PLANNING FOR THE FUTURE
Including:
Power of Attorney for Finances
Representative Payee
Bill Paying Service
Power of Attorney for Health Care
Living Will
Inventory
Funeral Arrangements
Long-term Care Insurance
Prepared by:
Legal Services of Northern California
Prepared for:
Passages Adult Resource Center
(530) 898-5923
PLANNING FOR THE FUTURE
The only thing about life that is certain is that the future is uncertain. We can’t control the future, but we can make certain preparations, which will help us, or our loved ones cope with future exigencies. None of us can guarantee that we will never become incompetent to handle our own affairs or suffer a serious physical infirmity. There are things we can do before that happens so that we control who may make decisions for us.
DURABLE POWER OF ATTORNEY FOR FINANCIAL MANAGEMENT A person may become incompetent to handle their financial affairs as a result of a debilitating stroke, a serious accident leaving the patient in a coma, Alzheimer’s disease, or senility. Such a person cannot legally sign a check, make a will, execute a deed, sign a lease, open a bank account, and protect him or herself from a scam. A Durable Power of Attorney for Financial Management (DPAFM) authorizes someone else, called the agent of attorney in fact, to do those things. In most cases such a Power of Attorney constitutes a prudent preparation.
A DPAFM is a document in which a person authorizes an agent to act for them in
financial matters to the same effect as thought the person themselves had so acted. The document must be signed and the signature must be notarized. The individual signing the Power of Attorney must be legally competent. If the person later becomes incompetent, however, the authority given in the DPAFM continues in effect. The authority given in a DPAFM ends with
the death of the individual who granted the power.
WARNING! Signing a power of attorney is an awesome transfer of power over your
affairs. Never give power of attorney to someone unless you totally and completely trust him or her to act only in your interest.
There are different types of power of attorney for financial management. The power granted can be limited to only certain transactions, such as signing checks or dealing with benefits, or stocks and bonds. In most cases, however, it is best to grant power to deal with any and all financial and/or business transactions. We never know when some unexpected matter may arise.
A power of attorney can also be limited as to time. If one were going on an extensive vacation, the individual can give a power of attorney to commence on a certain date and to end on a certain date.
Normally, a DPAFM takes effect as soon as it is signed and notarized. In many situations, however, it may be better to have what is known as a “Springing” power of attorney. This is a power of attorney, which grants power over financial or business affairs, but by its terms only takes effect if and when the individual signing the DPAFM becomes physically or mentally
unable to handle their own affairs. Generally the power of attorney will set forth how this will
The advantage of a springing DPAFM li4s in the fact that it cannot be used, if ever, as long as an individual is able to handle their own affairs. Without the requisite physician’s certification or other proof of incompetence, the springing DPAFM gives no authority to the agent. This greatly reduces the possibility of its being used by a dishonest agent to defraud the individual. If the individual becomes incompetent, however, it is immediately available.
There are other times when a springing DPAFM is not useful. A senior may reach a point where they are legally competent, but just don’t want to be bothered with financial affairs, paying bills, balancing a checkbook. Here, a springing DPAFM is ineffective as the individual is not incompetent, and what is needed is a power of attorney, which is presently effective. The type of DPAFM appropriate for a particular individual will vary depending upon individual circumstances.
If the DPAFM is to be used to transfer real property, it must be recorded at the county recorder’s office. A DPAFM can be revoked at any time. The written revocation should be given to the agent and anywhere else such as a bank, where the copies of the DPAFM have been distributed. If the DPAFM was recorded, the revocation must also be recorded.
REPRESENTATIVE PAYEE
A DPAFM provides assurance that a person’s financial matters can be addressed if the individual becomes incompetent. If this should occur and a DPAFM has not been previously signed, a number of difficulties may arise. Not the least of these may be receipt and use of Social Security checks. If a person is incompetent, they cannot endorse or cash checks.
In planning ahead it is wise to establish direct deposit of Social Security and pension checks. The depositing continues even though the recipient becomes incompetent. Such direct deposit also protects the bank account from attachment by judgment creditors.
If direct deposit has not been established, there fortunately is a remedy even though the recipient is not competent to endorse Social Security checks. Supported by a doctor’s certificate, application can be made at the local Social Security office to have someone else appointed as a representative payee. Thenceforth, this individual may receive and use Social Security checks for the benefit of the individual.
MONEY MANAGEMENT SERVICES
At times a senior may be legally competent but wants and needs assistance in seeing that bills are paid on time and the checkbook is kept balanced. A DPAFM would allow someone to take over this chore. The senior, however, may have no one living nearby to appoint as agent under a DPAFM. Even if there is a friend or neighbor, often the senior doesn’t want to impose. There is also a risk that someone given the authority under a DPAFM may be dishonest and defraud the senior.
In Chico and Paradise, a service has been established under the auspices of “Passages” that will provide someone to come to the home of a senior and arrange to pay monthly bills and keep the checkbook in balance. The person is bonded which eliminates any financial risk. There is a reasonable charge for this service so seniors need not feel they are imposing.
POWER OF ATTORNEY FOR HEALTH CARE DECISIONS
By law, a doctor or other medical practitioner cannot carry out any invasive medical treatment without the informed consent of the patient. If the patient is either unconscious or incompetent, it is impossible to obtain such informed consent. There are provisions where application can be made for a court order to carry out such treatment, but in an emergency there may not be time to obtain judicial intervention.
To provide consent in such a situation, a person should have in place a Durable Power of Attorney for Health Care Decisions (DPAHC). This document is like the springing power of attorney for financial matters discussed above. It is only effective if and when the patient cannot make his or her own decisions.
The person giving the power must sign a power of attorney for health care decisions. The signature must either be acknowledged before a notary or be signed in the presence of two witnesses, neither of whom can be the appointed agent, a health care provider, an employee of a health care provider or community care or residential care provider, and at least one of whom must not be related or a beneficiary of the estate of the person granting the power of attorney. If the individual is confined to a nursing home, a patient advocate or ombudsman must also witness the signature and sign a declaration to that effect. A DPAHC is revocable at any time.
Normally, the person granting the power will set forth in the document their desires for life-sustaining treatment in the event of a terminal illness. This should be thoroughly discussed between the person giving the power and the health care agent. A copy of the DPAHC should be given to and retained by the patient’s principal physician. The person chosen as the health care agent should, if possible, live where they are readily available.
ADVANCE DIRECTIVE/LIVING WILL
An advance directive, sometimes called a living will, is a document in which a person states their desires concerning life-sustaining treatment in the event the person should have an incurable and irreversible condition or be in an irreversible coma or persistent vegetative state. Under the California Natural Death Act, an individual can direct their attending physician to withhold or withdraw treatment including artificially administered nutrition and hydration that only prolongs the process of dying.
The advanced directive must be witnessed by two witnesses with the same restrictions as those applicable to witnesses to a DPAHC, including a declaration from an ombudsman if the person signing is a patient in a nursing home.
A copy of the advanced directive should be given to the treating doctor and to the hospital. Many hospitals require some form of advanced directive at time of admission. Of course, there is no requirement that a person request that life-sustaining treatment be employed.
It is advisable for a person to have both a power of attorney for health care decisions and an advance directive. While both may set forth the individual’s desire in the event of a terminal illness, the advance directive gives no authority where medical decisions are needed in situations not involving terminal illness, such as in injuries from an accident that may leave a person unconscious but not suffering from a terminal illness.
INVENTORY
For a number of purposes, an individual should make and keep an inventory of all their property, funds and securities. In case of fire or theft such an inventory will prove useful in making an insurance claim.
Upon death a detailed inventory of all bank accounts, securities, safe-deposit boxes (with location of the keys) and the like will save countless time and expenses for heirs and executors. The lack of such a list might even allow an account or safe-deposit box to be overlooked. The next of kin should be informed as to the location of the inventory or its title if recorded on a computer.
FUNERAL ARRANGEMENT
The time to make funeral arrangements is well before they are needed. At that time the individual can decide for himself or herself what they desire for their final arrangements. Otherwise the decisions are left to a loved one at a time of extreme bereavement. Decisions at that time can easily be clouded by feelings of guilt and remorse.
Several ways are available to pay for final arrangements. One can work with a funeral director and lay out their desires, leaving it to the heirs to pay the cost. There are plans where one can make periodic payments, either at a set amount or as desired, which are deposited with the state and become available to pay for the services. Full payments can be made in advance with a guarantee of the agreed price regardless of inflation. Of course the funeral director receives the interest on such payment, which will be greater than any inflationary increase in costs.
Life insurance companies offer “burial insurance” that will pay a set amount for burial expenses at time of death. Some name a funeral home as beneficiary. This can cause difficulty with the passage of time as the named funeral home may go out of existence or be located far from the place of death. The Neptune Society can provide cremation and a wide variety of ancillary services such as sprinkling of ashes.
No matter what one plans or how payment is arranged, the funeral director will only provide services commensurate with the amount of money on deposit, except as supplemented by the estate or next of kin.
LONG-TERM CARE INSURANCE
An ever-increasing concern, as life expectancy grows longer, is the prospect of needing long-term nursing home care. At present the cost of such care approximates $3000-$6000 a month per person. To protect from such a drain on life savings, a number of insurance companies offer long-term care insurance. In deciding whether such insurance is appropriate for a particular individual, the policy must be examined in detail and the following things taken into
consideration.
1. When will the policy take effect? Often there is a waiting period after entering the nursing home before the insurance company will start to pay.
2. For how long a period will the policy pay? While the average period of nursing home stays may be less than two years, individual stays may far exceed that amount of time.
3. How much is the premium and can the premium be increased? Most policies allow for across-the-board increases.
4. If you cancel the policy are you entitled to any refund for part of the past paid premiums? Generally there will be no refund.
While such an insurance policy may provide reassurance, it can prove to be at a high risk. By way of comparison when a life insurance policy is offered there is little risk. It is a given fact that the policyholder will die. Actuary tables can statistically determine an average when death will occur and the amount payable is predetermined. With a long-term care insurance policy, it is not known if the event of hospitalization will in fact occur and, if it does, the amount payable will depend upon the length of stay and the cost of care at a future date. The insurance company determines the premium based upon estimates as to these unknown factors. If these estimates are wrong, however, the policyholder, not the insurance company, bears the risk. The insurance company just increases the premium to cover the unanticipated higher costs.
Before purchasing such insurance, a person should do two things. Investigate the policies from several insurance companies. They will vary as to amount of premium and benefits. Then a person should calculate their financial position to determine to what extent they could afford nursing home care. It has been argued that if a person can afford long-term care insurance, they probably don’t need it.
The other part of the equation to consider is what government assistance may be available to help with the cost of long-term care. At present Medi-Cal will provide assistance after a
person’s assets have been mostly depleted. No one can tell, however, whether such assistance may be available in the future or what the criterion for such assistance may be.
