Planning for Incapacity

When you think about your future, you shouldn’t only consider what will happen after you pass away.

There are two main fields that have to be taken care of. The most important one regards the personal wellbeing. Here health care directives and also in some cases do-not-resuscitate orders allow to plan how medical treatment is conducted in case that yourself lose the capacity to decide on your own. On the other hand the financial side should not be left out. Everyone has many daily financial obligations that need attention even if one is not able to look after the finances himself, because he has become incapacitated for whatever reason. In this case somebody you trust should take care of your finances. That is what a durable power of attorney is used for.

Diligent estate planning attorneys, like the lawyers of Rinne Legal in San Francisco, Oakland, Fairfield, Walnut Creek and Sacramento can help you drafting the right documents.

Within this section you will find a description of the basic elements, that are commonly used to prepare for tragic events in life.

Durable Power of Attorney

Acceptance of the Durable Power of Attorney

With a durable power of attorney one (called the principal) grants someone else (called attorney-in-fact or agent) the legal authority to act on the principal’s behalf and thus to manage his practical financial tasks of daily life. That could simply be paying bills, or dealing with insurances or the IRS if a tax return is due.

If done in the proper way, the power of attorney is widely accepted. Banks, insurance companies and other institutions are used to see those documents and they can accept a valid copy of the power of attorney without the risk of being sued as long as they are in good faith. If an institution does not accept a valid power of attorney the attorney-in-fact may get a court order and the respective third person is liable for the attorney's fees incurred in an action or proceeding (California Probate Code sec. 4406).

The Sound-of-Mind Requirement

Everyone over the age of 18 (adult) who is sound of mind can create a durable power of attorney in California. The sound-of-mind requirement underlines the importance of creating a durable power of attorney as long as you are mentally fit. In terms of financial capacity one is deemed in good mental state as long as he can understand the consequences of financial decisions, e.g. responsibilities, risks and benefits of a financial transaction. Once a person has lost the mental capacity it is to late: a durable power of attorney may not be created any more.

Options of Effectiveness

There are two basic concepts for the effectiveness of a durable power of attorney. You can either make it effective immediately or alternatively you can make it effective under the condition that a certain physician establishes the status of incapacitation. In the latter the durable power of attorney will only take effect if the designated physician declares you mentally incapacitated (so called “springing durable power of attorney”). You can also stipulate that the status of incapacity has to be determined by two doctors.

There are advantages and drawbacks for both options. As always the right choice depends on your personal circumstances.

Immediate effectiveness is mostly a good thing if there is a person in your life whom you trust without reservation. As long as you keep your mental competence both your designated agent and you self are able to do business for you. Of course the trusted agent will only act on your behalf if you allow him or her to do so. A good example for the usefulness of such a durable power of attorney is a situation where you suffer from a severe illness, that consumes the energy to take care of the day-to-day financial duties, but are still mentally fit. In this case your agent would be able to act on your behalf, thus assisting you to overcome the illness.

On the other hand a springing durable power of attorney has the advantage that you don’t have to trust somebody as long as you’re mentally competent. But there is a major drawback. Because the document only becomes effective if the designated doctor determines incapacitation, the agent cannot act on your behalf until he has received the according statement from the doctor. Obtaining such a statement can sometimes be time-consuming. Thus if an urgent decision has to be made the agent will not receive the empowerment in time.

A diligent estate planning lawyer will consult you on both options and help you to decide which one is right for you.

Non-Transferrable Powers

Generally the principal can grant a wide authorization to the attorney-in-fact, that allows him to act on the behalf of the principal in nearly every area of life. But there are a few exemptions for very personal acts. The following acts cannot be delegated to an attorney-in-fact:

Medical decisions (for severe medical conditions you can plan ahead with an advanced health care directive, see the respective chapter).
Creating a last will
Marriage
Adoption
Voting in public elections

Under Californian law there are some actions that must be mentioned expressly in the power of attorney to be valid. A general authorization is not sufficient. The following actions require express stipulation:

Create, modify, or revoke a trust.
Fund with the principal's property a trust not created by the principal or a person authorized to create a trust on behalf of the principal.
Make or revoke a gift of the principal's property in trust or otherwise.
Exercise the right to make a disclaimer on behalf of the principal (there is an exemption for court orders).
Create or change survivorship interests in the principal's property or in property in which the principal may have an interest.
Designate or change the designation of beneficiaries to receive any property, benefit, or contract right on the principal's death.
Make a loan to the attorney-in-fact.

Revocation of a Durable Power of Attorney

A durable power of attorney can generally be revoked by the declarer as long as he lives and is sound of mind. The agent and all institutions the agent has been dealing with must then be informed of the revocation. With the revocation the legal authority of the agent ceases to exist. Also the power of attorney ends when the designated agent is no longer available or if the principal dies.

Spouses in California have to be aware that there is an important automatic legal mechanism that can render a durable power of attorney invalid: Upon divorce a spouse who has been the agent of the other spouse under a durable power of attorney looses his authority to act on behalf of the spouse immediately (For further reference see California Probate Code Sec. 4154(a). In this case a new power of attorney should be set up.

Being a Californian estate planning attorney, I also recommend to revoke and redraft a power of attorney when you move to another state. This ensures that the power of attorney is consistent with the new applicable state law.

Forms for granting Power of Attorney

The best way to prepare a power of attorney is to use a form. There are many forms available on the internet. Not all of the offered forms come for free but if you search a little bit, you will find the right form for you.

You should make sure to use a form that has been drafted according to the applicable state law, because many states have compulsory statutory regulations that have to be followed. A conflict between your power of attorney and the applicable state law may render the power of attorney invalid.

In California there is even a statutory form. In section 4401 of the California Probate Code the lawgiver has provided the exact wording of a valid power of attorney for persons that live in California. The Californian Form is not very detailed as far as the powers of the agent are concerned. Instead it provides the option to grant power of attorney in 13 different fields. These fields are specified in an unusual clearness in within the sections 4451-4463 of the Californian Probate Code. Unless explicitly stated the Californian statutory power of attorney becomes effective immediately.

The statutory form can be downloaded free of charge from the Sacramento Public Law Library. However there is no legal obligation to use this form. Other wordings can be used as well as long as they are consistent with the California Probate Code.

Formalities

In California the document with the power of attorney must be signed in front of a notary public. The notary will check your identity, witness your signature and seal the document using a seal stamp.

If the power of attorney entitles your agent to dispose of your real estate, the document must be recorded in the county recorder’s office in order to grant the power over real estate. Recording has to be done in the office(s) where real estate is located. The reason for this is to disclose the power of attorney to all interested parties, that may engage in a real estate transaction regarding property of the principal.

Some books recommend to revoke and restate a durable power of attorney every five to seven years. The only reason for this is to avoid that somebody might doubt the validity of an old document. Legally a durable power of attorney lasts as long as it is determined in the document, usually until you or the designated agent die.

Principles

Medical care can only be predetermined by an advanced health care directive. A Californian advance health care directive can be used for any of for the following purposes:

To specifically express your wishes regarding what kind of medical care you do or do not want in the case that you are incapable of making such decisions any more.
To designate a trusted person as a health care proxy (health care agent), who will be entitled to decide in cases that are not expressly mentioned in the advance health care directive.
To name a primary physician, who should be responsible for your treatment if available.
To stipulate whether your organs or other body parts may be donated upon death.

Anyone over the age of 18 who is sound of mind can make a valid advance health care directive. One is considered sound of mind as long as he can understand the nature and consequences of health care choices.

Unlike the durable power of attorney for finances, in the regular case the advance health care directive is not active immediately but springs into effect if the primary physician determines a lack of the capacity to make your own health care decisions. This can either happen because of a mental lack of capacity (the principal does not understand) or because of a lack of communication capability (the principal cannot communicate).

If you prefer that your agent receives authority to make health care decisions right away, you can do so by stating this within the directive. However as long as you are capable the agent is not authorized to override your own wishes regarding health care.

Powers of a Health Care Agent

Most people designate a health care agent for good reason. The agent can ensure that treatment is actually administered as outlined in the advance health care directive. In addition, having somebody who is following up the treatment will let the medical institution work more diligent as if there was none to look after and lobby for you.
The agent’s powers depend on the directive. People usually choose a highly trusted person as health care agent, most often the spouse. Therefore the agent frequently receives comprehensive powers. However, that is not necessary. The scope of the agent’s powers totally depends on the wishes and restrictions, outlined in the directive.

If you use the Californian statutory advance health care directive (see below) and don’t restrict the powers of the agent, he or she will have the power to:

Consent or refuse consent to any care, treatment, service, or procedure to maintain, diagnose, or otherwise affect a physical or mental condition.
Select or discharge health care providers and institutions.
Approve or disapprove diagnostic tests, surgical procedures, and programs of medication.
Direct the provision, withholding, or withdrawal of artificial nutrition and hydration and all other forms of health care, including cardiopulmonary resuscitation.
Make anatomical gifts, authorize an autopsy, and direct disposition of remains.

Ineligible Agents

Under Californian law some persons may not serve as a personal health care agent. Those are: The supervising health care provider or an employee of the health care institution where the patient is receiving care and an operator or employee of a community care facility or residential care facility where the patient is receiving care. There is an exemption for family members of employees of such institutions (for further reference see sec. 4659 of the California Probate Code).

Rejection of Health Care Decisions

In general medical providers have to follow the wishes outlined within the health care directive. But there are some exemption from this general rule. If a special treatment conflicts with the conscience of the doctor or a policy of the health care institution, the decision may be rejected. The prime example for these exemptions are life-ending measures. The law reflects the well known controversy whether it is morally right to discontinue life-prolonging care or not when a patient wishes to die or the medical agent expresses that whish on behalf of the patient. No doctor can be forced to participate in such matters and therefore doctors and hospitals are entitled to refuse such treatments.

The doctor may also reject a wish outlined in the advance health care directive if the treatment was medically ineffective or would violate generally accepted health care standards. During Pregnancy the right to determine one’s own health care is limited, because the rights of the unborn child overrule the general freedom to make health care decisions, which might effect the life of the child.

Forms

Similar to the statutory form for durable powers of attorney the California Probate Code also contains an statutory form for advance health care directives (Sec. 4700-4701 California Probate Code). The form may, but need not, be used to create an advance health care directive. Everyone may complete or modify all or any part of the statutory form. The statutory form can be downloaded free of charge from the Sacramento Public Law Library.

If you would like to get a personalized and lawyer checked advance health care directive or further explanations regarding the statutory form the estate planning lawyers of Rinne Legal in San Francisco, Oakland, Fairfield, Sacramento and Walnut Creek will be able to consult and draft a proper directive.

Formalities

A Californian advance health care directive must either be signed in front of two witnesses or be notarized. If you are a patient in a nursing home or other health care facility for long-term care it is required by law that the institution’s patient advocate or ombudsman signs the directive as one of the two witnesses or in addition to the two witnesses or the notary.

Advance Health Care Directives

HIPAA stands for the federal Health Insurance Portability and Accountability Act from 1996. HIPAA rigorously limits the disclosure of your medical information by health care providers and pharmacist and imposes heavy fines in the event any health information is wrongfully disclosed.

From a legal perspective, the advance health directive, should be legally sufficient for a health care provider to transmit your personal health information to your health care agent. Therefore as far as the health care directive is concerned no formal HIPAA release is required. However, there is a practical problem that the health care provider may not know what is and what is not legally sufficient. To be sure it is therefore advisable to also have an additional HIPAA release for the designated health care agent.

A durable power of attorney for finances or a living trust document usually does not contain an implied HIPAA release either. Nevertheless the designated agent or successor trustee might have to get access to your health information in order to diligently manage your finances. Therefore it is a good idea to expressively empower your trusted person to access your health information in accordance with HIPAA.