A Power of Attorney is a legal document that identifies and empowers a person to speak for someone who wants assistance with financial or healthcare matters or can no longer speak for themselves. While there are various laws governing Powers of Attorney, types of Powers of Attorney and the terms they use are common across the documents. CaringInfo will help you sort out what Powers of Attorney are and will help you feel empowered to complete the right document for the situation.
What goes into a Power of Attorney?
A person (usually called the Principal) appoints and authorizes someone to act on their behalf (usually called an Agent). The Agent and the Principal must be a minimum of 18 years old and of sound mind. Often the Agent will also be one of the caregivers for the Principal. Agents are not called “a Power of Attorney”, they have the Power of Attorney granted to them by the Principal via the document.
It can get a bit confusing, so we will be using the terms Agent and Principal throughout our discussion on Powers of Attorney so that you can get used to the terms.
Powers of Attorney may be durable or springing and may cover healthcare decisions or financial decisions. Healthcare Powers of Attorney are separate documents from Financial Powers of Attorney. Once executed – which is a term for activated – Powers of Attorney will stay valid until they are revoked by the Principal or the Principal dies.
The most important aspects for the Principal to remember are:
- Appointing a trusted person as an Agent
- Educating the Agent about their wishes
- Empowering the Agent to act on their behalf.
The best way for a Principal’s voice to be heard when they cannot speak for themselves is to have empowered one or more trusted persons and to have told those people what they want (and do not want). Agents have fiduciary, or legal, obligations to act in the best interest of the Principal, so the Principal and Agent need to be in communication about the Principal’s needs and wishes.
If the Principal changes their mind about who they want their Agent to be, they can simply execute a new Power of Attorney. Often it is prudent to list a back-up (or two) for the first chosen Agent in case that person becomes unavailable for some reason.
A power of attorney is valid and enforceable in all states, but the rules and requirements differ from state to state, so Principals and Agents need to check to be sure they have all the correct forms in place. This is particularly relevant if an Agent needs to manage property in multiple states. State bars or local attorneys can give specific further guidance. You may find your local state bar or a local attorney at the General Bar’s website.
When Is It Useful to Have a Power of Attorney?
Principals should consider appointing an Agent to help manage financial affairs long before they are incapacitated. As we age or deal with serious illness, managing finances can become increasingly difficult and burdensome. In those cases, appointing someone else to assist makes a lot of sense. When a person can make decisions for themselves, they will always direct their own health care, even if they have executed a Durable Healthcare Power of Attorney. This allows the Principal to still direct and give input, but the Agent is empowered to help get things done.
For example: the Agent will be empowered to speak with doctors on the Principal’s behalf and also access personal health information (see below). Without the Healthcare Power of Attorney, doctors may decline to speak with anyone other than the patient, creating difficulties in sharing information and care recommendations.
It is helpful for everyone involved – Principals, possible Agents, other caregivers, etc. – to discuss when it is time to have a power of attorney and who the Agent should be. When a person is seriously ill, it is very helpful to have the confidence that their finances and wishes are being looked after. They may be quite capable of managing their own financial or other logistical needs but prefer that someone else do it so that they can focus on their own medical care.
If a patient becomes unable to make decisions for themselves, and no power of attorney has previously been officially executed, then the courts will need to become involved. A prospective Agent will need to ask a court to give them authority to act for the Principal. This process can be lengthy and cumbersome, so being proactive is quite important.
Tip: Once a power of attorney has been executed, the Principal and the Agent should keep both paper and digital copies. Also, make sure to keep all pages of the document even if some do not apply to you. For instance, you may not have used the page for a notary if you had witness signatures. You must still include that page when you submit the document to an institution whether in paper form or digital form.
What are the types of Power of Attorney?
Powers of Attorney can cover Healthcare decisions or Financial decisions and may be made durable or springing.
What is a Healthcare Power of Attorney?
A healthcare power of attorney is a separate document from a financial power of attorney. Like the financial power of attorney, an Agent is appointed to speak with doctors and make medical decisions on behalf of the Principal.
Most Advance Directives include a living will, wherein a person describes the types of care they do and do not want, and a healthcare power of attorney, in which the Agent is appointed. Some advance directive forms have boxes to mark if the power of attorney is springing (requiring a letter from a physician that the Principal is incapacitated to take effect) or durable (taking effect immediately). States have their own Advance Directives, so the Principal and Agent need to be sure they complete all necessary forms.
The American Bar Association has recognized the importance of selecting and empowering a Healthcare Agent by making a universal form and a guide to its use available. This form appoints an Agent and is valid in all but four states (New Hampshire, Ohio, Texas, and Wisconsin). People that reside in those four states must use their specific state’s documents.
The Importance of a Healthcare Power of Attorney
Without a valid Healthcare Power of Attorney, physicians and healthcare organizations may not even speak with anyone other than the patient.
Even if a person does not want to complete living will or the full advance directive form, it is important to execute a Healthcare Power of Attorney. This is the only way a person who cannot speak for themselves gets the care they want and does not get care they do not want. For a caregiver, a Healthcare Power of Attorney is very important so that they are fully empowered to make the wishes of the person they are caring for known. Healthcare Powers of Attorney may be durable or springing.
In 2003, the U.S. Department of Health and Human Services enacted regulations under the Health Insurance Portability and Accountability (HIPAA) Act of 1996 (Source: CDC). The law includes privacy provisions that ensure patients’ confidential medical information is properly protected. Medical providers may be liable for serious sanctions and monetary fines if they fail to adhere to the stringent rules regarding the release of unauthorized “protected health information” (PHI).
Because definitions under HIPAA are very broad and the penalties for violating them are so severe, most health care providers are stringently reluctant to release PHI to anyone other than the patient, without legal authorization. Therefore, it is imperative to have a valid health care power of attorney with current HIPAA language, so that in the event of incapacity, family members or an appointed trustee, power of attorney, or guardian will be able to access medical records and make informed decisions on the client’s behalf.
What is a Financial Power of Attorney?
A financial power of attorney is a document specifying who is authorized to manage a person’s financial affairs if they become incapacitated. The forms are widely available on the web at sites such as LegalZoom or Rocket Lawyer. It is possible to specify which tasks are being empowered, for instance managing bank accounts and insurance but not allowing real estate transactions. Financial powers of attorney may also be durable (starting at time of execution) or springing (contingent on some event that must be documented).
Powers of Attorney must be signed according to state law (source: Eforms.com). The good news is that twenty-eight states have adopted a universal form, which you can find on eForms.com. A lawyer may need be consulted for more complicated situations.
How do financial institutions and businesses learn about a Financial Power of Attorney?
Once an Agent is appointed, relevant financial institutions and businesses need to be informed that that person will now be acting on the account holder’s behalf. Financial institutions and businesses can include banks, insurance companies, credit card companies, and investment companies, but also car dealerships and local stores. Reviewing bills and financial statements can help to create a list of who needs to be informed about the Financial Power of Attorney.
Some institutions and business will only need a digital copy of the power of attorney to authorize the Agent. However, other financial institutions and businesses may require paper copies or will want to see the original document. While it is obviously OK to let them examine it, do not let them keep it. Keep the original with your file of related, essential documents.
Financial caregiving will be much more difficult without a Financial Power of Attorney.
What is a Durable Power of Attorney?
A Durable Power of Attorney allows the Agent to begin managing affairs on behalf of the Principal as soon as the document is created. Think of it as a permission slip: once signed, a Durable Power of Attorney allows the Agent to take over any responsibilities that are included within the document. This is the simplest approach as no further action is required for the Agent. A Durable Power of Attorney will stay in effect until it is revoked or the Principal dies. A Healthcare or Financial Power of Attorney can be made ‘durable.’
Remember: the Principal will always direct their own healthcare so long as they are capable of doing so.
What is a Springing Power of Attorney?
A Springing Power of Attorney means it becomes effective upon the declaration by a licensed physician that the person granting the power is incapacitated.
This means that the Agent has no role until the Principal becomes incapacitated and that is documented by a physician. A Springing Power of Attorney may become problematic if something urgently needs attention as there may be a delay in getting the necessary documentation. For this reason, Durable Powers of Attorney are more commonly used. A Healthcare or Financial Power of Attorney can be made ‘springing’.
Once ‘sprung’, the Springing Power of Attorney also stays in effect until the Principal dies, or the power is revoked.
Communicating Needs Is Essential
Completing Powers of Attorney may feel like a stressful task. The key is open communication with your Doctors and Inner Circle. We’ve put together guides and tactics on how to communicate openly with whomever you need to.