order to avoid unnecessary delay in proving your in competency (which typically requires a doctor’s medical opinion).

A durable power of attorney grants to your agent the power to handle all of your personal affairs. The power of the agent does not typically extend to assets you own in your revocable living trust. Assets owned by your revocable living trust are not considered your personal assets. Your revocable living trust, itself, addresses the issue of your disability through the appointment of a successor trustee empowered to act upon your disability.

Under Michigan law, an agent may not make gifts without specific reference to the power to gift in the document. Such power is important in cases where you have commenced an annual gifting program for the purpose of reducing your taxable estate or to engage in the Medicaid planning discussed in Chapter Six. Absent the specific power to gift, your gifting program would be stalled by your disability. In light of the potential for misuse, it is our practice to include only a limited power to gift in our standard general durable power of attorney. A special Medicaid friendly durable power of attorney, with broad gifting powers, should be used where it is anticipated that you may require nursing home care.

MEDICAID DURABLE POWER OF ATTORNEY IN MICHIGAN

As you will see in Chapter Six, Medicaid planning necessarily involves some form of gifting. Neither Michigan law nor federal law recognizes the agent’s power to gift unless it is expressly provided for in the document. Thus, special gifting provisions must be added to the general power of attorney of someone who wishes to employ the techniques discussed in Chapter Six. Similar provisions should also be added to your revocable trust to ensure that Medicaid qualifying gifts can be made by your successor trustee. Your agent (named in your Medicaid power of attorney) should also have the power to revoke, reform, or terminate your trusts as necessary to qualify you for Medicaid.

You cannot assume that an old durable power of attorney drafted as part of your estate plan properly addresses the issues you are about to face. Standard powers of attorney or Designation of Patient Advocate forms are not sufficient when it comes to Medicaid planning. A special Medicaid power is required to accomplish the objectives spelled out in Chapter Six.

Naturally, there is great potential for abuse when you grant the power to make gifts to your agent or trustee. For this reason, language limiting your agent’s power to self-deal should also be added to your power of attorney and trust. For example, when gifting from the trust, either directly or by creating an interim trust, the agent should be required to preserve your dispositive scheme as expressed in your trust document. As a safeguard, your agent may also be required to account to the other family members to minimize suspicions and to maintain open communication with your beneficiaries.

DURABLE POWERS FOR HEALTH CARE IN MICHIGAN
Advances in medical science have created a health care dilemma: how long to keep terminally ill patients alive and on life support systems. Fortunately, Michigan, like all other 49 states, permits the appointment of a substituted decision maker in cases where you are unable to make your own medical decisions. Michigan law recognizes a health care power of attorney, which designates a patient advocate to make your health care decisions including the right to pull the plug in the event of terminal illness. Under Michigan law, the authority of the patient advocate comes into effect only when you are unable to participate in your own medical treatment decisions. To preserve your right to self-determination, the law reserves unto you the power to make your own medical decisions as long as you are able. The determination of your ability to participate in medical decisions is to be made by your “attending physician or another physician or licensed psychologist.”

Your patient advocate has the legal authority to work directly with your doctors to determine the nature and extent of your medical treatment, including decisions relating to life support system cessation. Absent a properly drafted health care power of attorney, the legal authority to make your medical decisions can only be granted with probate court intervention – by now, everyone is no doubt familiar with the Schiavo tragedy in Florida. In Michigan, living Wills and other informal documents are not effective for the purpose of effecting life-ending decisions.

To be effective, a health care power of attorney must be signed in the presence of two witnesses, neither of whom are your spouse, parent, child, grandchild, sibling, heir, physician, patient advocate, or an employee of a life or health insurance provider, health facility, or a home for the aged. The health care power of attorney must be dated, and must contain specific language exonerating health care professionals from liability for terminating life support systems. It must also clearly state that you understand that a decision of your patient advocate “could or would lead to my death.” All patient advocates must sign an Acceptance of Patient Advocate form, agreeing to act on your behalf in conformity with Michigan law. Perhaps most importantly of all, a health care power of attorney must be signed when you are competent.

Health care powers of attorney should be reviewed and re-executed from time to time. Even valid health care powers can become stale if many years have passed since their execution, bringing into question whether they have been revoked or revised in the intervening period. Although there is no time limit on the validity of Michigan health care powers (unlike several other states that limit how many years they are effective), old health care powers of attorney should be replaced every five years or so. Your health care powers should also be reviewed periodically to address changes in the law. For example, we recently changed all of our estate planning documents to address a new health privacy law known as HIPAA. The new law affects the disability provisions of all powers of attorney and trusts. HIPAA creates an interesting Catch 22: a doctor’s medical opinion is required to activate the disability provisions of your estate planning documents, but the doctor may not discuss your medical status with your family because it violates your privacy! The problem is easily solved by adding a provision to your powers of attorney and trust designating your named fiduciaries as “personal representatives for purposes of the Privacy Rule issued by the U.S. Department of Health and Human Services and required by the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) 45 C.F.R. Parts 160 and 164.”

Since it is impossible to address every medical contingency in a health care power of attorney, health care powers tend to grant the patient advocate wide discretion. It is therefore important to choose a patient advocate who understands your wishes, especially with respect to continued life support. For this reason, spouses, parents and adult children with whom you have a trusting relationship are the most logical choices to act as patient advocate. We recommend empowering only one patient advocate at a time. Although it is prudent to name successor patient advocates in the event that your first choice is unable or unwilling to act, naming multiple patient advocates with concurrent powers only creates the possibility for conflict. Hospitals cannot be expected to terminate life support systems when they receive conflicting instructions.

Recent studies have confirmed what the general public had long suspected. Health care directives, even when in writing and communicated to the physician, are frequently ignored by hospitals. For this reason, you must be diligent in implementing your health care power of attorney. The treating physician, hospital, and nursing home should be given a copy of the document. Knowing of the reluctance of hospitals and physicians to remove patients from life support systems, you or your patient advocate must be both assertive and vigilant. It’s your right! It is also advisable to verbally communicate your thoughts and wishes concerning terminal illness and life support systems to your patient advocate as well as other family members.

The Patient Self Determination Act requires all Medicare and Medicaid certified hospitals, nursing homes, home health agencies, HMOs, and hospices to inform patients of their right to accept or reject medical treatment and their right to create advance directives such as health care durable powers of attorney. Note, however, that there is no federal law dealing with durable powers of attorney, so health care powers of attorney executed in one state are not necessarily effective in other states. Accordingly, if you split time between or among states you should execute separate health care powers of attorney for each state.

A durable power of attorney may be revoked as long as you are competent. The best way to revoke a durable power is to destroy all copies of the document.

DO NOT RESUSCITATE ORDER

A Do-Not-Resuscitate Order protects terminally ill home bound patients by directing that you not be resuscitated in the event you heart stops or you stop breathing. Although Do-Not-Resuscitate Orders do not apply to nursing homes and hospitals, your durable power of attorney for health care can be used to accomplish the same result.

GUARDIANSHIP AND CONSERVATORSHIP IN MICHIGAN

Guardians and conservators are court-appointed fiduciaries who represent the interests of incompetent individuals who lack advance directives such as powers of attorney. Basically, a guardian has authority over your person and a conservator has authority over your property. You must be adjudged incompetent before a guardian or conservator can be appointed.

Guardianship
In the event you did not create powers of attorney while competent, authority to act on your behalf must be obtained from the probate court, the court with jurisdiction in such matters. To have a guardian appointed, it must be shown by clear and convincing evidence that you lack sufficient understanding or capacity to make or communicate informed decisions. Additionally, it must be shown that the guardianship is necessary to provide for your continuing care and supervision. This second requirement is intended to uphold the basic philosophy of our legal system: preservation of an individual’s right to self-determination. If an alternative to the guardianship is available – such as an existing power of attorney or a do-not-resuscitate declaration – it is generally the view of the courts that the guardianship should not be granted. The first step in obtaining guardianship is to file a petition with the probate court. The petition is filed by the petitioner – who can be anyone interested in your welfare - and is often accompanied by a treating physician’s written statement of your medical condition. When granting guardianship, priority is given to your family in the following order: spouse, adult children, and parents. Before granting the guardianship, however, the court must independently verify that your physical and mental condition as represented in the petition is accurate. As part of its investigation, the court will appoint a guardian ad litem “GAL” (typically a practicing attorney) to interview you, the petitioner, and other family members, and file a report with the court stating its findings. As further protection, all interested parties (basically your immediate family) receive notice of the proceedings, and are offered an opportunity to object. If the GAL’s report supports the appointment of a guardian, and there are no objections from other family members, the court will issue letters of authority granting the guardianship and outlining the powers granted.

Once appointed, the guardian’s responsibility is to procure medical and custodial care for you and attempt to restore you to the best possible state of mental and physical well-being so that you can return to self-reliance as soon as possible. In making these decisions, the guardian must consult with you if you are lucid and able to communicate. The guardian has the power to consent to or refuse medical treatment. Where no conservator (see below) has been appointed, the guardian must conserve your assets and apply them toward your support and care. The guardian must file an annual report with the court. Note that a nursing home may not compel you to obtain guardianship as a condition of providing care.

Conservatorship
The procedure for establishing a conservatorship is much the same as the procedure for establishing guardianship except that a conservator must procure a bond to protect the assets over which he has authority. To have a conservator appointed, it must be shown by a preponderance of the evidence (a lower standard than for guardianship) that you are unable to manage your property and business affairs effectively, and that your assets will be wasted or dissipated unless proper management is provided. The conservator is charged with managing your financial affairs and must file an annual accounting with the probate court. A conservatorship is appropriate when you have substantial assets, and the court determines that protection over and above that available through a guardianship is required. The same person may act as your guardian and conservator. With the court’s approval, guardians and conservators may be compensated for their services.

Beyond the expense and emotional toll of going to court, obtaining court authority may take weeks if not months. Although in a true emergency (which is rare) it may be possible to obtain court authority immediately upon the filing of a petition, usual court processes take several weeks to several months to complete, delaying important services and care.

PROTECTIVE ORDER IN MICHIGAN

A Protective Order (obtained by petition to the probate court) is appropriate when protection needed is for a particular transaction - as opposed to the ongoing protection of a conservatorship. For example, a protective order might be used when you are about to receive a personal injury settlement that would disqualify you from Supplemental Security Income (SSI). In that case, a protective order may be granted by the probate court allowing your family to establish a special needs trust which would allow you access to the settlement without disqualifying you from SSI.