When you undertake your estate planning, you don’t want to do only a so-so job. This is not an area of your life where you just want to “wing it.” You want to make sure you have all of the essential legal documents to your estate planning, and you may want to venture beyond the essential to the non-essential, but helpful, documents. In order to do that, you need to know what all of these documents are.
The basic documents to include in your estate plan are the following:
1. Will. Your will disposes of your assets in the manner in which you want them distributed. It also allows for the appointment of a personal representative of your estate, in case there are debts to be paid or claims to be made from third parties. Parents of minor children also usually name their chosen guardian for their children in their wills.
2. Durable Power of Attorney. Also known as the “financial power of attorney,” this document appoints an agent to handle your assets, from paying bills to overseeing investments, when you are unable to do so yourself. This document is usually made to be immediately effective, meaning your agent can act on your behalf even when you are not incapacitated, for convenience purposes.
3. Medical Power of Attorney. In the medical power of attorney, you appoint an agent to make medical decisions for you when you are incapacitated and unable to make those decisions yourself. This document is only effective when you are incapacitated.
4. HIPAA Release. Your personal health information is protected from disclosure by federal law. The HIPAA Release gives your permission for hospitals and medical professionals to share your medical information with those people you name. Your agents under the Durable and Medical Powers of Attorney should be named in this document, but you can name other friends or family as well.
5. Directive to Physicians. This is your “living will.” It sets forth your wishes regarding the use of life-sustaining technology when you have a terminal or irreversible condition and cannot participate yourself in the decision to use life support.
6. Designation of Guardian. Sometimes an adult’s incapacity degrades to the point that they need a guardian appointed to be legally responsible for that person’s well-being. The Designation of Guardian allows you to state who you would want in that caregiving role, and maybe more importantly, who you would not want appointed to that role.
7. Designation of Burial Agent. This document is added to the estate plan to let hospitals, funeral homes and crematoriums know who has authority to make decisions with regard to your body after you have passed away. It also may set forth your specific wishes as to the handling of your body.
The following documents may not apply to every individual, but can be helpful additions to the essential estate plan:
8. Trust. Revocable living trusts are usually created to hold your assets during your lifetime, and they include sections addressing the disposal or distribution of your assets after your death. In Texas, not everyone needs a revocable living trust; you should speak to your estate planning attorney to see if such a trust would be right for you. Testamentary trusts are trusts created within a will, to provide for asset management on behalf of a beneficiary. These are extremely helpful for those inheriting family members who are minors, who have trouble managing their money responsibly, or who have issues with creditors or divorce.
9. Transfer on Death Deed or Ladybird Deed. These are two types of deeds that allow you to pass real estate to a named beneficiary without the need to go through probate. The deeds are recorded during your lifetime but only go into effect upon the filing of an affidavit regarding your death. They can save your beneficiary the expense and delay of probate proceedings.
10. Survivorship Agreement for Community Property. Much like a Transfer on Death Deed, this agreement between spouses provides that if one spouse dies, the named property automatically passes to the surviving spouse. It is often believed, mistakenly, that the passing of community property to the surviving spouse happens automatically. This agreement is usually used in the context of real estate, such as homes.
11. Cohabitation Agreement. When two people live together but are not married, there is a risk of informal marriage, especially if there is a disparity of wealth between the two partners. If one partner dies, the other partner may claim that they were informally married, thereby entitling the surviving partner to particular spousal rights to property. The Cohabitation Agreement makes it clear that the partners are not married, and that each partner’s property belongs to him or her alone, thereby protecting it for the deceased partner’s beneficiaries.
12. Marital Agreement. Marital Agreements can be helpful in a myriad of situations when compiling estate plans for married couples. The most common use for a marital agreement is to make it clear what property is each spouse’s separate property, and what property is community property. It may also provide that the income from separate property remains the separate property of the owner of the underlying asset, which is not the default rule in Texas.
13. Caregiver Agreement. These agreements are executed between parents and their adult children who are serving as their full-time caregiver. These agreements document any payments to the child/caregiver and any benefits (such as the right to live with the parent rent-free), so those payments or benefits are not considered gifts by the parent. Continued gifts could implicate gift tax issues or cause friction among siblings.
14. Supportive Decision Maker Agreement. Some folks have difficulty knowing how to get all the facts needed for a decision, or they have problems assimilating information into a format that they can understand. This agreement appoints an agent to receive information on their behalf and convey it to the principal so the principal can make his or her own decisions. This supports the dignity and autonomy of the principal, who just needs a little help when they otherwise have the capacity to make their own decisions.
15. Entity Formation. Entities such as corporations and limited liability companies are the main method in Texas to protect business owners from personal liability on claims made against their businesses. The business assets are segregated for liability purposes, so that third party claimants cannot reach the business owner’s home or other personal assets when they are sued on a business claim.
Some of these documents belong in the estate plan of every person in Texas. Others may or may not apply to your personal circumstances. Schedule an appointment with an estate planning attorney at Hammerle Finley to discuss what is right for you.
