'What If...' Plans
There are three kinds of planning: current planning, future planning and contingency planning. Contingency planning is the “what if” scenario, and is a vital part of providing for both yourself and your family in the event of unexpected circumstances.
The two most common contingency planning documents are Durable Power of Attorneys for Health Care and Financial Durable Power of Attorneys.
Financial Durable Power of Attorney
A Financial Durable Power of Attorney (Financial DPOA) allows you to choose someone to conduct financial activities on your behalf (e.g. paying bills) should you become incapacitated. Covenant Trust Company® recommends every person consider the advantages of a Financial Durable Power of Attorney. Even if you have a revocable living trust, we still recommend that you have a Financial DPOA. The trustee of a trust has control only of the assets that have been transferred into the trust. A Financial DPOA authorizes the attorney-in-fact to work with those financial assets outside the trust.
Before you sign a Financial Durable Power of Attorney, it is important to know the character and the capability of the person you choose as attorney-in-fact, and to understand the powers being conveyed. A General Financial DPOA normally involves all financial assets not transferred to a trust. A Limited Financial DPOA authorizes only limited powers. Authority granted by the Financial DPOA ceases at your death.
Durable Power Of Attorney for Health Care
In case of illness or accident, many important decisions regarding medical treatment, necessary care therapy, and personal needs must be made. Normally you make these decisions personally after consulting with your physician, family and/or friends.
You will want to choose a person whom you trust to make these decisions if you are incapacitated and unable to make them yourself. In most states this can be done by signing a Health Care Durable Power of Attorney (Health Care DPOA), or—as it is known in some states—an Advance Directive. The Health Care DPOA allows you to designate your agent and authorizes him/her to make health care decisions on your behalf, using guidelines you have set down in the document. Most states authorize your physician and hospital to rely on the decisions of your agent.
It is important to have a signed Health Care DPOA in the legal format approved by the laws of the state where you live. If your state legislature has not approved a Health Care DPOA, a Living Will may be advantageous. Normally a Living Will does not have the same legal standing with doctors and hospitals, and does not provide the full authorization for your agent as a Health Care DPOA. However if the Health Care DPOA is not legal in your state, do consider a Living Will.
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) restricts who can access a patient’s medical information without their permission. Be sure your living will and/or Durable Power of Attorney for Health Care authorize the release of medical information to your health care surrogate. If not, there are HIPAA authorization forms that you can complete and attach to your existing documents.
If you are traveling and become incapacitated in a different state, that state usually will—but may not—recognize your home state’s Health Care DPOA. However we do recommend that you carry a copy with you when you travel.