Overview of Estate Planning Necessary Documents and Financial Considerations Presented by: STEVEN E. KATTEN of KATTEN & BENSON Attorneys at Law 4763 Barwick Drive Suite 100 Fort Worth, TX 76132 (817) 263-5190 Fax (817) 263-5197 October 4-6, 2017 Texas Advanced Paralegal Seminar -1-
Overview of ElderLaw Planning For Declining Capacity Necessary Documents and Financial Considerations I. Documents Needed in Advance of Declining Capacity The concept of becoming disabled or incapacitated usually seems like a remote possibility, particularly at younger ages. As we age, though the possibility of incapacity becomes less and less remote, with proper planning, it is possible to insure the continued management of assets and the consistency of medical decision-making. That is the purpose of the powers of attorney. there are other ancillary forms that are helpful in meeting the ultimate needs of person as they grow older, such as Directives to Physicians and Family or Surrogates and Declarations and Out of Hospital Do Not Resuscitate Orders. A. The Will. The cornerstone of any estate planning process is the will. A will is a legal instrument that complies with the requirements of state law. A will must express a person s testamentary intent, must be properly signed and witnessed, and the person executing the will must have the necessary testamentary capacity. That is, the person must know the nature of his property and the natural objects of his bounty. In addition, the person creating the will must not be subject to undue influence by other parties, and cannot be delusional at the time of the creation of the will. If a person has testamentary capacity, and executes the will in accordance with the requirements of state law, it will be given effect by the courts. The will allows the person to determine who is to receive his property, as well as who is to manage his property. The person making the will, who is known as the testator, has the ability to designate who is to receive his property after his death. It is advisable to provide in a will for numerous contingencies. That is, if a beneficiary does not survive, the will should say how the property is to pass. Typically, a will is structured with two types of gifts; specific and residuary. With a specific gift or bequest, the testator names who is to receive a specific item of property, and if that person does not survive then what is to happen to that property. After all the specific bequests have been made, then there is a residuary bequest. This is a gift of all of the remaining property owned by the testator. This residuary clause takes into account numerous contingencies, and provides for the possibility of various beneficiaries not being alive at the time of the testator s death. Generally there is a catch-all provision that says what will happen to the property if all of the main beneficiaries have died. -2-
With the will, the testator can control when the distribution is made to the beneficiaries. That is, he can arrange to have the property left in a trust for the benefit of his beneficiaries (such as minor children). The will spells out the specific conditions under which distributions may be made to or for the benefit of the ultimate beneficiaries. It also allows the testator to decide at what ages the beneficiaries will receive an outright distribution of the property. In estates that have to worry about the possibility of paying an estate tax, the will is a useful tool in structuring the disposition of the assets to minimize the total estate tax liability. If the testator is married, under current law it is possible to eliminate any tax upon the death of the first spouse. This is because assets that pass to a surviving spouse in a qualifying manner can be deducted from the gross estate for estate tax purposes, and are not includable at the taxable estate. The tradeoff is that the property will be subject to tax when the surviving spouse dies. Therefore, the will can be used as a tool to defer the estate tax liability. In addition to controlling the disposition of the property, the will also allows the testator to exercise control over who will manage the property. This is done by designating an executor. The executor is the person that is responsible for gathering the assets of the estate, paying the debts, administration expenses and taxes, and distributing the balance of the assets to the beneficiaries. If the property is to be held in trust, then the testator can designate who will serve as trustee. This is the person that will manage the assets for the beneficiaries named in the will. Finally, the will allows the testator to control who will be responsible for raising his children, in the event they are orphaned. A person can designate a guardian to be responsible for raising and managing the testator s children. In some states, it is even possible for a person to designate a guardian for his adult incapacitated children. This can be of extreme importance, and can significantly reduce the costs associated with a guardianship. B. The General Power of Attorney. 1. Basic Provisions. A disabling injury can actually be more costly and more troublesome than a death. In the absence of planning, if a person becomes totally incapacitated and unable to take care of himself, it is necessary to have a guardian appointed for that person. This requires an application to the court to appoint a person as guardian, which then results in significant legal fees. If a guardian is appointed, that guardian must account to the court on a periodic basis (usually annually) concerning the management of the incapacitated person s assets. Because it is court controlled, there is less flexibility in investment of the assets. A guardianship can be very costly and cumbersome, and is something that should be avoided if possible. A Statutory Durable Power of Attorney is a legal instrument that a person should execute to provide for the management of his property in the event of incapacity. It is extremely important that the power of attorney be durable. This term means that the ability of the agent to act survives the -3-
disability of the grantor of the power. If there is not specific language making it a durable power of attorney, then the agent s ability to act will terminate when that person becomes incapacitated. In some states, a person has a choice whether the power of attorney is to become effective immediately, or whether it will only come into effect in the event of a disability. A power of attorney that comes into effect upon the occurrence of a future event is known as a springing power of attorney. A person should be extremely cautious in deciding who to appoint as his agent under a power of attorney. That is because the agent has all of the powers to deal with a person s property that the individual himself has. If a power of attorney is granted to a spouse, and then later there is a divorce, the power of attorney should be immediately revoked. It is more important to exercise caution in appointing an agent if the state does not allow springing powers of attorney. If springing powers of attorney are allowed, the agent will not be able to deal with the property until a disability occurs. However, even in those situations, it is important to designate a person that is extremely trustworthy. It is also a good idea to designate an alternate, in case the first person named is unable to serve. 2. Alternate Provisions. The Statutory Durable Power of Attorney is not the exclusive form of power of attorney for financial purposes. The statute provides that individually drafted powers of attorney can also be effective. The problem, however, is that powers of attorney are only as good as third parties are willing to recognize them. If the bank, brokerage house or title company is not willing to accept a power of attorney, it is not of any use. Because of the proliferation of the statutory form, many financial institutions only feel comfortable with the statutory form. As of September 1, 2017, we have a revised Statutory Durable Power of Attorney. It addresses some issues that have arisen over the years that were not addressed in prior iterations of the statutory form. The specific changes are as follows: 1. It adds to the notice at the beginning that if the agent is to have the authority to sign a home equity loan, the document must be signed at the office of the lender, an attorney, or the title company. 2. It clarifies that the agent's authority terminates if the agent is removed pursuant to court order. The previous form listed circumstances for termination of the agent's authority (death of the agent, revocation, appointment of a guardian of the estate, or the agent's inability to act, but it did not include removal be court order. 3. The form clarifies that co-agents may be appointed, and in the absence of special instructions to the contrary, each co-agent may act independently of the other. -4-
4. It adds an additional power to the list of powers, which to deal with digital assets and the contents of an electronic communication. The specific detail on what constitutes a digital asset transaction is set forth in Estates Code Section 752.1145. 5. There are specific special instructions added in which the principal can make a choice by initialing next to what he or she wants: a. The first relates to the compensation of the agent. The principal can either provide that the agent is entitled to both reimbursement of expenses and reasonable compensation, or the principal can provide that the agent is only entitled to reimbursement of expenses. b. The principal can determine how decisions are to be made in the event there are co-agents. The options are that each co-agent can act independently, or that it requires them to act jointly, or in the case of more than two co-agents, they can act only if a majority of co-agents act jointly. In the absence of a choice, the co-agents can each act independently. c. The last relates to the ability of an agent to make gifts. In the absence of the selection of this provision, the agent does not have the power to make gifts. The amount of the gift is limited to the gift fax annual exclusion under federal gift tax law. In our practice, we rarely have the need to make tax-motivated gifts, but we frequently have the need to make gifts for the purpose of accelerating access to governmental benefits in order to preserve some assets to pass down to family members. Therefore we modify the language to expand the gift giving capabilities. 6. The form now allows specific powers that can be added to the Statutory Durable Power of Attorney. These are set forth in Texas Estates Code Section 752.052. The specific powers enumerated in such section, which must be separately initialed in order to be effective, are as follows: a. The power to create, amend, revoke or terminate a trust. b. The power to make a gift, subject to the limitations of Section 751.032 of the Texas Estates Code and any special instructions in the power of attorney. c. The power to create or change rights of survivorship. d. The power to create or change a beneficiary designation. e. The power to authorize another person to exercise the authority granted under the power of attorney. While I understand why this may be desired,, in case the agent is unable to act, I prefer to have the principal to name who he or she wants to serve as a successor, rather than to give the authority to designate someone to act who potentially could be a complete stranger to the principal. 7. The form changes the terminology from "revocation" to the broader term of "termination". It also changes the absolution of a third party relying on the power of attorney. -5-
Previously the termination of a power of attorney was not effective on a third party until the third party received actual notice. This has been changed to a broader standard of actual "knowledge", which the third party may have, even if the third party does not have notice. -6-
3. Execution. The Statutory Durable Power of Attorney must be executed in the presence of a notary public. It does not have to be witnessed. If it can be recorded in the county in which the principal resides, as well as any county in which the principal owns real property. It is not required to be recorded, unless the agent is transferring real property pursuant to the power of attorney. However, it is not a bad idea to record the power of attorney, because if the original is ever lost, a certified copy of the recorded power of attorney will be as acceptable as the original. C. Medical Power of Attorney. 1. Basic Provisions. The Statutory Durable Power of Attorney deals only with financial matters. There is a separate legal instrument that authorizes an agent to make health care decisions for an individual. While this instrument goes by various names, it is known in Texas as a Medical Power of Attorney. This instrument is used to designate the person to make health care decisions in the event of an incapacity. Medical powers of attorney are always springing powers, which means that they only come into effect in the event that the grantor becomes incapacitated. Once the grantor regains capacity, the agent s ability to act goes away until the next disability. 2. HIPAA Authorization In 1996, Congress passed the Health Insurance Portability and Accountability Act, which contained specific requirements concerning the confidentiality of medical information. These confidentiality provisions went into effect a couple of years ago, and there is a great deal of confusion about how the rules are to be applied. Basically, however, medical care professionals cannot release any medical information to anyone other than the patient, without specific authorization from the patient. When working with elderly clients, they often want their spouse or children to have access to their medical information, because they rely upon them for advice. A practice began to include the HIPAA release in the Medical Power of Attorney, since it seems reasonable that someone you choose to make medical decisions for you should have access to that information. There are two issues with that approach. The first relates to the fact that if the principal is incapacitated, under the HIPAA rules the agent under a Medical Power of Attorney is entitled to access to the principal s medical records automatically. The second issue is that the Medical Power of Attorney does not become effective unless and until the principal is incapacitated. Therefore, allowing the agent access to medical records as part of the Medical Power of Attorney may not be effective to allow the agent access if the principal is not incapacitated. Therefore, if a HIPAA release is to be included in a Medical Power of Attorney, it must explicitly state that the effectiveness of the release begins upon execution of the document, even though the agent s ability to act under the Medical Power of Attorney does not come into existence until the principal is incapacitated. Attached as Exhibit B is a Medical Power of Attorney, with HIPAA release language added as highlighted material. This is the Form that is in effect until December 31, 2017, and it requires the -7-
principal to sign in two separate places. Beginning January 1, 2018, there is a new form, that is essentially the same, except the notice provisions are moved to the end of the document, and the principal only needs to sign in one place. This document is attached as Exhibit C. I personally prefer using a separate HIPAA Release form, which is attached as Exhibit D. 3. Execution. Medical powers of attorney are a creature of state law, and originally they were required to be witnessed in Texas. There are restrictions on who can serve as a witness. At least one of the witnesses cannot be the designated agent, a family member, the attending physician or an employee of the attending physician, an employee of a health care facility that is providing direct patient care or is an officer, director, partner or business office employee of the health care facility or any parent organization of the health care facility, or any person who at the time of execution would have a claim against the declarant s estate. Now, however, a Medical Power of Attorney can be executed by having the signature of the principal notarized. D. Directive to Physicians and Family or Surrogates. 1. Basic Provisions. A document similar to the health care power is the advanced directive a/k/a Directive to Physicians and Family or Surrogates (which is more commonly referred to as a living will ). The living will deals with the limited circumstance of a terminal condition. Like the medical power of attorney, this is governed by the particular law of the state in which a person lives. The living will is an expression of a persons desire to not be kept alive by extraordinary means when that person is diagnosed as having a terminal condition. Usually that terminal condition must be either irreversible or incurable. This document also must be witnessed, and the same restrictions on who can serve as a witness to a medical power of attorney apply with respect to the advance directive. 2. Alternate Provisions. In addition to the general request concerning discontinuance of life sustaining procedures, it is possible to specifically address certain life sustaining procedures that a person explicitly wants to discontinue. A list of such procedures (although certainly not exclusive) would include nutrition, hydration, life-supporting electrical devices, heart and lung stimulation devices, electric shock stimulation, CPR, transfusions and mechanical breathing. It is also possible to direct under what circumstances you desire to have the life sustaining procedures withdrawn. The attached Exhibit D contains sample language that allows you to make such choices. It also contains specific language that relates to a persistent vegetative state. This language specifically states a person s desire to be removed from life sustaining treatment if in a persistent vegetative state or coma, even if the doctor does not certify that the situation is terminal or irreversible. This is the specific circumstance that faced Terry Schiavo. 3. Execution. -8-
This document is generally witnessed by two individuals. It does not have to be notarized, although that is now accepted as an alternate method for execution. The same persons that are prohibited from being one of the witnesses for purposes of a Medical Power of Attorney are also prohibited for purposes of the Directive to Physicians. E. Other Documents. 1. Designation of Guardian Before Need Arises. It is possible to express one's wishes in advance as to the preference for someone to serve as guardian. While the Durable Power of Attorney and Health Care Power are intended to prevent the need for a guardian, which may not always occur. For example, the person named as the agent may die first. The Declaration of Guardian allows someone to designate who that person wants to serve as guardian if it should become necessary. Perhaps even more importantly, it is possible to specifically exclude someone from serving as a guardian. As of September 1, 2017, this form does not have to be witnessed by two persons if the document does not disqualify someone form serving as guardian. Instead, it only needs to be notarized. However, if document does specifically disqualify someone from serving as the guardian for the principal, then it must be executed with the formalities of a will. That is, it must be signed in the presence of two witnesses and a notary public. 2. Out of Hospital Do Not Resuscitate Order (DNR). The Department of Health has its own form for informing care professionals of a person's desire not to have CPR performed in the event of an incident. If this is utilized, it should be placed on file with the local ambulance and emergency service unit. This form must also be witnessed, and the same limitations concerning witnesses that apply to the medical power of attorney and living will also apply to the out of hospital DNR. In addition, the physician must sign the form. Also, the statute provides for a DNR identification device for persons to wear to put health care professionals on notice that they have executed an out of hospital do not resuscitate order. It is possible to execute an out of hospital DNR on a form other than the one provided by the Department of Health. The form requires that the attending physician sign it, so it will usually be more appropriate to sign this instrument at the doctor s office, as opposed to the lawyer s office. 3. Declaration for Mental Health Treatment. The Texas Legislature has given us another form of Declaration, known as the Declaration for Mental Health Treatment. It allows a competent individual to make certain choices concerning mental health treatment in the event the person, in the future, loses the ability to give or withhold informed consent with respect to mental health treatment. This Declaration is intended to alleviate the difficult issues faced by a person suffering from mental illness, when involuntary commitment is often the only avenue available. As a practical matter, however, it is rarely used. This document also must be signed in the presence of two witnesses and a notary public. -9-
4. Beneficiary Designations Another instrument that is extremely important with regard to disposition of property is the beneficiary designation. The will provides how the property owned by the testator will pass. However, much of today s wealth is not necessarily governed by the will. Life insurance proceeds pass to the beneficiary named under the policy, rather than to the persons named in the will. Likewise, IRA s, retirement plans and some annuities represent contractual agreements that specify who is to receive the property. It is extremely important that the beneficiary designations of these items be coordinated with the will. Failure to do so can result in unintended estate tax consequences. For example, in a sizable estate, it is not uncommon to provide that the first $5,490,000 will pass to a Bypass Trust, and the balance of the estate assets will be left to the surviving spouse. The purpose for this planning is to allow the $5.49 million (which is the exact amount that could be sheltered in 2017 by the unified credit) to be subjected to tax without having to actually having to pay a tax. If this planning is set up under the will, and the beneficiary designations are not properly coordinated, then the full $5.49 million exemption equivalent may not be used. Instead, the majority of the assets will pass to the surviving spouse under the beneficiary designations, rather than to the Bypass Trust, and will be subject to tax in the surviving spouse s estate. However, under current law this is not fatal, because the surviving spouse can use the decedent spouse's unused exemption (DSUE). In order to so, there must be a ta return filed for the decedent spouse, which would not have been necessary if the planning had not been done by improperly coordinated beneficiary designations. 5. Jointly Owned Accounts. Another item that is similar in nature is jointly owned accounts. If assets are owned by joint tenancy with right of survivorship, then the property will pass automatically to the joint account holder or owner. Any joint tenancy ownership arrangement should be carefully reviewed to make certain that they are coordinated with the overall estate plan. Otherwise, unintended tax consequences can result. 6. Memorandum Disposing of Personal Property. Another document that may be of some help is a Memorandum that specifically disposes of personal property. Typically, there are items of jewelry or family heirlooms that a person may want to go to friends or more distant relatives. These items will change over time, as may the potential beneficiaries. If these items refer to a specific bequest in the will, then they cannot be changed other than by a codicil to the will or the execution of a new will. Since witnesses are required, it can be quite costly to constantly change your will. Instead, you can place a provision in the will that states that the personal property specifically designated in a separate Memorandum should go to those persons named in the Memorandum. While this is not necessarily binding upon the executor, it is an expression of the testator s desire and it usually will be given effect. It is much easier to change the Memorandum than the will, and therefore easier to accomplish the goals with this document. If a Memorandum is used, it should be kept in the same place as the will, so that it will be reviewed at the same time. -10-
7. Anatomical Gifts. Although not truly a part of the estate planning process, designations of anatomical gifts should be considered at this time. In some states, this can be taken care of by a notation on a person's driver s license. In other circumstances, it may be necessary to register with an organ donor bank so that persons are aware of the testator s desire. The Living Bank in Houston is an example of such a donor bank. F. Use of a Revocable Living Trust as an Estate Planning Tool. 1. Advantages of a Revocable Living Trust. The revocable living trust is a valuable tool to accomplish any of the following goals: (1) Avoidance of probate; (2) planning for incapacity or incompetency; (3) Avoidance of an ancillary administration (in another state); (4) Privacy; and (5) Avoidance of a potential will contest. While each of these advantages is significant, they must be viewed in light of the particular needs of the individual. Careful evaluation of the client's needs should be undertaken before a blanket recommendation of a revocable living trust is made. Only after a review of all the facts and circumstances affecting the client can a decision be made about the appropriate planning tool for that client. a. Avoidance of Probate. The principal reason for using a revocable living trust as an estate planning tool is the avoidance of the probate process and its related costs. In states where executor fees and attorney fees are based on a percentage of the probate estate, these costs can be significant. In those jurisdictions where a family member can serve as executor (and waive the fee) and attorney's fees are based on an hourly rate, these costs can often be kept to a manageable amount. Prior to recommending the use of a revocable living trust as a means to reduce probate costs, planners should compare the current cost of establishing a trust (legal and administrative costs) with the estimated future probate costs. If the estimated probate costs are significantly greater than the cost of establishing and maintaining the trust, and a less expensive means of avoiding probate is not appropriate, a revocable living trust is a good alternative. To effectively reduce probate costs, the revocable living trust needs to be fully funded. This ensures that all of the decedent's assets are removed from the probate estate and requires all assets titled in the name of the client to be retitled into the name of the trust. As a result, deeds to real property will need to be prepared, and transfer agents will need to be contacted to transfer all securities from the name of the individual to the name of the trustee. (These transaction costs should be considered in the determination to use a revocable living trust.) It is also advisable to have the trust creator execute a pourover will at the same time the revocable trust is created. A pourover will is a valid will that provides that all assets owned by the decedent at the time of his death will pass directly to the revocable living trust -11-
(which has become irrevocable as a result of the creator's death). The pourover will is a precautionary measure ensuring that all assets owned by the trust creator will be distributed according to the terms of the trust. Unfortunately, the pourover will defeats the stated purpose of avoiding probate because it will have to be admitted to probate just as if the decedent had a will and no revocable trust. However, in those states that provide for fees based on a percentage of the total estate, the majority of the decedent's assets will not be subject to probate costs as long as the trust is funded with the bulk of the decedent's assets during his lifetime. b. Administration of Assets in Event of Incompetency. Another important reason to use a revocable trust is to avoid a court-supervised administration in the event the trust creator becomes incompetent. A revocable living trust allows the client to transfer all of his assets to the trust and continue managing them as long as he desires. If the individual later decides to give up the responsibility of managing the property, he can resign as trustee, and the person designated as successor trustee will assume the management responsibilities of the trust's property. The ability to transfer management responsibility may be particularly desirable to elderly clients who are concerned about the possible future loss of their faculties and their ability to manage their assets. In the absence of a revocable living trust, a guardianship proceeding is required to appoint someone to manage the assets of an incompetent individual. In a guardianship administration, the actions of the guardian must be reviewed and approved by the court. This degree of court supervision, coupled with the high cost providing a required annual accounting to the court, makes guardianship administrations unattractive. Therefore, a revocable living trust provides a viable alternative to a guardianship administration. When a revocable living trust is used to avoid a guardianship proceeding, it is usually best to fully fund the trust at the time of its creation. This ensures that the successor trustee has control over all of the person's property in the event the person is incapacitated. In the event it is impractical for the trust to be fully funded, the establishment of the revocable living trust should be coupled with the granting of a durable power of attorney to the person who would ultimately serve as trustee in the event of incapacity. Under the terms of the power of attorney, the designated person would have the authority to transfer assets to the trust after the grantor suffered an incapacitating disability. If this funding method is desired, it is imperative that the durable power of attorney complies with the specific provisions of state law authorizing the attorney-in-fact to act as agent on the grantor s behalf after the grantor becomes disabled. c. Ancillary Administration. An ancillary administration is necessary if a decedent owned real property located in a state other than his state of domicile. As with regular probate administration, the expense associated with a ancillary administration is directly related to the specific requirements of the state in which the real property is located. If an ancillary proceeding is fairly simple, then it may not be necessary to establish a revocable living trust to avoid an ancillary administration in another state. However, an ancillary administration will usually require the same degree of cost and involvement as a -12-
regular administration. Furthermore, another attorney is usually required to handle an ancillary administration, since the attorneys handling the probate administration in the state of domicile may not be licensed in the other state. As an alternative to an ancillary administration, a revocable living trust can be established to hold title to the property located in another state. A revocable living trust established for the sole purpose of avoiding an ancillary administration will not need to be fully funded. It will be necessary, however, to transfer title to the out-of-state real property directly to the revocable living trust. The transfer of title is what makes this trust an appropriate planning tool. If the real property is titled in the name of the revocable living trust, then upon the death of the creator of the trust (who is most likely also the trustee) there will be no need to transfer title to the property in the other state. The title will have already vested in the trust, and the administration in the other state will be avoided. d. Privacy. Privacy is another a benefit of using a revocable living trust. An inventory of assets must be filed in a probate administration. This document becomes a matter of public record, subject to inspection by anyone who expresses an interest. A client is concerned about the privacy of his financial affairs can use a fully funded revocable living trust to prevent public disclosure of his assets. e. Reduce Risk of a Will Contest. A revocable living trust can also be used to minimize the risk associated with a will contested on the grounds of incompetency. If the competency of the client is in question, it may be better for him to establish a revocable living trust to dispose of his assets. If the trust is later challenged on the grounds that the grantor was incompetent at the time of creation, the previous will should still be valid. Conversely, if a person whose competency is in question executes a new will, the new will may be deemed effective to revoke the prior will even though it is not effective to transfer the property to the persons named in the later will. This could force the decedent's property to pass as if he died without a will. 2. Possible Pitfalls of a Revocable Living Trust. Although the revocable living trust can be a valued estate planning tool, problems are associated with the creation of such a trust. Principally, if the goal of the revocable living trust is to avoid probate, this goal will not be met if the trust is not fully funded. Failure to fully fund the trust usually results when the grantor receives property subsequent to its creation. However, the problem may also arise when the grantor owns property that is not conducive to trust ownership. If all titled property is not transferred to the trust, probate may be necessary to transfer title to property held outside the trust. Finally, there is a financial cost to creating and funding the trust. -13-
EXHIBIT A STATUTORY DURABLE POWER OF ATTORNEY NOTICE: THE POWERS GRANTED BY THIS DOCUMENT ARE BROAD AND SWEEPING. THEY ARE EXPLAINED IN THE DURABLE POWER OF ATTORNEY ACT, SUBTITLE P, TITLE 2, ESTATES CODE. IF YOU HAVE ANY QUESTIONS ABOUT THESE POWERS, OBTAIN COMPETENT LEGAL ADVICE. THIS DOCUMENT DOES NOT AUTHORIZE ANYONE TO MAKE MEDICAL AND OTHER HEALTH-CARE DECISIONS FOR YOU. YOU MAY REVOKE THIS POWER OF ATTORNEY IF YOU LATER WISH TO DO SO. IF YOU WANT YOUR AGENT TO HAVE THE AUTHORITY TO SIGN HOME EQUITY DOCUMENTS ON YOUR BEHALF, THIS POWER OF ATTORNEY MUST BE SIGNED BY YOU AT THE OFFICE OF THE LENDER, AN ATTORNEY AT LAW, OR A TITLE COMPANY. You should select someone you trust to serve as your agent. Unless you specify otherwise, generally the agent s authority will continue until: (1) you die or revoke the power of attorney; (2) your agent resigns, is removed by court order, or is unable to act for you; or (3) a guardian is appointed for your estate. I,, of,, County, Texas appoint my,, of,, County, Texas as my agent (attorney in fact) to act for me in any lawful way with respect to all of the following powers that I have initialed below. (YOU MAY APPOINT CO-AGENTS. UNLESS YOUPROVIDE OTHERWISE< CO_AGENTS MAY ACT INDEPENDENTLY. TO GRANT ALL OF THE FOLLOWING POWERS, INITIAL THE LINE IN FRONT OF (O) AND IGNORE THE LINES IN FRONT OF THE OTHER POWERS LISTED IN (A) THROUGH (N). TO GRANT A POWER, YOU MUST INITIAL THE LINE IN FRONT OF THE POWER YOU ARE GRANTING. TO WITHHOLD A POWER, DO NOT INITIAL THE LINE IN FRONT OF THE POWER. YOU MAY, BUT DO NOT NEED TO, CROSS OUT EACH POWER WITHHELD. (A) (B) (C) (D) (E) (F) (G) (H) Real property transactions; Tangible personal property transactions; Stock and bond transactions; Commodity and option transactions; Banking and other financial institution transactions; Business operating transactions; Insurance and annuity transactions; Estate, trust, and other beneficiary transactions; -14-
(I) (J) (K) (L) (M) (N) (O) Claims and litigation; Personal and family maintenance; Benefits from social security, Medicare, Medicaid, or other governmental programs or civil or military service; Retirement plan transactions; Tax matters; Digital assets and the content of an electronic communication; ALL OF THE POWERS LISTED IN (A) THROUGH (N). YOU DO NOT HAVE TO INITIAL THE LINE IN FRONT OF ANY OTHER POWER IF YOU INITIAL LINE (O). SPECIAL INSTRUCTIONS I grant my agent (attorney in fact) the power to transfer my assets and real property to him/herself. Further, in pursuing a course of self-dealing, my agent shall be immune from any claims regarding a breach of fiduciary duty, except for those transfers made in bad faith. This standard shall also apply regarding an agent s liability for the acts or omissions of any predecessor. Any successor agent is relieved of any duty to examine the acts of any prior fiduciary and shall be responsible only for those actions taken by the agent. Special Instructions Applicable to Agent Compensation: My agent is entitled to reimbursement of reasonable expenses incurred on my behalf and to compensation for serving as my agent. My agent is entitled to reimbursement of reasonable expenses incurred on my behalf but shall receive no compensation for serving as my agent. Special Instructions applicable to co-agents (if you have appointed co-agent to act, initial in front of one of the following sentences to have it apply; if no selection is made, each agent will be entitled to act independently). Each of my co-agents may act independently for me. My co-agents may act for me only if the co-agents act jointly. My co-agents may act for me only if a majority of the co-agents act jointly. Special instructions applicable to gifts (initial in front of the following sentence to have it apply): I grant my agent the power to apply my property to make gifts outright to or for the benefit of -15-
a person, including by the exercise of a presently exercisable general power of appointment held by me, except that the amount of a gift to an individual may not exceed the amount of annual exclusions allowed from the federal gift tax for the calendar year of the gift. ON THE FOLLOWING LINES YOU MAY GIVE SPECIAL INSTRUCTIONS LIMITING OR EXTENDING THE POWERS GRANTED TO YOUR AGENT. GRANTS OF SPECIFIC AUTHORITY My agent MAY NOT pursue any of the following specific acts for me UNLESS I have INITIALED the specific power listed below: (CAUTION: Granting any of the following will give your agent the authority to take actions that could significantly reduce your property or change how your property is distributed at your death. INITIAL ONLY the specific authority you WANT to give your agent. If you DO NOT want to grant your agent one or more of the following powers, you may also CROSS OUT a power you do not want to grant.) Create, amend, revoke, or terminate an inter vivos trust. Make a gift, subject to the limitations of Section 751.032 of the Durable Power of Attorney Act (Section 751.032 Estates Code) and any special instruction in this power of attorney. Create or change rights of survivorship. Create or change a beneficiary designation. Authorize another person to exercise the authority granted under this power of attorney. In exercising the above powers and any other powers, my agent must adhere to the duty to preserve my estate plan that is described in 751.122 of the Texas Estates Code. -16-
UNLESS YOU DIRECT OTHERWISE BELOW, THIS POWER OF ATTORNEY IS EFFECTIVE IMMEDIATELY AND WILL CONTINUE UNTIL IT TERMINATES. CHOOSE ONE OF THE FOLLOWING ALTERNATIVES BY CROSSING OUT THE ALTERNATIVE NOT CHOSEN: (A) This power of attorney is not affected by my subsequent disability or incapacity. (B) This power of attorney becomes effective upon my disability or incapacity. YOU SHOULD CHOOSE ALTERNATIVE (A) IF THIS POWER OF ATTORNEY IS TO BECOME EFFECTIVE ON THE DATE IT IS EXECUTED. IF NEITHER (A) NOR (B) IS CROSSED OUT, IT WILL BE ASSUMED THAT YOU CHOSE ALTERNATIVE (A). If Alternative (B) is chosen and a definition of my disability or incapacity is not contained in this power of attorney, I shall be considered disabled or incapacitated for purposes of this power of attorney if a physician certifies in writing at a date later than the date this power of attorney is executed that, based on the physician s medical examination of me, I am mentally incapable of managing my financial affairs. I authorize the physician who examines me for this purpose to disclose my physical or mental condition to another person for purposes of this power of attorney. A third party who accepts this power of attorney is fully protected from any action taken under this power of attorney that is based on the determination made by a physician of my disability or incapacity. I agree that any third party who receives a copy of this document may act under it. Termination of this durable power of attorney is not effective as to a third party until the third party has actual knowledge of the termination. I agree to indemnify the third party for any claims that arise against the third party because of reliance on this power of attorney. The meaning and effect of this durable power of attorney is determined by Texas law. By execution of this power of attorney, I hereby revoke all previous durable powers of attorney executed by me. If my,, dies, becomes legally disabled, resigns, or refuses to act, or is removed by court order. I name my,, of,, County, Texas, as successor to that agent. SIGNED this day of, 2017. -17-
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STATE OF TEXAS COUNTY OF TARRANT This document was acknowledged before me on this day of, 2017, by. AFTER RECORDING RETURN ORIGINAL TO: Notary Public / State of Texas My Commission Expires: -19-
IMPORTANT INFORMATION FOR AGENT (ATTORNEY IN FACT) Agent s Duties When you accept the authority granted under this power of attorney, you establish a fiduciary relationship with the principal. This is a special legal relationship that imposes on you legal duties that continue until you resign or the power of attorney is terminated or revoked by the principal or by operation of law. A fiduciary duty generally includes the duty to: (1) act in good faith; (2) do nothing beyond the authority granted in this power of attorney; (3) act loyally for the principal s benefit; (4) avoid conflicts that would impair your ability to act in the principal s best interest; and (5) disclose your identity as an agent or attorney in fact when you act for the principal by writing or printing the name of the principal and signing your own name as agent or attorney in fact in the following manner: (Principal s Name) by (Your Signature) as Agent (or as Attorney in Fact) In addition, the Durable Power of Attorney Act (Subtitle P, Title 2, Estates Code) requires you to: (1) maintain records of each action taken or decision made on behalf of the principal; (2) maintain all records until delivered to the principal, released by the principal, or discharged by a court; and (3) if requested by the principal, provide an accounting to the principal that, unless otherwise directed by the principal or otherwise provided in the Special Instructions, must include: (A) (B) (C) (D) the property belonging to the principal that has come to your knowledge or into your possession; each action taken or decision made by you as agent or attorney in fact; a complete account of receipts, disbursements, and other actions of you as agent or attorney in fact that includes the source and nature of each receipt, disbursement, or action, with receipts of principal and income shown separately; a listing of all property over which you have exercised control that includes an adequate description of each asset and the asset s current value, if known to you; -20-
(E) (F) (G) (H) the cash balance on hand and the name and location of the depository at which the cash balance is kept; each known liability; any other information and facts known to you as necessary for a full and definite understanding of the exact condition of the property belonging to the principal; and all documentation regarding the principal s property. Termination of Agent s Authority You must stop acting on behalf of the principal if you learn of any event that terminates this power of attorney or your authority under this power of attorney. An event that terminates this power of attorney or your authority to act under this power of attorney includes: (1) the principal s death; (2) the principal s revocation of this power of attorney or your authority; (3) the occurrence of a termination event stated in this power of attorney; (4) if you are married to the principal, the dissolution of your marriage by court decree of divorce or annulment; (5) the appointment and qualification of a permanent guardian of the principal s estate; or (6) if ordered by a court, the suspension of this power of attorney on the appointment and qualification of a temporary guardian until the date the term of the temporary guardian expires. Liability of Agent The authority granted to you under this power of attorney is specified in the Durable Power of Attorney Act (Subtitle P, Title 2, Estates Code). If you violate the Durable Power of Attorney Act or act beyond the authority granted, you may be liable for any damages caused by the violation or subject to prosecution for misapplication of property by a fiduciary under Chapter 32 of the Texas Penal Code. THE ATTORNEY IN FACT OR AGENT, BY ACCEPTING OR ACTING UNDER THE APPOINTMENT, ASSUMES THE FIDUCIARY AND OTHER LEGAL RESPONSIBILITIES OF AN AGENT. -21-
EXHIBIT B MEDICAL POWER OF ATTORNEY THIS IS AN IMPORTANT LEGAL DOCUMENT. BEFORE SIGNING THIS DOCUMENT, YOU SHOULD KNOW THESE IMPORTANT FACTS: Except to the extent you state otherwise, this document gives the person you name as your agent the authority to make any and all health care decisions for you in accordance with your wishes, including your religious and moral beliefs, when you are no longer capable of making them yourself. Because "health care" means any treatment, service, or procedure to maintain, diagnose, or treat your physical or mental condition, your agent has the power to make a broad range of health care decisions for you. Your agent may consent, refuse to consent, or withdraw consent to medical treatment and may make decisions about withdrawing or withholding life-sustaining treatment. Your agent may not consent to voluntary inpatient mental health services, convulsive treatment, psychosurgery, or abortion. A physician must comply with your agent's instructions or allow you to be transferred to another physician. Your agent's authority begins when your doctor certifies that you lack the competence to make health care decisions. Your agent is obligated to follow your instructions when making decisions on your behalf. Unless you state otherwise, your agent has the same authority to make decisions about your health care as you would have had. It is important that you discuss this document with your physician or other health care provider before you sign it to make sure that you understand the nature and range of decisions that may be made on your behalf. If you do not have a physician, you should talk with someone else who is knowledgeable about these issues and can answer your questions. You do not need a lawyer's assistance to complete this document, but if there is anything in this document that you do not understand, you should ask a lawyer to explain it to you. -22-
The person you appoint as agent should be someone you know and trust. The person must be 18 years of age or older or a person under 18 years of age who has had the disabilities of minority removed. If you appoint your health or residential care provider (e.g., your physician or an employee of a home health agency, hospital, nursing home, or residential care home, other than a relative), that person has to choose between acting as your agent or as your health or residential care provider; the law does not permit a person to do both at the same time. You should inform the person you appoint that you want the person to be your health care agent. You should discuss this document with your agent and your physician and give each a signed copy. You should indicate on the document itself the people and institutions who have signed copies. Your agent is not liable for health care decisions made in good faith on your behalf. Even after you have signed this document, you have the right to make health care decisions for yourself as long as you are able to do so and treatment cannot be given to you or stopped over your objection. You have the right to revoke the authority granted to your agent by informing your agent or your health or residential care provider orally or in writing or by your execution of a subsequent medical power of attorney. Unless you state otherwise, your appointment of a spouse dissolves on divorce. This document may not be changed or modified. If you want to make changes in the document, you must make an entirely new one. You may wish to designate an alternate agent in the event that your agent is unwilling, unable, or ineligible to act as your agent. Any alternate agent you designate has the same authority to make health care decisions for you. -23-
THIS POWER OF ATTORNEY IS NOT VALID UNLESS IT IS SIGNED IN THE PRESENCE OF TWO COMPETENT ADULT WITNESSES. THE FOLLOWING PERSONS MAY NOT ACT AS ONE OF THE WITNESSES: (1) the person you have designated as your agent; (2) a person related to you by blood or marriage; (3) a person entitled to any part of your estate after your death under a will or codicil executed by you or by operation of law; (4) your attending physician; (5) an employee of your attending physician; (6) an employee of a health care facility in which you are a patient if the employee is providing direct patient care to you or is an officer, director, partner, or business office employee of the health care facility or of any parent organization of the health care facility; or (7) a person who, at the time this power of attorney is executed, has a claim against any part of your estate after your death. I acknowledge that I have read and fully understand the disclosure information as indicated above on this day of, 20. (Name of Principal) -24-