Planning For Incapacity: Powers of Attorney and Living Wills

Failing to execute a living will and healthcare power of attorney agreement can create a nightmare for your loved ones. Legal incapacity or disability can come from many causes: illness, injury, aging, etc. Without authorizing in advance someone to act on your behalf, your  health and personal affairs could be neglected beyond repair unless one of your loved ones goes to court to obtain a guardianship. This is costly and time consuming, not to mention potentially embarrassing as your loved one in public proves to a judge that you are incapacitated. In short, people who fail to plan for incapacity frequently end up with compounded health problems, unpaid bills, accrued penalties, neglected property, defaulting loans, and so on.

Further, the real possibility that an accident could put you in a vegetative state means that without a living will (or “advance directives”), your estate could be decimated from medical bills for life-sustaining treatment that you may not want.

In this article, I hope to provide a simple explanation of powers of attorney and living wills. I’m thoroughly convinced that any estate plan should include these documents.

Powers of Attorney Generally

A power of attorney is simply an authorization for someone whom you nominate to be your agent (or “attorney in fact”) to act on your behalf. In drafting a power of attorney agreement, you as the “principal” specify the purposes and scope of the agency. Powers of attorney can be as broad or narrow as you make them. The types of authority that your agent can be given includes the following:

  • make healthcare decisions—such as admitting you to a nursing home—;
  • manage your real estate (which could include selling your real estate if needed to pay your bills);
  • manage your investments;
  • pay your taxes;
  • wind up or continue your business activities;
  • purchase insurance on your behalf;
  • initiate or resolve lawsuits on behalf;

The rule of agency for centuries has been that, by default, an agent loses his or her power of agency when the principal becomes incapacitated. The rationale for this rule is that the principal always retains the authority to revoke the agency relationship, but cannot do so upon incapacity. If a principal wished for the agency relationship to survive his or her incapacity, the power of attorney agreement would have to state that the agency relationship is “durable.”

However, because powers of attorney are so useful for allowing family members to take care of incapacitated individuals, Arkansas has reversed the traditional rule. Arkansas’s “Uniform Power of Attorney Act”, which was formerly called the “Arkansas Durable Power of Attorney Act” (codified at Ark. Code Ann § 28-68-101 et seq.) essentially states that that a power of attorney in Arkansas is durable unless stated otherwise. In addition to powers of attorney being durable or non-durable, they can be “immediate” or “springing.” A springing power of attorney comes into existence only upon a physician’s determination that the individual is unable to act on his or her behalf. Usually, such a determination is made by affidavit and attached to the power of attorney agreement. A power of attorney agreement that is not springing comes into existence immediately.

Your agent must possess good integrity and judgment. An agent is what the law calls a “fiduciary.” A fiduciary is someone who is legally bound to act in the best interest of another. As an attorney, I am bound by law to act as a fiduciary to my client. Other examples of fiduciaries include doctors, trustees, executors, conservators, and guardians. Fiduciaries have duties of loyalty and competence, among other things. Unfortunately, I have seen far too many gross breaches of fiduciary duties arising out of shady power of attorney agreements. The National Center on Elder Abuse reports, and my own experience confirms, that most financial crime against the elderly is perpetrated by family members. I say this not to scare people away from powers of attorney, but to warn people to choose someone with a long history of trustworthiness.

Healthcare Powers of Attorney

Healthcare powers of attorney in Arkansas are treated differently than standard powers of attorney. Arkansas’s Durable Power of Attorney for Health Care Act defines “healthcare” broadly as “any care, treatment, service, or procedure to maintain, diagnose, treat, or provide for the patient’s physical or mental health or personal care”. However, the Act clarifies that healthcare powers of attorney are not the same as living wills, which I cover below.

Healthcare powers of attorney are not advanced directives. Instead, they grant your agent the power to make healthcare decisions on your behalf in the event that you become incapacitated. In other words, while advance directives, which I discuss below, make clear the care you do not wish to receive, healthcare powers of attorney allow someone else to act on your behalf to keep you healthy. As stated previously, agents are fiduciaries who must act in your best interests.

Because Arkansas law is somewhat ambiguous as to the relationship between advance directives, powers of attorney, and healthcare powers of attorney, it is best to execute each of these as separate documents.

Living Wills

A living will (also known as “advance directives”) provides a method by which an individual may express his or her desires as to the giving or withholding of life-sustaining medical treatment. In Arkansas, these documents are governed by the Arkansas Rights of the Terminally Ill or Permanently Unconscious Act. By providing a safe-harbor form on which physicians can rely, the Act allows them to safely carry out the patient’s wishes in the absence of a conscious declaration. Additionally, living wills protect your loved ones from the unenviable position of having to determine your wishes.

However, while a living will can make the patient’s wishes clear, they cannot guarantee that those wishes will be carried out. When family members belief that life support should be continued, notwithstanding a clear living will to the contrary, many physicians err on the side of caution and continue life support until the family members change their mind. This is not to say that living wills are useless; most family members respect the patient’s wishes, and a living will keeps them from having to guess what those wishes are.