Penny DaVis
Davis Pagnano McNeil & Vigna LLP Portland, Oregon
Contents
I. Introduction . . . 5–1 A. The Aging Population . . . . 5–1 B. Estate Planning Statistics . . . 5–1 II. Planning Ahead for Disability . . . 5–2 A. Advance Directive for Health Care, ORS 127.505 et seq. . . . 5–2 B. Declaration for Mental Health Treatment, ORS 127.700 et seq. . . . . 5–4 C. Physician Orders for Life-Sustaining Treatment (POLST), ORS 127.663 et seq. . . . . . 5–4 D. Financial Power of Attorney, ORS 127.002 et seq. . . . 5–5 E. Revocable Living Trusts, ORS 130.001 et seq. . . . . 5–7 III. Long Term Care Considerations . . . 5–9 A. Long Term Care Basics . . . 5–9 B. Long Term Care and Disability Planning Documents . . . 5–11 IV. Beneficiaries with Government Benefits. . . 5–11 A. Financially Incapable Beneficiary . . . 5–11 B. Beneficiary Who Receives Government Benefits . . . 5–12 V. Consequences of Common Planning Techniques . . . 5–13 A. Inability to Protect Spouse If Medicaid Assistance Needed . . . 5–13 B. Inability to Protect Disabled Son or Daughter If Medicaid Assistance Needed. . . . 5–14 C. Inheritance Makes Beneficiary Ineligible for Government Benefits Based on
Financial Need . . . 5–14
I. INTRODUCTION
A. The Aging Population
1. The Age Wave. The percentage of older Americans is increasing. 13.7% of the U.S. population is age 65 or older according to the federal Administration on Aging. The first baby boomers turned 65 in 2011. By 2030, when the last baby boomers turn 65, 20% of the population (approximately 72 million people) will be 65 or older. The fastest growing age group is people age 85 and older. As part of the age wave, the 65 population is becoming more racially and ethnically diverse. The LGBT1 portion of the population is more visible, with same sex couples having won the freedom to marry in 32 states and the District of Columbia as of the date when these materials were prepared. Many of the same sex couples in the first groups to marry are older and been together for years.
2. Chronic Medical Conditions. Figures from the federal Centers for Disease Control and Prevention show that 2/3 of the people over 65 have multiple chronic medical conditions such as heart disease, arthritis, high blood pressure, diabetes, asthma, depression, stroke, and Alzheimer’s Disease. Treatment for people over 65 accounts for 66% of the country’s health care budget.
a. The prevalence of Alzheimer’s Disease and other forms of dementia increases as people age. According to projections by the Chicago Health and Aging Project (CHAP) in 2013, 11% of those over 65 and 32% of those over 85 have Alzheimer’s Disease. The hallmarks of dementia are a decline in memory plus at least one other cognitive ability.
3. Disability. In 2012, 36% of people over 65 reported having some level of difficulty in hearing, vision, cognition, mobility, self-care, or independent living in the U.S.
Census Bureau’s American Community Survey. In 2010, 28% reported difficulty performing one or more activities of daily living (ADLs) such as bathing, dressing, eating, and getting around the house. An additional 12% reported difficulty managing money, managing
medications, preparing meals, shopping, doing housework, or using a telephone, tasks which are categorized as instrumental activities of daily living (IADLs).
B. Estate Planning Statistics
1. 2014 Rocket Lawyer Survey. Surveys done by Harris Poll in 2013 and 2014 for Rocket Lawyer, an online legal document company, found that 64% of American adults did not have a will, including 34% of those over 55.
2. 2009 Lawyers.com Survey. A 2009 Lawyers.com survey found that 51% of American adults had at least one estate planning document, with 35% having wills, 18% having trusts, and 29% having powers of attorney for finances and/or health care. The survey
respondents reported that older relatives were more likely to have estate planning documents, with 65% having wills, 38% having trusts, and 58% having powers of attorney for finances and/or health care.
1 Lesbian, gay, bisexual, and transgender
II. PLANNING AHEAD FOR DISABILITY
A. Advance Directive for Health Care, ORS 127.505 et seq
1. Naming a Surrogate Health Care Decision Maker. Authorizing a trusted family member or friend to make health care decisions when the principal is not capable of making and communicating those decisions himself or herself is a key part of estate and disability planning. Counseling the client about choosing a health care representative who will respect and carry out the client’s wishes is an important part of the process of preparing an advance directive for health care.
a. In the absence of an advance directive for health care, Oregon law does not give the spouse, adult children, or other relatives the power to make health care decisions for an incapable adult with the exception of certain end-of-life decisions described in ORS 127.635(2).
b. If an incapacitated adult has not executed an advance directive for health care, a family member or friend or professional fiduciary may need to petition the court pursuant to ORS 125.005 et seq to appoint a guardian who will have the legal authority to make health care decisions. A guardianship may be necessary in some situations in which the principal has executed an advance directive for health care.
2. Requirements for a Valid Advance Directive for Health Care, ORS 127.515 a. The advance directive for health care was created by statute. The form is set out in ORS 127.531 and the requirement for executing it are in ORS 127.515. Oregon recognizes an advance directive (also known as a power of attorney for health care) executed by a resident of another state that complies with that state’s laws. ORS 127.515(5).
Practice Tip: The US Dept. of Veterans Affairs (VA) does not use the Oregon advance directive form or other state forms. Instead, it has created VA Form 10-0137, the VA Advance Directive Durable Power of Attorney for Health Care and Living Will, available online at http://www.va.gov/vaforms/medical/pdf/vha-10-0137-fill.pdf. A client who gets his or her medical care from VA facilities should be advised to complete the VA form.
b. A person over the age of 18 who is not incapable can sign an advance directive for health care to name a health care representative and alternate(s) to make health care decisions in the event that the principal becomes incapable. The health care representative or alternate must accept the appointment in order for it to be effective. The principal may use the advance directive to disqualify one or more people from those decisions. ORS 127.520(3).
Example of a Disqualification Provision for Part B, in “1. Limits”:
I disqualify [insert name of person(s) to be disqualified] from acting as my health care representative. I ask that the court not appoint [insert name of person(s) to be
disqualified] as my guardian. If a court determines that I need a guardian, I nominate [insert person named as health care representative] to act as my guardian.
c. The principal can use the advance directive form to give health care instructions for the health care representative and providers to follow. The instruction choices in the form relate to end-of-life care. The principal may add instructions in Part C or create an addendum and refer to it in Part C. Some principals add instructions related to treatment that they should or should not receive based on past medical history or on religious beliefs. For example, a
Jehovah’s Witness might include instructions refusing blood transfusions; a Catholic might
insert directions that follow the teachings of the Catholic Church related to end-of-life care; an Orthodox Jew might attach a Halactic Living Will based on Jewish law and custom; and a Muslim might add instructions consistent with Shariah law.
Example of an Instruction for Part C, in “6. Additional Conditions or Instructions”:
I have a POLST and I direct my health care representative and health care providers to follow it.
Practice Tip: Hard copies and online versions of the advance directive form are available from many sources. The Patient Self-Determination Act, 42 USC §§1395cc(f) and 1396a(w), and ORS 127.649 require hospitals, nursing facilities, HMOs, and certain other medical providers to inquire whether a patient has an advance directive and to provide information about advance directives. As a result, many hospitals distribute informational packets and advance directive forms to patients at admission. Some health care providers, including Asante, KaiserPermanente, and Providence, make the forms available online. Oregon Health Decisions, www.oregonhealthdecisions.org, sells information packets in English,
Spanish, Russian, and Vietnamese that include the advance directive form.
d. Completing an advance directive is voluntary. A health care provider or facility cannot require a patient to have an advance directive as a condition of admission or treatment.
3. Authority of Health Care Representative.
a. The health care representative named in the advance directive has the authority to make health care decisions during any period when the attending physician determines that the principal lacks the ability to make and communicate health care decisions. The health care representative has a duty to act consistently with the principal’s wishes, if known, and in the principal’s best interests if his or her wishes are not known. ORS 127.535.
b. The health care representative cannot make decisions about convulsive treatment, psychosurgery, sterilization, or abortion. The legislature amended ORS 127.540 in 2011 to remove “admission to or retention in a health care facility for care or treatment of mental illness”
from the list of decisions that the health care representative is not authorized to make.
c. The health care representative does not have the power to make decisions about withholding or withdrawing life-sustaining treatment unless the power is given in Part B of the advance directive and the principal is in one of the four end-of-life situations described in Part C of the advance directive.
d. The authority of a health care representative named in a valid advance directive supercedes the authority of a court-appointed guardian. ORS 127.545(6).
e. The health care representative for an incapable principal is the principal’s
“personal representative” under the Health Insurance Portability and Accountability Act
(HIPAA) of 1996, Public Law 104-191, and is entitled to receive the principal’s protected health information and review the principal’s medical records. 45 CFR 164.502(g); ORS 125.535(7) and 192.556(10)(b).
4. Revocation and Termination.
a. A capable principal may revoke an advance directive or a health care decision made by his or her health care representative “at any time and in any manner.” ORS 127.545.
Executing a valid advance directive revokes any prior advance directive. The revocation is effective when the principal communicates it to his or her attending physician, health care provider, or health care representative.
b. The advance directive is terminated when the principal dies or when it expires by its terms, but it will continue in effect if the principal is incapable at the expiration of the term.
ORS 127.510(3).
c. The advance directive is suspended if the document names the spouse as the health care representative, a petition for dissolution or annulment is filed, and the principal has not reaffirmed the appointment in writing after the petition was filed.
d The court may determine the validity of an advance directive, remove a health care representative, or revoke or suspend an advance directive in response to a petition filed under ORS 127.550 or in a guardianship proceeding filed under ORS chapter 125.
B. Declaration for Mental Health Treatment, ORS 127.700 et seq. A person who may need mental health treatment in the future can sign the declaration form set out in ORS 127.736 to name a representative and alternate(s) to make mental health treatment decisions for him or her if the principal becomes incapable of making those decisions. The declaration also can be used to state the principal’s wishes regarding mental health treatment. “Mental health treatment” includes psychoactive medication, convulsive treatment, and admission to and retention in an inpatient facility for mental health treatment not to exceed 17 days.
C. Physician Orders for Life-Sustaining Treatment (POLST), ORS 127.663 et seq. Oregon has been a leader in creating a uniform system for recording and communicating physician orders for life-sustaining treatment, including orders regarding resuscitation (“attempt resuscitation/CPR” or “do not attempt resuscitation/DNR”). The physician, nurse practitioner, or physician’s assistant signs the bright pink POLST form after discussing the patient’s
preferences with the patient or, if the patient is incapable, his or her health care representative, guardian, or other recognized surrogate decision maker. Completing a POLST form is
voluntary. There is more information about the POLST form in English and Spanish at www.or.polst.org.
1. POLST Registry. The legislature created a statewide POLST registry under the Oregon Health Authority (OHA) in 2009. The administrative rules for the POLST registry are at OAR 333-270-0010 et seq.
a. A physician, nurse practitioner, or physician’s assistant who signs or revises a POLST on or after December 3, 2009, has to submit it to the POLST registry unless the patient chooses to opt out. A patients also may submit his or her POLST to the POLST registry. Copies of completed POLST forms are entered into a secure electronic database. The patient retains the original POLST and will receive a packet from the POLST registry with a confirmation letter, a registry ID refrigerator magnet and stickers with the registry ID number.
b. First responders, hospital emergency departments, and ICUs who are treating a patient can contact the POLST registry 24 hours a day, seven days a week, to find out whether the patient has a POLST and the POLST orders. Other treating providers can contact the POLST registry as well.
c. A more recent POLST revokes a prior POLST. A patient who revokes a POLST in writing can submit the revocation to the POLST registry in order to have the revoked POLST removed from the active records.
2. Limited Role of POLST. The role of the POLST is to document the preferences of a person who has a serious illness or who is frail and to incorporate those preferences in the form of a physician order that can be followed by first responders and other health care
providers. The POLST does not take the place of an advance directive. It does not address most types of medical treatment and cannot be used to appoint a surrogate decision maker.
D. Financial Power of Attorney, ORS 127.002 et seq
1. Naming a Surrogate Financial Decision Maker. Authorizing a trusted family member or friend to assist the principal with paying bills and managing finances and property is a common component of estate and disability planning. Counseling the client about choosing an agent who will manage the client’s finances responsibly for the client’s benefit is an important part of the process of preparing a financial power of attorney.
a. In the absence of a financial power of attorney, Oregon law does not give the spouse, adult children, or other relatives power to manage the finances of a financially incapable adult.
b. The financial power of attorney is based on the common law of agency. It is an agreement between the principal and the agent that authorizes the agent to do certain acts, requires the consent of both parties, and creates a fiduciary relationship. See ORS 127.045. The principal can delegate almost any act to the agent, except for acts that public policy dictates can be done only by the principal, like making a will or casting a ballot, and acts that are limited by another agreement to which the principal is a party (for example, if the principal signed a revocable living trust agreement that states that the power to amend the trust agreement is personal and cannot be exercised by an agent acting under a power of attorney).
c. If a financially incapable adult has not executed a financial power of attorney or made other arrangements for his or her finances, a family member or friend or professional fiduciary may need to petition the court pursuant to ORS 125.005 et seq to appoint a conservator who will have the legal authority to make financial decisions. The conservator is required to furnish a surety bond to cover the value of the assets and income being managed by the
conservator. A conservatorship may be necessary in some situations in which the principal has executed a financial power of attorney.
2. Requirements for a Valid Financial Power of Attorney
a. A person over the age of 18 who is not financially incapable can sign a financial power of attorney naming one or more agents.
b. Under common law, the agent’s authority ends when the principal no longer has the ability to perform the act. ORS 127.005(1)(c) changes the common law by making financial powers of attorney “durable,” which means that the agent can act after the principal becomes financially incapable unless the document limits the period when the agent can act.
c. Third parties (such as financial institutions) are not required to recognize or accept a financial power of attorney.
Practice Tip: The principal’s signature on a financial power of attorney is often notarized, although that is not required in order for the document to be valid in Oregon.
Notarization is required in order for the financial power of attorney to be recorded, and recording is necessary if the financial power of attorney will be used to buy, sell, mortgage, or take similar actions with regard to real property. ORS 93.670. A title company may not recognize the authority of the agent to sell or convey real property if the document does not identify the real property by address and/or legal description.
3. Authority of Agent under Financial Power of Attorney
a. An agent named in a financial power of attorney does not have a duty to act unless that is stated in the document.
b. Unless the document provides otherwise, the power of attorney is effective when it is signed and remains in effect until it is revoked.
c. ORS 127.005(2) gives the principal the option of signing a “springing” power of attorney which does not become effective until the principal becomes financially incapable.
Practitioners differ on whether and when to recommend using a springing power of attorney and on whether a lawyer should agree to hold a financial power of attorney pursuant to a letter of directions from the client who is the principal.
d. A general power of attorney gives the agent the authority and the discretion to take a wide range of actions on behalf of the principal. A special power of attorney gives the agent the limited authority to act with regard to a specific asset or to take specific actions.
e. If the principal wants the agent to have the power to pay himself or herself compensation, to create or amend a trust, to make gifts (including gifts to the agent), or take actions that would otherwise be a breach of the agent’s fiduciary duties, the principal must specify those powers in the power of attorney.
Examples of Provisions Granting Extraordinary Powers:
- Payment to My Agent. Pay my Agent for the reasonable value of financial services provided by my Agent while acting under this power of attorney. The reasonable value is [insert a standard, if desired, such as, “the current fair market rate for bookkeeping services.”].
- Trusts. Transfer my interests in real or personal property to the trustee of the [insert name of trust] dated [insert date of trust], establish a revocable or irrevocable trust, amend or terminate an existing trust, and transfer my interests in real or personal property to a trust, provided that the income and principal are payable solely to me and/or to my spouse during my lifetime and that the trust is consistent with my existing estate plan to the extent reasonably possible.
- Government Benefits. Perform any act necessary or desirable in order for me to qualify for and receive all types of government benefits, including Medicaid assistance for long-term care. This includes the power to transfer my interest in our residence and other individual and jointly-held property to or for the sole benefit of my spouse in order to protect my spouse from impoverishment and to change beneficiaries under insurance
- Government Benefits. Perform any act necessary or desirable in order for me to qualify for and receive all types of government benefits, including Medicaid assistance for long-term care. This includes the power to transfer my interest in our residence and other individual and jointly-held property to or for the sole benefit of my spouse in order to protect my spouse from impoverishment and to change beneficiaries under insurance