Planning for Incapacity
See Also:
Related Videos:
Terms:Principal: Agent: Healthcare proxy: Living will: Durable power of attorney: |
Planning for Incapacity
The recent death of Bob Hope at age 100 is a reminder as to how long individuals can live in modern times. This added longevity creates a need for individuals to not only plan for death but, to also consider how they would handle life’s everyday tasks if they were plagued with extended periods of diminished capacity.
Almost thirty years ago, the Supreme Court ruled on a case that clarified one’s rights to make decisions regarding one’s own medical treatment, as an interpretation of the 14th Amendment due process liberty interest. See
Given the importance of the decision as to whether artificial means should be used to prolong someone’s life, it is necessary that this choice be unequivocal. The clearest way to honor someone’s wishes and avoid conflicting instructions is to provide written documentation in advance that specifies what types of heroic measures are wanted. The most common forms of advance medical directives are healthcare proxies and living wills.
Healthcare Proxy
States have codified the right of an individual (“principal”) to appoint an “agent” (usually a spouse, adult child or trusted friend) to make medical decisions on his or her behalf when that person is incapable of doing so. Although states may differ as to the form of their healthcare proxy, generally, the following minimum information would be needed:
- the names of the principal and agent;
- statement of intent giving the agent authority to make health care decisions on the principal’s behalf;
- signature and date by the principal; and
- the signature of two witnesses who observe the execution of the healthcare proxy, specifically stating that the principal acted willingly and free from duress.
One of the requirements for executing a healthcare proxy is that the individual doing so must be “competent” (must have the mental capacity) to execute such a document. In addition, the designated agent must be an adult, 18 or 21 years old, depending on the jurisdiction. To avoid the appearance of a conflict of interest, the use of medical personnel, unless they are also relatives of the person executing the document, is also restricted. Also, it is advisable to have at least one alternate agent, in case the first person chosen is not available. For example:
Paulette, age 50, lives next door to her only daughter, Vanessa and Vanessa's two sons, Michael, age 10, and Gregory, age 17. Vanessa's ex-husband lives out-of-state and rarely sees the boys. Vanessa was recently diagnosed with leukemia and will undergo a bone marrow transplant in two weeks. The best person to be appointed as Vanessa’s agent in a healthcare proxy is her mother, Paulette, since she is the closest family member who is an adult. In addition, since they live so close, Paulette would be available to actually make decisions if the need arose.
The agent’s power to step into the patient’s shoes to make decisions only occurs if the patient is incapable of his or her own medical decision-making. Once the patient is no longer incapacitated, the patient once again exercises control over his or her medical treatment. For example:
Paulette, age 50, lives next door to her only daughter, Vanessa and her two sons, Michael, age 10, and Gregory, age 17. Her ex-husband lives out-of-state and rarely sees the boys. Vanessa was recently diagnosed with leukemia and will undergo a bone marrow transplant. Vanessa’s appointed her mother, Paulette, to be her agent in a healthcare proxy. Paulette waited by Vanessa’s side before surgery. During a visit to her bedside before surgery, Vanessa’s doctor asked her for a medical decision. Even though Vanessa executed a healthcare proxy designating her mother as her agent, Vanessa is still in charge of making healthcare decisions because she is not yet incapacitated.
The best way for the agent to carry out the patient’s wishes regarding medical care is to discuss those desires with the person in advance of signing a healthcare proxy.
Living Will
A living will is a document which contains specific instructions concerning a patient’s wishes about the type of acceptable medical treatments (especially resuscitation) he or she does or does not want to receive, but unlike a healthcare proxy, there is no designated agent to make healthcare decisions. Despite this difference, both instruments rely on written documentation of the patient’s healthcare wishes rather than oral statements. See, e.g.,
Rather than use two separate documents, it is possible to integrate the patient’s intentions regarding medical treatment into a healthcare proxy. These instructions could possibly give more guidance to the designated agent regarding certain decisions. However, this inclusion in one document could restrict the agent’s authority, given the restrictive reading of instructions provided within a healthcare proxy, thereby providing less flexibility than if the healthcare proxy were silent.
To lessen the confusion, it is wise to specifically probe the patient about his or her wishes regarding artificial nutrition, hydration, and resuscitation, in particular, taking into account any possible religious restrictions or moral beliefs. Then, the patient would have ample opportunity to review the document to ensure it properly reflects his or her final desires.
Conversely, an advantage to incorporating the instructional language from a living will into a healthcare proxy is that it can stand alone if the primary or alternate agent is unavailable when the patient becomes incapacitated.
Durable Power of Attorney
A durable power of attorney is a document that allows a trusted family member or friend to make a variety of decisions, such as those involving real estate, banking and business transactions, on the client’s behalf. This person is called the “agent” or “attorney-in-fact” of the creator. It is “durable” because it is still effective despite the incompetence or disability of the creator. Such powers remain in effect until the creator’s death.
Conversely, it is not clear whether a “non-durable” power of attorney remains active upon the creator’s incapacity. As such, it is recommended that a client create a durable power of attorney, since it is most useful in managing the financial affairs of someone who becomes disabled or incapacitated.
Naturally, when giving another person complete control over one’s finances, there is the risk of fraud. Although the person’s “attorney-in-fact” does have a fiduciary duty to act in good faith in handling these matters, there is no outside oversight to monitor the transactions. One way to somewhat restrict the agent’s authority is to specify that the durable power of attorney only becomes effective on a certain date or after a certain contingency, such as disability or incapacity.
Long-term Care Insurance
As baby boomers continue to age, the need arises for planning for long-term care, whether at home or in an assisted-living facility. Unfortunately, neither one’s individual medical insurance plan nor Medicare covers all of these expenses. Medicaid only applies after someone becomes impoverished. If the incapacity and/or the need for nursing home care last for several years, this could create a heavy financial burden on the family and it can go a long way toward depleting the person’s assets to cover the expenditures. Long-term care insurance is one way of paying the costs for supervised care.
Like other types of insurance policies, consumers specify what type of protection they want. Typically, these policies offer different options of daily benefit, length of coverage, types of inflation protection and various elimination periods before payment of benefits.
Health problems are not the only consideration in planning for long-term care. An automobile accident or some other catastrophic accident could happen at any age. Thus, there are significant risks in putting off decisions about long-term care insurance. One can become uninsurable or the premiums for a policy purchased later in life might be prohibitively expensive.
This introduction to the types of issues that can arise in passing property to the next generation serves to illustrate the importance of estate planning, as opposed to simply leaving those matters to chance and/or government statutory and regulatory provisions.
In the next chapter, we will study the different types of taxes an estate might be subject to and discuss numerous planning techniques that are designed to minimize their impact on the decedent’s estate.