By Daphne Stern, Esq.
In my previous articles, I discussed the need for virtually every individual to have a valid will (“Why Do I Need A Will?” September 13) and the use of trusts to accomplish important goals (“Estate Planning, Part II: Trusts,” September 27). In this article, I will focus on two seemingly simple documents that are crucial for every person to create, no matter his or her age, health, or financial position — the power of attorney and health care proxy.
Powers of Attorney
The statutory power of attorney is a document authorized under New York General Obligations Law Article 5, Title 15, where the principal (the creator of the power of attorney) gives an agent (another person, sometimes called the attorney-in-fact) the power to handle his or her financial affairs. While the agent’s decisions must be made in the principal’s best interest, the power of attorney grants tremendous authority. Therefore, only someone who is trusted implicitly should be selected for this role. The power of attorney survives incapacity, which means that unless directed otherwise, the power of attorney will remain in effect until death even if the principal is incapacitated.
The power of attorney will be useful in many situations. If a person is traveling and his or her bank account needs to be accessed to pay for an unforeseen expense, the agent may do so. If an individual is having a medical procedure and is in the hospital, the agent will be able to pay the bills and expenses. Usually, the most important use of the power of attorney will be in the case of the incapacity of the principal. This document will allow a trusted individual to manage all of the principal’s financial matters, including making investment decisions, paying the mortgage and household bills, and resolving medical expenses. Without the power of attorney, a guardian would have to be appointed, which would require a court proceeding and the court’s involvement in the management of the incapacitated person’s affairs. This relatively simple document can provide a mechanism for accessing and managing the principal’s finances and living expenses, without the costs and inconvenience of a court proceeding.
More than one agent may be appointed and the agents may be directed to act jointly (together) or severally (each may act alone). If there are three or more agents, decisions are to be made by majority unless otherwise provided in the document. It is also advisable to appoint a successor agent if the agent is unavailable to act at any time. The principal may revoke the power of attorney at any time by delivering a written revocation of the power of attorney to the agent.
There are two basic types of power of attorney. The most commonly used is the statutory short form power of attorney, which gives the agent the authority to make financial decisions, effective as soon as the document is signed. This is the case even if the principal is available and has full capacity. The second type is the springing power of attorney which “springs” into existence upon the occurrence of an event, such as a person’s inability to handle his or her financial affairs, as certified by his or her attending physician. The springing power of attorney may at first glance appear more desirable, since most of us do not want to authorize another to manage our finances when we ourselves are capable of doing so. However, the springing power of attorney is not always a wise choice. First, a power of attorney may often be useful to a fully competent person who is traveling or is temporarily unable to manage or access his or her assets for any reason, as discussed above. Second, financial institutions are reluctant to honor the springing power of attorney and usually involve their legal department, which may cause significant delay. The statutory “non-springing” power of attorney is often a better choice.
Powers of attorney contain a list of the powers being granted, and the principal may choose to limit the types of powers given to the agent. I usually include certain additional powers in my form of power of attorney that could be useful to my clients, such as the ability to deal with government agencies including those responsible for Medicare and Medicaid. Without this authorization in the power of attorney, the Medicare and Medicaid offices usually will not speak with an agent. The client may choose whether or not to grant a wide range of additional powers to the agent, depending on the particular circumstances. However, the power to make health care decisions may not be given in a power of attorney but must be granted in a validly executed health care proxy.
Health Care Proxies
The health care proxy allows a person, as principal, to appoint another individual (the health care agent) to make health care decisions if the principal is unable to do so. New York Public Health Law Article 29-C sets forth the requirements of a valid health care proxy and authorizes the health care agent to choose or decline medical treatment on behalf of the principal. The agent will be given the ability to express and interpret the principal’s wishes as conditions and circumstances change. However, the principal may limit the health care proxy to certain decision-making powers, medical situations, or for a certain time period. The proxy may also be limited to take effect upon the occurrence of a certain condition. However, it is usually in the principal’s best interest to grant the health care agent full authority since it is difficult to predict the circumstances that may exist in the future.
The health care proxy will only take effect if the principal does not have capacity to make his or her own health care decisions. This determination will be made by the attending physician to a reasonable degree of medical certainty. Only one individual should be named as health care agent, since it would be undesirable if there was a lack of agreement about health care decisions at a crucial time. However, a successor, or a number of successors, may be appointed to act if the initial health care agent is not available.
A competent individual may revoke a health care proxy at any time by providing notice to the agent or health care provider. A health care proxy is also automatically revoked upon the individual’s execution of a new health care proxy. In the case of divorce, there is an automatic revocation of the appointment of a spouse named as agent, unless the health care proxy states otherwise.
In the event that a person does not execute a health care proxy, the New York Family Health Care Decisions Act sets forth the individuals who would have the authority to make health care decisions on the person’s behalf. However, the individual authorized by law may not be the individual a person would select. Some family members may not be able to make decisions in an emergency or may be uncomfortable in a hospital setting. It is important that the person with the power to make medical decisions for you is the person that you determine is best able to fulfill this significant role.
Powers of attorney and health care proxies will be needed in a variety of circumstances and are critically important in emergency situations and in cases of incapacity. While no one can predict what the future may bring, having the proper estate planning documents will ensure that your wishes are carried out and that you and your family have peace of mind.
Daphne Stern, Esq. is an attorney practicing in Woodmere. She specializes in the area of wills, trusts, estate planning, and estate administration. Daphne may be reached at 516-295-0962 or by email at email@example.com.