Critical Estate Planning Tools
Jul
2
Written by:
7/2/2010 7:57 AM
A major illness or accident is more than just a health problem for the elderly. Financial assets can be devastated, and families thrown into havoc when a person is rendered incompetent or incapable of executing financial and medical decisions. A simple way to avoid the cost and crisis of such a situation is by planning ahead with “advance directives,” and assigning Durable Power of Attorney to someone that can be trusted.
Advance directives are as varied as the individual’s situation, and can address all aspects of financial and health care needs. However, the Durable Power of Attorney is critical. The phrase “power of attorney” designates the holder as the “agent” for the giver of that power. Agents have the authority to bind their principals by signing contracts, writing checks, and many other things that the principal could have done for before becoming incapacitated. However, holding a power of attorney does not authorize someone to act as an attorney for that person.
Why Durable?
With an ordinary power of attorney, authority expires when a person becomes incompetent (or dies). The theory is that if the principal couldn’t do it himself, his agent ought not to be able to do it. This makes sense in ordinary commercial situations, but not in relation to the elderly. In some cases, the principal will be comfortable with the agent being responsible for any and all financial as well as health care issues in the event of illness and incapacitation. In that situation, the principal has assigned a financial power of attorney to deal with issues related to banking, finances and other assets as well as a health care power of attorney, which allows for making health decisions.
When is it used?
The power of attorney is used for situations when the principal can’t be present, but trusts an agent to do the job for them. So, they authorize the agent ahead of time to act in their place. This is a device for convenience. Without this device, an elderly person, who legally cannot have anyone act for them, yet suffers from something debilitating such as dementia, can only hope to find a conservator. Unfortunately, conservatorship is a lengthy and expensive court procedure requiring a volunteer to be the conservator.
Hoping for a volunteer to conveniently appear as a conservator isn’t prudent or reasonable. In addition, will there be enough time and money available for the volunteer to acquaint themselves with the demands of the situation before disaster strikes? And what about the legal formalities and court approvals?
Enter the Durable Power of Attorney, wherein conservatorship is not required, and costly legal fees are avoided. Someone can act for the incompetent without first going to court, if, when the incompetent was competent, he thought ahead to sign such a power. And importantly, it endures although the principal is incompetent.
Such conveniences make the Durable Power of Attorney a common estate-planning device. Responsible children choose to have such a power to handle the affairs of their parent(s), and married couples plan ahead by providing a power for each other.
Power balanced with responsibility
Powers of attorney are usually drafted to be extremely broad. They typically read as if the holder has the authority to do almost anything. However, the law has a silent sentinel called “fiduciary duties.” It prohibits taking advantage of the position and being self-serving. Thus, regardless of the apparent broad language of the durable power of attorney, one cannot convey things (money, property, etc.,) to themselves, or anyone else, as a gift, unless that power is included.
Durable Power of Attorney for health care decisions
A separate code section in the law provides for appointing an agent to make health care decisions for the incompetent. These powers are durable in the same sense as the durable financial powers--they continue beyond incompetence. Indeed, they are almost exclusively used for situations where the patient cannot decide or determine their best course.
In California, on July of 2001, the Uniform Health Care Decisions Act went into effect, which codified the Advance Health Care Directive (CA Probate Code Section 4701). In simple layman’s terms, this allows a person to select someone or to directly instruct a physician or health care provider to carry out their wishes regarding the type and extent of care to be given when he or she cannot make decisions or communicate them.
An agent acts for the principal. The principal can chose a primary agent and an alternate agent to act if the primary agent is not available or willing to make health care decisions. An expiration date can also be specified.
Health care instructions can define what type of care the signer wants as well as the choice to limit care. These types of decisions include:
· Limiting nutrition and hydration even though it may result in death
· Prolonging life
· Life sustaining treatment
· Organ donation
Requirements for an advance health care directive to be valid and binding include:
· It must be signed and dated by the patient him/herself, or at his/her direction.
· And either witnessed by two adults or notarized.
· Notarization is preferred
Executing a subsequent document may revoke advance health directives. It is very important that copies of the signed and witnessed or notarized health directive are provided to the treating physician or health provider, at the time the patient is in need of medical care. Treating physicians or health care providers should have copies on file when feasible. The person chosen as the agent should be aware of the principal’s wishes and have a copy of the Health Power of Attorney to provide on behalf of the incapacitated person. New Advance Health Care Directive Kits include a wallet ID with the health care directive.
Nursing Home Solutions can be reached (800) 773-6467 for further information.