Monday, May 1, 2006

Should Your Clients Review Their Powers Of Attorney?

Your clients already have their Durable Powers of Attorney and their Healthcare Designations of Patient Advocate done. Is there any reason they need to be reviewed or updated?

If a Power of Attorney is dated before 2004, it is likely out of date--particularly a Health Care Power. What do I mean by out of date? In April, 2004, the Health Care Portability and Accountability Act (HIPAA) became effective. One of its provisions deals with the privacy of clients' health care information. The Act creates some new terms of art.

These terms are broadly defined and their scope may reach unintended, or at least unsuspected "targets." Protected Health Information is a term for information about the client. It includes such things as billing and insurance information, as well as medical information. A Health Care Provider is any person or entity which has any Protected Health Information and transmits it in any manner electronically. This is a very broad definition. It means that, in addition to hospitals, doctors, dentists, clinics, etc., insurance companies, agents, CPA's, attorneys and many others may be treated as Health Care Providers.

If a Health Care Provider releases Protected Health Information without a specific, written authorization, they may face substantial penalties. An Agent acting under a Power of Attorney often needs just this information in order to make appropriate decisions.

HIPAA provides for the written designation of a "Personal Representative," who may authorize the release of Protected Health Information. This is a term of art which most Michigan Powers of Attorney which were executed prior to HIPAA do not address. These Powers of Attorney need to be updated to comply with the provisions of HIPAA.

Michigan Law also regards a Durable Power of Attorney with suspicion. The Common Law provided that a Power of Attorney was no longer effective when the Agent learned of his Principal's incapacity--exactly the time when an estate planning Power of Attorney is most needed. The Michigan Legislature created the Durable Power of Attorney, which is designed to remain effective. But our courts have said that, because this legislation differs from the Common Law view, these documents must be strictly interpreted. The practical significance of this is that if a power to do some act is not specifically recited in the document, it is likely that it will not be given effect. Over the past several years, we have found--more and more often--that a well-meaning third party will balk at the power. This is another important reason to review---and update your clients Powers of Attorney.

This Newsletter is intended to be informational only and does not constitute legal advice.  If you have questions, concerns or comments, please contact me at:, or by Telephone at 989-652-9923.

Andy Richards


About Issues For Advisors

About 3 years ago, I started publishing a Quarterly E-Newsletter targeted directly at professional colleagues and valued referral sources. The intent of the newsletter was to be a resource for professional advisors, including Accountants, Insurance Professionals, Financial Planners, Brokers, Bankers and Planned Giving professionals. The "Issues For Advisors," newsletters have 2 primary goals: (1) To provide timely, useful information about issues that are either of current significance, have caused a recent problem, or are of a recurring nature to our mutual clients, and (2) To keep the content brief (no more than a single page). It recently occurred to me that there is no "archive" where advisors can go to retrieve, or re-read prior Issues. Rather than "burying" them somewhere in the Smith Bovill website, I created an on-line Resource specifically dedicated to the Professional Advisors enumerated above. In addition to the "Issues For Advisors" Archive, Links to other resources (including, of course, the MICHIGAN ESTATE PLANNING BLOG and THE SMITH BOVILL LAW FIRM SITE), will be featured here.

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