The Uniform Power of Attorney Act (UPOAA) is a model statute published by the National Conference of Commissioners on Uniform State Laws.1 It has not been adopted in Michigan, however; in 2022, the UPOAA, incorporating revisions detailed below, was introduced to the state legislature as a bill and is expected to be reintroduced in 2023.2
Adopting the UPOAA would let Michigan benefit from the jurisprudence from other states that have enacted it and enable modifications of default provisions to promote consistency with current Michigan law and standards of practice. If adopted, the act would replace durable power of attorney provisions contained in the Estates and Protected Individuals Code.3
The UPOAA provides a series of default rules that give broad authority to the agent to act while protecting the principal from fraud, require the agent to financially reimburse the principal if the agent violates the rules, and protect third parties that rely on the power.4
APPLICATION OF THE ACT
The act applies broadly to all written records that grant authority to an agent to act on behalf of the principal5 except:
- A power to the extent it is coupled with an interest in the subject matter of the power.
- A power to make health care decisions.
- A delegation of a parent’s or guardian’s power regarding care, custody, or property of a minor child or ward.
- A proxy or other delegation to exercise voting rights or management rights with respect to an entity.
- A power created on a form prescribed by a government or governmental subdivision, agency, or instrumentality for a governmental purpose.
The act applies to powers executed prior to enactment and provides that a power executed in Michigan is valid if, when it was executed, complied with requirements for the execution of a power under the law of this state as it existed at the time.6 As a result, the UPOAA will not invalidate powers executed prior to its enactment as long as those powers were executed in conformance with Michigan’s requirements.
The UPOAA provides that if a power is executed in accordance with the requirements,7 then it is durable. That means it is not terminated by the principal’s incapacity8 unless the power expressly provides otherwise.9
For a power to be durable under current Michigan law, the power must include an affirmative statement that the power is not affected by the principal’s subsequent incapacity.10
To be effective under UPOAA, a power must be signed by either the principal or an individual directed by the principal to sign the principal’s name in the principal’s presence.11 However, a power signed in this manner is not durable.
To be durable, the power must either be acknowledged by the principal before a notary public or other individual authorized to take acknowledgements or be signed in the presence of two witnesses.12 An agent nominated in the power cannot act as a witness, but a witness can serve as the notary on the power.13
Also, for a power signed by an individual at the direction of the principal to be durable, it must be signed in the presence of two witnesses.14
In comparison to the act, current Michigan law requires that a durable power be signed in the presence of two witnesses, neither of whom is the designated agent, or be notarized.15 The option under the UPOAA permitting a power to be signed only by the principal or at the principal’s direction gives individuals the ability to create a power, although not durable, even if they do not have access to witnesses or a notary.
ACCEPTANCE AND DUTIES
The UPOAA provides that unless otherwise stated in the power, an agent accepts the appointment upon exercise of authority, performance of duties, or any other assertion or conduct indicating acceptance.16 The act also provides that prior to exercising any authority under a durable power, an agent shall execute an acknowledgement of the agent’s duties referred to as an agent acknowledgment.17
It is important to recognize that failure to execute an agent acknowledgment does not affect the agent’s authority to act, nor does it alter the agent’s duties or mitigate the potential liability for breach of duties.18 An agent does not have the ability to breach fiduciary duty and then claim no liability because an agent acknowledgement was not executed.
The UPOAA breaks an agent’s duties into the following categories:
1. Affirmative duties that cannot be waived by the principal:
a. Duty to act in accordance with reasonable expectations of the principal that are actually known to the agent and, to the extent actually known, act in the principal’s best interest.
b. Act in good faith.
c. Act only within the scope of authority granted by the principal.
d. Keep reasonable records of receipts, disbursements, and transactions made by the agent on behalf of the principal.19
2. Default rules that can be explicitly waived by the principal:
a. Act loyally.
b. Act as not to create a conflict of interest that impairs the agent’s ability to act impartially.
c. Act with the care, competence, and diligence that a prudent person would in dealing with the property of another.
d. Cooperate with a person that has authority to make health care decisions to carry out reasonable expectations of the principal that are actually known to the agent and, to the extent the expectations are not actually known, to act in the principal’s best interest.
e. Attempt to preserve the principal’s estate plan to the extent that the plan is actually known to the agent and preserving the plan is consistent with the principal’s best interest based on relevant factors including the value of the principal’s property, need for maintenance, minimization of taxes, and eligibility for public benefits.20
Unless the power states otherwise, an agent does not have a duty to account unless ordered by a court or requested by the principal, a fiduciary acting for the principal, or a governmental agency with authority to protect the welfare of the principal.21 If the principal is deceased, the principal’s personal representative or successor in interest may request an agent to account.22 This limited group given the authority to request an account is consistent with the premise that a principal with capacity should control the disclosure of financial information.
The UPOAA allows for the principal to appoint two or more persons to act as coagents. Unless the power provides otherwise, coagents may act independently23 which gives agents the flexibility to act unilaterally on behalf of the principal. However, it also may cause conflict unless the agents coordinate their efforts and act consistently on matters for the principal.
When appointing coagents who will be authorized to act independently, the issue of liability should be considered. Unless the power provides that coagents are liable for one another’s misconduct, an agent who does not participate in or conceal a breach of fiduciary duty is not liable for a breach committed by the other agent.24 However, if an agent has knowledge of a breach or an imminent breach of fiduciary duty by another agent, the agent is required to notify the principal and, if the principal is incapacitated, take any action reasonably appropriate to safeguard the principal’s best interest.25 If an agent fails to notify the principal or take action, the agent is liable for the reasonably foreseeable damages that could have been avoided if the agent had notified the principal or taken action.26
AGENT LIABILITY AND EXONERATION
An agent violating the UPOAA is liable for not only the amount to restore the value of the principal’s property to what it was prior to the violation, but also reimbursement of attorney fees and costs paid on the agent’s behalf in the defense of conduct constituting or contributing to the violation.27 An agent is liable for three times the value of the property if the agent embezzles or wrongfully converts the principal’s property or refuses to transfer possession of the principal’s property to the principal on demand.28
A principal has the ability to include a provision in the power to exonerate an agent from liability for breach of fiduciary duty unless it relieves the agent of liability for breach of duty committed in bad faith or with reckless indifference to the purposes of the power or the best interests of the principal or was inserted as a result of an abuse of a confidential or fiduciary relationship with the principal.29
ACCEPTANCE AND RELIANCE
The UPOAA is designed to protect persons who in good faith accept an acknowledged power. A power is acknowledged if verified before a notary public or other individual authorized to take acknowledgement.30 It is important to note that protections for persons accepting powers do not apply to unacknowledged powers of attorney.
Protecting a person accepting the acknowledged power in good faith presumes that a signature on an acknowledged power is genuine without actual knowledge31 that it is not genuine.32 Further, a third party that in good faith accepts a power or a vintage durable power33 without actual knowledge that it is void, invalid, terminated, or that the agent is exceeding their authority may rely in good faith on the validity of the power, the validity of the agent’s authority, and the propriety of the agent’s exercise of authority.34 Note that this provision applies regardless of whether the agent has executed an agent acknowledgement.
Although a person is not required to investigate whether a power is valid or if the agent’s exercise of power is proper, a person asked to accept an acknowledged power may request and rely upon any of the following:
- An agent’s certification, under penalty of perjury, of any factual matter concerning the principal, agent, or power.
- An English translation if the power contains in whole or in part language other than English.
- An opinion of counsel as to any matter of law concerning the power if the person requesting the opinion explains the reason for the request in a record.35
To discourage people from unnecessarily making routine requests that cause a delay in the agent’s ability to act, if a court finds that the reason for the request is frivolous, the person making the request is liable for attorney fees and costs incurred in providing the requested opinion.36
LIABILITY FOR REFUSAL TO ACCEPT ACKNOWLEDGED POWERS OF ATTORNEY
In conjunction with the provisions promoting acceptance of powers, the UPOAA also sets forth reasons a person may refuse to accept a power and the penalties for refusal to accept powers. Note that this section only applies to acknowledged powers of attorney.
When presented with an acknowledged power, a person is required to either accept that power or request an agent’s acknowledgement or a certification, translation, or opinion of counsel within seven business days after the power is presented for acceptance.37 Once the agent’s acknowledgment or a certification, translation, or opinion is provided, the person shall accept the power within five business days after receipt of the requested information.38 A person is not required to accept a power if any of the following apply:
- The person is not required to engage in a transaction with the principal in the same circumstances.
- Engaging in a transaction with the agent or the principal in the same circumstances would be inconsistent with federal law.
- The person has actual knowledge of the termination of the agent’s authority or of the power before exercise of the power.
- The person’s timely request for an agent acknowledgement or a certification, translation, or opinion is refused.
- The person in good faith believes that the power is not valid, or the agent does not have the authority to perform the act requested whether or not an agent’s acknowledgment or a certification, translation, or opinion has been requested or provided.
- The person in good faith makes or has actual knowledge that another person has made a report to the adult protective services office stating a belief that the principal may be subject to physical or financial abuse, neglect, exploitation, or abandonment by the agent or a person acting for or with the agent.
- The person is a financial institution within the meaning of the Financial Exploitation Prevention Act and the person is delaying or placing a freeze on transactions or assets relative to the principal.39
If none of the above apply and a person refuses to accept an acknowledged power, that person is subject to court order mandating acceptance of power and is liable for reasonable attorney fees and costs incurred in any action or proceeding that confirms the validity of the power or mandates acceptance of the power.40
In addition, if a person refuses to accept an acknowledged power after having requested and received a certification, translation, or opinion, that person is also liable for reasonable attorney fees and cost incurred in providing the requested certification, translation, or opinion.41
SPECIFIC AGENT AUTHORITY
An agent may do the following only if the power expressly grants the agent the authority:
- Create, amend, revoke, or terminate an inter vivos trust,
- Make a gift,
- Create or change rights of survivorship,
- Create or change a beneficiary designation,
- Delegate authority granted under the power,
- Waive the principal’s right to be a beneficiary of a joint and survivor annuity including a survivor benefit under a retirement plan,
- Exercise fiduciary powers that the principal has authority to delegate,
- Exercise authority over any electronic communications, and/or
- Exercise authority over any bank account, securities, or other financial account in a foreign country.42
Given the extent of the power that can be specifically granted, the UPOAA states that unless the power provides otherwise, any agent who is not an ancestor, spouse, or descendent of the principal may not exercise authority under a durable power to create in the agent or in an individual to whom the agent owes a legal obligation of support and interest in the principal’s property whether by gift, right of survivorship, beneficiary designation, disclaimer, or otherwise.43
However, the terms of the power may expand or narrow the class of agents subject to this restriction.44
GENERAL AGENT AUTHORITY
The general authority granted under the act may be incorporated by citing the section or referring to the descriptive term. General authority that may be granted to an agent includes:
- Real property.
- Tangible personal property.
- Stocks and bonds.
- Commodities and options.
- Banks and financial institutions.
- Operation of entity or business.
- Insurance and annuities.
- Estates, trusts, and other beneficial interests.
- Claims and obligations.
- Personal and family maintenance.
- Benefits from government programs or civil or military service.
Although not covered in detail in this article, Section 301 of the act includes a statutory form power of attorney. The purpose of the form is to give the public easy access to creating durable powers of attorney. However, individuals should use caution in preparing these important forms without the assistance of counsel.