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February 12, 2017

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Powers Essential for Everyone: Powers of Attorney for Property, Powers of Attorney for Health Care, Living Wills and HIPAA Declarations

Today people are living longer than ever before. It is crucial we plan not only for our heirs but for ourselves as well. Everyone’s estate plan must address the real possibility that old age, illness, or accident can leave us incapacitated and unable to manage our financial affairs or make health care decisions. Not planning for these possibilities can result in the need to have a guardian appointed by the probate court. Guardianship proceedings are costly, time consuming and can cause family fights. To address this problem everyone should have a Power of Attorney for Property, a Power of Attorney for Health Care, a Health Care Declaration (Living Will), and a HIPAA Declaration. 

Illinois Statutory Power of Attorney for Property: 

A Power of Attorney for Property allows a person (the Principal) to empower someone (the Agent) to handle their financial affairs when they are unable to do so. Before 1987 financial institutions such as banks and brokerage firms often refused to honor these powers of attorney for fear they would be sued if the Principal or a family member disapproved of an Agent’s action. The Illinois legislature fixed this problem with the Illinois Power of Attorney Act. 

The Act created the Illinois Statutory Short Form Power of Attorney for Property. When a person uses substantially this form both the Agent and the financial institutions they deal with are released from liability if they, in good faith, act in reliance upon the Statutory Power of Attorney for Property. As a result, most financial institutions honor an Agent’s directions. Acts performed by an Agent within the scope of his authority bind third parties even if the Principal is legally incompetent. 

The Statutory Power of Attorney for Property lets a person give his Agent a broad array of powers to manage property of all kinds. The statutory form lists fifteen categories of powers a person can give his Agent. These categories include transactions related to real estate, financial institutions, stocks and bonds, insurance and annuities, retirement plans, safe deposit boxes, and borrowing. They also include powers related to social security benefits, tax matters, claims, and litigation. A person can limit an Agent’s power by striking out a listed power or by written modification on the form. Most important, a person can name the person he wants to be his or her guardian if one needs to be appointed. Finally, a person can name successor Agents if the first named Agent cannot act for him. 

A person can broaden an Agent’s power by adding powers to the form. However, an Agent cannot amend or revoke a person’s Will or Trust. Powers that I add to the Powers of Attorney for Property I draft include the power to make annual exclusion gifts (including tuition and medical exclusion gifts), to manage a 529 account, to fund a Principal’s existing trust, and to establish, fund, and manage a retirement account. 

Needless to say an Agent’s job is important and one should choose an Agent carefully. An Agent must act with due care for the benefit of the Principal. An Agent can be liable for negligent exercise of his authority but not for any loss due to an error in judgment. Finally, an Agent must keep a record of receipts, disbursements, and significant actions taken under their agency. 

Illinois Statutory Power of Attorney for Health Care: 

As people live longer and medical advances keep us healthy longer, issues related to aging, disability, and illness will be faced by many people. More and more families will face a situation where someone will be called upon to make health care decisions for someone else. The Power of Attorney for Health Care allows a person to designate another individual as their Agent to make these decisions when they can’t do so themselves. It also allows a person to name successor Agents if the first named Agent cannot act for him or her. In addition, it also allows a person to name the person he wants to be his or her guardian if one needs to be appointed. 

Before 1987 people had the same problems with health care providers that they had with financial institutions. Many doctors and hospitals would not honor the directions of an agent for fear of later being sued. The Illinois Power of Attorney Act cured this problem. The Act created the Illinois Statutory Short Form Power of Attorney for Health Care. When a person uses substantially this form both the Agent and the health care providers they deal with are released from liability if they, in good faith, act in reliance upon the Statutory Power of Attorney for Health Care. As a result, most health care providers honor an Agent’s directions. Acts performed by an Agent within the scope of his authority bind third parties even if the Principal is legally incompetent. 

A Power of Attorney for Health Care is more useful than a Health Care Declaration (Living Will). It has a broader scope because it allows an Agent to make a wide variety of medical decisions in addition to just withholding or withdrawing life sustaining medical treatment. For example, an Agent can consent to specific surgical or medicinal procedures. The Health Care Declaration (Living Will) is inoperative if the person has an Agent acting under a valid Power of Attorney for Health Care. A Living Will is useful if the Power of Attorney for Health Care is invalid, cannot be found, or the Agent is unavailable. 

Under the statutory form the Agent has broad authority to act for the Principal. The Agent can make health care decisions for the Principal, admit the Principal to a hospital or nursing home, bind the Principal to a health care services contract, examine medical records, and authorize an autopsy. The statutory form allows a Principal to donate to science all or selected organs. I always add to the form a statement that the Principal is to continue to be given foods, fluids, and pain relief medication to provide him or her with comfort care and that the Principal is to be kept free from pain even if unconscious. 

Most important, the statutory form allows the Principal to make his or her own statement as to when life sustaining measures should be withheld or withdrawn or to give direction to continue food and fluids and life sustaining treatment in certain or all events. The form contains three general statements of which the Principal can choose one. 

The first statement is the least limiting and is equivalent to a “what’s in the best interests of the Principal” standard. It authorizes the Agent to withhold or remove life sustaining treatment if the agent believes the burdens of the treatment outweigh the expected benefits while considering the relief of suffering, the expense of treatment, and the quality as well as the possible extension of life. The second statement authorizes the Agent to withhold or discontinue treatment only if the Principal is in an irreversible coma. The third statement tells the Agent that the Principal wants his or her life prolonged in all events. The Principal does not have to choose any of these and can craft his or her own statement. If no direction is given as to when life sustaining measures should be withheld or withdrawn, the Agent has broad authority to make that decision. The Agent’s job is not only important but emotional as well. Both the Principal and the Agent have the responsibility to notify a health care provider of the agency. I always advise my clients to make the Power of Attorney for Health Care a part of the Principal’s permanent medical records. Finally, an Agent must keep a record of receipts, disbursements, and significant actions taken under their agency. These records must be made available upon request to those persons delegated to address elder abuse and neglect. 

Health Care Declaration (Living Will): 

A Health Care Declaration or Living Will is a written instruction to a person’s doctor that if the person is diagnosed with a terminal illness and lacks the capacity to make such a decision, he or she does not want to be kept alive by artificial or extraordinary means. Under the Illinois Living Will Act a person can document these wishes before they develop a terminal illness. Under the Act, a terminal condition is an incurable and irreversible condition which is such that death is imminent and the use of death delaying procedures serves only to prolong the dying process. However, the Act does not affect the responsibility of a doctor to provide treatment for a patient’s comfort or alleviation of pain. Nutrition and hydration cannot be withdrawn or withheld if the result would be that the patient would die of dehydration or thirst. I always add to the Living Wills I draft a statement that the patient is to continue to be given foods, fluids, and pain relief medication to provide him or her with comfort care and that the patient is to be kept free from pain even if unconscious. 

HIPAA Declaration: 

A person might need to release his or her medical information for a variety of reasons. A trustee of the person’s trust or their Agent under a Power of Attorney for Property may need to review medical records in order to pay for health care related costs. An Agent under a Power of Attorney for Health Care must be able to review medical records and speak with health care providers to make informed decisions. Under the Health Insurance Portability and Accountability Act (HIPAA) the privacy rules might prohibit disclosure of medical information to people who need it. To address this situation people should sign a HIPAA Declaration that releases medical information to specific people including trustees and Agents under powers of attorney for property and health care. 

With our population aging we owe it to our families and loved ones to help them help us. A good estate plan does that. Powers of Attorney for Property, Powers of Attorney for Health Care, Health Care Declarations (Living Will) and HIPAA Declarations are vital tools in everyone’s estate plan. 

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