Todd Ratner

woman-with-advisor-300The Power of Attorney is one of the Advance Directives, along with the Health Care Proxy and the Living Will.1 It is the document whereby one person, called the principal, appoints another person, called the agent, to act on the principal's behalf according to the authority it grants.

This authority often includes the ability to do banking, appear in lawsuits, and engage in other business and transactional matters. In the elder law setting, it often includes the ability to transfer assets into a trust, to apply for government benefits, and to request and access medical records.

Powers of Attorney come in the following varieties:

• General - grants broad authority across many different categories, even to the extent of allowing the agent to do anything the principal could do;

• Special - narrow and often limited to a single transaction or activity, like only the sale of a specific asset, or only banking on a specific account;

• Durable - continues to remain in effect even after the principal loses capacity, like after a stroke; • Springing - becomes effective (i.e., it "springs" into being) upon the happening of a specific event, particularly the disability or loss of capacity of the principal.

More often than not, the kind favored for elder law and estate planning purposes is the general durable Power of Attorney. It continues in effect after incapacity so that steps can be taken even after age, accident, or deteriorating health. It is broad so that it can be used to take care of all kinds of matters that could come up, including post-incapacity planning and putting care in place.

Some people, however, prefer a springing Power of Attorney because they dislike the idea that a regular one grants authority to the agent right away--instead, they prefer to have the agent acquire the granted powers only if and when the principal can no longer act.

A common provision in the elder law or estate planning setting addresses the Health Insurance Portability and Accountability Act ("HIPAA").2 HIPAA protects health care privacy by limiting disclosure of health care information and records to a patient's designated "personal representative." Such a provision will expressly give the authority to access medical records.

The springing Power of Attorney, therefore, presents a potential Catch-22: a seemingly unsolvable circular dilemma that could arise if care is not taken. This is because, by its nature, it does not become effective unless and until the principal becomes incapacitated, and proving this may very well require access to his medical records--which are not accessible until the agent acquires the ability to get the medical records - etc., etc., round and round in an endless Catch-22 loop.

Care must be exercised to avoid having the agent end up in this Catch-22. As a first step, both the Power of Attorney and the Health Care Proxy should contain language that explains that the agent is also the personal representative for the purposes of health care disclosures under HIPAA as well as the circumstances under which access would be allowed. More importantly, it would be prudent to also sign separate HIPAA release forms that explain what medical information can be disclosed, who can make the disclosure, and to whom the disclosure can be made.

An attorney well versed in both elder law and estate planning can help you decide what Advance Directives are right for you, and to make sure they mesh with the requirements of HIPAA.

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1. Many also consider the Last Will and Testament to be one of the Advance Directives as well.

2. The Health Insurance Portability and Accountability Act of 1996 ("HIPAA")(Pub.L. 104-191, 110 Stat. 1936, enacted August 21, 1996), and its so-called Privacy Rule, established federal standards for safeguarding the privacy of an individual's identifiable health information. It generally prohibits health care providers such as health plans and clearinghouses, health care practitioners, hospitals, nursing facilities and clinics from using or disclosing "protected health information" without written authorization from the patient.

Our office concentrates on Elder Law, Medicaid Planning, Trusts and Estates, Guardianship, Advance Directives, and Special Needs Planning. Contact us to discuss your particular situation: Tel. 718-276-0010 or This email address is being protected from spambots. You need JavaScript enabled to view it.. Visit our website at http://www.jimsarlis.com for more information.

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Senior Couple - Power of AttorneyA power of attorney for finances can be a valuable tool, especially for families caring for older adults. You can use it to help them manage specific transactions, to assist them for just a short time, or to regularly manage their everyday affairs. And what's called a durable power of attorney for finances sets up a simple, relatively inexpensive way to handle their finances if they ever become incapacitated. If you and they are considering a power of attorney for finances, here are some things to keep in mind.

Would a power of attorney help older family members now with their everyday finances?

Even if they're still competent to make major financial decisions, one or more of them may be finding it difficult to manage all their everyday money matters. Maybe your father's eyesight isn't sharp enough to confidently read financial documents or your mother's hearing isn't good enough to negotiate telephone transactions. Maybe it's not easy for them to get around, make trips to the bank, or oversee property.

In these situations, they might get some relief by executing a general power of attorney for finances. This document would give someone -- you or another family member -- the authority to act on their behalf in any financial transaction but would not take away their authority to act on their own whenever they choose.

Do your family members need a limited power of attorney to help with specific transactions?

They might still be able to handle everyday money matters without help. Even so, they might not be comfortable handling more complicated transactions that come up from time to time. These might include buying a car, making an insurance claim, buying or selling a home, or arranging long-term care.

For any particular situation in which they feel unsure of themselves, they could execute what's called a limited power of attorney for finances. This would authorize someone -- called an agent or attorney-in-fact -- to act on their behalf only for the specific transaction listed in the document. The power of attorney would end once the transaction was complete. Sometimes an ending date is placed on the appointment of the agent as an extra limitation.

Would a temporary power of attorney for finances help protect your older family members while traveling?

It might.They may regularly spend time away from home, perhaps even out of the country. Or they may be planning a trip at a time when they know a specific financial matter is likely to need attention. If so, they could execute a power of attorney for finances -- either a general power of attorney or one limited to specific transactions -- to operate only during the time they're away. The power of attorney would expire on the date they're to return home, as specified in the document. As with any other type of power of attorney, they could revoke it -- meaning it would no longer be effective -- earlier, as long as they're still mentally competent.

Should older family members consider a durable power of attorney for finances in case they become incapacitated?

One of the most difficult and complicated situations any family can face is the sudden and permanent incapacitation of someone close to them. The problems are worse if that person hasn't prepared a document that authorizes someone to act on his behalf regarding financial matters that may continue needing attention for as long as he lives. Although it may make him nervous to give anyone else power over his finances, without such a document, your family may be faced with the complicated and expensive process of having a conservator or guardian court-appointed for him.

Fortunately, there's a simple document that makes this court process unnecessary. It's called a durable power of attorney for finances -- the word durable means that it remains in effect after the person is incapacitated. Although it's a good idea to have a lawyer review the document, preparing it is a relatively simple and inexpensive matter that can save untold distress. Every older adult should consider having a durable power of attorney for finances. In fact, it's never too early to have one in place -- no one expects to have a stroke or accident, but when it happens the patient's family may need financial authority.

Who should serve as the agent under a durable power of attorney for finances?

It's important to pick the right person to act as the agent (or attorney-in-fact) who's given authority under someone's power of attorney for finances. Trustworthiness is most important, of course. But beyond that, different people might fit different needs. For complicated one-time transactions, the agent should be familiar with the particular financial matter. For temporary handling of everyday money matters while the person is away, it should be someone with easy access to the necessary paperwork. For ongoing, general power-of-attorney duties while the person remains in charge, it should be someone who gets along well with him and can easily accept what he does and doesn't want done for him.
The most important choice of an agent is for a durable power of attorney. This is someone who will retain authority indefinitely if and when the person granting the power of attorney is permanently incapacitated. The durable power-of-attorney agent should not only be capable of handling all financial affairs but also be willing and able to give sufficient time and energy to these responsibilities over the long term.

Does someone need a durable power of attorney for finances if all his assets are held jointly with his spouse?

If your father, for example, and his present spouse, have all their income and assets under both their names, it may not seem as if there's any need for a power of attorney for finances. If something happens to your father, the spouse already has authority over the assets. But a durable power of attorney for finances is still a good idea. That's because one spouse may become incapacitated at the same time, or soon after, the other. Or, a separate asset or income might later come to your parent without his spouse's name on it.

Does someone need a durable power of attorney for finances if he's set up a living trust?

The trustee of a revocable living trust may have much the same authority to deal with someone's finances as the agent does in a durable power of attorney. Even if he has a living trust, however, it's still a good idea for him to execute a durable power of attorney for finances. (He could name the same person to both jobs -- trustee of the living trust and agent in the power of attorney.)

The reason it's wise to have a separate document is that not all his income and assets may wind up in the living trust; if some income or asset comes to him after he's incapacitated or wasn't placed in the trust through some oversight, the trustee would have no authority over it.

Who should have copies of a power of attorney for finances?

The original power-of-attorney document should be kept in a safe place, either at home, in a safe deposit box, or at his lawyer's office. The person named as agent or attorney-in-fact in the document should be given a certified copy and told where the original is. Alternate or successor agents should also get certified copies and be told where the original is, as should close relatives. His tax preparer, accountant, lawyer, and broker should have copies in their files. And each financial institution where he regularly does business or maintains an account should also have a copy for its files.

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Alzheimer Disease - Power of AttorneyAs you may have already heard or read, a Durable Power of Attorney (DPA) is a very important and beneficial document to have available, not only as you age, but at other times as well. It is a very powerful tool in the hands of the right appointee.

The usual and best form for a DPA is a broad and unlimited grant of authority by you (the principal) to your appointee (the attorney-in-fact), which is effective upon signing. The execution of a DPA fundamentally gives your attorney-in-fact the ability to be you as far as all of your assets and material possessions are concerned.

In the absence of a DPA, the only mechanism whereby somebody is authorized to act on your behalf is to go to the Probate Court and petition to have somebody appointed as either your guardian or conservator. In each of those instances, the appointee will have the power and authority to handle and manage all of your assets.

While your attorney-in-fact is able to act without any supervision at all, the important and significant difference with a guardian or conservator is that the Probate Court will supervise their performance by virtue of the requirement of filing regular accountings. An accounting is the report to the court that lists assets received, their disposition, all income received, and each expense paid. While this supervision may seem desirable, it does include a degree of expense, formality, and time, which may not always be beneficial.

While the simplicity and directness, not to mention efficiency, of a DPA is more often than not appropriate, it does open up the opportunity for concerns relative to supervision. Think about it this way: Suppose you were to take all of your assets and convert them into widely circulated 10- and 20-dollar bills and place all of it in a strong box. Then, you hid that strong box in a place that only you and your potential appointee knew about. Finally, you assured your appointee that for one week he would be able to access that strong box without anybody in the world knowing or seeing. In that situation, are you willing to appoint this person as your attorney-in-fact?

If your answer is anything but an immediate and unqualified “yes” with regard to that appointee, then you should not appoint that person and begin thinking about someone else. In most instances, people are completely comfortable with those they appoint and are able to derive the full measure of benefits available from an effective DPA.

You should also contemplate appointing a successor attorney-infact, since, if the document is worth having in the first place, it is worth having it be as durable as possible. Successors should be named who can serve in the event that the first, or even second, named individual is not available, and thereby allow for action on the principal’s behalf by somebody duly authorized.

Another consideration to bear in mind when appointing somebody to be attorney-in-fact is geography. Appointing somebody local rather than distant can offer both logical and logistical benefits.

Oftentimes people say that they cannot choose among the people they are considering, and therefore seek to appoint more than one person as co-appointees. While this is permitted in the context of a DPA, it is frequently discouraged for the reason that “rule by committee” often turns out to be no rule at all. This means that any disagreement between the appointees leads to inaction, or possibly controversy, and bitterness may ensue.

It is also important in the course of thinking about whom you might appoint that you contemplate who might best discharge the responsibilities of being an attorney-in-fact, rather than simply appointing the oldest or the closest geographically. In this way, you will have someone who will exercise rational and thoughtful judgment in the course of acting on your behalf.

The final aspect of this topic involves the issue of whether to utilize a durable power of attorney that has a ‘springing’ power, or one that is effective immediately. A springing power is one where the attorney-in-fact’s authority to act comes into effect at such time as you are no longer able to function capably on your own behalf. This is to be distinguished from a DPA that is effective immediately upon signing.

As you contemplate whether your DPA should be effective immediately, consider the following: very often the point in time when you are no longer functioning capably is not a clear line in the sand. Disagreement and anxiety might arise between you and the attorney-in-fact who believes that it would be beneficial for you to have the help at a time when you might not agree.

Furthermore, if you are willing to appoint this person and trust him or her enough to take on this significant responsibility after you are no longer able to function on your own behalf,why then wouldn’t you want to take advantage of having them available while you are still competent, as there are circumstances and/or opportunities when it might be beneficial or convenient to have that help?

There are likely to be times when you are traveling, or even if you are just feeling under the weather, when you can not get out to file a document, pay a bill, or renew a CD in a timely fashion. It can be very convenient to have your appointee available to take care of such things for you.

Despite the possible concern relative to the unsupervised authority of your attorney-in-fact, the durable power of attorney is indeed is one of the most desirable and beneficial documents to have within your estate planning arsenal.

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Elderly QuestionsMany of my clients come in with a "durable" power of attorney, believing they are all set with it. However, after carefully reviewing it, I invariably have to recommend they need a new one. Why is that?

First of all, if the power of attorney is more than five years old, many financial institutions may simply refuse to honor it, believing that it may have been revoked.

You may not realize it, but some states even provide that any person who arbitrarily or without reasonable cause refuses to comply with the directions of the agent named in a valid power of attorney will be liable for costs, expenses and attorney's fees to appoint a conservator or go to court to enforce the power of attorney.

Unfortunately, even if the law says they must follow the power of attorney, it could be a time-consuming and expensive proposition to force them to do so. A better idea is simply to sign an updated one every few years.

Second, most power of attorney documents do not permit gifting by the agent named in the document, or if they do, it is handled all wrong! Some documents limit gifts to the federal gift tax annual exclusion (currently $12,000 per person per year) or prohibit gifts to the person serving as the agent. While those provisions may be useful for a wealthy client, they can really hinder effective Medicaid planning. In fact, it would be better if the document said nothing at all about gifting than include such limitations, because it's always possible to go to court to get permission to make large gifts for Medicaid planning purposes, but once the judge sees those limits in the power of attorney document, he might not permit it.

So what are the "must have" provisions to include in a durable power of attorney? It should specifically address gifting for Medicaid planning purposes. It should permit gifts to the agent, perhaps by someone other than the agent. It should include the power to purchase a "Medicaid annuity" and make a loan secured by a Medicaid-friendly promissory note. It should include at least one successor or back-up agent. It should include many powers you think you don't need but may well need in the future!

In short, the cheap or free forms you get at the office supply store or online are false bargains. Spend the small fee it costs to get a good power of attorney, one that includes the important provisions discussed above. In the long run, it could save your family thousands of dollars. And that's a good thing!

Attorney K. Gabriel Heiser has devoted his legal practice to Medicaid planning, elder law, and estate planning for the last 23 years. NOTE: For more information on this topic and other Medicaid planning techniques, see http://www.MedicaidSecrets.com, which describes an exciting new 256-page book written by attorney Heiser, "How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets." You don't have to go broke to get Medicaid to pay your nursing home bills, you just have to know the rules and planning techniques. For the first time ever, you can learn the inside secrets of high-priced estate planning and elder law attorneys, in attorney Heiser's new book.

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