Wednesday, September 30, 2020

Estate Planning Provides Lifetime Protections

Law Matters

When most people think of estate planning, they think about giving their assets away after death. However, estate planning should involve so much more. An attorney discussing estate planning with his or her client should first focus on protecting the client while the client is alive and then address what to do with the client’s property after death. That is the cardinal rule of estate planning in our firm and we have found most of our clients give it little thought before they meet with us to discuss preparation of a will or trust.

The most important lifetime protection involves designating someone to make medical decisions in case of incapacity. Even the young and most fit can be involved in a car accident or other tragedy rendering them unable to make decisions about their own medical care. Florida statutes provide that one may by a written designation of health care surrogate. The designation must be in writing and signed by the principal in the presence of 2 signing adult witnesses. The person designated as the surrogate may not be a signing witness.

Florida statutes also confirm the principal can designate an alternate health care surrogate to act if the first chosen surrogate is not willing, able, or reasonably available to act. This is an important safeguard, as medical decisions must often be made on an immediate, emergency basis. The primary health care surrogate may be unavailable or may even be in the same accident as the principal.

The statutes provide a suggested form for designation of a health care surrogate. That form confirms that the authority granted can be as broad or limited as the principal desires. The power may authorize the health care surrogate to obtain medical information and that authorization can take effect immediately or be delayed until the principal is incapacitated.

Most married couples designate the spouse as primary and one or more children as alternates. Some have all of their children as the alternate “group” requiring the group to agree. Drawback of that approach is the group may not agree or may take a long time to discuss and reach an agreement, neither of which will protect the principal when an immediate decision is needed. If a group of co-surrogates cannot reach a decision, a guardian may be needed and that is usually a proceeding most want to avoid due to its cumbersome nature and expense. In a guardianship proceeding, the court appoints someone to make decisions for the incapacitated person. 

Few people carry their designation of health care surrogate with them at all times, although they will present them to a hospital when checking in for scheduled procedures. Because there may be an unscheduled procedure, it is generally a good idea for the principal to give a copy of the health care surrogate document to all of the person’s doctors, possibly their church and certainly to those appointed in the document.

Florida statutes also authorize the designation of a health care surrogate for a minor by the minor’s parent, legal custodian or legal guardian. The person or persons so appointed are authorized to make medical decisions for the minor when the principal is not willing, able or reasonably available to make those decisions.

Florida statutes not only authorize designation of a health care surrogate, but they also specify responsibilities. Those responsibilities include expeditiously consulting with appropriate health care providers, making health care decisions in accordance with the principal’s instructions or which he or she believes the principal would have made under the circumstances. The surrogate is even authorized to apply for public benefits. If a guardian is appointed by the court, the designation of health care surrogate remains in effect unless the court modifies or revokes the surrogate’s authority.

Florida’s legislature recognized that many do not properly designate a health care surrogate and provide by statute a pecking order for medical decisions if the principal has not executed an advance directive. That pecking order starts with one’s spouse, then any adult child or if more than one adult child a majority of the adult children, then a parent, then an adult sibling or if more than one sibling a majority of the adult siblings, and if none then by any adult relative and if none even a close friend of the patient.

Good planning should not rely on the statute’s fallback designations. Many would be most unhappy to find a person designated by the statute placed in charge of medical decisions. And, leaving the decision to the default alternates in the statute also leaves open the issue of locating a person who is designated and willing to assist.

A well-drafted designation of health care surrogate will not only appoint people selected by the principal, but will also include contact information. The document should make it easy to contact the surrogate. 

Medical decisions are important to one’s physical well-being. However, designating someone to make medical decisions does not provide protection for financial or contractual matters. Those matters are addressed by designating an agent with authority to deal with the principal’s contractual financial matters through a power of attorney.

Florida has a Power of Attorney Act, which requires Florida powers of attorney to be signed by the principal and by 2 subscribing witnesses. Power must also be acknowledged by the principal before a notary public or comparable authority provided in the statute. 

A power of attorney authorizes an agent to act on behalf of the principal, with as much or little authority as is specified in the power. The principal may designate 2 or more persons to act as co-agents and may designate one or more successor agents to act if an agent resigns, dies, becomes incapacitated, is not qualified to serve, or declines to serve. The principal can require co-agents to act jointly or can authorize each individual to exercise all authority granted in the power.

A power of attorney is effective when executed. Florida used to authorize a contingent power of attorney, which only became effective when the principal was incapacitated. Incapacity was established by affidavit of the principal’s primary attorney. In theory, the contingent power of attorney was a good idea as it did not authorize the agent to act unless the principal was incapacitated. That was intended to limit the opportunity for the agent to engage in wrongdoing or something the principal would not want. In practice, we found few physicians willing to sign the affidavit, so the contingent powers were useless. In fact, they were worse than useless as they gave a false sense of security to many believing their agent could act if they became incapacitated. The legislature stopped authorization for the contingent powers in 2011, but provided that such powers executed before October 1st, 2011 would remain in effect.

A power of attorney can be as broad or limited as the principal desires. It can be restricted to authority over a single bank account or allow the agent to act as the principal in all contractual or financial matters. Powers of attorney do more than simply authorize someone to “pay the bills.” They authorize the agent to deal with insurance companies, the government, condominium and homeowner associations and even utility companies. This authority is not found in a designation of a health care surrogate. Since the Legislature banned contingent powers and the agent may exercise authority granted by the power of attorney immediately, a principal must make sure that the agent selected is worthy of trust. There is no guarantee the agent will not do something dastardly. Those with concerns can appoint multiple agents with requirement that they act jointly. That does not eliminate risk, but reduces it.

The Act lists a number of actions that require separate signed authority for an agent to act under power of attorney. Those include creating or amending a trust, making a gift, changing rights of survivorship or beneficiary designations and waiving right as a beneficiary under an annuity or retirement plan.

The legislature recognizes the importance of an agent’s authority under the power of attorney. By statute, third parties must accept or reject a power of attorney within a reasonable time. A third person is not required to accept a power of attorney if the person has knowledge of termination of suspension of the agent’s authority, the power of attorney is witnessed or notarized remotely and the third person is not provided electronic Journal record, the third person believes in good faith the power is not valid or the agent does not have authority, the third person knows of a report to the local Adult Protective Services office stating the principal may be subject to physical or financial abuse and other Limited bases. If a third person rejects a power of attorney other than as provided by statute, a court may order acceptance and impose liability for damages, attorney’s fees and costs.

A power of attorney remains effective and can be exercised at any time the principal could act until it is revoked by the principal, expires by its own terms, or a guardian is appointed. That means, the agent under power of attorney cannot act if the principal could not legally act. Since most estate planning related powers of attorney are intended to provide protection for the principal in event of incapacity, it is important that the power be made durable. A durable power of attorney includes language stating it is effective even after a principal becomes incapacitated.

Even a durable power of attorney is terminated if the principal is adjudicated incapacitated by a court and is suspended if a proceeding is filed to determine the principal’s incapacity or appointment of a guardian advocate until the termination of the petition by the court. If a power of attorney appoints a spouse, the spouse’s authority is terminated if an action is filed for dissolution or annulment of the marriage to the principal for legal separation unless the power of attorney otherwise provides.

Designation of a health care surrogate and power of attorney are important estate planning documents for protection during life. These options should always be discussed with one’s attorney during the estate planning process.

William G. Morris is the principal of William G. Morris, P.A. William G. Morris and his firm have represented clients in Collier County for over 30 years. His practice includes litigation and divorce, business law, estate planning, associations and real estate. The information in this column is general in nature and not intended as legal advice. 

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