Estate & Trust Planning

Estate & Trust Planning

“Estate planning” is a broad term and it is not unusual for it to mean something different for everyone.  I like to use the following definition for estate planning because I think it does a good job of capturing the overall intent of Estate Planning for most people.

 ”We want to manage our property while we are alive, take care of us and our loved ones if we become disabled, and give what we have to whom we want, the way we want, and to whom we want.  Furthermore, if we can, we want to save every last tax dollar, professional fee, and court cost legally possible.”

Here is an article that goes into a little more detail on the component parts of Estate Planning.

Estate Planning – what is it?

When I tell people I am an Estate Planning attorney I often get head nods and affirmations that generally include something like, “OK, so you write Wills for people?” I’ve even had some respond. “Well, I don’t have an estate, but if I did I would call you.” Or, they may even ask if I can help them with their investments. To this last response I quickly answer that I am not a financial advisor so I do not give investment advice, but I can introduce them to the appropriate people.
I have come to believe that most people have a limited view of Estate Planning and they equate it with one of the following: (1) Drafting Wills; or (2) Something done only by the wealthy. In reality, both views are misguided. My view of Estate Planning is much more broad and comprehensive. For example, the definition I teach to my clients is as follows:

“We want to manage our property while we are alive, take care of us and our loved ones if we become disabled, and give what we have to whom we want, the way we want and when we want. Furthermore, if we can, we want to save every last tax dollar, professional fee and court cost legally possible.”

I believe this comprehensive definition encompasses all aspects of Estate Planning and communicates that it is more than just having a Will or plans in place for when you or a loved one passes away.

There are three components to Estate Planning that I work through with my clients: (1) Incapacity Planning; (2) Wealth Transfer Planning; and (3) Beneficiary Protection Planning.

Incapacity Planning

A vitally important part of Estate Planning, and one that is often overlooked, is planning for one’s incapacity, whether it be temporary or permanent. It is here that we determine how the client’s assets will be managed if the client is unable to do so himself. For example, who is going to make sure the bills get paid on time? Who will make investment decisions? Or, what type of facility will the client move to if long-term care is needed?

Some of these decisions can be made by an agent under a Power of Attorney, but in my experience a successor trustee is in a much better position to handle these issues. Furthermore, this is one area where a Will based estate plan falls short because a Will does not take effect until the Testator (the one who created the Will) dies.

Wealth Transfer Planning

This is the area that most client’s think of when they hear the term “Estate Planning.” This is the part of the plan that determines how the assets in the estate will be distributed. There are many hurdles that must be navigated in this phase. For example, who will be responsible for administering the estate? Is privacy a concern? What assets will go to what beneficiaries? And, will estate tax be due and how will it be paid?

Beneficiary Protection Planning

Like incapacity planning, this too is an often overlooked area of Estate Planning. I like to help my client’s accept the following description of Beneficiary Protection Planning: “We will do whatever it takes to ensure that when we are gone: (1) Family harmony is realized; and (2) The inheritance we leave protects, improves, and enhances the lives of our beneficiaries.”

Therefore, I work with my clients to make sure that what they are leaving to their beneficiaries will be protected and preserved for as long as possible. After all, you, the client, have spent a lifetime building your estate, and it should not be blown in an instant by a careless beneficiary.

So, I encourage you to broaden your view of Estate Planning and seek a qualified professional who can assist you in planning for these three important components that can affect everyone regardless of the size of the estate.

If you have any questions about estate planning, contact me.

The main idea behind estate planning is that we work together to devise the best possible plan that will enable you to distribute your estate in accordance with your wishes. There are many tools we will use when we design your plan and the ones we use will be determined by your desires and Your Plan will be founded on either a Will or a Revocable Living Trust. Here are a couple of articles that help explain how these tools work.

What Is a Last Will and Testament and Do I Need One?

A Last Will and Testament, or Will, is a legal document that outlines how the assets in your estate will pass to your surviving spouse, children, or other beneficiaries upon your death. In my opinion, everyone needs a Will. For some the Will may be the only asset transfer document they have; for others, they may have a Will in conjunction with a Revocable Living Trust.

In Texas it is relatively easy to draft a Will; you can even write your own. However, if you choose this method, be forewarned that a Will must meet certain criteria in order to be valid under Texas law. Most people choose to visit an estate planning attorney and have them draft their Will. This is a much safer option because your attorney, if they practice in this area of law, will be familiar with the proper drafting and execution requirements. Your attorney will also be able to counsel you on specific areas and topics that may have a huge impact upon your estate, surviving spouse, and beneficiaries.

In Texas, the testator (the one who makes a Will) must be at least 18 years old, or be married or be a member of the armed forces. If you choose to draft your own, there are two ways to do it:

It can be handwritten. If you choose this method, it must be completely in your own handwriting, signed and dated by you;
You can type it. If you choose this method then it must then meet other requirements. Not only must it be signed and dated by you, it must also be signed by two witnesses who are not related to you, and the witnesses should not be beneficiaries under your Will.
In addition, whether your Will is handwritten or typed, it can, and in my opinion should, have a self-proving affidavit. This document, which is attached to the Will, is also signed by you and your witnesses, and a notary. It serves to prevent the witnesses from needing to appear in court when your Will is offered for probate.

Speaking of probate, a common misunderstanding that I hear often is the belief that if you have a Will, your estate will not have to go through probate. In fact, if you have a Will you are almost guaranteed to go through probate. I say “almost” because if your estate has nothing in it, or if all of your assets pass by beneficiary designation form or by a right of survivorship, then probate is not necessary.

A Will can be very simple and only be a few pages in length, or it can be quite extensive and complex. Your Will can also be drafted so that your assets are left in trust to your surviving spouse or children. This can be a great way protect those assets from their creditors and predators.

If you do not have a Will, or if yours is out of date, please consider contacting a reputable estate planning attorney.

David Meredith can be contacted through this website.

What is a Revocable Living Trust and Should I Consider Having One?

The short answer is that a Revocable Living Trust (“RLT” or “Living Trust”) is another tool that can transfer your assets upon your death. If a client has a Will as the centerpiece of their estate plan I describe that as a “Will based” plan. If they use an RLT as the centerpiece, I describe that as a “Trust based” plan.
Let me start by explaining what a trust is and how it works. A trust is simply an agreement between two parties: (1) the trust maker (often called the Grantor, Trustor, or Settlor); and (2) the trustee(s). The Grantor establishes the trust, sets its rules, determines what property will be in the trust, and decides who will serve as trustee. In addition, the Grantor determines who will benefit from the trust; the beneficiaries. Once the trust is created, the Grantor then passes control of the trust over to the trustee, who manages it for the benefit of the beneficiaries.

Some trusts are irrevocable and some are revocable. As the name suggests, the one I am focusing on here is revocable, meaning the Grantor can decide to get rid of it. In addition, if it is created to be the centerpiece of you estate plan, it is also a Living Trust, because the Grantor has created it during his or her lifetime. In contrast, you can also have a testamentary trust. This type of trust is created is a Will or as a “sub-trust” in an RLT. However, the testamentary trust does not come into existence until the Grantor has passed away.

Perhaps the best way to describe a living trust is through an example. Consider Tom and Cindy Client. They determine that it is time to do their estate planning, and along with their attorney, decide to have an RLT as the centerpiece, or foundation, of their estate plan. They like the fact that an RLT allows them to control and manage their assets while they are alive even if they are incapacitated, provides efficient transfer of their estate upon the death of them, and ultimately provides asset protection for their beneficiaries. Once Tom and Cindy agree on the terms of their trust, they sign it (which puts it into effect) as both Grantors and Trustees.

While Tom and Cindy are alive, they will not only be the Grantors of their RLT, they will also serve as co-trustees, as well as the primary beneficiaries; they still have complete control over their property and assets. Upon the death of one of them, the surviving spouse can serve as sole trustee, or if they desire, the surviving spouse can serve with a co-trustee (perhaps one of their children). Tom and Cindy create their RLT so that upon the death of both of them, their estate is split into three separate trusts, one for each of their children. Each child can serve as their own trustee along with a co-trustee at a predetermined age established by Tom and Cindy. Furthermore, upon reaching another predetermined age, the children can serve as the sole trustee of their own trust.

An RLT is an excellent vehicle to have as the foundation of your estate plan. Look for my next post, where I will compare and contrast a Will and a Revocable Living Trust.

What Are The Differences Between A Will And A Revocable Living Trust? Which One Should I Use?

This is a question that I hear often from my clients. Some believe that a Revocable Living Trust (“RLT” or “Living Trust”) is something that is only used by the rich and famous and a Will is best for everyone else. That is not necessarily true. In fact, I believe an RLT is a better choice over a Will for the following reasons.
Death Instrument vs. Living Instrument

I recently had a friend jokingly say, “I’ve got a Will and I’m dying to use it!” Funny thing is, although he is not dying, he was correct; he will not use it until he dies because a Will is a death instrument. By this I mean that a Will does not do anything for you until you pass away. Then, through the probate process, your Will is brought to “life.” So, think of it this way. While you are alive, you create a Will. That Will is “dead” until you die. Then, through probate (which in Texas can only happen once someone dies), your Will is brought to life.

On the other hand, a Living Trust is created and in effect while you are alive. Upon your death, your successor trustees simply steps into your, now empty trustee shoes, and continues to manage your trust and its assets according to your instructions.

Because a Will does not take effect until probate, a Will can not contain any instructions on how to manage your estate if you become incapacitated. If you have a Will based estate plan, and incapacity becomes an issue, your estate will be managed by either your agent under a Durable Power of Attorney, or a Guardian that the court puts in place.

A Living Trust, however, because it is in effect as soon as you sign it, will continue even if a Grantor is incapacitated. If this happens, a successor trustee, whom you have previously named, simply steps in and manages the trust according to your instructions.

In Texas, probate is not an especially difficult process. But, it does cost time and money, and can be avoided if an RLT is properly funded.

Public vs. Private

Because a Will is subject to probate, it is a public document. In Texas, part of the probate process is filing an inventory of the estate. This inventory is also a public document. This means that if someone wanted to go through the appropriate steps, they could not only find out what your Will said, but also find out what you owned and the value of what was included in your estate.

In contrast, if a Living Trust is fully funded (which I will discuss in a later post) there is no need for probate. Therefore, a Living Trust offers much greater privacy than a Will.

Miscellaneous Issues

There are a couple of other advantages of a Living Trust that I would like to point out. First, if you own property outside of Texas, such as a vacation home in Colorado (or any other state for that matter), you can title your vacation home in the name of your trust and avoid probate in Colorado. An out of state probate, called an ancillary probate, can be expensive and time consuming, and can be avoided with a Living Trust.

In addition, if you are concerned about an estate contest from a disgruntled heir, a Living Trust provides a greater chance that the contest will not prevail, and therefore, your plan will remain intact.

One advantage of a Will however, is that typically it may be a little less expensive.

Whether we use a Will or a Revocable Living Trust, how each is designed will depend on your desires and needs. Take a look at the following to get some insight on the specifics.

How Will My Assets and Estate Pass To My Spouse, Children, and Beneficiaries?

There are two basic ways to leave gifts to your heirs or beneficiaries: outright or in trust.
Outright Distribution

Over the course of history, outright distribution has probably been the most common type of transfer. Here, property (real or personal) passes to the beneficiary with no strings attached. It is the simplest kind of transfer. In legal language, where there is an outright distribution the beneficiary will own the asset in “fee simple.” This means that the beneficiary is free to do whatever they want with the asset; they can sell, give, or transfer it as they desire.

The downside of fee simple ownership is that the assets may also be subject to any creditors or predators of the beneficiary. Therefore, if the beneficiary is ever sued or has a judgment levied against them, their assets may be subject to seizure and ultimately lost. So, there is no protection for the beneficiary.

Often, a beneficiary may acquire an asset though a beneficiary designation form, a “Pay on Death” or “Transfer on Death” designation, or as a joint tenant. Often, these types of transfers are outright transfers and offer no protection for the beneficiary.

Trust Distribution

When assets are transferred in trust, the beneficiary is able to benefit from them, but there is a level of protection that is not found in an outright distribution. In my opinion, it is always better to leave things in trust versus a outright. And , contrary to popular belief, trusts are not only used by the rich and famous.

When something is left in trust, it is not technically owned by the beneficiary. Legal (technical) ownership is held by the trustee. The trustee is obligated by their fiduciary duty to manage the trust and its assets according to the instructions left by the trust maker (Grantor). If the Grantor did not leave any specific instructions, then the trust code will provide the instructions. So, if a beneficiary of a trust gets sued, they are unlikely to loose their inheritance. This is because they do not actually own the assets in the trust; the trustee “owns” the assets while the beneficiary simply “benefits” from the trust.

Some trusts are designed so the trustee is also the beneficiary. So, there may not be a need for a third party trustee. Even if the trustee is also the beneficiary, there is a still a level of protection for the beneficiary. This is because the trustee is bound by the terms of the trust and in many situations can only make distributions from the trust to the beneficiary according to the standards in the trust document.

If the trust is drafted correctly, the judgment creditor can not step in and seize the assets in the trust. You can also enhance the protection offered by a trust, by naming an independent, third party trustee, and allow them to make distributions for any purpose. Or, you can limit the distributions to “ascertainable standards” for an interested trustee.

Trusts can also be designed to last for a specific amount of time or they can last as long as state law will allow. Some states, such as Texas, still abide by the “Rule Against Perpetuities” while other states say a trust can last indefinitely.

It might be worth your time to look at your Will or Revocable Living Trust and see if you are leaving assets to your beneficiaries in trust or outright.

Estate Planning For Families With Young Children – Part 1 of 2

For those families with minor children, estate planning should be a top priority. Unfortunately, for many families that is not the case. They are so busy that they do not take time to put plans in place to care for their children if mom and dad are either incapacitated or suffer an untimely death. My wife and I both work and have two young children, so we know all too well how quickly the calendar can fill up. But we also know how important it is to have contingency plans in case of an emergency.
I have found that for my clients who have young children, their overriding concern is who will care for their children if both mom and dad are either incapacitated or pass away. These concerns are what often prompt them to begin the planning process. These parents are seeking the peace of mind that comes from knowing they have provided for their children.

In Texas, if either a husband or wife passes away without naming a guardian, the surviving spouse will continue to provide care for the children. However, if both parents pass away, or are determined to be incapacitated, and they have minor children, someone will have to be named as a guardian for the children. If the parents have not named qualified persons to care for their children, the Court will name someone for them. This is called a guardianship proceeding and the Court will likely name a guardian of the child’s person, and a guardian of the child’s estate.

For most of my young clients with children, they are primarily concerned about naming a person to be guardian of the child’s person. This is the person or persons who will take over the parent’s role of raising the children. It can be hard for the parents to decide who should fill this role because most parents believe that no one will do a good enough job. I tell my clients that there is no one who will raise your children exactly the way you would, but at least there is some comfort in naming a close family member, or in some cases a close friend, and know that your children will be loved and cared for.

There are some things to consider when choosing these back-up parents. Some of these are:

Do they share your philosophy of parenting?
Do your children know them well?
Do the potential guardians have children of their own? If so, how might that impact your children?
Will the people you name take your children to church and do they share the same faith that you do?
Will your children be able to remain in the same city and attend the same schools, or will they have to relocate to another area?
Are the potential guardians in good health?
In addition to choosing who will raise your children in your absence, it is wise planning to make sure your estate plan includes a trust for your children so the assets you pass along to them will be protected and will be used for your children’s well being. I will touch more on this issue in my next post.

Estate Planning For Families With Young Children – Part 2 of 2

In my previous post I discussed the need and issues involved in naming guardians to care for your young children in case both mom and dad are incapacitated or pass away. In this post we will continue that discussion but focus on naming one or more guardians of the child’s estate.
A guardian of the child’s estate is responsible for managing the money and other assets that pass to the child from the deceased or incapacitated parents. As in the previous post, if either mom or dad pass away or are declared to be incapacitated, the other parent will continue to be the guardian of the child’s estate. However, if both parents are incapacitated or pass away it will be necessary to name someone to manage the money left to care for the children.

Like the guardian of the person, this person plays a vitally important role in the life of the child. While they may not have daily interaction with the child, they are responsible for making sure the assets that the parents left to care for the child are managed responsibly and are used as the parents instructed.

In some cases it is desirable to name separate guardians of the person and of the estate. This method tends to create a “checks and balances” approach because the guardian of the child does not have their “hand in the cookie jar” as they raise the child. On the other hand, this method can create the potential for conflict because the one raising the children must communicate with the one controlling the money and the money may not be quickly accessible in an emergency. For many families, the two roles are filled by the same person or persons.

If the parents established a trust for the children’s benefit, the guardian of the estate and the trustee should be the same person. In this case, the trustee will be bound by their fiduciary duty to carefully manage the money.

Here again, it is very important to pick a person whom the parents trust will manage their children’s money. Some of the considerations are:

Is the person financially responsible with their own money?
Does the person buy things impulsively or do they make careful decisions?
Does the guardian follow directions well or do their own thing?
Do the parents know the person well?
Will the person act in the best interest of your children?

I Am A Business Owner, How Do I Transfer My Business To My Descendants?

For those of you who own a business, have you given any thought to how that business will be transferred to others in the future? How will you ’pass the baton’ to those who will carry it on after you retire?
If you have a family business, you may have some children who work in the business while others do not. Will it be divided equally between all of your children or just between those who work in the business? If only those who work in the business will receive it, will you provide in other ways for those who do not work in the business? If yours is not a family business, do you have some business partners or key employees who will succeed you in the future?

In legal terminology the process of determining how a business will be transferred is called Business Succession Planning. Whatever situation you are in, here is a good article that gives you some things to consider. (you might have to click “skip this add” to get to the article – sorry for the inconvenience.)

Can I Include Charitable Giving In My Estate Plan?

For many people, charitable giving is an important element of their overall estate plan and there are several different ways you can structure your plan to include charitable gifts.
Here is a short article that briefly explains some of the most popular options.

Naming A Trust As The Beneficiary Of An IRA: Is It A Good Idea?

On Friday, April 29, 2011, the IRS issued Private Letter Ruling (“PLR”) 201117042.  An ancillary issue in this PLR was whether an IRA could be titled in the name of a revocable trust during a Grantor’s lifetime. The IRS said that an IRA could not be held in the name of a Trust.

Here is a quick summary of the facts of the case as they relate to this issue:

The account owner was declared to be disabled by the Social Security Administration. The agent of the IRA account owner signed paperwork to transfer the disabled owners IRA to a Trust which would qualify as a Special Needs Trust under state law (the Trust was not here in TX.) The IRA was transferred to the Trust and the taxpayer was issued a 1099 showing a distribution from the IRA to the trust. The IRS stated the 1099 was validly issued because there was a taxable distribution when the IRA was transferred to the Grantor trust. Thus, there was an immediate tax bill due on the entire amount of the IRA.

Please keep in mind that a PLR does not create binding precedent and is only valid for the client who requested the letter ruling. However, they do give us a glimpse as to how the IRS will likely rule in similar situations.

If you are interested, here is a short 10 minute pod cast on Friday’s ruling. It is offered by Bob Keebler, a CPA and an expert on retirement distribution planning.

So, this gives us confirmation that it is a bad idea to transfer an IRA from the owner to a Trust. However, it is still a good idea, and in my opinion wise planning, to name a trust as a beneficiary of an IRA. I personally believe it is best to set up a stand alone trust for larger IRAs to ensure the IRA will be able to take advantage of the stretch provisions. The second best option, although it does have its pitfalls, is to name a sub-trust created inside the client’s Will or Revocable Living Trust as a beneficiary of their IRA. Of course, if the client is married, his or her spouse should likely be the primary beneficiary and the trust should be the secondary beneficiary.

Following are some of the reasons why I believe a stand alone trust is the better option:

Technical reasons:

1.       There are a number of regular provisions in a living trust that will disqualify it as a designated beneficiary trust. For instance, the beneficiaries will not be able to use their own life expectancy for calculating RMDs and may be forced to use a life expectancy as short as 5 years. These provisions include but are not limited to: payment of debts; expenses and taxes; accounting for principal and income; and charitable beneficiaries.

2.       Although it is possible to firewall some or all of these provisions when a beneficiary is given a conduit trust, the process of firewalling becomes much more complicated if an accumulation trust will be used.

3.       Since a standalone IRA Trust with the toggle switch feature can allow the protective benefits of an accumulation trust if needed in the future and the separate IRA trust has already received a PLR stating it qualifies as a designated beneficiary trust (PLR 200537044). Plus, if the IRAs (husband and wife) exceed a $150,000, it makes more sense to use a standalone trust than take the risk that a 5-year RMD rule could apply and that future protection may be lost.

Here are some practical reasons:

1.       A Standalone trust clearly states on the very first page that it is established to meet the requirements of a designated beneficiary trust. In addition, it is much easier for a custodian to read, understand and implement. When these designated beneficiary trust provisions are buried inside a larger living trust, the custodian often delegates their decision to their legal department which can hold up the process of implementing the trust in a timely manner.

2.       By having a standalone trust, it alerts the beneficiaries to the fact that the IRA has special treatment and makes it less likely that the beneficiaries (including a beneficiary that may be serving as Trustee) will immediately go to the custodian and cash out the IRA or take other actions that may have adverse tax consequences.

There are several PLRs that state a trust can be a beneficiary of an IRA. One of the first was PLR 200537044.

How Do I Fill Out The Beneficiary Designation Form For My IRA or 401(k)?

Beneficiary Designation forms are the instructions for the custodian of the IRA or life insurance company that tell them what to do with the funds in the accounts when it is time to distribute them. Life Insurance, IRAs and other Qualified Plans, and Annuities pass by beneficiary designation form.

Most people do not realize that these assets are considered “non-probate assets” and will not pass according to the terms of a Will or Revocable Living Trust unless the “estate” is specifically named as a beneficiary or there is no beneficiary named at all. Therefore, because these assets are often the largest in the estate, it is very important to make sure your beneficiary designation forms are filled out correctly and are consistent with your overall estate plan.

Once again, consider Tom and Cindy Client. Tom has a 401(k) offered to him through his employer and Cindy has her own IRA set up by their financial advisor. They are both wondering who to name as primary and secondary beneficiaries.

There are four common choices for designated beneficiaries that Tom and Cindy can choose from:


The spouse is the most common choice as the primary beneficiary of an IRA and for good reason. This is because when the spouse is the designated beneficiary they do a “Spousal rollover” and rollover the inherited IRA into their own IRA


In cases where there are children from a previous marriage, the children are sometimes named as the primary beneficiaries. This allows the owner to make sure their children receive all, or a portion, of their IRA. However, in my opinion, if children are going to be the primary beneficiaries, I suggest naming a trust as the beneficiary and have the trust determine how distributions are made. More on this in a moment.


For some, a charity is the best option because the full amount of the IRA will be distributed to the charity tax free. For individuals and non-charity beneficiaries, tax will be due when distributions are made (unless the distributions are from a Roth IRA). However, because the charity is tax exempt, there is no income or estate tax due on the distributions.


In my opinion, a trust is a wonderful option as the beneficiary of an IRA or 401(k). The trust can be drafted so that the funds are protected from any creditors of the beneficiaries, distributions can be controlled to ensure stretching, and the assets are kept out of the beneficiaries’ estate for estate tax purposes.

There are several options for how the trust is designed. It can be a separate stand alone trust that only handles the IRA. Or, the trust can be a sub-trust within a Will or Revocable Living Trust, or if the client is charitably inclined, a charitable remainder or charitable lead trust can be used.

Back to Tom and Cindy, ideally they will name each other as primary on their respective forms and then they will name a special trust (which names their children as beneficiaries) as the contingent beneficiary.

  In addition, here is another article that offers some more information on filling out the form.

Along with your Will or Revocable Living Trust, we will also use several ancillary documents such as Durable Power of Attorney, A Medical Power of Attorney, A HIPAA authorization form, A Living Will, and a Declaration of Guardian For Minor Children (if you have children under the age of 18). See the following articles for a discussion on these documents.

What Is A Power Of Attorney For Financial Matters?

A Power of Attorney is a legal document where you the “Principle” name another person as your “Agent” to speak on your behalf with third parties.  For example, let’s assume Tom and Cindy Client are moving to another city.  Tom is out of the country on business and Cindy is the one handling the buying and selling of the houses.  Tom knows that he will not be available to sign the closing documents, so he names Cindy as his agent.  Therefore, Cindy is able to sign for Tom in his absence and complete the transactions.  It is important to note that Tom is not giving up his ability to act for himself, is just letting others know that Cindy can act for him in his absence.

General or Limited Purposes

A Power of Attorney can be for “general” or “limited” purposes.  If Tom wants Cindy to handle all necessary matters for him while he is out of town, he can appoint her as his agent for “General” purposes.  If this is the case, the actual document will need some specific language to indicate that Cindy can handle a wide range of situations.  Most likely, Tom’s Power of Attorney document will actually list what types of things Cindy can handle for him in his absence.  For example, a General Power of Attorney will likely list some of the following transactions: Real estate; tangible personal property; business operations; banking; stocks, bonds and commodities; insurance; gifts; taxes; and family maintenance.

On the other hand, if Tom only wants Cindy to handle real estate transactions then he will have a limited Power of Attorney.  This document would say that Cindy is only able to handle these types of transactions and nothing else.

Immediate and Springing

Tom can also choose to make his Power of Attorney come into effect right away or immediately.  This means that as soon as he signs it, Cindy has the authority to handle the types of transactions listed in the document.

On the other hand, if Tom only wants Cindy to have that authority upon his incapacity, then he can make it “spring” into effect at that time.  This can be problematic however for the following reasons:

  1. There can be problems with determining when someone is officially incapacitated.  Normally a medical doctor will have to make this determination.
  2. Family members may disagree to what extent the Principle is incapacitated;  and
  3. Third parties such as banks may be reluctant to accept the authority of an agent.


Advantages and Disadvantages

A Power of Attorney is a great document and should be a part of everyone’s Estate Planning portfolio.  However, there are some downsides to a Power of Attorney:

  1. Some institutions are reluctant to accept them if they are beyond a certain age.  For example, a bank will be more likely to accept a Power of Attorney signed in the last year than if it was signed 10 years ago.  If it is too old it is considered “stale”;
  2. A Power of Attorney only gives the Agent the authority to act, it does not tell them how you want them to act.  If you want to give your agent instructions, it is best to name them as a successor trustee under your Revocable Living Trust; and
  3. An Agent acting under a Power of Attorney does not have as much authority as a Successor Trustee under a Trust.
What Is A Healthcare Power of Attorney And How Is It Used In Estate Planning?

Like a Power of Attorney for financial matters, a Power of Attorney for Healthcare allows the “Principle” to name someone to act as their “Agent” when healthcare situations arise. Like the Power of Attorney for Financial matters, you are not giving up your ability to speak for yourself; you are simply giving your agent the ability to speak for you if you are unable to do so. The Healthcare Power of Attorney will be used if you are temporarily, or permanently, incapacitated and need healthcare services.

Again, let’s consider Tom and Cindy Client. Assume that Cindy has named Tom as her Agent for healthcare. Unfortunately, Cindy is in a vehicle accident and is taken to the hospital. Surgery is needed and the doctors need to know who to speak with about the particular treatment. Because Tom is her Agent, he is able to speak to the doctors on her behalf and authorize the needed treatments.*


Scope of the Agent’s Powers

The scope of the Agent’s authority depends on what the Principle has determined. Like the Power of Attorney for Financial matters the powers can be general or limited. Some of the things you may want to consider in your Healthcare Power of Attorney are:

  1. Religious objections to particular treatments;
  2. Preferences as to home, hospital, or hospice treatments;
  3. Organ donation; and
  4. Certain treatments for certain illnesses, including addressing the “persistent vegetative state” question.

Selecting the Right Agent

Because you, the Principle, are giving the Agent a great deal of influence over your body, it is very important you have complete trust in your Agent. It is also advised that you speak with your Agent and communicate your desires. This discussion should include some “what if” scenarios to make sure the agent understands their role.

Distinction between a Healthcare Power of Attorney and a Living Will

I will discuss the Living Will (aka Physician’s Directive”) in a later post, but allow me to distinguish between a Power of Attorney for Healthcare and a Living Will. A Living Will is designed to communicate your desires to your Agent and physician’s when/if life support becomes necessary. A Living Will does not give anyone the authority to do anything; it simply communicates your desires for end of life decisions.


Please note, Cindy Client did not suffer any harm in the writing of this post; this fictitious situation was used only as an example!

What is an Advance Directive, or a Living Will, and How Do They Work?

An Advance Directive (also known as a Living Will) is a legal document that communicates your desires about future medical treatments, or the lack thereof, when you are unable to communicate on your behalf. Ordinarily, this document outlines your desires about whether you do or do not want life support in the event that is the only method that will sustain your life.

This document, along with a Healthcare Power of Attorney and a HIPAA Authorization, is a very important document to have. It is a loving document because it can help alleviate some of the stress placed on your loved ones if they have to determine, on their own, whether or not life sustaining treatments, as defined below, should be discontinued. This document allows you to communicate your desires about such treatments in advance and take some of the burden off you family and loved ones.

It is important to note, that your doctor must follow his or her Hippocratic oath. This means they will use whatever methods available to restore you to good health. Because modern medicine is able to keep your body “alive” even after your body is unable to do so on its own, it is a good idea to provide your doctors and loved ones with your own desires about life sustaining treatments. Thus the need for this document.

In Texas, you will need to determine whether or not you want “life sustaining treatments” in two situations:

  1. If you are suffering from a terminal condition; and
  2. If you are suffering from an irreversible condition.

Life sustaining treatment is defined as “treatment that, based on reasonable medical judgment, sustains the life of a patient and without which the patient will die. The term includes both life-sustaining medications and artificial life support such as mechanical breathing machines, kidney dialysis treatment, and artificial hydration and nutrition. The term does not include the administration of pain management medication, the performance of a medical procedure necessary to provide comfort care, or any other medical care provided to alleviate a patient’s pain.”

terminable condition is defined as “an incurable condition caused by injury, disease, or illness that according to reasonable medical judgment will produce death within six months, even with available life-sustaining treatment provided in accordance with the prevailing standard of medical care.”

An irreversible condition is defined as “a condition, injury, or illness:

  1.       that may be treated, but is never cured or eliminated;
  2.       that leaves a person unable to care for or make decisions for the person’s own self; and
  3.      that, without life-sustaining treatment provided in accordance with the prevailing standard of medical care, is fatal.”

For illustration purposes, many Living Will documents offer the following explanation:

Many serious illnesses such as cancer, failure of major organs (kidney, heart, liver, or lung), and serious brain disease such as Alzheimer’s dementia may be considered irreversible early on. There is no cure, but the patient may be kept alive for prolonged periods of time if the patient receives life-sustaining treatments. Late in the course of the same illness, the disease may be considered terminal when, even with treatment, the patient is expected to die. You may wish to consider which burdens of treatment you would be willing to accept in an effort to achieve a particular outcome. This is a very personal decision that you may wish to discuss with your physician, family, or other important persons in your life.

A common form used in Texas looks like this:

Terminal Condition: If, in the judgment of my physician, I am suffering with a terminal condition from which I am expected to die within six months, even with available life-sustaining treatment provided in accordance with prevailing standards of medical care:

Option 1 I request that all treatments other than those needed to keep me comfortable be discontinued or withheld and my physician allow me to die as gently as possible; OR

Option 2 I request that I be kept alive in this terminal condition using available life-sustaining treatment. (THIS SELECTION DOES NOT APPLY TO HOSPICE CARE.)

Irreversible Condition: If, in the judgment of my physician, I am suffering with an irreversible condition so that I cannot care for myself or make decisions for myself and am expected to die without life-sustaining treatment provided in accordance with prevailing standards of care:

Option 1 I request that all treatments other than those needed to keep me comfortable be discontinued or withheld and my physician allow me to die as gently as possible; OR

Option 2 I request that I be kept alive in this irreversible condition using available life-sustaining treatment. (THIS SELECTION DOES NOT APPLY TO HOSPICE CARE.)

What Is A Declaration Of Guardian, And How Does It Work?

A Declaration of Guardian is a legal document where you tell the court who you want to serve as your guardian if there is ever a guardianship proceeding for you. There are two types of guardians: Guardian of your estate, and guardian of your person.

     Guardian of Your Estate

The Guardian of your estate is entitled to possess and manage your property including all of the assets in your estate. They will also enforce any obligation in favor of you and bring and defend lawsuits by or against you.

     Guardian of Your Person

The Guardian of your person has the duty to provide care, supervision, and protection for you. This includes providing clothing, food, medical care (i.e., decisions regarding operations, medications, and medical procedures and treatments) and shelter.

Ordinarily, a guardian of your estate will not be needed if you have named an agent under a power of attorney for financial matters and a guardian of your person will not be needed if you have named an agent under a healthcare power of attorney. However, it is important to know that a Guardianship trumps a Power of Attorney. Therefore, if a Guardianship of the Estate is granted by a Court, the named Guardian of the Estate shall replace the agent named in the Durable Power of Attorney. Likewise, if a Guardianship of the Person is granted by a Court, the named Guardian of the Person will supersede the agent named in the Medical Power of Attorney. The person(s) named will only serve if you become incapacitated.

     Guardians for Minor Children     

For those with young children, it is very important that they name Guardians for their children in case mom and dad are either incapacitated or pass away. These persons will take on an incredibly important role because they are essentially replacement parents. I know that no one can or will parent your children the way you and your spouse do, but this document allows you to name who you want to fulfill this role if it is ever needed.

Without this document, if there is ever a need for your children to have a guardian, the court will use the “best interest of the child” standard and along with a host of appointees used by the court, to will determine whom your children should live with. In Texas, if you have not named anyone to serve in this capacity, the court will first look to your parents (your children’s grandparents), followed by your siblings and so forth.

I find that this can be the single most difficult decision for parents, but it is often the deciding factor that encourages young parents to complete their estate planning. In Texas, the Code allows for parents to name guardians for their children within their Will and in a separate document.

Here are a few miscellaneous articles that you may find interesting in regards to your Estate Planning.

Should I Update My Estate Plan?

Yes, absolutely. No question about it. I could make this one of the shortest and easiest to read posts, but allow me to elaborate on my answer.

In my opinion, it makes total sense to continue your relationship with your estate planning attorney and have your documents reviewed on a regular basis. I personally see no reason to go through the entire process and pay good money, only to never have your plan evaluated.

Our Lives Change

I think one of the most compelling reasons to continue your relationship with your attorney and make sure you plan is up to date is that our lives change. Children are born and they get married, you might have grandchildren, or maybe there is a change in your marital status. Or, maybe there is a change in your income, or you get relocated to a new state, or perhaps you acquire a significant asset in another state such as a vacation home. Or, you might inherit something from your parents or siblings. Whatever the reason, chances are your life will not look the same 5 years from now.

Here are some other reasons to update your estate plan:

  • You reach age 70 ½ and must take required minimum distributions from your IRA
  • The person you selected as a beneficiary is deceased or is no longer deserving
  • Your executor or trustee is deceased or you no longer want them to serve

If you think about it, we do go to the doctor (or at least we should go to the doctor) for annual exams. For our vehicles, we do routine maintenance such as changing the oil and rotating the tires. For our homes we clean the carpets, put on new roofs, re-paint the walls, and update our appliances. All of these things are done to protect ourselves against sickness and to maintain the value of our investments. So, why would we not do the same for our estate plans? Is this the one of the few things that will leave a lasting impression on future generations?

Legacy Plan

All of my clients have the opportunity to enroll in our Legacy Plan. This is our regular maintenance plan that allows us to continue our relationship and ensure that the client’s estate plan is optimally designed for their current situation. For those clients that choose to do so, they get the following benefits:

     1. A face-to-face meeting at least once every two years where we sit down and take inventory of their estate, review beneficiary designations, and make sure their plan is meeting their current needs;

     2. The ability to call or email as needed with no fear of getting a bill;

3. Free word processing changes in their documents if they need to simply change out an executor or trustee;

4. Continued enrollment in our emergency medical directive and contacts program;

 5. Secure electronic access to all of their documents; and

6. A discount on future substantive changes or amendments to their estate plan.

If your estate planning attorney does not offer a regular maintenance plan, I encourage you to find one who does, because your life will undoubtedly change in the next 5, 10, 15, or 20 years.

Can I Use The Internet To Create My Own Estate Planning Documents?

In short, “yes, you can.” Perhaps a better question is, “Should I create my own estate planning documents?” In my opinion, the answer to that question is “probably not.” In today’s world of Google and You Tube we have access to a huge amount of information that explain how to do just about anything. If I need to know how to repair the brakes on my car, chances are I can find an article, or better yet, a video explaining the process. But, just because we can find out how to do something, that does not mean we are qualified to do it; there are things that are better left to the experts.

I consider the legal arena to be one of those areas that is better left to the experts. I am sometimes asked why a person would choose to hire me rather than just go on the internet and draft their own documents. I think there are a couple of good reasons why that is not such a good idea.

1.   A website does not offer you the advice and counsel that a qualified attorney can.

2.   A website does not keep up with changes in the law not does it know the specifics about what your state may require.

For example, here are a couple of paragraphs from terms and conditions from a popular website that offer legal documents: provides an online legal portal to give visitors a general understanding of the law and to provide an automated software solution to individuals who choose to prepare their own legal documents. To that extent, the Site includes general information on commonly encountered legal issues. LegalZoom’s Services also include a review of your answers for completeness, spelling and grammar, and for internal consistency of names, addresses and the like. At no time do we review your answers for legal sufficiency, draw legal conclusions, provide legal advice or apply the law to the facts of your particular situation. LegalZoom and its Services are not substitutes for the advice of an attorney.

LegalZoom strives to keep its legal documents accurate, current and up-to-date. However, because the law changes rapidly, LegalZoom cannot guarantee that all of the information on the Site is completely current. The law is different from jurisdiction to jurisdiction, and may be subject to interpretation by different courts. The law is a personal matter, and no general information or legal tool like the kind LegalZoom provides can fit every circumstance. Furthermore, the legal information contained on the Site is not legal advice and is not guaranteed to be correct, complete or up-to-date. Therefore, if you need legal advice for your specific problem, or if your specific problem is too complex to be addressed by our tools, you should consult a licensed attorney in your area.

3.  It may save you some money up front, but chances are you, or your beneficiaries, may spend thousands more cleaning up the mess that has been created.

Finally, here is a good article I recently came across that points out some of these and other shortcomings of on-line legal work. It is written by Rob Clarfeld, a financial advisor and contributor to Forbes.

What Happens To My Facebook, Linkedin, and Twitter Accounts When I Pass Away?

Ten years ago, I bet you never wondered, “What happens to my social media presence and online accounts when I pass away?”  But today, that is, or should be, a consideration.  Here is a short synopsis that explains the process for social media sites.  It is written by one of my Wealth Counsel collegues, Darlynn Morgan.

Along the same lines, you should also consider compiling all of your usernames and passwords for your online accounts.  For example, your ebay and paypal accounts should be closed when you die but who knows how to log into those and shut them down?  Or for those of us who use online banking or pay bills online, is there someone who knows how to log into the system and conduct transactions if you are unable to do so?  I recommend keeping a list of all your online accounts along with the username and password for each so they can be managed upon your incapacity or death.

My Spouse (or Parent) Seems To Have Periods of Forgetfulness or Dementia, What Do I Need To Do?

Due to our aging population, more and more people are suffering from some level of forgetfulness or dementia. Often, there is not an actual diagnosis by a physician, but the spouse or child of the person begins to notice that their loved one may at times seem confused, or forget something that was once well known.

If you are beginning to see signs of confusion, forgetfulness, or dementia in a loved one, you may want to start thinking about what legal documents you, or your loved one, may need.

Here is a short action list for you to consider.

 1. Find the Will (or Trust), Durable Power of Attorney, Healthcare Power of Attorney, HIPAA Authorization, and Living Will of your loved one. Once you have located these documents, I suggest you read over them and make sure they are up to date and that you, or the one who will be providing care, are named as the agent(s) on these documents. It may be necessary to make some changes to who has been named as an agent. If these documents do not exist proceed to step 2.

2. If the documents in step 1 do not exist, or they are in need of an update, you should speak to a qualified estate planning attorney so they can provide counsel and draft these documents for you.

Most likely, these documents will be sufficient to avoid a costly and time consuming court appointed guardianship. A guardianship is a court procedure where someone is named by the court to serve as the Guardian of one’s Estate, and if needed, Guardian of one’s person. If possible you will want to avoid the guardianship process all together, and the documents discussed here should allow you to do just that.

How Do I Get My Financial Affairs In Order?

Clients often tell me they are wanting to “get their affiars in order” so their spouse or children do not have to worry about it later.  While this will be different for everyone, here is a recent Wall Street Journal article (with a depressing title!) that provides a good overview of what you may consider.

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