Many people understand the importance of developing a comprehensive estate plan for the purpose of administering their assets upon their death, but far fewer understand the equally, if not greater, importance of incapacity planning. Incapacity Planning, also referred to as life planning, is planning for the unfortunate circumstance of becoming unable to control your finances or health decisions. Two of the most important tools that will allow another individual to make health care decisions and financial decisions for an incapacitated person are a health care proxy and a power of attorney.

A health care proxy is an instrument in which you (the principal) appoint another person of your own choosing (the agent) to make medical decisions for you in the event that your treating physician determines you no longer have the capacity to direct your own care.

A health care proxy must be signed by the principal in the presence of two witnesses in order to take effect. Under New York law, only one person at a time may serve as a health care agent.

A power of attorney is an instrument in which you (the principal) appoint another individual of your own choosing (the agent) to make financial decisions for you. It is important to note that a power of attorney does not grant your agent carte blanche powers. In order for your agent to be granted the requisite authority to engage in Medicaid planning, for example, additional language needs to be added and the principal will also need to execute a statutory gifts rider.

Unlike a health care proxy, a principal can name multiple agents to act concurrently under power of attorney. These agents can either have the authority to act separately or together. A power of attorney must be signed by both the principal and the agent in the presence of a notary public in order to take effect. It is important to note that the principal and agent do not need to sign at the same time. However, a statutory gifts rider, which grants an agent the power to make gifts on behalf of the principal and is attached to the power of attorney, must be signed by the principal in the presence of a notary public and two witnesses.

When choosing their agents, clients often appoint a spouse or a child because they are the people that clients trust the most. However, in the case of larger families, issues can arise when one child is chosen to act instead of another. The child who is not chosen can harbor bad feelings and distrust, either towards the parent who saw fit not to appoint him or with the sibling that was chosen in his/her stead. This is especially likely if there is a history of discord between siblings. In such circumstances, it is important to consider the following:

1. The principal is under no obligation to disclose to his children information about his finances or his estate planning and the child has no right to demand access to such information from the agent.

2. An agent under a power of attorney does not have the right to prevent other family members from being able to visit the principal.

3. During capacity, the principal can revoke his power of attorney at any time. This is done by notifying the agent and any third parties to whom the power of attorney has been presented in writing. The writing must be signed by the principal in the presence of a notary public.

4. In the event the principal is incapacitated and a concerned family member has good cause to believe that an agent is not acting in the principal’s best interests, the family member can seek the intervention of the court, usually in the context of a guardianship proceeding, to revoke the power of attorney and appoint a guardian.

5. The authority of the agent ends on the death of the principal. In New York, after the death of the principal, a proceeding must be commenced in Surrogate’s Court to appoint an administrator or executor to administer the deceased individual’s estate.

Certain steps can be taken to avoid family disputes. For example, even though you are under no obligation to discuss your estate planning with your children, doing so may help them understand your choices. Your reasoning could be as simple as geographic proximity or particular knowledge or expertise and may have nothing to do with the character of one child over another.

In the case of a power of attorney, it may be prudent to name all of your children as your agents with the authority to act separately. If neither option is appropriate, you can consider appointing someone who is not a family member, such as a close friend or professional fiduciary. To determine the best approach for your individual circumstances, you should consult with an experienced elder law attorney.

Written by Ronald A. Fatoullah, Esq, principal of Ronald Fatoullah & Associates, a law firm that concentrates in elder law, estate planning, Medicaid planning, guardianships, estate administration, trusts, wills, and real estate. Attorney Fatoullah is a Member of the National ElderCare Matters Alliance.  and he and his firm are Featured Members of ElderCareMatters.com – America’s National Directory of Elder Care / Senior Care Resources for families.

The Importance of Incapacity Planning for You and Your Family was last modified: December 13th, 2018 by Ronald Fatoullah, Esq.

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