If you are over the age of 18, you are a legal adult and no one other than you is legally authorized to represent or make decisions for you. Yes, even if you’re in high school and living in your parents’ home, you are an adult in the eyes of the law. To help avoid a court or the laws of the State of Texas determining what happens to you and to your estate, you should at least have the following documents:
1. Financial Power of Attorney
In Texas, the financial power of attorney is known as the Statutory Durable Power of Attorney (SDPOA). This document designates an agent to act on your behalf with regard to your property and finances. If you are in the hospital for an extended period of time, for example, the person you have designated as your SDPOA can pay your bills and handle any other financial matters while your are incapacitated. At Thrash Law Firm, we have tailored our SDPOA documents to provide our clients with flexible options when granting powers to their agents.
To sign an SDPOA, you must have capacity, so if you are already in an advanced stage of illness such as dementia or are otherwise incapacitated, it is not possible for you to sign an SDPOA. It’s important not to wait too long to get this and your other documents signed and in effect.
Without an SDPOA, the only way someone could become authorized to handle your estate or finances would be to apply to a court for appointment as the legal Guardian of your Estate. A guardianship like this is expensive, become public record and involves more than one attorney. However, it is at least an alternative for loved ones when it is too late to sign estate planning documents.
2. Medical Power of Attorney
The person designated as your Medical Power of Attorney (MPOA) is authorized to make treatment and healthcare decisions on your behalf if you are incapacitated. This is a broad power and you should carefully consider who you name and discuss any beliefs or preferences you have regarding medical treatment so they can make knowledgeable decisions for you. Naming an MPOA can avoid fighting among your loved ones when they cannot agree upon a course of treatment by putting the decision in the hands of one trusted person.
Again, if you are already incapacitated, it is too late to designate an MPOA and a Guardian of your Person would need to be appointed by a court.
3. HIPAA Authorization
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) enforces very strict punishments on doctors, hospitals and other institutions in possession of your “protected health information” (PHI). As a result, you may be forced to present identification or proof that you are a spouse if your husband or wife is taken to the emergency room. If you didn’t grab your driver’s license or your marriage license on the way out the door or if you aren’t legally married, you could face serious resistance from hospital staff once your loved one is admitted. Avoid this traumatic scenario by signing a HIPAA Authorization and naming all of your loved ones you would want the hospital or doctor to release information to in the event you are sick or admitted.
4. Declaration of Guardians for Minor Children
Who will take custody of your children and be responsible for raising them if you and your spouse are gone? Even if you have made the choice, have you written it down in a legally binding document? Your verbal discussions will not prevent putting your children’s living situation in limbo if you pass away. Don’t do this to them or to your family or friends — write down and sign a legal Declaration of Guardian and to make sure a court would know your preferences and your intentions.
5. Last Will and Testament (or Revocable Living Trust, below)
A Last Will and Testament (LWT) determines the distribution of your property and assets upon your death. Much goes into properly drafting an LWT, and an experienced attorney’s advice cannot be underestimated. Not only will your attorney help make sure your LWT is valid under Texas law, but he or she should also make sure that the LWT qualifies for the simplest type of probate administration in Texas (known as an independent administration).
In addition, it is important that the language in the LWT is clear and unambiguous. A gift such as “my house to my daughter as long as she is alive” may seem clear to the Testator, but does the Testator intend that (a) the daughter is to have a life estate in the home for her lifetime or (b) the daughter is only to inherit the house if she is alive when the Testator dies? Ambiguities like this can result in long and expensive court battles.
An LWT is designed to go through court in what is known as the probate process. In Texas, if you have a valid LWT and will have an independent administration, the probate process is not known to be cost-prohibitive (in some states a percentage of the estate must be paid in order to go through probate, but in Texas, the expense consists of court costs and attorney’s fees). The person designated in the LWT as the personal representative (ideally, in Texas, this person is designated as the Independent Executor) submits the original LWT to the court of proper jurisdiction, attends a hearing to prove up the terms of the LWT and to get approved and officially appointed by a judge as the estate’s representative.
6. Revocable Living Trust
A Revocable Living Trust (RLT) is, like the LWT, created to distribute your assets and property upon your death, but it is also a great tool for protecting your privacy, planning for incapacity and avoiding probate. However, in an RLT, you transfer your assets during your lifetime to the trustees of your trust. Upon your death or incapacity, the people you name to serve as your backup trustees take over the management and administration of your property. Common reasons for using an RLT instead of an LWT in Texas are:
a. Privacy: Minimize the likelihood of fighting
An RLT is administered outside of the courtroom, so the notice and publication requirements required in the probate process do not apply. This often allows your Trustee to take care of the administration of the trust without the interference of litigious beneficiaries. In order to contest the terms of an LWT, for example, a beneficiary essentially just needs to show up at the court hearing or enter their objection in the ongoing probate case. To contest an RLT, a beneficiary would need hire an attorney to open an entirely new court case – a much more expensive and cumbersome process. In addition, an RLT is not published of record like an LWT is in the probate matters, so the terms of the document are not readily available to individuals who are not otherwise named or involved in your estate.
b. Prepare for your long-term illness or incapacity
If you or your spouse have been diagnosed with a long-term illness or can reasonably expect such a diagnosis based on family or medical history, an RLT is an excellent tool for preparing for this process. The people you designate as your successor trustees will be there to take over the management of your estate for your benefit when you can no longer do so yourself. This transition from you to your successor trustee is a private process that does not require the involvement of a court. Ideally, you will avoid the need of an appointment of a legal guardian, a position that is supervised by the court as long as it is in effect.
c. Avoid Probate: Owning property in multiple states
Did you just purchase a second home in Colorado? Inherit a lot in California? Upon your death your estate will have to be probated in every state in which you own real property. To avoid this, you can instead deed your property to yourself as trustee of your trust during your lifetime, so upon your death it will pass to your trust beneficiaries without the involvement of a court (or multiple courts). This is a private and cost-effective result.