Don’t Let Your Power Of Attorney Become Powerless
One of the cornerstones of a solid financial plan is properly configured estate planning documentation—especially your medical and financial powers of attorney (POA). POAs give you the ability to legally authorize an individual to handle your affairs and make healthcare decisions in the event you become incapacitated and are unable to make them on your own. While you may already have POAs in place, several legislative changes over the years have given financial institutions and healthcare providers reasons to reject them. Here are several steps you can take to ensure that your documents are effective.
1. Engage a qualified estate planning attorney
Consulting an estate planning attorney in your state can mean less expense and hassle for you in the long run. These professionals will make sure that necessary legislative changes are incorporated into your POAs correctly since state laws can vary dramatically. While there are online legal service providers and forms you can download from the internet, you don’t want to cut corners.
2. Ensure legislative changes are included
As new laws are enacted, necessary provisions must be incorporated in your POAs to keep them current. Not including certain language could mean your documents will not be accepted. Notable examples include:
- Your medical POA was executed prior to your state adopting the Uniform Health Care Decisions Act (UHCDA). In 1993, the UHCDA was approved to expand and solidify the authority of a medical POA (also referred to as an advanced medical directive); and since then has been enacted state by state. Key changes include decision-making power surrounding life-prolonging procedures, authorizing organ donation, and approving admission to health care facilities for treatment. Updating your documents with these authorities will provide your POA with additional flexibility.
- Your medical POA does not include Health Insurance Portability and Accountability Act (HIPPA) language. In 1996, Congress enacted HIPAA to ensure privacy of a patient’s medical information. If your POA was drafted prior to adoption of this law by your state, it will not include the necessary language authorizing access to your personal medical information and needs to be updated.
- Your financial POA does not disclose certain provisions adopted by the Uniform Power of Attorney Act (UPOAA). The UPOAA was enacted in 2006 to help enforce the acceptance of POAs and to standardize provisions across states. This is because financial institutions, particularly banks, often reject POAs if they believe, in good faith, that it may no longer be a valid document. Certain authorities (known as “hot powers”) will now only be accepted if they are clearly written into your document. These powers include the ability for your POA to amend trust documents, make gifts on your behalf, and designate or change beneficiaries.
3. Review your documents every two to three years
Once your POAs are in place, it is vital to keep them current. If they become outdated, you run the risk of rejection when you need them. Major life events or changes in your situation are also trigger points for reviewing your documents. It is important that the people you designate to act on your behalf continue to be in line with your wishes. Reasons to make a change could include separation or divorce from your spouse, death, distance, or incapacity of the person you have named.
In addition, you should avoid naming multiple people to act jointly. Requiring individuals to coordinate and agree when acting on your behalf can cause unnecessary difficulties and delay in decision-making. Although, it is highly recommended that you always name a backup in the event your current named POA is unable or unwilling to serve.
Reviewing your POAs every few years to ensure they not only remain compliant with current legislation, but also consistent with your goals and wishes are vital steps to preventing your POAs from becoming powerless. A financial advisor knowledgeable in estate planning can help address your questions and refer you to a qualified attorney in your area.