The research is clear – we are living longer and needing more medical care as a result.  This makes the Power of Attorney for Healthcare (also referred to as a Patient Advocate Designation) a critical component of any well-drafted, comprehensive estate plan.

But did you know that there is another healthcare-related document that can be critically important to managing your finances when you are unable to do so yourself . . . a document that many estate plans lack?  It’s a stand-alone HIPAA authorization and it can help ensure a smooth transition for your financial agent(s) and help your family stay out of court.

You see, the trusted family, friends, or financial institutions that many individuals choose to manage their financial affairs if they are incapacitated are not necessarily the same ones chosen to make healthcare decisions.  A comprehensive estate plan will use Financial Powers of Attorney and Trusts to help ensure your finances can be handled by those you trust most if your are unable to manage them yourself.

Many times the authority given to others in Financial Powers of Attorney or Trusts do not become “effective” until you are incapacitated or otherwise unable to manage your financial affairs.  A physician is usually involved in making the determination of incapacity and signing the necessary certifications so that your financial agents can begin managing your financial affairs.

Traditional planning and the Health Insurance Portability and Accountability Act (HIPAA) can throw a wrench into the situation.  How?  HIPAA restricts access to your medical records to those who you authorize.  Because your financial agents may not be the same as your healthcare agents, any HIPAA authorizing language in your Healthcare Power of Attorney will not cover them (you do have HIPAA authorizations in your Healthcare Power of Attorney, right?).  Without that authorization, the physician most likely will not sign off on the necessary documentation and your family (and agents) could end up having to go to court to move forward.  This would likely lead to costs and delays you no doubt wanted to avoid.

That’s where the stand-alone HIPAA authorization comes in.  It allows you to name individuals who can have access to your medical records without giving them authority to make medical decisions.  Certainly your healthcare agents would be included, but you should also consider including your financial agents and trustees (if you have a trust).  Doing so, will help ensure that the transition of authority can be a smooth one and your estate plan works when it is needed most.

Michael Lichterman is an estate planning and business planning attorney who helps families and business owners create a lasting legacy by planning for their Whole Family Wealth™.  This goes beyond merely planning for finances – it’s about who your are and what’s important to you.  He focuses on estate and asset protection planning for  the “experienced” generation, the “sandwich generation” (caring for parents and children), doctors/physicians, nurses, lawyers, dentists, professionals with minor children, family owned businesses and pet planning.  He takes the “counselor” part of attorney and counselor at law very seriously, and enjoys creating life long relationships with his clients – many of which have become great friends.