• Estate Planning

1. Health Care Power of Attorney. A power of attorney is a legal documents in which the principal (the person who creates the power of attorney) grants another trusted individual (and one or more back-ups) the authority to manage the principal's health care. A health care power of attorney allows the principal to name an individual (called the attorney-in-fact or agent) who can make medical decisions for the principal IF the principal is unable to make or communicate those decisions on his own. As long as the principal can communicate with his doctors and make his own decisions, he does so. The power of attorney is used if the principal is unconscious or too ill to make decisions, or if he has suffered cognitive (thinking and reasoning) changes that make it unlikely that the principal can make an informed, rational decision. A health care power may also include advance directives (see below) to guide the agent and doctors in their choices. A health care power of attorney may be canceled or revised freely by the principal. The purpose of the health care power of attorney is to be sure that the principal will always have someone to speak for him in a medical crisis.

2. Financial Power of Attorney. Like the health care power of attorney, a financial power of attorney (often called a durable power of attorney becomes it generally remains in effect until revoked by the principal or until the principal dies) allows the principal to name a trusted individual (and one or more back-ups) to manage financial matters for the principal, and only for the benefit of the principal. The financial powers granted may by quite limited (such as the power to pay his rent while the principal spends the summer out of state) or quite broad. Depending on the state in which the principal lives, the financial power of attorney may go into effect as soon as the principal signs it, or he may have the option to create the power of attorney now, but to delay it becoming effective until he should become incapacitated (unable to manage his own finances for physical or mental reasons). Even if the power of attorney becomes effective immediately, the principal gives up no powers; the principal may continue to manage all of his finances independently, but the agent may also have the right to manage those finances. Because a financial power of attorney does NOT transfer ownership of the principal's money or other assets to the agent, but only allows the agent to manage them as needed for the benefit of the principal, a power of attorney may be a better choice for many individuals than adding children or others as co-owners on the principal's bank accounts or real estate; please consult an attorney for advice regarding which plan is better for you. A financial power of attorney can be canceled by the principal, if he follows state procedures for doing so. The primary purpose of a financial power of attorney is to ensure that the principal, if he were to become seriously ill, would always have someone to manage the principal's assets to provide care for the principal and to pay the principal's debts, as appropriate. The risk of creating a financial power of attorney is that it does grant another person access to the principal's bank accounts, investments, real estate and other property and could be misused and the property stolen. An individual should be very cautious in choosing an agent for a power of attorney; the agent should be someone the principal can trust completely and someone with the experience to manage the principal's finances wisely. Authority under a power of attorney ends with the principal's death (or when the agent is notified of that death).

3. Advance Directives. An advance directive, which is similar to a living will but a bit more powerful, permits its creator, the principal, to set out written guidelines explaining what health care measures the principal wants if she is too ill to make her own decisions in the future. For example, advance directives often discuss whether the principal, if she were close to death and not expected to recover, would want to have her heart, if it stopped, restarted by cardiopulmonary resuscitation (CPR), would want to have a ventilator or respirator breathe for her if she could not breathe on her own, or would want artificial nutrition or hydration (often referred to as "tube feedings") if she could not eat or drink on her own. Other items often discussed in advance directives are the principal's feelings about antibiotics or surgery if the principal is terminally ill, about mental health treatment, about care facilities, guardians, organ or body donation and autopsy. A principal will sometime try to describe what she believes to be an acceptable quality of life for her. The purpose of the advance directive is to provide guidance to the principal's agent or doctors regarding what type of health care the principal would find desirable or unacceptable for her. These advance directives are sometimes included in the text of a health care power of attorney or they may be stated in a separate document.

4. Appointment of Agent to Control Disposition of Remains. The authority granted by a health care power of attorney, which is only for medical decisions, ends with the death of the principal. There have been situations where it is unclear who has the authority to say whether the body of a deceased individual should be buried or cremated, or where the body should be buried, what type of funeral should be held, etc. Many states hold that the body of the deceased belongs to the next of kin, who can dispose of the remains as he or she believes is appropriate. Similarly, Texas has set out a listing of next of kin, with the highest surviving person on that list having control of the body of the deceased. Because that is not always what the deceased would have wanted, or simply to clarify matters for a grieving family, Texas, unlike most states, gives the individual (before death, obviously) the opportunity to appoint an agent to control disposition of the individual's remains and to give that individual instructions regarding what the individual wants done after his or her death. This is a sort of power of attorney that remains in effect after death; it is an unusual, but useful, legal document, that names the individual who will control the remains and can provide very specific instructions about funeral wishes, burial vs. cremation, choice of cemetery, headstone and other matters.

5. Will. After an individual dies, her debts must be paid and her remaining property distributed. A Will is a legal document that the individual creates prior to death. The document specifies who is in charge of the estate (what the deceased individual owned at the time of death) after the individual dies and will pay the deceased's debts (to the extent the estate has funds to do so) and distribute the remainder of the estate according to the instructions stated in the Will. That person is called the Personal Representative or Executor of the estate. Death is an unavoidable part of life. Creating a Will is part of planning for death in order to leave affairs in an organized and manageable state and to lessen disagreements among potential heirs. Wills must meet certain state requirements to be legal and enforceable; an attorney can help an individual create a valid Will. If an individual fails to create a Will prior to death, state statutes determine who will inherit the assets of the deceased; those may not be the individuals to whom the decedent wished to leave her property.

6. Trust. Some individuals or families choose to create a Trust (a fictional entity that can hold title to the individual's assets) prior to death. While not everyone needs a Trust, trusts can have some advantages in financial management and lessening estate taxes after death, especially for large or complex estates. An individual's trust can own the individual's property. While the individual may die, the trust does not. Therefore, after the individual dies, the trust can continue to pay debts and can then distribute trust assets to the beneficiaries designated in the trust, avoiding much or all of the probate process. A trust can also help with financial management during an individual's lifetime, for example, if the individual becomes too ill to manage assets personally. Trusts are also helpful in making charitable gifts and to ensure that the gifts given to children or grandchildren, before or after death, are managed wisely. An estate planning attorney can advise his or her client as to whether a trust would be helpful to that client.

7. Probate of an estate. When an individual dies, her assets (those not held in a trust) are suddenly in limbo. They belong to someone who is deceased. The deceased cannot act to transfer those assets to anyone else, even to those heirs or beneficiaries designated in her Will. Some living person must have the authority to liquidate investments, transfer bank accounts, sell houses, sign deeds, etc. Probating an estate is all about managing the deceased's assets to pay her valid debts and to then distribute the remaining assets to the heirs and beneficiaries named in the Will (or if there is no Will or Trust, to those heirs determined by state law). Some assets will not need to be probated; assets held in joint tenancy or those on which there is a legally designated beneficiary may not need to be probated (for example, a life insurance policy with a named beneficiary, a bank account with a joint tenant or a "pay on death" beneficiary). The Personal Representative or Executor named in the Will takes charge of the other assets, but usually must be granted authority by the local probate court in order to manage those assets (there are some exceptions for small estates). An attorney represents the Personal Representative before the court, files the proper documents to open an estate file with the court, advises and assists the Personal Representative during the administration of the estate, and files the needed closing documents with the court when the estate has been fully settled (debts paid, taxes filed, and the remaining assets distributed to the beneficiaries or heirs).

WARNING: Please do not interpret any of our web site's text under this section as legal advice. Our text is only here to provide some basic educational material that may help you identify topics of interest to you. Each person's situation is unique and no one legal solution fits everyone. If you have a legal concern or need, please contact your own attorney, or an attorney who practices in the area of law related to your concern, and ask that attorney for specific legal advice. If your concern is for a family member or friend, be sure to contact an attorney who practices in the state where that person resides. Laws differ from state to state and attorneys can only practice, or give advice, regarding laws in the state in which the attorneys are licensed to practice law. By the way, it is okay to ask an attorney up front how much the attorney charges for meeting with clients and for specific services. Some attorneys charge for the type of representation (for example, the attorney can tell you that he will charge a certain amount to prepare a Will or to establish a guardianship) and some charge by the hour. Some attorneys will ask for a deposit before beginning work for you (often called a retainer). All of these are valid methods of charging clients for services, but it may help you to ask for enough information on the attorney's billing customs to estimate costs in advance.