Every day we make decisions. Sometimes they’re simple like choosing what to eat for lunch or what to wear. Sometimes they’re a little more complicated like deciding how to manage our hard-earned money. Big or small, these decisions have an impact on how we care for ourselves and others. Indeed, many of us have spouses, children, or grandchildren that depend on our good decision-making abilities. What happens if you are suddenly not able to make all these decisions? What will be the outcome without a care plan for disability?
What is Your Plan for Incapacity?
When people think about settling their affairs, they often only think about what should happen after they die. But who will care for you and manage your life if you no longer can but remain alive? Everyday people succumb to debilitating and life-altering illnesses. In fact, every sixty-six seconds someone in the United States develops Alzheimers according to the Alzheimer’s Association. Others might have a stroke or an accident that impairs their brain and cognitive functioning. So you should ask yourself:
Who is qualified to make decisions for you and have they been legally named?
When can they start acting on your behalf and is that in your best interest?
Do you know what exact powers and authority or what limitations they have to act on your behalf? Has anything been overlooked?
Have you created a clear plan that spells out in detail your true wishes and desires about the way in which you want to be cared so as to avoid any confusion or conflict?
The good news is that there are two powerful tools in your estate planning toolbox:
A power of attorney and
An advance healthcare directive (sometimes referred to as a healthcare proxy)
They are sometimes confused as being the same, but they deal with different aspects of your care. A power of attorney gives someone else (your medical agent) the authority to make financial decisions for you, while an advance healthcare directive gives the authority to make medical decisions It is important to note these are separate and distinct powers.Having one does not mean you have the other.
How a Power of Attorney Works
Immediate or springing. An immediate power of attorney goes into effect the day it is signed and notarized by you. A springing power of attorney goes into effect only after the you becomes incapacitated and proof of that incapacity is obtained. Commonly this is obtained by a letter from a physician or two physicians. The rules controlling proof of incapacity are actually contained within your power of attorney. You choose the way in which it is decided. For example, you can elect that a doctor or doctors need to render an opinion as to whether you are incapacitated. This could pose timing and potential legal challenges (as some doctors might be wary of liability and getting sued). Instead, you might create a disability panel made up of persons pre-selected by you who decide when you are incapacitated. Such a panel might be able to decide with less impasse or delay than having a doctor or two doctors make an opinion and a write a letter confirming it.
Limited or general. A limited power of attorney gives the agent limited authority (“you can manage only my Chase bank account”). A general power of attorney is open-ended (“you can undertake any action that I could perform”).
Typical abilities provided in a power of attorney might include:
- Handling your financial transactions: paying your bills, managing your bank accounts, investing your assets
- Paying taxes
- Overseeing the operation of your business to keep it running
- Buying or selling real estate
- Managing your digital assets and online accounts
- Purchasing life insurance
- Settling claims and obligations or pursuing or defending lawsuits on your behalf
- Making necessary changes to your estate plan in order to qualify you for government benefits, such as Medicare.
- Ability to access and manage your safe-deposit boxes
- Make appropriate financial gifts to family
Statutory or non-statutory. A statutory power of attorney incorporates all of the provisions set out in your state’s probate code, and a non-statutory does not incorporate those provisions. Using the statutory provisions generally do not have all of the provisions you might want. Experienced attorneys add a variety of provisions to expand the agent’s powers beyond those the state legislature listed when it first enacted the statute, but balanced with the restrictions that best fit your needs and goals.
How a Healthcare Directive Works
An advance healthcare directive, also known as a healthcare proxy or medical power of attorney, gives someone you choose the ability to handle your medical affairs. Generally, these are the springing variety such that the authority is only effective when it is determined you are incapacitated.
Although it may seem obvious that a spouse or family members would make medical decisions on your behalf if you ever became incapacitated, there is no guarantee that hospitals and doctors would accept their decisions for you without the proper legal documentation. Nor is there a guarantee that your various family members would agree on which decisions to make for you.
An advance healthcare directive would appoint those you trust to make your medical decisions if you ever became unconscious or mentally incapacitated. The directive, in conjunction with a living will, would also provide your specific instructions for important decisions like:
- When your agent should begin, continue or discontinue medical treatment
- Whether you would like to be kept on life support for any time period
- Whether you authorize organ donation for transplantation, for medical research, or not at all
- Whether you prefer to be maintained in your residence with home care professionals should an assisted living facility ever become a need
- The circumstances in which your agent could, if ever, admit you for psychiatric help
- If your agent could order an autopsy if needed
A power of attorney and an advanced healthcare directive are powerful tools in your estate planning toolbox. They will help your family avoid expensive and draining court proceedings and ensure your wishes are carried out the way you want. This will alleviate emotional stress for your family and reduce the opportunity for conflict over how you want to be cared for or your finances managed.
