PLANNING AGAINST A DISABLING ILLNESS OR INJURY

@ Charles E. Hamilton

I.    INTRODUCTION

II.    FORMS OF INCAPACITY OR NEEDED ASSISTANCE

      A.   "Incapacitated Person" is:

                    -- a minor; or

-- an adult who is unable to provide for himself or herself, to care for their health, or to manage their financial affairs. This replaces old terms of "incompetent persons ," "persons of unsound mind " and "habitual drunkard " formerly used regarding guardianship proceedings.

      B.   Minority

"Minor" is a person under 18 who has never been married nor had their disabilities of minority removed. Generally a minor's contracts are not void but only voidable at the minor's instance and may be either disaffirmed or ratified by the minor.

      C.   Physical/Mental Disability; Dependency

             Incapacitated adult may have guardian appointed by court.

      D.   Geographical Distance

      E.    Review Sample Facts

III.   MEDICAL DECISION MAKING

      A.   Durable Power of Attorney for Health Care

             1.   Since 1989 Texas has distinguished between healthcare powers and property management powers. A healthcare durable power of attorney must have certain clauses which conflict with the clauses required for a statutory durable power of attorney.

             2.   The durable power of attorney for healthcare becomes effective only if the principal's attending physician certifies in writing that the principal lacks capacity to make health care decisions.

             3.   Once it takes effect, it continues until revoked or until the principal regains capacity to make healthcare decisions.

             4.   A specified form of disclosure statement must be read and signed before the durable power of attorney for healthcare becomes effective.

             5.   If a court appoints a guardian of the person of the principal, the guardian of the person has sole authority to make healthcare decisions unless the court orders otherwise.

      B.   Directive to Physicians ("Living Will")

             1.   This allows a competent adult to direct his/her [physician to withhold or withdraw life-sustaining procedures in the event of a terminal condition. It was first adopted by Texas in 1977 as the Texas Natural Death Act and is now contained in the Texas Health & Safety Code.

             2.   Since 1991, Federal law has required that patients be informed of their rights to make advance directives upon admission to a medical facility, and be provided with written information concerning advance directives.

             3.   This applies if patient has an incurable condition certified to be terminal by two physicians, and where the application of life-sustaining procedures would serve only to prolong the moment of death and where the attending physician determines that death is imminent or will result within a relatively short without the application of life-sustaining procedures.

             4.   Does not authorize mercy killing.

IV.  ASSET MANAGEMENT

      A.   Statutory Durable Power of Attorney

             1.   "Durable" means that the power of attorney specifically provides that it remains effective despite the principal's subsequent disability or incapacity.

             2.   Texas now has "laundry list" checkoff style form authorized by statute for durable power of attorney for business matters.

             3.   Good news/bad news: The agent's powers usually are very broad.

             4.   The court appointment of a guardian of the estate of an incapacitated person terminates the powers of the agent under a durable power of attorney.

             5.   Estate tax issue: Generally, the estate of a person who dies holding a "general power of appointment" will be taxed on the value of the property to which it relates. A general power of appointment is defined as a "power" which is exercisable in favor of the decedent, his estate, his creditors, or the creditors of his estate. Example: Father gives son a general power of attorney to manage his ranch, including the power to make gifts. Son is killed in a car wreck and the father survives. The value of the ranch is includable in the son's estate.

      B.   Standby Revocable Trust

             1.   Combines benefits of lifetime management through a trust (rather than a power of attorney) and transfers made at and after death (rather than through a will).

             2.   A typical fact setting.

             3.   Pourover Power of Attorney Needed. (What if the person who creates the standby trust has an unexpected stroke?)

             4.   Pourover Will is still needed in most cases as it is impossible to be certain that all rights and property to be acquired in the future will be in the trust. (What if a person's house burns down and he/she dies shortly afterward?)

V.   DECLARATION OF GUARDIAN IN EVENT OF LATER NEED

      A.   In 1985 Texas allowed a competent adult to pre-specify who will be allowed to serve as a guardian and (sometimes more important) who is disqualified from serving as a guardian.

      B.   Identity of guardian is very important if family is not cohesive.

             1.   Note that appointment of guardian supersedes authority of agent under a property management power of attorney and will also supersede a healthcare agent until the court orders otherwise.

             2.   If a Will leaves specified property to a given person and general assets to others, the sale of the specific property by the guardian would have the effect of frustrating the plan of the Will.

             3.   Making a Declaration of Guardian may well head off later disputes regarding healthcare standards or support of successor spouse or children of second marriage.

      C.   Form of Declaration of Guardian is provided by Probate Code.

      D.   An inter-vivos trust can and often does provide that a guardian later appointed has no authority to revoke the trust or withdraw trust assets -- this may best solution to potential disputes over level of care, or support of others, or plan of distribution.

VI.  WHERE SHOULD YOU PUT THE PAPERS?

      A.   Important papers should be put in a safe deposit box where they are safe from fire and theft! But some papers need to be delivered to others ---

      B.   Durable Power of Attorney for Healthcare: Should be delivered to your agent so that they will have the document and can act if the principal is incapacitated. A copy may be delivered to the primary physician.

      C.   Directive to Physicians. Deliver a copy to your primary physician and ask them to make it a part of your permanent health records. The original should be put in your permanent records.

      D.   Statutory Durable Power of Attorney (for property management): The decision whether to sign such a power, and who should have custody of it, should be made after careful thought. One possibility is to leave it with a attorney with instructions to disclose it only if incapacity is apparent.

      E.    Pourover Will and Pourover Power of Attorney (for an inter-vivos trust): These should usually be given to the trustee or succor trustee named in the trust so that they can act to move the assets into the trust if necessary.

      F.    Declaration of Guardian: This should definitely not be placed in the safe deposit box, but should be delivered to the first person named as guardian. Otherwise a next-of-kin might gain access to the safe deposit box under a temporary guardianship before the designated person knew of the guardianship, delaying or perhaps frustrating the directions contained in the declaration.

VII. TYPICAL TRANSACTION COSTS

      These are all documents of a standardized nature and the attorney should be able to specify a fairly definite fee after the facts have been discussed. Often the fees will be lower if several documents are executed at the same time rather than piecemeal, as several of the documents require the presence of witnesses.