A power of attorney (POA) is a document that allows you to designate a person or entity (your “agent” or “attorney-in-fact”) to manage your affairs if you’re not able to do so yourself.
There are several different kinds of POAs. Each one gives your attorney-in-fact a different degree of control or control over different areas of your life. Generally, you have Durable Powers of Attorney (Springing or Shifting) and Health Care Powers of Attorney, also called Advanced Health Care Directives. The latter often also deals with HIPAA releases of information, or Health Insurance Portability and Accountability Act.
A limited power of attorney provides another person with the power to make decisions on your behalf in limited and specific situations. The opposite of this is a general power of attorney, a comprehensive authority that gives your attorney-in-fact all the powers and rights that you yourself have. A durable power of attorney can be general or limited in scope, however, it remains in effect after you become incapacitated; hence the word “durable”. You can also further distinguish powers of attorney as springing or shifting, which indicates when the given powers come to life. Basically, they can be immediate or on a specific date “shifting” or “springing” upon incapacity. The latter is typically used as a part of your estate planning, while the former is normally executed for a specific reason, like a big surgery requiring a significant recovery period or a long trip out of the country.
A springing power of attorney “springs” into effect when you become incapacitated. There are a lot of folks who lean toward the idea of this type of POA because they don’t want to make their power of attorney effective while they’re still able to manage their own affairs.
But a springing power of attorney can cause more problems than it solves. For instance, rather than being able to use the power of attorney as soon as the need arises, the agent or attorney-in-fact is required to receive a “determination” of your incapacity before they can use the document. Typically, this means that your physician must certify that you’re no longer able to make your own decisions. Knowing how doctors’ offices operate, this could take some time and cause a delay in the handling of your finances. We, at NM LAW, APC typically draft these documents in a way that allows multiple “triggers” and ways of determining incapacity so that someone in need can easily transition authority to their selected agent.
Another issue that may arise deals with privacy. There are state and federal laws, such as the Health Insurance and Portability Act (HIPAA) that protect a patient’s right to their medical information, meaning that your physician can release information about your medical condition only in limited circumstances. In an incapacity situation, your attorney-in-fact (typically your health care agent rather than the agent listed under your durable power of attorney) will be required to show proof that the doctor may legally release your medical information to him or her. In some instances, a HIPAA Release Form will resolve this issue if it’s signed before you become incapacitated. We recommend executing powers of attorney that clearly address these issues upfront and in the original documents.
The issue beyond stating the definition of your incapacity is the fact that rarely does a person wake up one morning and become “incapacitated.” It can be a gradual decline, and you may have good days and bad days You may need help managing your finances before you become incapacitated as defined by your springing power of attorney. This gray area can make it hard for your agent to help you when you need it. Comprehensive estate planning documents tying in your health care professionals, trusted advisors and your family can help avoid a situation where help does not step in until damage is done. Keep in mind, well drafted and timely executed powers of attorney are one of the key ingredients to keeping you out of court in a Conservatorship proceeding, which is a costly and public process to allow others control over your person and your assets.
California law has specific requirements for powers of attorney, and some financial institutions may require their own versions. Speak to an experienced estate planning attorney about the best for your specific situation. Contact NM Law at (949-253-0000) to speak to an experienced estate planning attorney about all your plans for the future.
Disclaimer: This article is intended to provide a general summary of laws in the State of California and should not be construed as a legal opinion nor a complete legal analysis of the subject matter. Noelle Minto is an attorney at NM Law, APC in Tustin, California, a law firm specializing in Trusts & Estates and Business Transactions.