Third party care from simple powers of attorney to complex guardianships
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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 [email protected] Introduction. What is 3 rd party care?

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Third party care from simple powers of attorney to complex guardianships l.jpg

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


[email protected]

Introduction l.jpg

  • What is 3rd party care?

    • Can mean lots of things, depending on the need

  • Need for 3rd party care varies

    • Incapacity (temporary or permanent)

    • Convenience

    • Sophistication/specialization of tasks/knowledge

    • Legal/contractual requirements

  • Solution should be tailored to the need

Overview l.jpg

  • 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!!

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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

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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

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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

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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.

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Durable Power of Attorney

  • Texas Probate Code (TPC), Ch XII

    • “Durable Power of Attorney Act”

  • §482 Definition:

    • Written instrument

    • Signed by adult principal

    • Contains ‘words of durability’ and

      • NOT required to match statutory form

    • Is acknowledged

  • Remains (or becomes) effective upon the principal’s disability

  • Durable PoA are immensely useful and recommended in nearly all situations

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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

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“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

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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

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Directive to Physicians

  • A/k/a “Living Will” but DO NOT confuse with Last Will and Testament

    • Not effective after death

    • Does not dispose of assets

    • Does not control guardianship of minor children

    • Does not serve tax purposes

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Directive to Physicians

  • 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

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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

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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

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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

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Revocable Living Trust

  • Most typical kind of trust used for 3rd 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

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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

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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

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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

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Special Needs Trusts

  • Pros:

    • Enable beneficiaries to receive (or continue receiving) government benefits

    • Avoids forfeiting benefits when beneficiaries inherit

  • Cons:

    • Highly specialized

    • Highly restrictive

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  • Court-created relationship by which one person is charged with the care of another

    • “Nuclear bomb” of 3rd 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

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  • 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

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  • 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

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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

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  • 3rd 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