Estate Planning Reference

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Glossary of Estate Planning Terms

A legal document that provides instructions for how to distribute assets after death. A will may also (1) state the guardian for minor children and/or (2) appoint an executor to administer the estate in accordance with the Testator’s wishes.

A person who has died.

The legal process of proving the validity of a will. Probate is often understood to refer to the legal process in which the estate of a decedent is administered.

A Decedent with a valid will is described as being a “testate” and is referred to as a testator (male) or testatrix (female).

A Decedent without a valid will is described as being “intestate.”

Intestate Statute:
A state law that sets out the distribution of assets for a person who dies without a valid will.

A supplement, modification, or addition to an existing will. A codicil is considered to be a legal instrument and so must be executed with the same legal formalities as the will.

Attested Will:
A will is considered to be “attested” when it has been signed by two witnesses, who in Texas must be over the age of 14, in the presence of the testator.

Self-Proving Affidavit:
A document that in court serves as a substitute for live testimony of the attesting witnesses.

Holographic Will:
A will that is entirely in the handwriting of the Testator.

A person or entity who is eligible to receive assets of the Decedent as specified in the will.

A person who is the offspring or adopted child of the decedent.

A personal representative appointed by the probate court to oversee the settling of the Decedent’s affairs.

A personal representative is appointed in the will by the Testator to administer the estate in accordance with the instructions in the will.

A Guardian is one who has the right and duty to care for a person (Ward) or Ward’s property. A Guardian of the Person is charged with the right to care for the Ward and has a duty to provide care, supervision, and protection of the Ward. The Guardian of the Person also has the power to consent to medical treatment of the Ward. A Guardian of the Estate is one who is charged with the right and duty to manage the Ward’s property. The Guardian of the Estate also has the duty to enforce the Ward’s obligations and bring or defend suits involving the Ward.

A Trustee is a person who is responsible for the long-term management of property for the benefit of a beneficiary, such as children, surviving spouse, or other beneficiaries.

Non-Probate Assets:
Assets that do not pass through probate are to be transferred to beneficiaries. Examples of Non-Probate Assets include:
life insurance policies, pension plans, 401(k) plans, IRAs, joint bank accounts, payable-on-death accounts, and property owned as joint tenants with the right of survivorship.

Per Stirpes and Per Capita:
These terms refer to methods of distributing an estate to a group of individuals. Per Capita is distributed equally to each person. Per Stirpes is the distribution to an eligible member’s descendants in the event the eligible member predeceases the Testator.

Incapacity Planning Documents

Statutory Durable Power of Attorney.
Under the Texas Estates Code, a Durable Power of Attorney is a written document that enables the person executing the document (the principal) to designate a holder of the power (the attorney-in-fact or agent) to act on the principal’s behalf for financial matters. The power of attorney can be effective on the date that the principal signs the document or it can take effect when the principal becomes incapacitated or disabled.

Declaration of Guardian for Children.
If one spouse survives the other, the surviving spouse is the natural guardian of his or her minor children. However, in the event that both of the child’s natural parents die, individuals who have children who are under the age of legal majority need to ensure that their estate plan includes a Declaration of Guardian for minor children pursuant to the Texas Estates Code. Each parent must decide who should be given the responsibility of raising the minor child.

Declaration of Guardian for Self.
Texas Estates Code allows a person to designate a guardian of the person and/or estate for himself or herself in case the person later becomes incapacitated to the extent that a court-supervised guardianship is required. This document is called A Declaration of Guardianship in the Event of Later Incapacity or Need of Guardian.

Medical Power of Attorney.
A Medical Power of Attorney allows a person to designate a third party to make health care decisions in the event of the person’s incapacity. The Medical POA’s authority generally begins when a doctor certifies that the individual who executed the Medical Power of Attorney lacks the capacity to make health-care decisions for himself or herself.

HIPAA Authorizations.
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) can be read to require express authorization for the disclosure of confidential information about a patient. The use of this separate document can also alleviate concerns that some medical professionals may have about relying upon medical powers of attorney.

Directive to Physicians.
Also known as the Living Will or Medical Directive, this document indicates the patient’s intentions should the patient become disabled or otherwise lack the legal capacity to make decisions for himself or herself with regard to life-sustaining treatment. Generally speaking, the Directive deals with health care measures that the patient wants imposed should he or she become unable to express his or her desires.

The Texas Estates Code includes a form that separates medical conditions into two broad categories: (a) irreversible conditions, and (b) terminal conditions and gives the patient the choice in each case to have life-sustaining treatment procedures applied or withheld.

Some clients like to also include additional requests to clarify the types of treatments he or she would want or would not want to have under certain circumstances.

  1. (1) Irreversible Conditions and Terminal Conditions. The patient indicates in the directive whether to have life-sustaining treatment either applied or withheld, and this decision must be made for each of two situations: (i) irreversible conditions and (ii) terminal conditions. Each of the conditions is determined by the judgment of the patient’s physician.
    1. Irreversible Condition is one (i) that may be treated but is never cured or eliminated, (ii) that leaves the patient unable to care for or make decisions for himself, and (iii) that will be fatal without life-sustaining treatment.
    2. Terminal Condition is (i) an incurable condition (which appears to be different from an irreversible condition, and (ii) that will produce death within six months even with life-sustaining treatment.
    3. Life-Sustaining is any treatment that sustains the life of a patient and without which the patient will die. The treatment specifically includes artificial life support, dialysis, and artificial nutrition and hydration.
    4. The Six Month Distinction. The obvious distinction between irreversible and terminal conditions is the six-month window. One could almost say that both refer to conditions that are definitely going to cause death, with the only difference being that the former refers to conditions with a six-month or longer life expectancy and the latter refers to conditions with less than a six-month life expectancy.
  2. Without a signed Directive, the law provides that in the event a patient is incompetent to make a treatment decision, a Court- court-appointed guardian, if any, or agent under the Medical POA has the authority to make the decision. Therefore, if you want your Medical POA to make your final life-and-death treatment decisions, you do not need a medical directive. If you do not have a Directive, Medical POA or Guardian appointed, the statute provides the following family members in order to make these decisions: spouse, “reasonably available adult children,” parents, or nearest living relative. Note a Directive is not the same as a DNR (or do not resuscitate).

Trust v Will? What do I need?

You may have heard that trusts are better than wills, or vice versa. Both estate planning tools are used to distribute assets and property, and each has advantages and disadvantages. Some of the differences between Wills and Trusts are highlighted below:

Once filed with the county probate court, a Will becomes a public document. A trust is not filed with the court, and a fully funded trust may allow for full asset distribution without court involvement.

A trust will not exist without trust property. To avoid the probate process, all property must be re-titled in the name of the trust. This can be time-consuming and costly. A Will (and trusts created in a Will) is not funded until death and a properly worded Will may dispose of all property efficiently with less initial cost.

Providing for Minors:
A trust allows the trust creator (Settlor) to determine how much of an asset a minor should receive, and when. It allows the Settlor to have more control over the disposition of assets. Many clients set up trusts within their Wills to provide for minor children.

Creditor Protection:
Trust property may be protected from creditors so long as the Settlor names a Trustee other than himself and retains no control over the trust property.

A carefully worded and funded Trust is not subject to probate upon the death of the Settlor. The property passes according to the terms of the trust. This reduces expenses after death. However, probate would still be required for any property or accounts that were not included in the trust.

Note that trust provisions may also be added to a Will (often referred to as testamentary trusts) to accomplish some of these goals.

Need a PDF version of this information? Download it here: StoneMyers Law – Estate Planning Reference

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