5 Most Important Legal Documents You Need

Transcript of Interview: “5 Most Important Legal Documents You Need”

Mike Barnes:

We’ve talked so many times about legal situations, and by the time you need something, if you don’t have it, it’s too late. 

Kim Barnes:

Today we’re going to talk about the five legal documents that everyone needs. We’re joined by Jeff Barnett and Keith Leuty of Barnett and Leuty. They’re lawyers, and we’re so excited to have you with us today to go over this and make sure that everybody knows all those documents that they need. 

Mike Barnes:

Let’s start with number one. The biggest one I think that most people know about is the will.

Jeff Barnett:

Yeah, so basically everyone needs a will. A will is a document that disposes of all of your property when you die. It also names somebody called an executor or an independent executor to administer your estate at the time that you die. It rounds up any debts that you may have and then distributes the estate according to the will’s terms. If the person has minor children, then a will also names a guardian for those minor children and makes sure that there’s somebody to take care of those kids after you’re gone. That’s also a very important aspect as well.

With a will, the probate process is very streamlined, very easy, and very predictable. My partner and I often use the analogy of a long, straight, well-paved highway. When you’ve got a will, the exit ramps are all clearly labeled. You know exactly how much gas it’s going to take to get from one place to the other, and everything is easy to plan and understand. If you don’t have a will, the probate process is kind of like off-roading. It can be very bumpy, with a lot of detours and roadblocks, and it takes a long time.

When you have a will, the probate process is typically three to four months. You can stretch things beyond that for distribution, but generally speaking, the court part is over in three to four months. If you don’t have a will, it easily exceeds six or eight months and sometimes goes on beyond a year. It’s definitely a more complicated, complex, and expensive process because of all that.

Kim Barnes:

Does every will have to go through probate?

Jeff Barnett:

Not necessarily. If there are probate assets—if the person dies with assets in their name that need to be probated in order to transfer—then yes, any will like that needs to be probated. But sometimes people die having made a will in preparation for death, and it turns out that every account they have and every real property they own transfers at death by some other means. There are ways to avoid probate, but it’s always a good idea to have a will because you don’t always get those things done or those documents prepared.

Kim Barnes:

I think that sometimes when people hear the word “estate,” they assume it must be something big, like a large estate with a lot of money. A will is still really helpful even if you don’t have very much, right?

Jeff Barnett:

Right. Most people wouldn’t want to leave behind and give to the bank or the state of Texas ten thousand dollars, for instance. A will can help you obtain that ten thousand dollars or fifteen thousand dollars, or even a small estate. It’s essential for hundreds of thousands and millions, but absolutely, small numbers like a house and thirty thousand dollars—definitely, you need a will for that. You don’t want to go through that more lengthy, costly, and expensive process, especially when it’s disproportionately large compared to the amount of assets in the estate.

Mike Barnes:

One last will question: You mentioned the term “executor.” When you have several kids in the family, can that be a problem? Is it hard picking out who’s going to be the executor, and how do you pick them?

Jeff Barnett:

Yeah, it absolutely can be. It can be complicated for some people and super easy for others. Sometimes you’ve got three kids, and all three of them are super intelligent and fair, so they’d all be good choices. Then deciding who’s going to be first or second becomes tougher. Sometimes it’s more obvious—you’ve got someone business-minded or legally minded in your family, and another who’s a nurse or doctor, so you can divide the roles. Proximity can also be a tiebreaker—if someone lives in Maine and another in Austin, the one in Austin might be a better choice even if living in another state doesn’t disqualify them.

Mike Barnes:

Well, you mentioned the term “power of attorney.” Let’s talk about medical power of attorney.

Keith Leuty:

There are actually two powers of attorney that we consider everyone needs. One is the medical power of attorney, and the other is called a statutory durable power of attorney, which means a financial power of attorney. The medical power of attorney allows a person to choose who they want to step into their shoes from a medical standpoint should they ever be unable to make their own medical decisions for any reason—illness, injury, temporary or more permanent conditions.

We encourage people to think of three or four people in succession. In a married couple, typically a spouse might be the first choice, followed by children. The medical power of attorney tells the doctor who legally can step in to make those decisions. It’s important to also have a HIPAA release. We include it as part of our medical power of attorney, but some attorneys choose to do it as a separate document. The HIPAA release allows the agent serving as the medical power of attorney to access the medical records and information before making a decision.

The other type of power of attorney, the financial power of attorney, allows the person to manage financial affairs—pay bills, receive debts, sign deeds to transfer real estate, and pretty much anything other than medical. It’s important to have both powers of attorney in place to avoid guardianship, which is expensive, time-consuming, and not always guaranteed.

Kim Barnes:

I think the one thing that I’ve learned that’s important and often missed is that the will is for after someone passes, while the powers of attorney are for while they’re still alive, helping with their care—paying bills or making medical decisions. If you want to have a relationship with your parent’s doctor, do you need that power of attorney or HIPAA release to legally talk to them about concerns?

Keith Leuty:

Legally, the answer is yes. In the real world, some doctors, especially if they know the family, might answer some questions or give some leeway. But from a legal standpoint, yes, you absolutely do. We encourage anyone with a loved one diagnosed with Alzheimer’s or dementia to put the powers of attorney first on their list of things to do while their loved one still has the legal capacity to sign them.

Mike Barnes:

That’s really important because once you need it, it’s too late if they’re not able to sign it. I’m a bit confused about the difference between a medical power of attorney and a medical directive. Can you explain the difference?

Jeff Barnett:

The medical power of attorney appoints an agent to make medical decisions for the person who is no longer able to do so. The medical directive, also known as a directive to physicians and family or surrogates, living will, or advance directive, states what you want to happen if you’re brain-dead or have a terminal irreversible condition and can’t speak for yourself. It outlines whether you want to be kept alive on a ventilator or feeding tube or have those things removed to allow your body to die naturally. It gives clarity to doctors and peace of mind to your family.

Kim Barnes:

Is a do not resuscitate order (DNR) part of that medical directive?

Jeff Barnett:

No, a DNR is a separate document. A DNR says if you find me without a pulse, don’t revive me. It’s useful for someone with end-stage cancer, kidney disease, heart disease, or someone very elderly and ready to go. But for someone young, middle-aged, and otherwise healthy, a DNR is generally not recommended. The medical directive expresses your wishes, while the DNR tells medical personnel not to revive you.

Mike Barnes:

While the will and powers of attorney need an executor or agent from your family, the medical directive is just your wishes?

Jeff Barnett:

That’s correct. It expresses the decision you’ve already made about your care if certain conditions are met. It doesn’t name an agent because it outlines your decisions.

Mike Barnes:

We’ve mentioned four documents. What’s the fifth?

Jeff Barnett:

The fifth is the appointment of agent for disposition of bodily remains. This document appoints an agent to take care of your body after you die. It states your wishes for cremation, burial, donation to science, and other details. It names an agent to make these decisions. Keith has a story about a call we received at five o’clock on a Friday a few years ago. Keith, tell them about that.

Keith Leuty:

Yes, I randomly picked up the phone, and a young lady said, “You got to help me.” Her brother and sister were about to have her father embalmed, but he had always wanted to be cremated. I asked if she had a disposition of remains document, and she didn’t know what that was. Without that document, the next of kin makes the decision, which can cause conflicts if family members disagree.

Kim Barnes:

So, without that document, the next of kin makes the decision, and it can cause conflicts?

Jeff Barnett:

Yes, if there’s no surviving spouse, it goes to the kids. If they disagree, there’s a lack of clarity. The document ensures your wishes are followed and avoids conflicts.

Kim Barnes:

Bottom line, having all these documents takes a lot of the guesswork out, ensuring decisions are made ahead of time and reducing disagreements.

Keith Leuty:

Exactly. When we talk about the five legal documents everyone needs, we like to add a bonus: the ladybird deed. It allows you to transfer ownership of real estate upon death without going through probate. Texas is one of the few states that have ladybird deeds. If you own real estate, consider getting a ladybird deed to avoid probate.

Kim Barnes:

If you’re not in Texas, do you have similar options?

Keith Leuty:

Every state is different. Some states have a transfer on death deed, which is similar. Check with your individual state to find out your options.

Kim Barnes:

Those are the five plus the bonus with the ladybird deed. People often say they need a trust. How do you know if that’s necessary?

Jeff Barnett:

It’s very state-dependent. States like California have lengthy, complicated, and expensive probate systems, so everyone needs a revocable living trust. In Texas, with a more streamlined probate system, it’s more fact-dependent. We don’t recommend it to everyone, but there are circumstances where it can be helpful.

Keith Leuty:

There are different kinds of trusts, like a supplemental needs trust for a special needs individual or a Medicaid asset protection trust. It’s very case-specific.

Kim Barnes:

Hopefully, this gives everyone an idea of the five important documents. If they have one and not the others, it gives them the language and ability to fill in the gaps.

Mike Barnes:

Jeff Barnett, Keith Leuty, thank you so much for all these tips.

Kim Barnes:

It is a lot to think about and can be overwhelming, but knowing the right words to use and what things are called is really helpful. 

Mike Barnes:

We’ve done a full interview with Keith about the ladybird deed. If you have any other topics you’d like us to discuss here on Parenting Aging Parents, please let us know.

*This transcript is auto-generated. Please excuse any typos or mistakes.