Elder Law Center

One Essex Street

Saugus, Massachusetts 01906

Telephone 781.233.4444   Fax 781.231.2222

November 25, 2004

HIPPA PRIVACY RULE AFFECTS DURABLE POWER OF ATTORNEY

 I have previously written about the durable power of attorney (DPOA) and health care proxy as two basic estate planning documents that everyone should have. Last year the Health Insurance Portability and Accountability Act (HIPPA) was passed and results in some problems for those of you that have not updated your documents to take this new law into consideration. Specifically, the problem that will arise is that your durable power of attorney might not be able to be used when needed because of this new privacy law.

DURABLE POWER OF ATTORNEY BASICS

 The agent under a DPOA is given unlimited powers to handle your financial affairs. Generally, these are needed when a person can no longer handle their financial affairs. If someone becomes incapacitated the agent would have the power to transfer assets pursuant to a sound estate plan.

 Many people think that because their assets are held jointly that they do not need a DPOA, “because there is another name on the account”. But this in fact is not true. If you own real estate, both owners must sign the deed (or an agent under a DPOA). A power of attorney is also needed to transfer life insurance policies, sell stock or mutual funds and obtain medical records.

 Power of attorney forms come in many types. There are LIMITED DPOA’s that are specifically for one certain financial transaction. GENERAL DPOA’s cover most everything. SPRINGING DPOA’s take effect only upon the person becoming incompetent. You should seek legal advice to determine which is the right one or ones for you.

 Another strong consideration of why you should have a properly drafted DPOA is that in the event you were incapacitated it would eliminate the need for a court appointed guardian to transfer any assets. This is a costly and time-consuming process. Without a DPOA, a guardian would have to be appointed and seek the approval of the court to transfer assets, even if to the spouse!

HOW HIPPA AFFECTS YOUR DPOA

 Let’s say a couple years ago you decided to have a DPOA prepared and that you selected a “springing” durable power of attorney. You did this because you were reluctant to give your child, or anyone for that matter, the unlimited right to have access to all of your financial assets. Your springing durable power of attorney states that in order for the DPOA to become effective, the agent must get two letters from doctors stating that you are incompetent. The HIPPA law that came into existence about a year ago says that health care providers must obtain consent from patients before they can disclose medical records in “nonroutine” cases.

 Here is the problem. A power of attorney has the right to get your medical records, but in your case the agent under the durable power of attorney, although named, is not yet empowered without getting two doctors letters stating that you are incompetent. The doctors will not release any medical information because of HIPPA. The result is that your named agent under the DPOA is unable to get the information needed to become empowered under the DPOA. You are stuck with a DPOA that cannot be used.

THE CURE

 Assuming that you want to keep your DPOA with a springing power, you should have your DPOA amended to include a HIPPA authorization form, also called a HIPPA waiver, that will allow the named agent under a DPOA to access the medical records required to prove incapacitation. Because I find that getting two doctors to write letters saying that you are incompetent is very time consuming, and that usually there is some urgency for getting the power of attorney to act immediately, we generally advise against the use of a springing DPOA. Instead we advise people to select two individuals as their agent under the power of attorney, who both have the power to act immediately, either alone or together. This way, if something happens to one of them, you still have another that can act for you.

 In light of the recent passage of the HIPPA law, we recommend that you check your DPOA to be sure that it will work as intended.

 This article gives general information and not specific advice on individual matters. Persons wanting individualized advice on matters discussed should contact an advisor experienced in those matters. To the extent this article provides information on legal matters, it is based on law in effect in Massachusetts on the date of posting (laws in effect in other states are often quite different).

 Ronald H. Surabian is a CPA and attorney who works at the Elder Law Center in Saugus, Massachusetts. He also holds a masters in accounting and a masters in tax law. He currently serves on the board of directors of the Massachusetts Chapter of the National Academy of Elder Law Attorneys. If you have any questions please call me at the Elder Law Center, One Essex Street, Saugus, MA 01906 (781)233-4444. To view this or any prior article, please visit our web site at www.elderlawcenter.org

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