Attorney Thomas B. Burton discusses the key differences between a Health Care Power of Attorney vs. a Financial Power of Attorney and discusses how each document serves a key role as part of a comprehensive estate plan. In the latest video in our Estate Planning 101 educational video series, Attorney Thomas B. Burton discusses in-depth what the terms 'Health Care Power of Attorney' & 'Financial Power of Attorney' sometimes also called a 'Durable Power of Attorney' really mean and how each document serves an important role as part of your estate planning.
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Transcript of Video – Health Care Power of Attorney Vs Financial Power of Attorney - What's the Difference?
Welcome back to our Estate Planning 101 Series.
I'm attorney Thomas Burton, I'm an estate planning and asset protection attorney here in Wisconsin. Thank you for joining us once again.
So today's topic is Healthcare Power of Attorney versus Financial Power of Attorney - what's the difference? This question comes up a lot in my practice and the terms surrounding these two documents are similar but they serve two distinct purposes and today in Estate Planning 101, we're going to go through the differences between these two documents and what each is used for.
So we'll start off here, I've got on the yellow legal pad, the healthcare power of attorney and POA, if you see POA, that's short for power of attorney. A. I got tired of writing it out every time and B. this is a common abbreviation you may see people use, so I'm using it in the video to help it get familiar in your mind. So both the healthcare power of attorney and the financial power of attorney allow you to name an agent and that person is designated to act on your behalf if you're ever unable to act for yourself so in general, we think we use the term incapacitated meaning you're unable to make these decisions on your own and we'll get into the difference a little later but you can name a primary agent and a successor agent, number two, under both documents. You can name more than that even but I, for sure, recommend if you do the document, you name primary and one successor or at the very least, a primary, if you can't come up with the name of a successor but I'll just say commonly for married couples, they often name each other as the primary and then a backup and if you're single, you name whoever you choose a friend, a relative, someone you trust and a backup and each one is a different purpose. So these don't have to be the same person. The person who's good at making health care decisions, may not be the person best at making financial. So keep that in mind and that's why we separate the powers.
Now, the first major difference a healthcare power of attorney is effective only if you are incapacitated and if you look at the new Wisconsin power of attorney for health care which went into effect earlier this year, it used to say two physicians must certify your incapacity or a psychologist and a physician. Now they've included nurse practitioner and or a physician, it can be a combination of those two that certify, there's a certification paragraph you should examine carefully but that would trigger the health care agent acting for you. So for health care, constitutionally, as long as you are able to communicate and you have the mental capacity, you are in charge of your own health care decision. So even if you execute the document and let's say in the document, you say you don't want feeding tubes used or you want them removed. If you're alert and laying there on the bed, your agent cannot have the feeding tubes removed. Okay? Because you have capacity. It only kicks in when you're incapacitated.
Now the financial power of attorney, let me turn this here, can be springing or immediately effective. So sometimes you hear this term springing and essentially, that's what's happening with the healthcare power of attorney, it's springing meaning it springs into life upon a certain event happening and for the healthcare power of attorney, that event happening is those two doctors or the doctor and the nurse practitioner, signing a statement that you're incapacitated and unable to act on your own behalf. So for the financial power of attorney, we can include a springing provision but it's less common to do it here but it's up to you but some, again, for a married couple, often they're comfortable having it be immediately effective for the spouse and it could be springing for the second but a lot of times you want someone under the financial, to make, pay bills and things like that and so in that sense, sometimes we don't make it spring but be aware, the health care essentially, is always springing only upon your incapacity to make your healthcare decision.
Okay, so next, we're going to move to what they each govern and I got into this a little bit but the healthcare POA, governs healthcare decisions only while incapacitate, again, if you're alert, able to communicate, you govern your own healthcare decisions. So for thinking about this, it's easiest to think about being in a coma, right, because you're alive but unable to communicate. That's a classic case the healthcare document would come into place. The financial power of attorney is authority to manage assets. So think of financial assets and some, we call it financial power of attorney, sometimes people just call it a general power of attorney or a durable power of attorney but the key is that it doesn't cover health care decisions. It's about managing assets such as real estate, stocks, bonds, annuities, pay bills, pay taxes, sell property and if you use the statutory form, there's boxes you can check next to each of these powers.
Now to be effective, I often recommend you want to give your agent broader powers depending on your situation and what you're doing the planning for but discuss that with your attorney when deciding. If you don't really trust your agent, you're going to want to limit those powers and then, I would say, I would consider, picking someone else's agent or an independent third party such as a trust company or a fiduciary to act, okay, so, the healthcare power of attorney then covers things like feeding tubes, do you want feeding tubes used and there's language in there about what conditions. Also, end of life care such as would your agent have the authority to admit you to a nursing home? Then there's a section on special provisions, limitations, desires, you can write something in, a special request like for example, I would like to be in a room near a window or sunlight or things that are important to you, other things related to your health care and then organ donation, also in the healthcare power of attorney, at the end, you can make your choices regarding organ donation. So, if you have this on your driver's license, I suggest you make it consistent with that because if you got in the situation, they would look at that document.
So overview, the healthcare governs all these healthcare decisions and financial governs things related to your property, financial assets and they don't cross. So the health care agent can't make decisions about this and the financial agent can't make decisions about this. The two distinct things by law. So here's how it works, if you regain capacity, the agent's authority under your healthcare power of attorney ends, so, let's say, you wake up from the coma, you have capacity, so you say, "wait a minute doctor, I'm alert, I'm functioning, I'm making these decisions, not my agent." The financial power of attorney is often that were durable which means it survives your incapacity. So in most instances, you want this, you want a durable power of attorney because if you are incapacitated, if you're in the coma over here, you want someone who has authority to pay your bills, file your taxes, while you're in the coma. If it isn't durable, it would mean, it wouldn't survive your incapacity and that often defeats the purpose of creating it. So just be aware of that but again, the healthcare power of attorney constitutionally, if you regain capacity, mental capacity to act, you have the authority.
Then we go down here, what happens if you don't have one to default, if no healthcare power of attorney then and you have this medical condition and know you haven't put a living will together, with wishes, separately, you have no one to act, your friends or relatives are going to have to go to court and get a court-ordered guardianship of the person, okay, and this is quite an undertaking because the courts are very reluctant to take away rights from someone, constitutionally, okay? So it takes time, plan on weeks or months and expense. I would budget several thousand in attorney's fees to help you get the guardianship and go through the court process. Probably three thousand minimum, up to contested guardianship can go, you know, ten thousand or more, it depends but just be aware this takes time and the involvement of the court but the law says, if you have a validly executed healthcare power of attorney, the reason you're doing that is to avoid this but I see this happen a lot when, when people don't have one in place.
The same with the financial power of attorney, if no financial power of attorney or a trust, let's say, you have all your assets in the trust, then your trustee can act for you if you're incapacitated and this is a great way to do it but if you have no, okay let me switch it over here, if you have no financial power of attorney or trust, court ordered guardianship of the estate, so again, it's two different processes, a guardianship of the person and a guardianship of the estate and sometimes the court will award both and sometimes just one because again, they're very reluctant to get involved in your affairs and give away rights which you traditionally hold. You can do both guardianships at once but sometimes you won't get awarded both, it depends on the facts here. A great reason to have both documents is to avoid the need for those court-ordered guardianships and this often occurs in old age but it can occur at any age.
Once you're age 18, if you're in a coma and you haven't filled out a healthcare power of attorney, there's no one to act on your behalf because you're an adult in the eyes of the law, even if you think your parents can act for you, legally they can't. So my recommendation is, if you have anyone over 18, have them fill out that healthcare power of attorney form.
So under the healthcare power of attorney, finally let's talk about what the agents are supposed to do. They act according to your wishes on the subject, so if during life you talk to them about your wishes about things, they're supposed to remember, okay, "mom talk to me about this and I'm acting according to her wishes on the subject", so, you can't as the agent, substitute your own thoughts about feeding tubes for mom. You're supposed to follow her wishes, in this case, if mom is the principal. Then if they haven't expressed their wishes in the document on a subject or to you in person, you know how there's a lot of gray area because a big reason to have a health care agent is, I always give the example, if you're in the coma and the doctor needs to decide we could do this surgery or we could do this thing, someone has to be able to make that decision, weigh the odds and think about it, right? So for all the rest, the gray area, you have to do what you believe is in their your but in the principal's best interest. So that's the standard, you apply if it's not something they've expressed a wish to you, while they had capacity or in the document and under the financial power of attorney, the agent has a duty to act in your best interest. So same as here, best interest trust meaning they're fiduciary, they aren't supposed to substitute their judgment for your judgment, instead under both, the agent it is a fiduciary acting in your best interest regarding either your health care or your financial affairs.
So those are the key differences between the healthcare power of attorney and the financial power of attorney and I see a lot of confusion about this so, if you were to ask me, what's one document I should have, in terms of my estate planning and if I could only pick one, what document would I tell you? I would say a healthcare power of attorney document because like I said, many people don't realize when you turn 18, that's the age of majority in the state of Wisconsin and after that you need to name an agent under your healthcare power of attorney to have someone to act for you, so for instance, a lot of kids go off to college at age 18. It's a good idea to have them fill out a healthcare power of attorney and get it witnessed before they leave, if you're a parent before they leave the house and the good news is, Wisconsin makes the healthcare power of attorney free, you can download it from the department of health services and even a financial power of attorney, the basic document. Now I recommend working with a lawyer, if you're able and they can guide you through these documents but for someone like the college kid heading off, you can download that healthcare power of attorney and get it filled out before you go and eventually, I may get to a video, I have a video on how you can create your own basic will for free, so check out that video, if you're interested but the process is similar for these other documents. It's more walking through the document, taking your time to make your choices and then signing it in front of the two witnesses because required by the law.
So I hope today's episode of Estate Planning 101, has been useful to you, again, I wanted to go over the highlights between the differences of an agent under healthcare power of attorney and an agent under a financial power of attorney and I know this stuff is confusing and often the first time for many folks, when they're working with my office. So I'm creating these videos, at my office we believe in empowering the client through education to put you in charge of your own estate planning and what I'm trying to do with these videos is give you the tools to become educated and informed, so then when you meet with your attorney, you can ask more informed questions and use your time wisely, focusing on the other questions you have to be answered and this series, if you walk through this Estate Planning 101 series, my goal is that you could become very informed about the various tools we use in your estate planning before you meet with your lawyer. So thanks for tuning in and we'll see you next time.
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