Preparing for Possible Incapacity

While we always hope for the best, the reality is that most of us will experience a period of incapacity at some point in our lives.  We may be unable to direct our own medical care, and we may not be able to pay our bills, sell our house, or otherwise deal with our assets and finances.  At these most critical junctures, being prepared can save you and your loved ones a great deal of financial and emotional cost.

Each state has its own form of a medical directive.  Oregon, for example, has an Advance Directive that allows you to name health care representatives who can make medical decisions for you if you are unable to direct your own medical care, and also allows you to tell the doctors directly whether you do or do not want life support or tube feeding in four very serious situations.  The Advance Directive may be your most important estate planning document, given that nothing will impact you more personally than someone else directing your medical care.

A well-drafted general financial power of attorney is also crucial if you become financially incapacitated.  A general power of attorney would allow a person you designate (your attorney-in-fact) to do anything with your finances and assets that you could do.  A thoughtfully drafted power of attorney might also authorize gifting in appropriate circumstances.  Oregon has recently passed a law specifically allowing “springing” powers of attorney that do not take effect until a specified event takes place (such as becoming incapacitated).  Springing powers of attorney can add a level of protection to you and your finances, but may also raise a further issue.

Language in powers of attorney or trusts that allow someone else to handle your finances often require some evidence that you are incapacitated – often in the form of a letter from a doctor.  However, the HIPAA privacy laws can make it next to impossible for your attorney-in-fact (or successor trustee under a Trust) to obtain a letter from a doctor as proof of incapacity.  Different doctors and hospitals will have their own versions of HIPAA Authorizations (or “Releases”) that will allow you to grant to specified individuals access to your medical records for designated purposes.  It is wise to also have a backup HIPAA Authorization that can be used if needed.

While Wills and Trusts are the estate planning documents that receive the most attention, Advance Directives and well-drafted powers of attorney are also critical.  An appropriate HIPAA Authorization may be the key needed to help unlock the power of your estate planning documents that you have so carefully prepared.

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