There are many legal strategies involved in estate planning, including wills, revocable living trusts, irrevocable trusts, durable powers of attorney, medical powers of attorney, and other health care documents. We have had many people say that they do not have an estate plan. We believe most people would be surprised to learn that they actually do have a plan. In the absence of legal planning otherwise, their estate will be distributed after death according to Texas's laws of intestacy. Of course, this may not be the plan they would have chosen. A properly drafted estate plan can replace the terms of the State’s estate plan with your own.
Your Last Will and Testament is just one part of a comprehensive estate plan. If a person dies without a will, he or she is said to have died "intestate," and state laws will determine how and to whom the person's assets will be distributed. Some things you should know about wills:
Trusts come in many "flavors." They can be simple or complex and serve a variety of legal, personal, investment or tax planning purposes. At the most basic level, a trust is a legal entity with at least three parties involved: the trust-maker, the trustee (trust manager), and the trust beneficiary. Many times, all three parties can be represented by one person or a married couple. In the case of a revocable living trust, for example, individuals may create a trust (the trust-maker) and name themselves the current trustees (trust managers) who manage the trust assets for their own benefit (trust beneficiary).
Depending on the situation, there may be many advantages to establishing a trust, including avoiding probate court. In most cases, assets owned in a revocable living trust will pass to the trust beneficiaries (or heirs) immediately upon the death of the trust-maker(s) with no probate required. Certain trusts may also result in tax advantages both for the trust-maker and the beneficiary. Trusts may be used to protect property from future, potential creditors, or simply to provide for someone else to manage and invest property for the trust-maker(s) and the named beneficiaries. If well drafted, another advantage of trusts is their continuing effectiveness even if the trust-maker dies or becomes incapacitated.
A power of attorney is a legal document giving another person (the attorney-in-fact) the legal right (powers) to do certain things for you (the principal). What those powers are depends on the terms of the document. A power of attorney may be broad or limited and specific. All powers of attorney terminate upon the death of the principal. Powers of attorney can be effective immediately or upon the incapacity of the principal. When the intent is to designate a back-up decision-maker in the event of incapacity, then a durable power of attorney should be used. Durable Powers of Attorney should be frequently updated because banks and other financial institutions may hesitate to honor a power of attorney that is more than a year old.
An advance directive is a document that specifies the type of medical and personal care you would want should you lose the ability to make and communicate your own decisions. Anyone over the age of 18 may execute an advance directive, and this document is legally binding in Texas. Your advance directive can specify who will make and communicate decisions for you, and it can set out the circumstances under which you would not like your life to be prolonged if, for example, you were in a coma with no reasonable chance of recovery.
A document that goes hand-in-hand with your advance directive is an authorization to your medical providers to allow specified individuals to access your medical information. Without this authorization, your doctor may refuse to communicate with your hand-picked decision maker, in fact your doctor may not be able to disclose pertinent health information to your loved ones.