Many people assume that an estate plan is limited to their will and/or trust. However, there is often a period of disability prior to death during which important health care and financial decisions need to be made. This article will explain some of the options available in further detail.
A FINANCIAL POWER OF ATTORNEY gives one or more persons (your "agent") the power to act on your behalf to handle financial matters for you (the "principal"). The power may take effect immediately or upon the occurrence of a future event, such as your inability to act for yourself due to a mental or physical disability. Most powers of attorney are durable, meaning that they remain in effect despite your incapacity, until you revoke them or die. All powers of attorney cease being effective when you die. It is important that a power of attorney be durable, because if it is not and you become unable to manage your personal or business affairs, it may become necessary for a court to appoint a conservator or guardian to act for you.
With a valid power of attorney, your agent can take any action permitted in the document. Some powers of attorney are very broad while others limit your agent to act on your behalf for a specific purpose, such as to sell an automobile or to buy real estate.
The Connecticut legislature recently enacted the Connecticut Uniform Power of Attorney Act, which will become effective on July 1, 2016. The new Act updates Connecticut’s 1965 Power of Attorney statute. Specifically, the updated law allows a principal to grant an agent authority over more subjects than under current law, and it makes a power of attorney created under its provisions automatically durable. The Act is designed to protect vulnerable individuals from power of attorney abuses and financial exploitation by allowing a probate court to continue, limit, suspend or terminate a power of attorney when it appoints a conservator and by authorizing certain people to petition the probate court to review a power of attorney or an agent’s conduct. It classifies certain powers (such as unlimited gifting or the ability to change the beneficiary of an annuity) as "hot" ones that must be expressly granted by the principal and will not be assumed. Finally, the Act requires a person to accept powers of attorney in most circumstances and limits when a person can refuse to accept powers of attorney.
Massachusetts adopted its version of the Uniform Power of Attorney Act several years ago. Massachusetts law requires that specific language be used to create a durable power of attorney or a power of attorney that will become effective in the future. The law also provides that all actions taken by an agent during a period of disability will have the same binding effect as if the principal were not disabled. Under Massachusetts law, unless the instrument states a time of termination, the power of attorney stays effective even if it was executed many years ago.
New York’s Power of Attorney statute took effect on September 12, 2010. The biggest change to the prior law is the requirement that a Statutory Gifts Rider be executed if the principal would like to allow the agent to make gifts on the principal’s behalf. The Statutory Gifts Rider, along with the power of attorney, has very strict execution requirements. If the Statutory Gifts Rider is not executed correctly, it will not be a valid document and the authority of the agent to engage in gifting or transfers on behalf of the principal will be severely limited.
A HEALTH CARE POWER OF ATTORNEY or a health care proxy names an agent who will make health care decisions on your behalf if you are incapable of making and communicating them for yourself. It is very important to choose someone who can handle conflicting opinions of family members, friends, and medical personnel, and who will be able to implement your stated wishes. Divorce or legal separation may revoke the power if the spouse is the agent.
A Living Will is a document in which you express your desire that life-sustaining procedures be withheld or withdrawn in the event of a terminal condition. It is imperative that you discuss with your agent your end-of-life care desires so that they have a clear understanding of those wishes. If your agent does not know what your wishes are, he or she must act in your best interests.
Connecticut law allows anyone at least 18 years old to execute an "Appointment of a Health Care Representative." The Appointment may contain health care instructions, the appointment of a "Health Care Representative," the designation of a conservator of the person for future incapacity, and a document of anatomical gift. A Health Care Representative has the authority to make any and all health care decisions for a person who is incapacitated and is no longer able to actively take part in decision-making nor able to direct his or her physician as to his or her medical care.
Massachusetts’ Health Care Proxy statute allows you to designate a health care agent to make medical decisions for you if you lose the ability to make those decisions for yourself. You may only designate one person (with successors) to act as health care agent. The reason for this limitation is so the physician in charge only has to look to one person for a decision.
Massachusetts does not officially recognize Living Wills, but it is a good idea to execute one because Massachusetts case law has recognized the existence of a Living Will as strong evidence of the principal’s intentions and it will be given weight in any disputed situation.
In New York, it is very important to have both a Living Will and a Health Care Proxy. The Living Will is for a person to set forth his or her wishes as to what medical procedures the person does or does not want. The Living Will is used directly by the health care professionals who would administer artificial life sustaining treatment while a Health Care Proxy names an agent to make health care decisions. Under New York’s Health Care Proxy statute, an individual can also express his or her wishes regarding organ and tissue donation.
HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT OR HIPAA is a federal law governing health information privacy. It requires that a principal give an agent a document in order for the agent to access the principal’s medical information for various reasons, such as the coordination of the principal’s medical care, or the determination of the principal’s mental capacity. In Connecticut and Massachusetts, that document is called an "Authorization for Use and Disclosure of Protected Health Information," and in New York, the necessary language is contained in the Living Will and Health Care Proxy.
AUTHORIZATION AND CONSENT FOR RELEASE OF ELECTRONICALLY STORED INFORMATION: Most electronic communications, such as your e-mail, documents and photos in cloud based storage or social media posts are protected by federal privacy law and will be inaccessible to your agent, family or fiduciaries without your written consent. We can help make sure that your fiduciaries and agents can access the information they need with your signed authorization.
CONCLUSION: Even after you have executed powers of attorney, it is important to review them frequently, and consider executing new ones. New documents may be needed for many reasons, including if your wishes have changed, if you’ve moved and your powers of attorney aren’t recognized in your new state or you have gotten divorced and your former spouse is named as your agent. Even if nothing has changed since you have signed your documents, it is a good idea to sign new ones every few years since some financial institutions and health care providers are hesitant to honor powers of attorney that are more than a few years old because of liability concerns.