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Taking Control: The Importance of Living Wills in Modern Healthcare

Season #2

Communication is key. It is key to a good marriage, it is the key to a good work-life balance. It can even be said that communication is one of the essential skills in life.

Today, we are going to talk about one of the darker corners of finance. One of those areas that we don't often talk about, but is just as crucial for our wills.

What is a Living Will?

A living will, often referred to as an advance directive, is a legal document that outlines your wishes regarding medical treatment in the event that you become incapacitated and cannot communicate your preferences yourself. Unlike a last will and testament, which provides instructions about the distribution of your assets after your death, a living will focuses on healthcare decisions while you're still alive but unable to make those decisions.

In the unpredictable journey of life, unexpected events can render us unable to voice our choices, especially concerning medical interventions. This is where a living will steps in, acting as your voice when you might not have one. It can specify whether you want life-sustaining treatments, resuscitation, tube feeding, and other critical interventions.

Having a living will is about taking control.

It's about ensuring that your wishes are respected and that your loved ones are spared the agonizing uncertainty of making life-altering decisions on your behalf without clear guidance. It's a conversation that might be uncomfortable now but can provide immense clarity and peace of mind in the future. Just as we communicate our needs and desires in relationships and work, it's vital to communicate our wishes for our own health and well-being. In the realm of personal finance and life planning, a living will is a testament to the power of proactive communication.

Living Wills Are Different In Each State

Indeed, when we talk about any legal documents, especially in the context of end-of-life decisions and healthcare directives, we're referring to a complex framework that encompasses a range of legal documents and provisions. Each state has its own set of statutes that govern these matters, and while there are similarities, the nuances can be significant.

In the context of Living Wills, there are really a number of documents and directives that we'd want to get in place. Speaking with an Elder Law Attorney is a great place to start. Depending on your state, you may need to create one or more of the following:

1. **Living Wills**: As previously discussed, this is a directive that outlines your wishes regarding medical treatment if you're unable to communicate them. It can specify treatments you do or do not want.

2. **Durable Power of Attorney for Health Care (DPOA-HC)**: This document allows you to appoint someone (an "agent" or "proxy") to make medical decisions on your behalf if you're incapacitated. The appointed person's authority can be as broad or as limited as you specify.

3. **Do Not Resuscitate (DNR) Orders**: This is a request not to have cardiopulmonary resuscitation (CPR) if your heart stops or if you stop breathing. Some states have specific forms and procedures for DNR orders.

4. **Physician Orders for Life-Sustaining Treatment (POLST)**: This is a more detailed directive than a DNR and can include instructions about CPR, ventilators, antibiotics, feeding tubes, and more. It's meant to guide emergency personnel and is often used by people with serious illnesses. Some states or hospital systems require these forms to be on file in addition to any living wills. Often times, each institution will have their own forms that need to be filed in order for living wishes to be honored.

5. **Anatomical Gifts/Organ Donation**: Many states allow you to specify organ and tissue donation preferences in your advance directives or on your driver's license.

6. **Mental Health Directives**: Some states allow for directives that specifically address mental health treatments, including preferences about medications, admissions to facilities, and other interventions.

7. **Guardianship/Conservatorship**: If a person becomes incapacitated without a DPOA-HC, the court might appoint a guardian or conservator to make decisions on their behalf.

8. **Recognition of Out-of-State Directives**: While each state has its own laws, many will recognize the validity of directives created in another state as long as they were created in compliance with that state's laws or are in compliance with the new state's laws.

9. **Digital Access**: Some states have provisions that allow you to grant your healthcare proxy or another designated person access to your digital assets, like your electronic medical records.

Given the complexity and the stakes involved, it's essential to approach these documents with care. It's not just about having the paperwork in place but ensuring that they truly reflect your wishes and values. Regular reviews and updates, especially after major life events or health changes, are crucial. And, as always, consulting with professionals, whether they be legal experts, doctors, or spiritual advisors, can provide invaluable guidance in navigating this intricate framework.

What Is a Health Proxy

A health proxy, often referred to as a "healthcare proxy" or "medical proxy," is a legal document that allows you to designate another person (called an "agent" or "proxy") to make medical decisions on your behalf in the event that you become incapacitated or are otherwise unable to make these decisions for yourself. The person you designate as your health proxy will have the authority to speak with doctors and other healthcare providers, review your medical records, and make decisions about tests, procedures, and treatments.

Here are some key points about a health proxy:

1. **Scope of Authority**: The authority granted to the health proxy can be broad or limited, depending on how the document is drafted. You can specify which decisions the proxy can make and under what circumstances.

2. **Difference from Living Will**: While both a health proxy and a living will pertain to medical decisions, they serve different purposes. A living will outlines your specific wishes regarding medical treatments, whereas a health proxy designates a person to make these decisions on your behalf. It's possible to have both, and in many cases, it's advisable to do so.

3. **Choosing a Proxy**: It's crucial to choose someone you trust, who understands your values and wishes. This person should be willing and able to advocate for your preferences, even if they face opposition from medical professionals or family members.

4. **Alternate Proxy**: It's a good idea to designate an alternate proxy in case your primary choice is unavailable or unwilling to act when needed.

5. **Duration**: The health proxy remains in effect as long as you are incapacitated, unless you specify a particular time frame or revoke it.

6. **Revocation**: You can revoke or change your health proxy at any time as long as you are mentally competent. The revocation process typically involves notifying your healthcare provider and proxy in writing.

7. **State Laws**: The requirements for creating a valid health proxy vary by state. Some states require witnesses or notarization, while others have specific forms.

8. **Communication**: It's essential to discuss your medical preferences with your designated proxy. This ensures they are well-informed and can confidently make decisions that align with your wishes.

Having a health proxy is an integral part of advance care planning. It ensures that someone familiar with your values and desires is in a position to make crucial decisions during moments when emotions run high and clarity is paramount.

Wills vs Living Wills

I think it's important to understand that there's a big division between documents that give people authority while we're alive, and documents that give people authority when we're no longer around.

Generally speaking, the same document cannot be used for both circumstances.

I could have a Will that says that when I pass, my wife can make all financial decisions.That document only applies when I'm no longer around. While I am still alive that document doesn't come into play. It's just a piece of paper. It's not even worth the ink that it's printed on.

Let's delve deeper into this division:

1. **Authority During Life**:

   - **Living Will**: This document outlines your medical preferences should you become incapacitated. It speaks for you when you can't but only concerns medical decisions.

   - **Durable Power of Attorney (DPOA)**: This grants someone the authority to make financial and other decisions on your behalf if you're incapacitated. It's active during your lifetime and becomes void upon your death.

   - **Healthcare Proxy**: This designates someone to make medical decisions on your behalf if you're unable to do so. Like the DPOA, it's only valid during your lifetime.

2. **Authority After Death**:

   - **Last Will and Testament**: This comes into play only after your death. It outlines how your assets should be distributed and can appoint an executor to manage this process. The executor's authority begins after your passing.

   - **Trusts**: These can be structured to distribute assets before or after death, depending on the type of trust and its specific provisions.

What Is a Power of Attorney (POA)

A Power of Attorney (POA) is a legal document that allows one person (the "principal") to grant authority to another person (the "agent" or "attorney-in-fact") to act on their behalf in specific matters. This can include making financial decisions, handling real estate transactions, or making healthcare decisions, among other responsibilities. 

In the eyes of the law, a person with a POA is no different than the actual person. This can be extremely helpful for a spouse, or children that is handling matters for an incapacitated spouse or parent. This can be critical in helping ensure that bills continue to get paid or legal proceedings are handled in a timely fashion.

The Different Types of POAs

1. **General Power of Attorney**: Grants the agent broad powers to act on behalf of the principal. This can include handling financial transactions, entering into contracts, buying or selling real estate, and more.

2. **Limited or Special Power of Attorney**: Grants the agent authority to act on the principal's behalf for a specific purpose or during a specific time frame. For example, a person might use a limited POA to give someone the authority to sell a particular piece of property on their behalf.

3. **Durable Power of Attorney**: Remains in effect even if the principal becomes incapacitated. Unless a POA is specifically designated as "durable," it will automatically end if the principal becomes mentally incapacitated.

4. **Springing Power of Attorney**: Only becomes effective upon the occurrence of a specific event, usually the incapacity of the principal. It "springs" into action when the specified event occurs.

5. **Medical or Healthcare Power of Attorney**: Allows the agent to make healthcare decisions on behalf of the principal if they become incapacitated. This is different from a living will, which specifies the principal's wishes regarding end-of-life care.

6. **Financial Power of Attorney**: Specifically grants the agent authority to manage the principal's financial affairs, including banking, investments, taxes, and other financial matters.

Important Considerations When Creating a Power of Attorney

- **Trust**: Because the agent will have the authority to make important decisions on the principal's behalf, it's crucial to choose someone trustworthy, responsible, and aligned with the principal's values and wishes.
- **Revocation**: A POA can be revoked by the principal at any time, as long as they are mentally competent. The revocation should be done in writing and communicated to the agent and any relevant third parties.

- **State Laws**: The requirements for creating a valid POA vary by state. Some states may require the document to be notarized or witnessed.

- **Duration**: Unless specified otherwise, a POA generally remains in effect until it's revoked, the principal dies, or, in the case of non-durable POAs, the principal becomes incapacitated.

In summary, a Power of Attorney is a powerful legal tool that allows individuals to ensure their affairs are managed according to their wishes, even if they are unable to handle them personally. Given its significance, it's advisable to consult with a legal professional when drafting or updating a POA.

Trusts and Medicaid

No discussion about living wills would be complete without talking about asset protection trusts in the context of medical bills, specifically medicaid.

**Asset Protection Trusts**:
An asset protection trust is a type of irrevocable trust designed to hold a person's assets to protect them from creditors. When structured correctly, these trusts can help individuals qualify for Medicaid while preserving their assets for their heirs.

**Medicaid and Asset Limits**:
Medicaid is a means-tested program, meaning eligibility is determined based on income and assets. Each state has its own thresholds, but in general, to qualify for Medicaid's long-term care benefits, an individual must have limited assets.

**How Asset Protection Trusts Work in Medicaid Planning**:

1. **Irrevocable Trusts**: For Medicaid planning purposes, the trust must typically be irrevocable, meaning once assets are transferred into the trust, the individual no longer has control over them and cannot easily change the trust terms or dissolve the trust.
2. **Look-Back Period**: Medicaid has a look-back period (typically 60 months or 5 years) where they examine asset transfers. If assets were transferred to a trust or another individual during this period, it could result in a penalty or disqualification period for Medicaid benefits. It's crucial to plan early.
3. **Protection from Creditors**: Assets in the trust are generally protected from creditors, including Medicaid, ensuring they aren't used to pay for medical bills and can be passed on to heirs.
4. **Income and Principal**: While the principal of the trust is protected and not counted as an asset for Medicaid eligibility, any income generated by the trust's assets might be considered available for medical expenses.

5. **Trustee**: The individual cannot be the trustee of their own asset protection trust for Medicaid purposes. A trusted family member, friend, or professional can be appointed as the trustee.

**Other Considerations**:
Medicaid rules are complex and vary by state. It's essential to consult with an elder law attorney or estate planning professional familiar with Medicaid planning to ensure compliance and maximize asset protection.
- **Holistic Approach**: When considering an asset protection trust, it's essential to look at the broader financial and estate plan. Consider factors like tax implications, potential future needs, and the desires of heirs.

In conclusion, while living wills address an individual's medical wishes, asset protection trusts play a crucial role in ensuring that an individual's assets are preserved in the face of mounting medical bills and potential long-term care needs. Proper planning can provide peace of mind that both healthcare wishes and financial assets are protected.

I strongly suggest consulting with Medicaid attorneys, especially if Medicaid is a potential consideration for your future.

Incorporating powers of attorney is essential for your estate planning. Your financial advisor should lead this discussion and link you with local professionals in your state. These experts will assist in drafting the necessary documents to ensure they align with your wishes.

It's crucial to note that regulations vary not only by state but also by individual hospital networks. While a state might have specific guidelines, a hospital might have its own set of rules. Therefore, it's beneficial to work with someone who is familiar with these intricacies and handles them regularly to guarantee everything is done correctly. As always, stay safe, and if you have any questions don't hesitate to reach out.