A valid and effective general power of attorney and healthcare power of attorney forms the basis of incapacity planning. The primary objectives when planning for incapacity is the avoidance of the court- controlled guardianship system. Avoiding the court system can be broken down into planning for two areas: management and control of finances and property; and control of health care decisions.
Solving this problem requires implementing a durable general power of attorney and a healthcare power of attorney. A power of attorney authorizes another person, referred to as your attorney-in-fact, to act for you, the principal, when you are unable, unwilling or incapable of acting on your own. The power can apply to a particular transaction or under a widespread host of circumstances. The type of power of attorney you execute will govern the types of transactions covered by it and often the time period during which it may be used. The primary objectives when planning for incapacity is the avoidance of the court- controlled guardianship system. Avoiding the court system can be broken down into planning for two areas: management and control of finances and property; and control of health care decisions. Solving this problem requires implementing a durable general power of attorney and a healthcare power of attorney.
General Powers of Attorney
A general (or property) power of attorney grants your agent the power to act for you in matters other than healthcare decisions. All 50 states and the District of Columbia have adopted a statutory short form power of attorney. These statutory forms are simple and easy to establish but often lack the details instructions needed to address the complexities of the modern world. To be fully effective, the power of attorney must address issues related to retirement accounts, creation or modification of trusts, Medicaid eligibility provisions, power to pursue other government benefits, power to fund or create trusts (include long term care asset preservation trusts) among others.
It is important to note, however, that whenever an agent is named to hold these broad powers, there is a risk of abuse. Extreme care must be taken to ensure that the chosen agent or attorney-in-fact can be trusted implicitly by you.
The Health Care Power of Attorney/Health Care Proxy
The health care power of attorney is a spin-off from the durable power of attorney. Just as the durable power of attorney allows someone to make important financial decisions on behalf of another, the health care power of attorney allows a principal to give another person authority to make medical decisions.
Here are some areas you may want to address in your health care durable power of attorney:
- Care instructions in the event of severe dementia or Alzheimer’s disease
- Religious objections to a particular treatment
- Preference for a certain home, hospital, or hospice treatment
- Organ Donation
- Use (or limitations on the use) of life sustaining machinery
- Pain relief
- Burial or cremation instructions
The Health Insurance Portability and Accountability Act
The Health Insurance Portability and Accountability Act of 1996 (or HIPAA), was enacted to allow for the easy portability of health insurance. It also contains strict privacy rules that are meant to protect your sensitive medical information from inappropriate disclosure. If these privacy rules are violated strict penalties may be imposed, including fines and possible imprisonment.
In light of the potential civil and criminal penalties, health care professionals tend to interpret HIPAA conservatively making it harder for family members and loved ones to access your medical information. As a result, it is often advisable to create a stand alone HIPAA release granting the release of protected medical information to your designated individuals.