Don’t Leave Your Family Guessing:
The Need for Wills and Powers of Attorney

By Jerry M. Scroggins
and Amanda M. Gyeszly

In these days of Terri Schiavo media coverage, intra-family litigation and medical privacy laws, it is particularly important for an individual to set forth his desires for medical care, the management of assets in the event of incapacitation, and ultimately the disposition of assets upon death in a way that avoids conflict and guessing among loved ones. As discussed below, several different instruments allow individuals to set forth their desires regarding management of assets during life and after death, as well as preferences with respect to future medical treatment.

Medical Power Of Attorney
The Medical Power of Attorney (MPA), which is a statutory form adopted by the Texas Legislature, is an important tool in planning for incapacity.1 Promulgated under the Health and Safety Code2, any Medical Power of Attorney should be substantially similar to the form provided. Due to hospital and doctor familiarity with the statutory form, it may be advisable to not alter the form any more than necessary to achieve a client’s goals. In addition, the statutory form includes a separate disclosure statement, which gives a “Plain English” description of the MPA.3
An MPA allows an individual to designate who will make her medical decisions in the event that she becomes incapacitated and unable to make such decisions. The statutory form creates a “springing power of attorney,” meaning that the agent’s authority to make medical decisions for the principal under the document becomes effective upon written certification by a physician that the principal is unable to make her own health care decisions.4 The MPA form provides a blank for the principal to set forth limitations on the decision-making authority of the agent, and allows the principal to designate alternates to serve in the event of the appointed agent’s resignation or failure to serve. Under the statutory form, it is possible to name two or more agents to serve jointly or singly under the MPA. However, in drafting the Medical Power of Attorney for two or more agents required to act jointly, the document should specify how decisions are to be made where a disagreement arises between the agents, or how decisions are to be made if one of the agents cannot be located. The MPA is revocable at any time, and must be signed in the presence of two witnesses, at least one of whom is disinterested.5 Many clients find the MPA to be an invaluable tool in ensuring that their medical decisions are made by the person of their choosing.
Third party access to an individual’s medical records has become more complicated due to the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”).6 The limitation on such access imposed by HIPAA has impacted the advance planning in this area. The powers granted under an MPA are not in effect until the principal is unable to make medical decisions for herself. Often times, the principal may have sufficient capacity to make medical decisions, but needs assistance from friends or family members in filing insurance claims, filling prescriptions, arranging appointments for medical procedures, etc. To facilitate the agent’s access to medical information, a separate power of attorney is often executed, which allows access to medical records for the person designated under the MPA. Unlike the MPA, the Power of Attorney for HIPAA–type access is generally operative at any given time.

Directive To Physicians And Family Or Surrogates
The Legislature has set forth a form for written Directive to Physicians and Family or Surrogates.7 Often referred to as a “Living Will,” the Directive allows an individual to evidence his intention to receive or not to receive life sustaining treatment (defined as treatment that sustains the life of the patient and without which the patient will die) where the individual (i) has a terminal condition and is expected to die within six months, or (ii) has an irreversible condition8 so that the individual cannot care for himself and is expected to die without life sustaining treatment. This type of document has become increasingly popular after the widespread media coverage of legal battles surrounding Terri Schiavo.
Some clients choose to execute both an MPA and a Directive to Physicians. However, care should be taken so that the two documents do not conflict with each other. One way to accomplish this is to have the MPA refer to the Directive to Physicians and to direct the agent to make decisions in a manner consistent with the Directive to Physicians. When the documents conflict, the one executed most recently controls.9 A directive can be revoked at any time, surprisingly even after the incapacity of the individual, and such revocation can be oral.10

Designation Of Guardian In The Event Of Future Need
The Texas Probate Code allows an individual to designate a guardian of his person and/or estate in the event that a guardian is needed.11 The Code also allows an individual to expressly disqualify certain individuals from serving as guardian. This document is particularly helpful for individuals who wish to have a person other than those listed in the statutory hierarchy named as guardian should the need arise.12 This is often important for unmarried individuals, individuals who have strained relationships with children, or individuals who believe his or her family may fight over who should be appointed as guardian.

Durable Financial Power Of Attorney
The Durable Financial Power of Attorney is an important tool in planning for incapacity and avoiding the need for appointment of a guardian in the event of incapacity. Often times, the appointment of a guardian is a time consuming and expensive process, and the guardian is required to post a bond and have most actions approved by the Probate Court.13 The Durable Financial Power of Attorney allows an individual to designate who can sign his name and enter into financial transactions on his behalf. These documents are also commonly referred to as “General Powers of Attorney” (indicating that the powers granted to the agent are broad and general) and as “Durable Powers of Attorney” (meaning that the powers granted to the agent are effective even if the principal becomes incapacitated).
The principal has two options in establishing the effective date of his agent’s authority. The principal can make the power effective immediately upon execution of the document, or he can create a “springing power of attorney,” which is effective only upon the principal’s subsequent disability or incapacity. The authors of this article recommend that the power of attorney be worded so as to become effective upon execution, if that option corresponds to the principal’s wishes and the agent appointed. If a springing power of attorney is executed instead, the document should specify very clearly the circumstances under which the agent’s authority becomes effective. Otherwise, the issue of incapacity or disability could be disputed and complicate matters.
The statutory form for the Durable Financial Power of Attorney provides for written certification of incapacity by a physician, which can be difficult to obtain, and can cause a delay in accessing funds or completing financial transactions. An additional benefit of a power of attorney becoming effective upon execution is that it allows the principal to supervise the actions of the agent while the principal still has the ability to revoke the power.

Living Trusts / Revocable Trusts
A Revocable Trust (or a “Living Trust”) allows an individual (the “Grantor”) to place assets in a trust for her benefit while serving as trustee and maintaining the right to make distributions to herself during her lifetime. The Living Trust also allows the Grantor to designate a successor trustee to serve if the Grantor becomes incapacitated, and this successor trustee will manage the assets for the benefit of the Grantor during her incapacity. This can be an important tool for avoiding guardianships of the individual’s estate because the assets are already placed in a trust under management by a trustee of the Grantor’s choosing, thus obviating a need for a court-appointed guardian to manage the assets. The Grantor’s ability to designate who will manage his or her assets upon incapacity makes the Revocable Trust a useful tool for planning for incapacity. An alternative is to use a Financial Power of Attorney to cover this contingency.
An additional benefit of a Revocable Trust can be the avoidance of probate. In many other states, probate can be a very expensive and time consuming process requiring substantial court supervision and significant attorney fees. In these states, the use of a Revocable Trust is quite common to avoid having assets pass through probate.14 However, in Texas the probate system is quite streamlined, and the creation of Revocable Trusts for the purpose of avoiding probate is less common. Generally a “pour over” Will is prepared in conjunction with a Revocable Trust to place any assets owned in the Grantor’s name into the trust at her death.
Upon the death of the Grantor, if all of her assets are in the name of the Revocable Trust, it will be unnecessary to probate the will. Frequently, however, the Grantor fails to place one or more assets in the trust, which makes it necessary to probate the will to cover the assets not placed in the Revocable Trust. Revocable Trusts typically specify the distribution of the individual’s assets upon her death, serving as somewhat of a substitute for a detailed will. For privacy reasons, some clients may prefer to use a Revocable Trust instead of a will to dispose of their assets upon death. When a will is probated, the Executor is required to file a Probate Inventory with the court and the inventory becomes a public record.15 With a Revocable Trust, the assets transferred to the Revocable Trust prior to death are not required to be disclosed publicly.

Preparing A Will
Most people recognize the need to prepare wills once they have children. However, a will can be useful in all phases of life, even if an individual has no children or has only adult children.
One of the major benefits to having a will when an individual has minor children is that an individual may, in his will, designate the guardians of the person and estate of his children if something were to happen to both of the child’s parents. Additionally, an individual may provide for a trust to hold assets for a child’s benefit (either until the child attains a certain age or for the child’s lifetime) to avoid placing assets in a court registry or having a guardianship of the estate for the child if the child is a minor when he or she inherits.
Another major advantage to preparing a will is to avoid disagreement among family members after an individual is gone. For example, an individual can specify who will receive certain personal items under a will. If the same individual died without a will, under state law the family members would split personal effects, but would not have any specific guidance as to which personal effects pass to which individual, leaving significant opportunity for disagreement.
Perhaps the biggest advantage to preparing a will in Texas is the ability to name an Independent Executor of the estate.16 As mentioned above, probate in other states can require significant court supervision, but in Texas where an individual is clearly named as Independent Executor under a will, the Executor has minimal court supervision.17 The Executor is required to notify and pay creditors, file an inventory with the court, file a U.S. Estate Tax Return (if necessary), and distribute the assets in accordance with the will.18 However, the Independent Executor does not have to seek court permission to sell property, pay debts or make distributions. Where a will does not exist, or where the will does not specify an Independent Executor, the court can require that the personal representative serve as Dependent Executor or Dependent Administrator, and require such personal representative to obtain court approval before practically any action can be taken with respect to the assets of the estate.19 Although some judges may allow the beneficiaries to agree on the advisability of having the personal representative serve independently from the court, they are not required to allow independent administration, and some judges are reluctant to do so unless the will so provides. 20 Accordingly, it is advisable to clearly name an Independent Executor in a will to facilitate the estate administration process.
Although any individual can prepare a holographic (handwritten) will, to ensure that the testator’s intent is clearly set forth in the will, and that the will complies with Texas law, it is preferable to have an attorney draft and supervise the execution of the will. Texas law clearly states that the drafting of a will constitutes the practice of law and only a licensed attorney is authorized to prepare a will, supervise the execution of the will, and provide legal advice regarding the effect of the will.21
In addition to preparing a will and specifying the disposition of assets upon an individual’s death, it is important to ensure that all beneficiary designations for life insurance and qualified plans/IRAs are coordinated with the will to provide for the desired distribution of an individual’s assets. If an individual is leaving assets outright to adult beneficiaries, it may be preferable to assign the same percentages to those individuals inheriting through the will as to those who are designated beneficiaries. If a will contains trust planning, it may be preferable to designate a trust as the beneficiary of IRAs and/or life insurance. However, in coordinating beneficiary designations, it is important to pay close attention to the income tax rules surrounding IRAs/qualified plans,22 and to ensure that no assets pass outside of the will by beneficiary designation to minors.
Finally, it is important to remember that any assets held as joint tenants with right of survivorship (“JTWROS”) or payable on death (“POD”) circumvent the will and pass by account agreement.23 Many people will want to add one of their children or a trusted friend as a signatory to an account for the sole purpose of allowing that person to pay bills or manage the account should they become disabled. The additional signer on the account is not intended to receive the account upon death. However, if the agreement creating the account includes language such as “with right of survivorship,” “payable on death,” or similar language, then when one of the signors on the account dies, the remaining funds pass to the other signor, regardless of the disposition provided for in the deceased signor’s will. In other words, the “right of survivorship” language trumps the will. Each individual should ensure that if any accounts are styled with right of survivorship, this styling does not interfere with the dispositive or tax planning provisions of the will or leave property outright to a minor. Alternatively, if the additional signor is on the account for convenience only, then the “right of survivorship” or “payable on death” designation should be avoided. In such cases, the accounts are generally styled as “tenants in common.”

Conclusion
This article discussed several available tools that allow individuals to specify who is to make medical decisions upon incapacity, how their assets will be managed during their lifetime (either immediately or upon incapacity), and the disposition of assets after death. In addition to preventing disagreement among loved ones, these documents can avoid court-supervised guardianships, guardianships of the estate for minors, and can provide comfort in knowing that an individual’s wishes will be carried out after he or she is unable to make such decisions himself. These documents not only provide peace of mind for an individual, but ultimately provide guidance to family members who are forced to make exceedingly difficult decisions when a loved one is incapacitated or gone.

Jerry Scroggins received a BBA from the University of St. Thomas and a J.D. from the University of Houston Law Center. He is a shareholder in the law firm of Fizer, Beck, Webster, Bentley and Scroggins. His primary areas of practice are estate planning and probate, and he is board certified in those areas.

Amanda Gyeszly received a B.S. from The University of Texas in 2001, with honors, and a J.D. from the University of Texas in 2004, with honors. She is an attorney with Fizer, Beck, Webster,
Bentley and Scroggins practicing taxation, estate planning, and probate.

Endnotes
1. Tex. Health & Safety Code Ann. § 166.164 (Vernon 2005). 2. Id. 3. Tex. Health & Safety Code Ann. §166.163 (Vernon 2005). 4. Tex. Health & Safety Code Ann. § 166.164 (Vernon 2005). 5. Tex. Health & Safety Code Ann. §§ 166.154 and 166.155 (Vernon 2005). 6. See the Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191, 110 Stat. 2024). 7. Tex. Health & Safety Code Ann. § 166.033 (Vernon 2005). 8. Both terminal and irreversible conditions are defined in Section 166.033 of the Texas Health and Safety Code. 9. Tex. Health & Safety Code § 166.008 10. Tex. Health & Safety Code Ann. § 166.042 (Vernon 2005). 11. Tex. Probate Code Ann. § 679 (Vernon 2005). 12. Tex. Probate Code Ann. § 677 (Vernon 2005). 13. See Tex. Probate Code Ann. § 774 (Vernon 2005). 14. For example, probate in California and Florida can be quite complicated. 15. Tex. Probate Code Ann. §§ 15-17A, 250-251 (Vernon 2005). 16. Tex. Probate Code Ann. § 145 (Vernon 2005). 17. Tex. Probate Code Ann. §§ 145,146 (Vernon 2005). 18. Tex. Probate Code Ann. §§ 294(a), 295, 145 (Vernon 2005); Treas. Reg. §20.6018-2. 19. Tex. Probate Code Ann. § 145(c) (Vernon 2005). 20. Tex. Probate Code Ann. § 145 (Vernon 2005). 21. Palmer v. Unauthorized Practice Committee of State Bar of Texas, 438 S.W.2d 374 (Tex.App.—Houston [14th Dist.] 1969), no writ. 22. See Choate, Natalie B., Life and Death Planning for Retirement Benefits (Ataxplan Publications 5th ed. 2003). 23. Tex. Probate Code Ann. §§ 439,441 (Vernon 2005).

Text is punctuated without italics.

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