VLTA Legal Update: COVID-19 Highlights the Importance of Advance Care Planning for an Unexpected Illness or Incapacity

 

For those less familiar with the topic of estate planning, in summary, it’s the coordinated process of creating a customized plan for (1) ensuring your assets are distributed to whom you wish and in the specific manner you desire; (2) preserving your estate by minimizing estate taxes and avoiding probate and possible conservatorship fees; and (3) planning for death or disability.

While this third topic—which includes planning for an unexpected illness or incapacity—is always an important component of planning for one’s future financial and personal security, it’s not always top-of-mind among young or otherwise healthy individuals when it comes to considering the management of their assets and well-being many years down the line.

With the current COVID-19 pandemic, we are all facing an increased risk of serious illness and the possible need to make difficult decisions regarding medical care for ourselves or loved ones.   Thus, the world as we know it is changing and advance care planning has never been more important—and it will undoubtedly become a topic of greater familiarity as we navigate the realities of the so-called “new norm” we’re all living in.

This update will explain what advance care planning is, why it’s important, the types of decisions that may need to be made and considered as part of your plan, and the heightened importance of these essential planning initiatives as a result of the current COVID-19 pandemic.

Why is Advanced Care Planning Important?

When a person becomes incapacitated by an illness or accident, that person may no longer be able to manage their financial assets or make medical decisions of their own.  Sometimes this period is temporary.  In more unfortunate situations, it can be permanent.

Without proper planning this can result in an assortment of undue and costly delays in the management of one’s health and financial assets.   This is especially true in the current COVID-19 environment, where, in the absence of proper advance planning, the only alternative for someone who becomes unexpectantly and suddenly incapable of managing his or her affairs is paying for someone to go to court and ask to be appointed as that person’s conservator.  (A conservator is a responsible adult appointed by a judge to care for an adult who is unable to manage their finances or personal care or both.)

This is an expensive, public, and time-consuming process[i] for anyone to go through, let alone for someone to have to deal with amidst a loved one’s sudden illness and the uncertainty of these unsettling times.  These frustrations may be further compounded by the various restrictions put in place due to the COVID-19 pandemic, including partial closures or restricted access to the court system—making it increasingly difficult for someone to step in and seek court-ordered relief on your behalf.

What is Advanced Planning?

Contrary to the popularly misguided belief that estate planning is only necessary for older adults or wealthy individuals, advance care planning is not just something elderly or currently ill individuals should discuss and have in place.  After all, no one knows what their future holds and there is no way to predict if a sudden illness—such as COVID-19—or an unexpected accident could result in unforeseen hospitalization that leaves you or a loved one unable to make your own healthcare decisions.  Again, by designating an agent (or agents) to make medical and financial decisions on your behalf in the event of your incapacitation, you can prevent costly and frustrating delays in the management of your health and financial assets.

In short, advanced care planning involves learning about the types of decisions that might need to be made, considering those decisions ahead of time, and then letting others know—both your family and your healthcare providers—about your preferences.   Some of these decisions include priorities for medical care and treatment options, including decisions such as living longer and receiving treatment through all medically effective means, maintaining current levels of health while avoiding unwanted treatments, and maximizing comfort through symptom management.   You may also state your wishes for end-of-life care[ii] and specify whether you would like to receive medical treatments that would prolong your life artificially, such as artificial respiration or nutrients supplied to you by a feeding tube if you are unable to swallow on your own—keeping these painful decisions within your immediate family and circle and out of court.

The Advanced Care Planning Instruments

Advance care plans and preferences are often put into two separate documents that designate one or more individuals to make decisions for you in the event of incapacitation—a Power of Attorney for asset management and an Advance Health Care Directive for healthcare decisions.  Both documents are an integral part of a comprehensive estate plan and are not interchangeable; but instead, must be coordinated with one another as part of an overall estate plan.

An Advanced Health Care Directive (“AHCD”) allows you to name a person (your agent) to communicate on your behalf and make decisions regarding your health care, personal care, anatomical gifts, funerals, autopsies, and related matters if you are unable to do so yourself.[iii]

If you can understand and communicate in some way, your decisions will remain those which your doctors respect.  However, there may be instances where you are unable to make medical decisions because you are unconscious or because you are too confused to understand your choices.  For example, if you are on a ventilator, you may not be awake or able to talk and reason and thus will need someone to step in and make decisions for you.  Additionally, if you are awake but too confused or disoriented to understand the risk or benefits of a specific medical procedure, your agent would also need to step in and make decisions for you.  In the absence of a properly prepared Advanced Health Care Directive, medical professionals are typically left seeking the advice of close family members who may not be able to come to a consensus on any given correct course of action.  Moreover, in extreme instances, this can even lead to a deadlock that results in costly litigation.

A Power of Attorney (“POA”) allows you to designate a person (your attorney-in-fact) to act for you and manage financial matters should you become unable or perhaps unavailable to do so.  For example, with a POA, if you were suddenly hospitalized for a few weeks, your agent could pay your bills, hire someone to clean your home, manage your investments, and make other financial decisions on your behalf temporarily (or permanently in the event a mental impairment renders you unable to perform these tasks on a permanent basis).  Without a POA, your family members or loved ones would run into a brick wall if attempting to take these same actions on your behalf.  Finally, while a POA can take effect immediately or at the time of your incapacity, it must be established while you still have your mental faculties; you cannot create a Durable POA once you become incapacitated.

Coordinating Your Advanced Care Planning with your Estate Planning

While having a legally enforceable AHCD and POA will provide numerous benefits and assist you and your family if faced with an unfortunate event, these documents only deal with the lifetime management of your health and assets.  (A POA terminates when your agent has actual knowledge of your death.)  Therefore, when it comes to fully protecting yourself and your assets should you become incapacitated or die, a much better solution is to establish a revocable living trust.

If you establish a revocable living trust with yourself acting as the initial trustee, property transferred to your trust can be managed by you as trustee while you are alive and in good health.  Should you become ill or incapacitated, your selected successor trustee can step in and manage your affairs.  With a trust, there is generally no interruption in the management of your property, and there is no ongoing court supervision over your affairs.  Moreover, revocable living trusts also enjoy a greater level of acceptance throughout the legal and financial community.  For those who have a living trust that holds title to property, it is important to remember that you still need a  POA so your agent can deal with assets not normally held as a part of the trust, such as motor vehicles, small bank accounts, safe deposit boxes, insurance policies, government benefits, and retirement plans.  A POA can even authorize your agent to transfer non-trust property into your trust, which can be very helpful for families who may need to do some last-minute estate planning if someone were to become unexpectedly and suddenly terminally ill.

Concluding Remarks

In summary, a POA and AHCD are important documents which should be consistently reviewed and updated as part of an individual’s overall estate plan.  With the gradual lifting of current restrictions and the reopening of our economy in the coming months—and the potential for a second round of COVID-19-related illnesses in the fall—now is the perfect time and reminder for those who have been putting off advance care planning to contact legal counsel and create a plan for establishing surrogate decision-makers to act on your behalf if a sudden illness or incapacitation renders you unable to make decisions or speak for yourself.  For those who already have these materials in place, both documents should be reviewed to ensure that the decision-makers named in these powerful instruments are still those best suited to address and tackle the potential decisions they may be called upon to suddenly make on your behalf some rainy day in the hopefully far-distant future.

Frequently Asked Questions

Question: “Can’t my spouse make decisions concerning my medical issues as opposed to having an AHCD”?

Answer: While your spouse may be able to make very basic care-related decisions on your behalf, your spouse will be unable to make any even mildly significant medical decisions on your behalf without a legally enforceable AHCD signed by you while you have full capacity to understand its terms and all powers granted under it.  Without this, your spouse will need to petition a court to name him or her as your conservator.”[iv]

Question: “Can I revoke powers granted under an AHCD or POA after I recover from an illness or incapacitation which triggered the need for my agent to step in and act on my behalf?”

Answer:  Yes, so long as you as the principal are fully competent at the time you wish to revoke either instrument.

Question: Do I need an attorney to assist me with preparing an AHCD and POA?  What are the costs associated with hiring an attorney to assist me with preparing these documents?

Answer:  While you may be able to locate and complete these documents using various online forms and reference guides, an attorney can be instrumental in explaining the different types of powers of attorney in greater detail and tailoring these two powerful documents to fit your unique situation and desires.[v]  Moreover, if you own any substantial assets or real property, or if you have a living trust, these two documents will need to include specific powers and provisions to address the handling of your personal and real property assets, which, should also be coordinated with the powers and duties provided to current or successor trustees of your revocable trust.

In terms of costs, most attorneys in California bill by the hour for consulting on minor issues and considerations with respect to preparing an AHCD and POA.  The total cost will likely vary based on the level of specificity required by each client’s unique factual circumstances.  For those interested in greater protection over their assets (especially real property), a better solution is to create a full estate plan.[vi]  There is not a “one size fits all” plan and the cost of a full estate plan will vary in price and complexity based on each individual client’s needs.  With that in mind, we are happy to give you 15 minutes of our time to discuss our estimated fees to address your particular needs.

Authors

Kelly Kilkenny, Attorney.   For over 20 years, Kelly has concentrated her practice on estate planning as well as trust and probate administration.  Kelly’s experience allows her to put together a guideline of the who, what, when, how, and where you want things to go when events occur that affect your life.  Without exception, it is certain that one life event will happen for each of us.   But, if you don’t plan your intentions, desires, and directions, then the state has a guideline already in place for you.  It can be found in the Probate Code.  And probate, among other things, is expensive!   While you may not have control over life events, you do have choices.  A well-crafted estate plan will give those that matter directions tailored to your wishes at a fraction of the cost of probate.  Kelly can be contacted here to answer any questions you may have about estate planning and advance care planning.

Patrick “Reid” Miller, Associate.  Reid provides advice and transactional services to individuals and businesses pertaining organizational and entity formation decisions, contract negotiations, employment and purchase agreements, contracts between co-owners of property and closely held businesses, as well as business succession planning and estate planning considerations.  Reid can be contacted here to answer any questions you may have about advance care planning or any of the topics and practice areas above.

Disclaimer: The information and opinions in this article update are for informational purposes only and not for the purpose of providing any type of legal advice.  You should contact an attorney to obtain advice with respect to any issue or problem concerning any subject matter or topic discussed herein.  Use of and access to the VLTA website, this article, or any of the links or e-mail addresses contained within this website or article do not create an attorney-client relationship between VLTA and the reader, user, or browser.

[1] While guardianship and conservatorship proceedings may sound like a relatively easy solution to an unfortunate problem, these proceedings can be costly—with expenses often being incurred even before the guardianship or conservatorship is officially established.  For example, you will have to pay court costs for filing the initial petition to determine capacity. If you enlist the help of an attorney in preparing and filing the petition, you will incur legal fees on top of fees for physicians, nurses, or social workers who may assist with determining if the person is indeed incapacitated.  Additionally, some physicians are reluctant to offer medical opinions or declare a person legally incapacitated as a result concerns over potential malpractice claims.  You may also have to secure a bond before you are appointed as guardian of any property.  And these expenses can continue into the life of the legal arrangement.

[2] Your end-of-life instructions apply only when (1) medical treatments may prolong your life for a limited amount of time but not help you recover and (2) when not receiving treatment will lead to your death.

[3] Most address instructions for handling the following: (1) life-prolonging treatments, including blood transfusions, medication, and surgery; (2) artificial life support and COVID-19 ventilators; (3) pain relief or palliative care; (4) administration of food and water (including tube feeding); and (5) do-not-resuscitate (DNR) orders.

[4] There are two distinct types of probate conservatorships: (1) conservatorships of the person, and (2) conservatorships of the estate.  A POA for health care, especially when coupled with a durable POA for personal care, largely replaces a conservatorship of the person.  A durable POA for property management essentially obviates the need for a conservatorship of the estate.

[5] For example, a POA can be tailored to provide (1) power over specific items or classes or property; (2) power to create, modify, or revoke a trust; (3) power to make gifts after the principal has become incapacitated; (4) the ability to nominate a conservator of the principal’s person or estate; (5) power to petition the court (or limit a specific individual’s ability to do so, to prevent undesirable judicial challenges) and of course (6) the ability to restrict or modify any power.

[6] Estate planning documents typically include: (1) a Trust; (2) a Will or Pour-Over Will; (3) a Power of Attorney; (4) an Advance Health Care Directive; (5) Funding documents (grant deeds, assignments, etc.); and (6) Miscellaneous documents also related to a trust’s funding (such as a Certificate of Trust and Affidavit of Trust).