There are basic estate-planning documents that every adult needs.
In Texas they are:
- Last Will and Testament
- Financial Power of Attorney (Statutory Durable Power of Attorney)
- Living Will (Advanced Directive to Physicians)
- Medical Power of Attorney
- Declaration of Guardian
- HIPAA Release
In Michigan, they have slightly different names but they cover the same concepts:
- Last Will and Testament
- Financial Power of Attorney (Durable Power of Attorney)
- Patient Advocate Designation
- HIPAA Release
I will address each in turn.
A person’s last will and testament is the document that states how you want your property distributed and your debts and expenses paid at the time of your death. It can also appoint guardians for minor children. It is frequently referred to simply as a will. The person who makes the will is called the testator. You may also hear a female testator called a testatrix but this form is rare.
A will may optionally include one or more trusts, called testamentary trusts, to accomplish specific goals of the person writing the will. And for very large estates, a will can use tax planning strategies to reduce potential federal estate tax issues.
While a will is likely the single most important document in many people’s estate plans, it’s important to know that a will has no legal effect at all until:
- The testator dies; and
- The will is taken to court and the court admits the will to probate.
Until the above happens, the will is just fancy pieces of paper. Thus, a will does nothing if you suffer an incapacity before death. Because a will has no legal effect until after the testator dies and the will is admitted to probate, it’s very important to make sure that you have a durable power of attorney, medical power of attorney, and declaration of guardian in place to state your wishes in the event of your incapacity before death.
Without a will, your property will pass according to the intestacy laws of your residence state and but any real property outside of your state may pass according to the intestacy laws of the state where the real property is located. Intestacy is just a fancy way of saying “without a will.” This may not be what you want to happen considering it can create conflicts between surviving spouses and children, especially if you have children from a prior marriage but are now married to a new spouse. It can also cause many conflicts if you have substantial property before marriage even if you had no prior marriage.
A durable power of attorney is a “financial” power of attorney. Durable means that the power of attorney survives and continues to be effective after a person becomes incapacitated. It lets a person name a third party to act as if they were the naming person. If you are in the hospital recovering from an illness, and you had already named your spouse as your durable power of attorney, your spouse could use the power of attorney to access your accounts to pay bills, temporarily run your small business, or take care of other financial matters. The powers granted may be broad, or may be very specific. They can also be effective at the time of signing the power of attorney or they can only become available at incapacity. These are good areas of discussion with your lawyer.
- In Michigan, you can also name a guardian over your finances and property in this document.
- Texas requires a separate "declaration of guardian" form.
A common mistake with Powers of Attorney (medical or durable) is that loved ones try to use the power of attorney after the person giving the power dies. This is an invalid use of a power of attorney and can even subject the person that is wrongfully using the power of attorney to legal consequences. This is because the power of attorney dies with the person at time of death.
This document may be referred to as a living will. In Texas, tts full legal name is "advanced directive to physicians". However, most people simply refer to it as a living will. In Michigan this can be a standalone document or can be combined as part of a Patient Advocate Designation.
It’s the document that lets you choose to die peacefully or whether life sustaining treatments should be continued if you are suffering from major medical issues.
Note, that if you are awake and conscious and have capacity to make health-care decisions for yourself, then you trump whatever is put on this form. However, it does let your family and your doctors know now just what your wishes are in the event that you are not conscious nor have capacity to make health-care decisions for yourself.
This is a document similar to the financial power of attorney except it deals with medical decisions instead of financial decisions. It lets you give decision making authority to a third person. You can also use it to make specific health-care requests such as “I never want surgery on XYZ body part.” Like the living will above, if you are awake, conscious, and have capacity to make health-care decisions, then you will make those decisions, not your power of attorney. Only when you are incapacitated will the appointed person(s) have a say.
A Michigan Patient Advocate Designation can include guardian nominations as well as living will provisions.
This document is intended as fall back protection in the event that the medical and durable powers of attorney are not sufficient to prevent a guardianship lawsuit and resulting guardianship. This document lets you name your desired guardians to take care of you in the event they are needed. It also specifically lets you exclude persons from being your guardian. A court must follow exclusions but only treats your nominations as guidelines. But, most courts will bend over backwards to try and use your nominees as your Guardians under the idea that you know better than anyone else who would take the best care of you in the event of a guardianship. The main reason a court disqualifies someone from a guardianship is if that person has a criminal background and therefore can’t qualify according to the guardianship laws.
This is the document that lets you receive protected health care information from hospitals and physicians but does not grant any decision-making authority. This typically needs to be a standalone document that is not included in a medical power of attorney or patient advocate designation due to a federal rule that prohibits combining HIPAA releases with the former documents.