Powers of Attorney and Appointments of Health Care Representative- Why are they important?

Two very common tools for a complete and thorough estate plan are a Power of Attorney and an Appointment of a Health Care Representative. While neither is the focal point for most people’s estate plan, they are both necessary to a complete estate plan and are tools to provide an individual with the comfort of knowing that, in the event of their incapacity, they are in good hands.

What Does a Power of Attorney Do?

The Power of Attorney allows for the principal to entrust the attorney-in-fact (or agent) with the authority to make certain financial decisions for the principal. The types of financial decisions for the principal that an attorney-in-fact can make can vary by state, but Indiana statute provides that an attorney-in-fact has the powers enumerated in I.C. Article 30-5, which include, but are not limited to, the power to engage in real property transactions for the principal, the power to make bank transactions for the principal, and the power to make claims and enter into litigation on behalf of the principal. See I.C. Chapters 30-5-2; 30-5-5; 30-5-11. Each principal executing a Power of Attorney may select which powers to exclude, and which powers might be added.

The Power of Attorney is specifically useful if the principal becomes incapacitated or unable to make competent financial decisions. Under these circumstances, the attorney-in-fact can act in a way that is in the principal’s best interest when the principal is unable to act. The attorney-in-fact has a fiduciary duty to act in the principal’s best interest, and so, although the Power of Attorney grants powers to the attorney-in-fact, his or her fiduciary duty to act in the best interest of the principal provides a cheque on that power by making the attorney-in-fact personally liable for any acts taken that are not in the best interests of the principal, whether those acts are malicious or merely negligent.

What Does a Legal Healthcare Representative Do?

The Appointment of Healthcare Representative document is similar to the Power of Attorney, except that in this document, the principal entrusts the healthcare representative (or agent) with the authority to make health care related decisions for the principal in the event that the principal becomes incapacitated. Incapacitation is determined by the principal’s treating physician. I.C. § 16-36-7-35.Once the physician has determined that the principal is incapacitated, the appointed health care representative can make medical decisions for the principal.

The Appointment of Health Care Representative document works in tandem with a Living Will. A Living Will is a document that instructs the health care representative concerning life-prolonging procedures in the event that the principal’s death will occur within a short time. A Living Will is just an instruction and it is not legally binding; so even though a principal can instruct a health care representative to not elect to use life-prolonging procedures, the health care representative, if they so choose, can still elect to use them if they believe it to be in the best interest of the principal. However, even though the Living Will is not legally binding, we find that most individuals appointed as health care representatives appreciate also having a Living Will so that they can carry out the principal’s wishes.

So, even though the Power of Attorney and the Appointment of Health Care Representatives do not deal with the distribution of property, they are still important documents for the composition of a complete estate plan. They provide a way for a principal’s interests to be carried out if the principal cannot carry out those interests for himself or herself, and they provide comfort and security to those who elect to use them.

Please contact a member of Barrett McNagny’s Estate Planning team with any questions about these or any other issues related to your estate plan. 

About the Author:

Jordan R. Spence focuses his practice in the area of estate planning and administration. He can be reached at 260.423.8864.