Don’t mistake “durable” for “invincible.” Several times in the past year I have been asked whether a durable power of attorney is still effective after the death of the principle. The answer is no – sort of.
A durable power of attorney (“DPOA”) terminates when the death of the principal becomes known to the agent. See MCL 700.5504.
While the principal is still living, a DPOA allows for the management of the affairs of a principal who has become incapacitated. This is a powerful tool, but it must be created before the principal suffers the onset of the disability, as at that point it is probably too late for the principal to have the capacity to sign a valid DPOA.
What are the alternatives to a DPOA? If property is owned in a trust, under many circumstances a successor trustee can take over during a period of incapacity. For property outside the trust, though, this would not be effective. The other alternatives to a DPOA are a judicial guardianship or conservatorship. These involve judicial oversight and creation, and are generally far more costly and less desirable alternatives.
While many people understand the reality of their own mortality, they do not consider the likelihood or even possibility of their temporary incapacity, and thus they overlook incapacity planning as part of their estate plan. However, incapacity planning is an important part of estate planning and a DPOA is a document that should be included in most estate plans.
Now a word of caution. This is not a document to be drafted without professional counsel. Care must be taken in drafting the DPOA not only to assure that it is effective and controlling when it is needed, but also to include restrictions as appropriate to avoid unintended tax consequences.
This is a good time for me to restate the important restrictions noted at the top of the blog – I cannot, and by way of this blog I do not, offer legal advice without knowledge of all of the relevant facts. This blog does not provide create an attorney-client relationship and does not provide legal advice. It is designed solely to raise issues that merit further discussion and exploration. It is of utmost importance that you contact your own attorney before taking, or refraining from taking, any action that can affect your legal rights.
Thursday, March 29, 2007
Tuesday, March 27, 2007
Does A Michigan LLC Need To Maintain A Minute Book?
In short, yes.
As an attorney, one of the misconceptions I am commonly confronted with is the idea that a Limited Liability Company (LLC) is exempt from the need to maintain the kinds of records that would typically be found in a corporate minute book.
In Michigan, LLCs are required to maintain certain records. By statute, an LLC is required to keep numerous records at its registered office or principal place of business, including copies of tax returns, financial statements, operating agreements, and records relating to distributions and voting rights. To view the statute, click here.
The statute does not use the word “minute book”, but the requirements of the statute are items that you would expect to find in a minute book for a company.
Why is this important? First, because the statute says these records “shall” be maintained. Following the requirements of the statute is not optional. Of equal, or perhaps greater, importance, is that failure to maintain corporate formalities, including keeping proper records, is a key factor in determining whether an adverse party may “pierce the corporate veil”, thereby defeating the limited liability protection of the company and allowing the adverse party to directly take action against individual members.
One other item to keep in mind is that the requirements of the statute should be viewed as a floor, not a ceiling, meaning that as a matter of practice we recommend that our clients maintain more records then just the bare minimum required by the statute. This not only eases administrative work for the company over time, it is also provides the members with greater protection against claims that seek to pierce the corporate veil.
The recordkeeping requirements of the Michigan statute are not overly burdensome and the results of failure to comply with the statute can be significant. On at least an annual basis, our office reviews the records for not only the corporations we represent, but also the LLCs we represent. Give the annual records of your company the attention they need by performing an annual review or, if you have questions, contact me to arrange a consultation to review your company’s records and to help set up an efficient recordkeeping system for your LLC.
As an attorney, one of the misconceptions I am commonly confronted with is the idea that a Limited Liability Company (LLC) is exempt from the need to maintain the kinds of records that would typically be found in a corporate minute book.
In Michigan, LLCs are required to maintain certain records. By statute, an LLC is required to keep numerous records at its registered office or principal place of business, including copies of tax returns, financial statements, operating agreements, and records relating to distributions and voting rights. To view the statute, click here.
The statute does not use the word “minute book”, but the requirements of the statute are items that you would expect to find in a minute book for a company.
Why is this important? First, because the statute says these records “shall” be maintained. Following the requirements of the statute is not optional. Of equal, or perhaps greater, importance, is that failure to maintain corporate formalities, including keeping proper records, is a key factor in determining whether an adverse party may “pierce the corporate veil”, thereby defeating the limited liability protection of the company and allowing the adverse party to directly take action against individual members.
One other item to keep in mind is that the requirements of the statute should be viewed as a floor, not a ceiling, meaning that as a matter of practice we recommend that our clients maintain more records then just the bare minimum required by the statute. This not only eases administrative work for the company over time, it is also provides the members with greater protection against claims that seek to pierce the corporate veil.
The recordkeeping requirements of the Michigan statute are not overly burdensome and the results of failure to comply with the statute can be significant. On at least an annual basis, our office reviews the records for not only the corporations we represent, but also the LLCs we represent. Give the annual records of your company the attention they need by performing an annual review or, if you have questions, contact me to arrange a consultation to review your company’s records and to help set up an efficient recordkeeping system for your LLC.
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