Are Out-of-State Advance Directives Valid in Your Home State?

Beverly Flaxington is a practice management consultant. She answers questions from advisors facing human resource issues. To submit yours, email us here.

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Note from Bev: I have been partnering with experts in the elder care arena. I receive so many questions related to legal documentation that this week I’ve asked our partner, Howard Krooks, to provide some insight.

Howard says they frequently receive questions about clients’ advance directives, such as durable powers of attorney and health care advance directives. Here is the information he provided:

These documents are designed to allow another individual, the agent, to make decisions for your client when s/he is unable to do so due to incapacity, whether physical or cognitive. Learning how to deal with clients who have advance directives in place is important for advisors since many people plan for incapacity by executing durable powers of attorney and health care advance directives.

Here, we are concerned primarily about the durable power of attorney, which is a legal document wherein a client may appoint another individual, an agent, to make financial decisions for him/her. While prevalent, the documents themselves don’t tell the advisor how to deal with an agent, or what to do if an out of state advance directive has been presented to the advisor. Should that advance directive be honored? If it was executed out of state, and in accordance with the laws of another jurisdiction, can it be honored in the advisor’s home state?

Let’s say a client moves from New York to Florida with a New York power of attorney appointing her son as agent. You have been dealing with this client in Florida for about five years without issue, running investment decisions by her, discussing advantages and disadvantages of each proposed transaction in advance, and obtaining approval for each trade before it is consummated. Lately, however, you are noticing that your client is not as responsive when you present options to her, oftentimes not responding at all. Even when she makes herself available to you, you find her asking many of the same questions over and over, and you are no longer certain that she understands the implications of the proposed investment, even after multiple discussions.