1. Third Party Care: From Simple Powers of Attorney to Complex Guardianships Christian S. Kelso, Esq. Winn, Beaudry & Winn, Attorneys at Law 4200 Thanksgiving Tower 1601 Elm St. Dallas, Texas 75201 214-969-0001 csk@wbwllp.com

2. Introduction What is 3 rd party care? –Can mean lots of things, depending on the need Need for 3 rd party care varies –Incapacity (temporary or permanent) –Convenience –Sophistication/specialization of tasks/knowledge –Legal/contractual requirements Solution should be tailored to the need

3. Overview Review of legal tools Spectrum of “control” –Ability to act on behalf of another –Balanced with responsibility/duty to act in a certain way Basic Levels –Powers of Attorney General, Special, Durable, Springing, Medical –Trust Revocable Living Trusts, Special Needs Trusts, Other –Guardianship Guardianship of the Person, Guardianship of the Estate Remember: Levels often overlap!!

4. Powers of Attorney Generally Agency relationship whereby a principal selects another to represent him or her in some capacity, usually financial Generally does NOT have to be in writing Generally does NOT survive death or incapacity May be general or “limited” to a specific circumstance or transaction

5. Powers of Attorney Generally Pros: –Flexibility –Effective during life –Fully revocable, so long as principal has capacity –Copies are valid and easily transmitted –Power to make gifts limited

6. Powers of Attorney Generally Cons: –May not be recognized by all parties –May not enumerate all powers –Not effective after death or incapacity –Subject to abuse (even criminal) –Power to make gifts limited

7. Powers of Attorney Generally Note: To be effective in a real estate sale, a PoA must be notarized and filed in the county records. Also: PoA’s are often needed when the principal becomes incapacitated, but the general rule makes them invalid at this time.

8. Durable Power of Attorney Texas Probate Code (TPC), Ch XII –“Durable Power of Attorney Act” §482 Definition: 1.Written instrument 2.Signed by adult principal 3.Contains ‘words of durability’ and NOT required to match statutory form 4.Is acknowledged Remains (or becomes) effective upon the principal’s disability Durable PoA are immensely useful and recommended in nearly all situations

9. Statutory Durable Power of Attorney TPC §490 Pros: –Well-recognized, particularly by institutions –Short/simple/sweet –May be limited/extended by crossing out/writing in provisions Cons: –May be inadequate for some circumstances, particularly special needs trust planning, where special gifting language should be included

10. “Springing” Power of Attorney Durable power of attorney which becomes effective only on incapacity Pros: –Potential for abuse is highly diminished Cons: –Efficacy is highly diminished because incapacity must be proved Result: Typically not recommended –Better sign regular PoA and keep until needed

11. Medical Power of Attorney Health & Safety Code (H&SC) –§166.151 et seq. Similar to financial PoA, except specifically designed for medical purposes Not necessarily for end of life decisions Effective only on incapacity May require HIPAA release Statutory form at H&SC §166.164 Execution recently simplified

12. Directive to Physicians A/k/a “Living Will” but DO NOT confuse with Last Will and Testament –N–Not effective after death –D–Does not dispose of assets –D–Does not control guardianship of minor children –D–Does not serve tax purposes

13. Describes a patient’s desire to “fight to the end” or “die with dignity” –Often referred to (deceptively) as “pulling the plug” even though no plug is pulled –Should be called “pull the tube” Can be very important if ever needed –Terri Schiavo

14. Directive to Physicians Pros: –Effective when patient cannot express his or her own wishes –Provides guidance to doctors and agent acting under a medical power of attorney –Alleviates family tension –May save significant amounts of money –May be modified to specific desires

15. Directive to Physicians Cons: –Lay people often find terminology difficult to understand and attorneys often have difficulty explaining it –Family may not wish to carry out directive –Requires clients to address issues they typically do not want to face –Only effective if doctors and family know it exists and where it is located

16. Trusts Generally A trust is a legal arrangement whereby one or more “trustees” hold some right or property for the benefit of one or more “beneficiaries.” Accomplished by splitting legal and equitable title Historical background –Statute of Uses; Henry VIII

17. Revocable Living Trust Most typical kind of trust used for 3 rd party care Established by executing a trust agreement and transferring assets into the trust May be amended or revoked in any way May include language to address special needs

18. Revocable Living Trust Pros: –Fully revocable –Avoids probate –Functions like a PoA during life and like a Will after death –May avoid repayment to Medicaid –Allows grantor to designate successive persons to handle affairs

19. Revocable Living Trust Cons: –May be cost prohibitive –Must be respected –May be too complicated for some people –Clients may fail to transfer all assets into the trust –Does not provide tax benefits

20. Special Needs Trusts Allow beneficiaries to qualify for means- tested government benefits, such as Medicaid and Supplemental Security Income. Generally divided into two categories: –Trusts established/funded by an applicant –Trusts established/funded by a non-applicant More restrictions apply where the trust is funded by the applicant

21. Special Needs Trusts Pros: –Enable beneficiaries to receive (or continue receiving) government benefits –Avoids forfeiting benefits when beneficiaries inherit Cons: –Highly specialized –Highly restrictive

22. Guardianship Court-created relationship by which one person is charged with the care of another –“Nuclear bomb” of 3 rd party care –Similar to parent-child relationship Types: –Guardianship of the person –Guardianship of the estate Must be “least restrictive alternative” and should always be the last resort Co-guardians generally disallowed, but different people may be guardian of the person and estate

23. Guardianship Pros: –Complete control –A person may designate their preferred guardian before incapacity –May be terminated if ward regains capacity –Court supervision to prevent abuse –Costs may be reduced by eliminating the need for guardianship of the estate

24. Guardianship Cons: –Court proceeding/supervision –Cost Bond Annual accountings –May be manipulated –May be contested Ward/proposed ward Others –Guardianship removes an otherwise emancipated person’s civil rights

25. Examples of Overlap Clients may wish to include special language in their PoA’s to address trust issues, particularly funding By establishing (and properly funding) a trust, guardianship, or at least guardianship of the estate may be avoided MPoA’s often reference DTP’s for comprehensive planning Trusts often reference guardianship as evidence of incapacity sufficient to trigger trusteeship succession

26. Conclusion 3 rd Party care requires a comprehensive plan Clients should speak with family members about their plan to ensure that it is implemented as intended and does not cause turmoil in the family Clients should discuss options with their attorney and other professionals

27. Questions?