Many clients are confused regarding the use of Durable Powers of Attorney in their Estate Plan. In California we have two separate documents, the Healthcare Power of Attorney, known as the Advanced Healthcare Directive (AHCD). The Financial Power of Attorney is called the Uniform Durable Power of Attorney (UDPA).

The AHCD is essential for healthcare desires should you lose capacity. The one I draft includes attachments that detail how you wish to be handled in various states of consciousness. It covers your wishes should you be comatose and lists options on twelve (12) medical procedures in four (4) states of mind. As a result, you make these delicate decisions prior to incapacity rather than burdening your family. Your agent merely sees that the options you chose are carried out by the medical providers.

Regarding the UDPA, this document provides authority over your financial assets. If you have a Living Trust, some assets are not owned by Trust such as IRAs, 401Ks, other retirement plans, annuities and insurance. Most other assets are transferred to the Living Trust in which the Trustee has authority. Any asset which is not transferred to the Trust would then be under the control of the agent designated in the UDPA.

Example: Dick and Jane own a home, rental, mutual fund account, an IRA and an annuity. They would transfer the home, rental and mutual fund account to their Living Trust. The IRAs and annuity remain outside of the Trust governed by the UDPA should a spouse lose capacity. Now, all assets have been designated under the authority of the Trustee or UDPA agent to avoid Court orders and Court jurisdiction over such assets.

Tips for the AHCD and UDPA provisions:

  1. Discuss whether the agent in the AHCD will have the authority in the document to demand funds from the Trustee and/or agent in the UDPA for long term care expenses for the Principal (the person who signs and authorizes the power of attorney.)
  2. Discuss whether the Principal will allow gifting of assets should he/she become incapacitated.
  3. If the principal has digital assets (photos, account numbers, special emails, etc.) there should be a provision in the UDPA to access and transfer those assets, preferably to the Living Trust. As a result, access codes must be, in some way, made available to the agent should the Principal become incapacitated.
  4. Make sure your UDPA has authority to amend your Living Trust for changes in the law. The same provisions must be in your Living Trust.
  5. Unbelievably, I have seen clients with significant retirement accounts, annuities, life insurance, etc. which are not addressed in the UDPA. There must be provisions in your UDPA to designate beneficiaries if none or indicated; to exercise options in these investments such as rollovers and withdrawals; to transfer or exchange contracts; etc.

Remember, if you have a valuable retirement plan, your UDPA can be as important, or sometimes be more important than your Living Trust.

Take care of and nourish these documents for the health of your overall Estate Plan.