It May Be Time to Review Your Estate-Planning Documents

By Jenny Migdal, CFP®, CKA®
Dec 27, 2023
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Since the last time I wrote an SMI article on this topic in 2017, I have had two clients die, my mom has moved near us from out of state (not quite kicking and screaming), and one client developed dementia and aggression and had to be placed into assisted living. To say I now know a lot more about the realities of estate planning is an understatement. (As you read this, think about estate planning from the perspective of a wealthy widow in her 80s with dementia.) 

As a general rule, you should review and update your estate-planning documents every five years. Set a reminder! Even ask your attorney to call you every five years. Please be diligent and do this.

A lot can change in five years. For example, if you appointed a brother or sister to make decisions on your behalf and that person has passed away since you last updated your documents, those documents will be of little help. You may want to appoint a trusted grandchild to make these decisions instead.

The new standard package

I ensure each of my clients has a will or trust, a power-of-attorney (POA) for finances, and an advance healthcare directive. The directive is relatively new. It combines several instruments into a single document: what used to be called a living will, a POA for healthcare matters, a guardianship appointment, and possibly a “HIPAA waiver” (more on that shortly). Each power-of-attorney designates a temporary agent to act on your behalf (in finances or healthcare) if you become incapacitated. 

I want to emphasize that many financial institutions will not accept a POA for finances without additional paperwork they want you to sign. Get this done ahead of the crisis. (In 2022, TD Ameritrade refused my POA for my husband, because the form was old. However, they accepted his POA for me, even though it was the same form!) 

In my opinion, a will that creates a testamentary trust — a commonly used estate planning tool — is ineffective in complicated health and financial situations. A will comes into play only after you die.  You need a trust that will provide for your care while you are alive and unable to care for yourself.

HIPAA’s unintended consequences

HIPAA stands for the Health Insurance Portability and Accountability Act of 1996. The legislation increased privacy protections for personally identifiable medical information. (You probably have had to sign paperwork saying you’ve received your doctor/dentist/clinic’s HIPAA Privacy Notice.) If you become incapacitated, the paperwork allows the care provider to disclose information about your medical condition to a specific person.

To encourage compliance, HIPAA includes penalties for unauthorized disclosure of your medical information as high as fines of $250,000 and 10 years in jail! With those stiff penalties in mind, providers occasionally choose not to release information even when it could be helpful to do so. That’s why it’s essential to make your wishes known through your own estate-planning documents via a HIPAA waiver.

I like my privacy, so the HIPAA restrictions sounded good initially. But as with many laws, HIPAA often has unintended consequences. Consider the following scenarios.

Suppose I don’t have the capacity to make decisions for myself? Who is signing a hospital’s HIPAA paperwork on my behalf? Is it my caregiver because I live in a different state from my kids and grandkids?

The hospital could possibly consider disclosing my incapacity to be a prohibited release of private medical information. To be sure, that would be a rare situation. Most hospitals likely would disclose such information to family members, but it’s possible that some would not. (One of the first questions asked when I’m with my mom during medical appointments is if they can talk about her medical history in front of me.) 

Here’s another scenario. Suppose I were to be hospitalized for a cardiac issue while having dementia. To protect me — and those around me — many of my normal civil rights might be taken away, but my privacy rights under HIPAA would still apply. Perhaps in my paranoia, delusion, or hallucination, I am convinced that my family is trying to harm me rather than help me. (My mom fell in 2023, and an advocate called to make sure that she was not subject to elder abuse.)

Without a HIPAA waiver, the hospital would be left to decide whether I — though suffering from dementia — can be my own advocate. My family might be prohibited from making decisions for my care during a time of crisis.

Too dramatic? Here’s a more likely case. I’m hospitalized and in desperate need of prayer, but because of my condition, I’m unable to sign the hospital’s HIPAA paperwork. As a result, my pastor is denied access to me or information about me because the hospital is concerned about violating HIPAA. Even a notice about my situation in the church bulletin can’t be posted without my permission.

The unintended consequences of HIPAA need to be addressed legislatively. But until that happens, what can you do? The best approach is to be explicit in your estate-planning documents, including a HIPAA waiver that specifically addresses who is authorized to receive medical information about you.

When updating your documents, check to see what (if any) permissions you have previously granted to release your medical information.

Be sure to state in new or revised estate-planning documents that you intend them to be HIPAA-compliant. It would be best if you further mentioned that you are signing the documents voluntarily and without duress. Also, be clear about when you intend for the release of information to expire, and note that your medical data can be released to your executor or trustee after your death if requested (to pay bills, send death certificates to financial agencies, etc.).

Other important details

Another essential point regarding your estate-planning documents is to make sure those you designate to act on your behalf have copies of those documents. When my daughters went off to college, I had each one sign an authorization for the release of medical information to me in the event of incapacity. (I recommend the same with clients’ children.) My daughters also authorized me to receive financial and/or academic information. They signed healthcare powers of attorney and advance directives, and appointed me as their guardian in the case of significant incapacity. Each authorization — signed and notarized — was held in my possession. (One of my daughters is now married, and I am nagging her and her husband to update their estate planning documents.)

Powers of attorney usually are state-dependent, so when my mom moved to New Mexico to live near us, almost the first thing I did was have her sign updated powers of attorney. She also worked with her oncologist to put into place a Do Not Resuscitate (DNR) / Do Not Intubate (DNI) order.

A DNR is usually put into place for someone with a terminal illness, such as cancer. The idea is that if the person with a DNR stops breathing and a paramedic or doctor would normally try to restart their breathing, with a DNR on file, the patient will not be resuscitated. Obviously, this is a matter to be considered carefully and discussed with your family. However, if you have a DNR order on file for you or a loved one, and that person recovers to the extent that the DNR isn’t applicable anymore, be sure to cancel or revoke the DNR. (In 2022, I had to put a DNR on my mom when I was called about a surgery at 2 a.m. I don’t wish this kind of phone call on anyone. We revoked the order the next day after she came through the surgery with flying colors.)

Of course, I pray that none of the scenarios I’ve raised will ever be an issue in your family or mine. But it is wise stewardship to think through these issues and act now while you are not in a crisis. Don’t make the mistake of thinking you won’t get older or frailer or live much longer than you anticipated! 

[Disclaimer: I am not licensed to practice law. Consult an attorney in your state to ensure you comply with applicable laws and regulations. – J.M.]

Written by

Jenny Migdal, CFP®, CKA®

Jenny Migdal, CFP®, CKA®

Jenny Migdal, a longtime SMI member, is a CERTIFIED FINANCIAL PLANNER™ professional and Certified Kingdom Advisor® with Cove Wealth Management in Albuquerque, N.M.

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