Financial Advice for Retirement, Social Security, IRAs and Estate Planning

Estate Planning Strategy: Planning for Medical Care in Retirement

Your estate plan should be about a lot more than finances.

An estate plan isn’t complete, for example, without the medical care documents.

In fact, I always recommend making this a priority. Have the medical care documents finalized while you’re still considering the other issues in the estate plan.

Also understand that medical care documents in estate plans have evolved rapidly over the last few decades. So there are several documents to consider.

HIPAA Authorization

This simple document didn’t exist and wasn’t even contemplated when I was in law school and for years afterward.

There was a time when you could visit someone in a hospital, say you were a friend or family member, and learn about the patient’s situation.

But patient privacy was enhanced under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and changed that.

Under HIPAA, providers can release any information about you only to people you specifically authorized to receive it.

Each medical care provider can interpret the law differently. It is not unusual to find providers who won’t give details without a written HIPAA authorization even to close family members who have appropriate identification.

Fortunately, the HIPAA authorization is straightforward and can be incorporated into your other medical care documents, as we’ll discuss.

Living wills and advance directives

Not long ago, living wills were novel and controversial.

Over the years, living wills became so widely accepted that most states enacted legislation authorizing them and approved sample forms.

But living wills often aren’t strong enough planning tools by themselves.

A living will in its basic form states whether or not you want certain levels or types of care in certain circumstances.

The basic, traditional living will states – “If I have a terminal condition, and there is no hope of recovery, I do not want my life prolonged by artificial means.”

In real life, a living will often isn’t very effective, because a person’s health situation rarely is clear cut. Often, it can’t be said with certainty that someone has no hope of improvement or is terminally ill.

There is also debate over whether some types of care, including feeding and hydration tubes, are artificial life support or are a means of providing comfort.

They also can be a means to help someone recover from a condition that otherwise would be a final illness.

The response of some estate planners is to draw up detailed, custom living wills. Those planners can work with their clients to go through questionnaires that sometimes total 60 pages or more.

The questionnaires give different scenarios. The client decides the decision to be made in each circumstance.

You might have seen an example on the television show Seinfeld. Eventually, many estate planners began calling these documents advance directives instead of living wills.

Even this approach has drawbacks. Technology and medical knowledge change. A situation that was terminal five years ago might be treatable today.

Also, we don’t really know what a person is feeling or experiencing in all circumstances, so it is hard for others to apply the directives.

Of course, even a questionnaire of 60 pages or more cannot cover every possible scenario.

Finally, there still can be disagreements over the facts and certainty of the prognosis.

Another caution about living wills is some studies found they aren’t always effective. Doctors and nurses might not see the documents until after treatment has been administered.

Some studies argued that care providers would ignore the documents because they feared lawsuits.

At other times, doctors interpret the documents as calling for approving treatment when other doctors or family members had a different interpretation.

What’s more, if one or more key family members ask for treatment, doctors normally comply even if the document says otherwise.

Often unsaid is that the original intent of living wills was to stop or remove care. You, on other hand, might prefer to receive care in all but a few circumstances.

Health care power of attorney

The main problem with a living will or advance directive is that you are trying today to determine the treatment you do or don’t want in the future.

There are too many possible scenarios for you to imagine them all and give clear guidance.

You’re also asking the medical providers to interpret the document to determine what you would want if you were able to make a decision.

Because of these and other limits, a health care proxy or agent should be appointed instead of or in addition to having a living will or advance directive.

The name of the document in which you make the appointment varies among the states, but it generally is referred to as a health care power of attorney (HPOA) or proxy.

An HPOA gives one or more people the authority to make medical decisions when you are unable to do so.

Those given authority through a HPOA talk with the medical providers to understand your situation and the options.

That process provides real information, instead of the theoretical scenarios you deal with when developing a living will or advance directive.

Ideally, of course, the agents know you fairly well and have a good idea of the course of treatment you would want.

The persons with the power of attorney need to be available to the care providers, so you might not want to name someone who lives a sizeable distance from you, travels a lot, or doesn’t have some flexibility.

I think you ease the burden on others by naming more than one person. Some people appoint only family members. Others believe that the decision can be less emotional if at least one trusted non-family member is named.

When more than one person is named, you need to have voting rules. Do you want a unanimous decision or a majority?

You also need a default rule. For example, you can say the default is to provide treatment recommended by the lead medical provider unless all the agents agree to withhold it or choose a different treatment.

The HPOA can be supplemented with a living will, advance directive, or other document that expresses your philosophy and wishes under at least some circumstances.

In addition, whichever documents you use can include non-medical instructions. You can give instructions regarding, for example, music, grooming, and other aspects of your environment you’d like when you are receiving care.

Stay tuned next week, when I’ll share more tips for planning medical care in your estate plan.

You can check out Part 2 of this post here.

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