Medical incapacity is a subject most of us shy away from. We don't want to discuss it, much less plan for the possibility. Unfortunately, becoming incapacitated—unable to make reasonable decisions or meet our basic needs—is a possibility for all of us, whether it's by accident, injury or illness. That's why it's critical that we do not limit our estate plan to what happens after we pass but detail our wishes now, lest we become unable to carry out those wishes later on.
Without a plan in place, a court may appoint a guardian to make financial and medical decisions on your behalf. A comprehensive plan can protect both you and your assets. Here are some of the documents that you should consider:
- Power of attorney: A power of attorney (POA) allows you to assign someone you trust to act on your behalf, and it is a document that you must complete while you are still competent.
- There are different powers of attorney that you may consider. Generally, power of attorney is granted immediately to the person you name as your agent (although it's important to understand that you retain your ability to make decisions and to act on your own behalf), and the POA becomes invalid should you become incapacitated. A durable power of attorney allows your agent to continue to act on your behalf after you become incapacitated. Another POA, a springing power of attorney, will go into effect only after a certain condition is met, such as incapacity. Talk to your financial advisor or attorney about which one is right for you.
- You should consider two types of POAs—namely, financial power of authority and health care power of authority.
- Financial power of attorney: A financial power of attorney grants your appointed person the ability to manage your finances. You will specify what your grantor can do, such as manage your bank accounts or pay your bills. If you wish, the individual can also handle real estate transactions on your behalf and manage your investments. Thus it is vital to assign someone you trust to handle your assets.
- Health care power of attorney: This is also known as a durable power of attorney for health care, advance medical directive, or health care proxy. It allows the person you appoint to make health care decisions on your behalf. It takes effect only if you are incompetent or otherwise unable to communicate with your doctors. As with other POAs, you should appoint someone you trust. The decisions your grantor may make could extend to giving permission for medical tests and surgery to choosing the doctors who provide your care. End-of-life decisions could include whether to accept or decline feeding tubes, ventilation and other medical means to extend your life.
- Living will: A living will states your wishes to your health care provider about whether you would want to remain on life support if you were in a vegetative state and terminally ill. It is possible to have both a living will and a health care power of attorney since the two cover different scenarios.
- HIPAA authorization: The Health Insurance Portability and Accountability Act (HIPAA) requires health care providers to protect your private medical records. An authorization allows your physicians to share your medical information with your health care agent. However, if your health care power of attorney does not specifically authorize your agent to know your full medical condition, your physician could refuse to disclose certain information.
When putting together a plan in the event you become incapacitated, make sure to select someone you can trust as your agent. A relative is the most common proxy, but factors you should consider include location and availability. Take the time to talk with your agent and confirm that they are willing to make such potentially difficult decisions for you.
In addition, talk to your financial advisor or lawyer to map out a thorough plan. Having the right documents in order while you are competent is critical. Not only are you protecting yourself, but you are also taking care of your family. Including potential incapacity in your estate planning could help you and your loved ones meet uncontrollable situations with peace of mind, knowing that you have already decided on these matters.