TEXAS ESTATE PLANNING HANDBOOK

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TEXAS

ESTATE PLANNING

HANDBOOK

By Brad Wiewel

Texas Trust Law

Estate Planning * Asset Protection * Probate * Special Needs * Charitable

www.TexasTrustLaw.com

1601 Rio Grande, Suite 550 6400 RR 2147 West, Suite 101 1618 Williams Drive

Austin, Texas 78701 Horseshoe Bay, TX 78657 Georgetown, Texas 78628

Phone: 512-480-8828 Phone: 877-545-8828 Phone: 512-869-1435

Fax: 512-480-0888 Fax: 512-480-0888 Fax: 512-480-8828

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Author’s Note

The information contained in this booklet is for informational

purposes only. It is not intended to give anyone specific legal advice.

This author recommends that you consult with a qualified estate

planning attorney for answers to your specific family situation. Data

regarding the cost and expenses of probate was obtained from

studies described in The Living Trust Revolution by Robert A. Esperti

and Renno L. Peterson, and Field Guide, National Underwriter.

Derek N. Rodstrom, Robert A. Esperti and Renno L. Peterson. All

rights reserved. No part of this handbook may be reproduced or

used in any form, or by any means, electronic or mechanical,

including photocopying, recording, or by any information or

retrieval system by anyone. Printed in the United States of America.

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TABLE OF CONTENTS

About the Author

Foreword

Preface

Wills

Probate

Living Trusts

Trustees

Joint Tenancy with Right of Survivorship

Asset Protection

Special Needs Planning

Charitable Giving

Estate Taxes

Pet Planning

Medicaid and Elder Law Planning

Life Insurance Trusts

Finding an Estate Planning Attorney

LifePlanning Legal Services™

Epilogue

Last Will and Testament (According to the Texas Legislature)

Glossary

About The Wiewel Law Firm

Nothing contained in this publication is to be considered as the rendering of legal advice for specific cases, and readers are responsible for

obtaining such advice from their own legal counsel. This publication is intended for educational and informational purposes only.

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ABOUT THE AUTHOR

Brad Wiewel is Board Certified in Estate Planning and Probate Law by

the Texas Board of Legal Specialization. He received his B.A. from the

University of Illinois, and his Juris Doctorate, with Distinction, from St.

Mary’s University in San Antonio. He is licensed in Texas, and the

United States Supreme Court, the United States Court of Appeals for the

Fifth Circuit and the United States District Court, Western District of

Texas. He is a former legal columnist for the Austin American-Statesman.

Brad is a Life Fellow of the Texas Bar Foundation, has been very active

in a variety of public and private educational and charitable activities, and

has acknowledged for his Pro Bono contributions.

Brad is a member of Wealth Counsel. Wealth Counsel is comprised of

hundreds of estate planning attorneys throughout the United States. Its

members provide state-of-the-art estate and business planning legal

advice, counsel and documentation to their clients. These attorneys are

committed to leadership in innovative estate planning techniques, and

dedicated to assisting families, preserving wealth, and perpetuating

philanthropy. He is also a graduate of the Advanced Studies in Wealth

and Estate Strategies program sponsored by the Esperti-Peterson Institute

in conjunction with Michigan State University.

Brad is a much sought-after speaker at estate planning training classes for

CPAs, financial advisors and insurance professionals. In addition, he

teaches continuing education classes in the CFP preparatory program at

The University of Texas. He formerly hosted “Law Talk with Brad” on

Talk Radio 1370 AM in Austin.

Brad and his wife, Cindy, are the parents of three sons: Sam, Andy and

Zach, all of whom are, like Brad, Eagle Scouts.

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Foreword

The Bridge Builder

An old man, going a lone highway,

Came at the evening, cold and gray,

To chasm, vast and wide and steep,

With waters rolling cold and deep.

The old man crossed in the twilight dim;

That sullen stream had no fears for him;

But he turned when safe on the other side

And built a bridge to span the tide.

“Old man,” said a fellow pilgrim near,

“You are wasting your strength with building here;

Your journey will end with the ending day;

You never again will pass this way;

You’ve crossed the chasm, deep and wide ---

Why build you this bridge at eventide?”

The builder lifted his old gray head:

“Good friend, in the path I have come,” he said

“There followeth after me today

A youth whose feet must pass this way.

This chasm that has been naught to me

To that fair-haired youth may a pit-fall be,

He, too, must cross in the twilight dim;

Good friend, I am building the bridge for him.”

Will Allen Dromgoole

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PREFACE

Estate planning is a combination of the rational mind, which knows what

to do with information, and the compassionate mind, which teaches and

listens. An estate planning attorney should never lose sight of these

principles. How we plan our estate will have a profound impact on our

families and the ones we love.

Each family has different needs and different concerns. It is important

that your estate plan is designed for your particular family situation.

As a client, you have the right to expect your estate planning counselor to

always strive to help you identify your greatest hopes fears, dreams, and

aspirations for both yourself and your family.

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WILLS

Many people have felt uneasy, even guilty, for not preparing a will for

their loved ones. They put it off for years, only to feel a surge of relief

when they finally sign one in their lawyer’s office. Unfortunately,

their sense of relief may not be well founded.

Surprisingly, about the only aspect of your estate that wills actually

control is property owned solely in your name or in your name with

another person as “Tenants in Common.” For most people, this is a

relatively small portion of the estate. The list of what wills do not

control usually includes the lion’s share of an estate’s value, including:

* Life insurance and annuity proceeds

* Retirement benefits (profit sharing plans, pensions, and IRAs)

* Joint Tenancy with Rights of Survivorship

Life insurance and annuity proceeds and retirement benefits are not

controlled by wills. They are controlled by beneficiary designations.

People who are recently married or remarried may have quite a

shock when discovering their actual beneficiaries may be their ex-

spouse or their parents! This, of course, can have disastrous results.

Jointly held property has its own rules. The results of these rules may

be very different from what you had intended in your will.

Most people who seek the will services of a lawyer look to him or her

for guidance. When asked by a lawyer what they want to do in their

wills, they often reply, “Leave everything to my spouse, and then to

my children equally.” The result is almost always a simple paragraph

or two saying just that (with a little Latin thrown in) and nothing

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more. The rest of the will document (and most trusts for that matter)

is bare-bones boilerplate: a sterile legalese that does not have any

loving instructions for the care of spouses, children, and

grandchildren. Software wills are perhaps the worst choice because

many are either invalid or grossly ineffective because people have no

real idea as to the legal impact of the selections they make.

If you have property in your name and you do not have a valid will or

other planning, your property automatically passes to beneficiaries

named under your state’s law and your property goes through

probate. In that case, at least two lawyers are required to be

employed. Later in this booklet you will find the “Last Will and

Testament (According to the Texas Legislature)” which describes the

disaster that may await your loved ones.

Probate has been said to be “a lawsuit you start against yourself with

your own money for the benefit of your creditors.” Not only can

probate costs be substantial, but they are also the first to be paid. In

many states the fees are often taken as a percentage of the gross value

of the estate (that is, before creditors put a hand in). In Texas,

however, attorney’s fees for probate can be charged on a percentage

or hourly basis; the Texas standard is “reasonable fees”. In Texas, like

most states, probate costs do not necessarily have a “cap”.

Your will cannot take care of you if you are incapacitated. It only

takes care of the people that you leave behind. Your will can do

absolutely nothing to help you or your loved ones while you are

mentally incompetent, because it is only effective at your death.

Although a power of attorney can allow someone to take care of you if

you are mentally incompetent, a power of attorney is often a “blank

check” to handle your assets however someone chooses, though they

are expected to operate with your best interests in mind. In fact, in

many cases it is often difficult (and occasionally impossible) to get a

financial institution to recognize a power of attorney.

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Every will is a public document upon being filed for probate. When it

is filed, it becomes totally public. A legal notice that the will has been

admitted to probate is published in a local newspaper, and anyone

can go to the courthouse, look at it and see exactly how your estate is

divided. In addition, the probate inventory must be prepared which

shows such things as many of your non-retirement financial

relationships and the balances of those accounts, the value of your

house and other property. If the estate of the deceased owed

unsecured debts (other than for taxes or administrative expenses) on

the date the probate inventory is due, then the probate inventory is

also made public, exposing very private financial information. Most

people do not want to make any part of their family’s affairs public,

especially at this very vulnerable time in their lives. In certain Texas

counties, such as Travis County, everything required to be filed with

the court is placed on the Internet, and made available to anyone,

anywhere in the world!

Do you have minor children or grandchildren? If you do, and your

will leaves your property directly to them, you have really left your

financial affairs and the well-being of your children and/or

grandchildren in the control of the probate court. Also, whether you

have a will or a trust, by leaving your property outright to loved ones,

regardless of their ages, you have not protected them from:

* The claims of their own or their spouse’s creditors,

* Disability and the risk of a guardianship proceeding, or

* Their inexperience and/or inability to handle their inheritance

wisely.

Wills do not cross state lines very well. If you make a will in one state

and die a resident of another, the laws in your new state may be used

to interpret your will. This can often lead to confusion, and confusion

can lead to increased expenses. As it happens, each state’s will laws

are different, which is why lawyers tell their clients “if you move out

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of state, be sure to have your will redone to meet the laws of your new

state.” Having to rewrite your will may be expensive, but not

rewriting it is even more expensive! In Texas, a will that is valid and

self-proved (which means that the witnesses to the will do not need

to testify) in the state in which it was written, can be admitted to

probate here as if it was written in Texas. Despite this, problems and

additional expenses arise, however, because research into the original

state’s laws can be necessitated, and the other documents required

for comprehensive estate planning (medical and financial powers of

attorney, etc.) should be updated to comply with Texas laws. As an

aside, one of the biggest problems with software wills is that the law

of the state in which the software developer lives may be used instead

of Texas law which can add to delay, confusion and expense.

In addition, if you own land or other real property in more than one

state, it is possible that your estate may have to be probated in each

state in which you own property. For example, the estate of a Texas

married couple with a condominium in Colorado might face four

probates – one on each death in Texas, and another on each death in

Colorado. Think of paying administration expense, court costs,

attorney fees, and related expenditures for each state!

Your natural reaction by this point might be to wonder why wills

remain so popular. Why do so many lawyers continue to recommend

them? The answer is quite simple: people - particularly lawyers - are

conservative by nature. Wills have been and continue to be an

institution in our society.

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PROBATE

A deceased or a mentally incompetent person cannot sign deeds,

write checks, pay bills, transact business, transfer assets, or care for

children. Probate is the legal process of accomplishing these tasks.

Death probate is the most familiar of the two types of probate.

Guardianship is the process of obtaining a court order appointing a

guardian to control your person, and/or a guardian to control your

property. Your guardian (including your spouse) will be required to

purchase a surety bond, and the court will retain jurisdiction over the

guardians, and require regular reports and accountings to be filed for

the rest of your life.

Dying with or without a will almost always results in probate.

Before probate can even begin, the probate court must first establish

whether a will exists and, if so, whether it was signed correctly. (If the

deceased did not leave a will, the probate court distributes the

property as provided by the state’s laws.) Please see “The Last Will

and Testament (According to the Texas Legislature)” later in this

booklet. The court must also determine whether the maker of the will

was legally competent and that the maker was not forced to sign the

will.

Anyone who disagrees with a will’s provisions can bring a lawsuit in

the probate court. This is called a will contest; it can be a way for

unscrupulous potential heirs to attempt to collect what they were not

directly left by the will.

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If you have a will, you can designate the person you would like to

manage your estate. If you die without a will, you give up that right.

The agent for an estate is known as an executor, an administrator, or

a personal representative depending on the state and the

circumstances. In Texas, the Executor will need to hire a lawyer to file

the necessary papers and to make all court appearances. Often the

Executor has no experience in estate administration and is totally

dependent on the lawyer. Both the Executor and the lawyer are

legally entitled to be paid for their services.

One of the Executor’s main responsibilities is to notify creditors and

heirs of the estate. Creditors are notified either directly by the

Executor or by legal notices that are published in newspapers.

Currently in Texas, the standard used to calculate attorney fees is

“reasonable compensation”. Reasonable compensation is usually

determined by hourly rates, fixed fees, percentages, customary fees,

or whatever the attorney can justify by the “difficulty of the case”, the

“level of experience required”, and so on. Ordinarily, judges in typical

Texas probate cases do not even know the amount of attorney’s fees

that are being charged because that information often is not required

to be disclosed to the court.

The length of time it takes to complete probate averages sixteen

months nationwide. Theoretically, in Texas an estate can be closed in

4-6 months, although it certainly can take longer, especially if it is a

taxable estate. Those families not lucky enough to be “average” can

spend years waiting for probate to end. The assets often will not be

distributed until the probate process is completed. In fact, the

Executor could be sued if he or she distributed assets to heirs before

creditors had been paid.

Probate is designed to give public access to previously very private

information. Everything filed with the probate court is open to

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inspection by everyone, and can be scrutinized and copied at any

time, for any reason, or for no reason whatsoever; to whom and how

you leave your property is all made very public. As noted earlier, in

some Texas counties, such as Travis County, this highly personal

information is placed on the internet for anyone, anywhere in the

world to see and access!

A living trust is designed to avoid probate. A living trust should have

carefully structured instructions for the care and well-being of both

you and your loved ones while you are alive but incapacitated and of

your loved ones after you are gone.

A living trust avoids probate when title to your various assets is

transferred to the name of your trust while you are alive. On your

death your living trust remains alive - your property and the

instructions that accompany it are immediately available for the

benefit of your loved ones - without the intervention of the probate

process. Although a trust administration is often necessary, if the

trust is fully funded (which means your trust owns your assets – but

you control the trust!) all of the deceased’s property and the trust

provisions remain private.

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LIVING TRUSTS

“Estate Planning” is a term frequently used but rarely understood.

Proper estate planning should be centered-around the following

mission statement:

I want to control my property while I am alive, take care of

myself and my loved ones if I become disabled, and be able to

give what I have to whom I want, in the manner I think

appropriate, and if I can, I want to save every last tax dollar,

attorney fee, and court cost possible.

Planning your estate with a fully funded living trust meets these

estate planning goals and also does the following:

* Provides instructions for your care and that of your loved ones in

the event of your disability, avoiding any possibility of a guardianship;

* Avoids probate;

* Keeps your planning affairs totally private;

* Prevents out-of-state probates if you own property in more than

one state;

* Achieves federal estate, gift and income tax planning which can save

your loved ones thousands of dollars;

* Provides loving instructions for the care of minor children and

children with special needs;

* Allows you to determine what age and under what conditions you

want your children and loved ones to inherit;

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* Prevents the time, expense and humiliation of a guardianship - in

the event you become mentally incompetent;

* Is difficult for disgruntled heirs to contest;

* Allows you to leave extensive instructions for the care and

assistance of your loved ones after your death;

* Both Living Trusts and wills allow you to create protective trusts for

your little ones, challenged children and/or grandchildren, which

frees them from impersonal, expensive, and cumbersome supervision

of the court, and can also protect your children’s inheritance from the

claims of their creditors or future ex-spouses.

“Well,” you might ask, “if living trusts are so good, why does everyone

seem to talk about estate planning in terms of wills?” The answer is

simple: people - particularly lawyers - are conservative by nature.

Wills are perceived as old and venerable and have been accepted as

the way to plan. Lawyers take courses about wills in law school, but

they generally have not received much instruction about other

planning alternatives.

Trusts have been in existence even longer than wills. Unfortunately,

they are perceived as only for the very wealthy, or that they are too

complicated or unmanageable for most people. Nothing could be

further from the truth. Living trusts are for anyone who wants to

achieve the goals discussed here.

People who learn about the problems associated with wills - and how

they can be overcome with living trust planning - generally embrace

the living trust concept.

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People Centered Estate Planning Process. Estate planning

attorneys who are dedicated to people-centered estate planning

embrace the following philosophies:

* A living trust should contain your carefully crafted instructions for

your own care and that of your loved ones. To meet this end, the

estate planning attorney should conduct a detailed interview with

you to identify your hopes, fears, dreams and aspirations for yourself

and your family.

* Your estate plan should be custom drafted like a suit of fine clothing

to meet your individual planning goals.

* Because you never know what might happen, your trust should plan

for every contingency and should be on the cutting edge of the law.

* Your trust should be written in straightforward, understandable

language, with a minimum amount of technical legal language.

Easy to Create. With the help of your advisors and your attorney,

you can quickly and comfortably establish a living trust for yourself

and your loved ones. In Texas if you are married, it is often

recommended that you and your spouse have a joint living trust.

Easy to Change or Cancel. Your living trust can be changed or

canceled at any time. You are not locked into a fixed position; after

signing your name, you always have the option of “unsigning” it. In

fact, it is recommended that you regularly review and update your

living trust. Please see the chapter on “LifePlanning Legal Services™”

later in this booklet.

Easy to Maintain Control. Your living trust receives its strength by

becoming - for your benefit - the “owner” of your property. As the

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maker, trustee, and primary beneficiary, you control every aspect of

how your property is to be used and enjoyed.

Easy to Appoint Trustees. Both you and your spouse can be the

original trustees of your joint trust, or you can each be sole trustee for

your own separate trust. You can specify different trustees to take

care of your loved ones after your death. You can name as many or as

few trustees as you like. You can determine how they may be

terminated or replaced, and you can even name their replacements.

Can Be Set Up Quickly. Creating a living trust can usually be drafted

in three to four weeks.

Funding Your Trust. In order for your trust to meet your planning

goals and to avoid probate of your assets, it is critical that your assets

be titled in the name of your trust. The process of transferring your

assets into your trust is called “funding” your trust. An unfunded

trust is like a car without gas; neither will get you very far! A good

estate planning attorney should provide you with assistance in

funding your trust. Unfortunately, many estate planning attorneys do

not have qualified funding coordinators or paralegals to help you

during the funding process.

Tax Consequences. There are no adverse income or property tax

consequences to establishing a living trust. You do not need any

special tax identification numbers nor do you need to file any special

tax returns. In fact, you continue to file your tax returns just as you

always have. Also, your property taxes are unaffected by the trust.

Inexpensive in the Long Run. Settlement of a fully funded living

trust can cost less than a probate or guardianship proceeding.

Disadvantages of a Living Trust. There are very few disadvantages

of using a living trust to plan your estate. The most common criticism

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of a living trust is that you must fund it. But, think how much easier it

is for you to do this than for someone less familiar with your affairs,

such as a family member or a close friend. And you are the one who

will have the satisfaction of knowing your affairs are really in order,

not just put off for others to handle. Another concern about living

trusts are their perceived complexity. Certainly your living trust

should include the latest and most sophisticated tax planning; and

everyone knows how complicated the tax laws are. So if you want to

save your heirs every tax dollar possible, some detailed tax planning

is needed.

As to the complexity of maintaining your business affairs through a

living trust instead of personally, in actual practice there is very little

difference. Often the only “complication” (if there is one at all) of

handling an asset which has been transferred to your living trust may

be occasionally writing “Trustee” after your signature when you sell

real estate.

A Word of Caution. Proper estate planning revolves around your

relationship with a qualified estate planning attorney. Unfortunately,

there are many businesses and salespeople masquerading as estate

planning professionals. They are inundating the public with sales

schemes that involve selling wills, living trusts, and other estate

planning documents without the involvement of attorneys in the

design and drafting of the documents. These people prey on well-

intentioned families, the elderly and the uninformed. They sidestep

practicing legal professionals and deceive the public. They are the

opposite of what the People Centered Estate Planning Process stands

for: professional thoroughness by the attorney and other advisors,

and respect for the overall well-being of the client and the client’s

family. It aspires to the highest ethical and professional behavior that

will lend dignity to the client and competence to the planning process.

Software trusts usually have the same problem as software wills –

they usually do not work right!

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Three Misconceptions. While a Living Trust is an excellent tool for

controlling assets during a disability and avoiding probate, there are

three very popular and totally erroneous misconceptions about this

tool. First, people hear the word “trust” and assume that by having a

living trust they have magically protected their assets from their

creditors. Unfortunately, Living Trusts add NO ASSET PROTECTION

to your estate. While there are several tools available to shield your

property if you are sued such as Limited Partnerships (LP) and

Limited Liability Companies (LLC), a Living Trust, in and of itself,

provides no additional protection. The second misconception is that

when someone dies with a Living Trust no legal work is needed. This

is also false. Although a properly implemented Living Trust may

avoid the need for Court involvement, you will almost always need

the help of a qualified estate lawyer to assist the successor trustee

with the legal requirements imposed by the terms of the trust. Third,

despite the superiority of a living trust over a durable power of

attorney, you still need a durable power of attorney to manage

retirement accounts (401(k), IRA, etc.). It’s best to contact the firm

that has your retirement accounts and get their form for those

accounts.

A Living Trust Prepared Through the People-Centered Estate

Planning Process is the Essence of Estate Planning. It allows you

to control your property while you are alive, to take care of yourself

and your loved ones if you become disabled, and enables you to give

what you have to whom you want in the manner you want, and saves

every last tax dollar, attorney fee, and court cost possible.

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TRUSTEES

Under the laws of our country, a trustee is a super-agent charged with

the most important of duties: administering our property for the

benefit of you (if you have created the trust) and your loved ones.

Whether the trustee is a person or an institution, the responsibility of

the position remains the same: to follow the trustmaker’s

instructions.

The compensation of trustees in many states is defined as whatever is

reasonable. “Reasonable” is frequently determined by what

professional trustees - banks and trust companies - charge. Generally,

their charges are 1.5% or less per year of the value of the funds they

administer.

Trustees and guardians have different functions. A guardian raises

your minor children and provides loving care. A trustee is your

children’s financial manager, handling money and property. The

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trustee and the guardian may be the same person as your guardian or

the trustee and the guardian can be two different individuals. This

establishes a checks-and-balances system for the benefit of your little

ones.

You are trustee as long as you are alive and well. Your family, friends

or any bank trust department, trust company, Certified Public

Accountant or responsible adult can serve as a trustee for you and

your loved ones after you are unable to serve as your own Trustee.

They can serve alone or in combination with other trustees you name.

When selecting your trustees, be mindful that you are not limited to

naming a single trustee. You can name as many co-trustees as you

like. You can change your trustees any time, and you can name

different trustees for different circumstances. For example, you can

have one set of trustees while you are alive and healthy, another set

on your disability, and yet another set on your death. An important

aspect in the selection of trustees is balance. You may want to

augment the financial thoroughness of a bank with the understanding

of a responsible adult when it comes to planning for your children.

In addition to selecting successor trustees, you can also specify in

your living trust the conditions under which trustees should be either

removed or replaced. In short, you have an open hand in the choice,

manner, and number of trustees.

It is preferable to name yourself (and your spouse, if married) as your

initial trustee. If single, you can name a child or another close loved

one or advisor as your initial co-trustee, or you might want to

function as the sole initial trustee of your trust.

If you are married, you can name one or more replacement trustees

to assist your spouse while you are disabled. This choice is

recommended, because your spouse may appreciate having help with

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your financial affairs at a difficult and stressful time. Alternatively,

however, you can rely only on your spouse to take care of you and

manage the family finances as sole trustee. Professional advisors,

close family members, institutional trustees, financial advisors and

accountants are often named because they know so much about the

family’s finances; they can step right in and help a spouse who may

not be well informed with respect to the family’s finances.

People who do not have advisors or a particularly close relationship

with their advisors usually select close family members or corporate

fiduciaries as their successor trustees. Close family members are

selected when they can offer moral support and some financial or

administrative help to loved ones. Corporate trustees are usually

named solely for their ability to manage one’s financial affairs, from

the investment of funds to record keeping and the preparation of tax

returns. Generally, corporate trustees are used when either the

family dynamics are complex or the assets in the trust require special

talent. If a corporate trustee is utilized, a “Trust Protector”, usually a

close family friend, is named. The Trust Protector monitors the

performance of the corporate trustee and can replace the trustee if

the circumstances call for it.

A spouse trustee has different needs after you are gone. This is still

true even if your spouse is an expert in your finances. A period of

intense grief follows the loss of a loved one, and during this time even

the soundest of business minds does not function very well. It is

important to ensure that your spouse has access to clear thinking and

supportive help. This is especially true if any relatives or family

acquaintances begin to propose dubious financial ventures on the

basis of the newfound affluence. Blended family issues and the

desirability for re-marriage protection should be factored into this

critical decision.

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Your loved ones need prudence, but they also need loving care. That

is where the personal touch of a close family member or trusted

advisor can make all the difference. Such persons can offer

understanding when dealing with complex family relationships and

unique personalities. Adding them to your trustee team is a real

planning plus. Your estate planning attorney can assist you in

selecting the proper combination of caring and competent trustees to

ensure your own well-being and that of your loved ones.

JOINT TENANCY WITH RIGHT OF SURVIVORSHIP

Joint Tenancy with Right of Survivorship (JTWROS). “JTWROS”

may be a huge planning pitfall. Although JTWROS has been assailed

for years by many estate planning experts, it remains - unfortunately -

a very popular form of property ownership.

How Joint Tenancy With Right of Survivorship Works. In

JTWROS, each person owns the entire asset, not a part of the asset.

“Right of survivorship” means that whoever dies last owns the property.

The deceased joint tenant merely had the use of property while he or

she was alive.

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JTWROS property cannot be controlled. Even if a joint tenant intends

to have his or her share pass to loved ones, the property is not

controlled by the provisions of the owner’s will or trust. Property that

is owned in JTWROS automatically passes to its surviving owners by

operation of law. This means that no one - not even a court - has any

effect on who receives the property.

Misconceptions. JTWROS can be a trap. The term itself has nice

connotations because it implies “the two of us,” a partnership, a

marriage of title as well as love. On the surface, it appears to be the

right way for people who care for each other to own property. It is

psychologically pleasing, which too many people is the real advantage

of joint ownership.

JTWROS is easy and convenient. Some advisors continue to

recommend JTWROS, claiming that it bypasses the entire probate

process; however, this is not entirely true. In addition, the tax

consequences are often misunderstood.

The Truth. For most people, the disadvantages of JTWROS far

exceed any advantages. Some of the more devastating pitfalls of

JTWROS are:

* Property passes to unintended heirs.

* There are no planning opportunities.

* Unnecessary and increased death taxes may be paid

* Probate is at best delayed, not totally avoided.

* For nonspousal owners, unintentional gift taxes and death taxes can

be generated.

* JTWROS offers no protection from creditors.

Unintended Heirs. JTWROS property passes to the surviving joint

tenant and no one else, no matter what you do. If it is your intent to

-25-

leave your property to your spouse and then to your children,

JTWROS is not for you.

Joint tenancy with right of survivorship provides no means of

ensuring that your property will pass to whom you want. For

example, if your spouse remarries and puts part or all of the estate in

JTWROS, your children may inadvertently be disinherited. Or, against

your wishes, your spouse may create a new will to disinherit some or

all of your children after your death. If you and your spouse die

together in an accident, significant questions may arise as to who is

going to inherit your property. JTWROS is a pitfall because you

cannot control where such property passes after your death.

No Planning Opportunities. What if your spouse or your children

need assistance in managing the property you left them? JTWROS

cannot help. It has no provision for help. If you become disabled,

your JTWROS property may be tied up in a guardianship proceeding

while you desperately need it for your own or your loved ones’ care.

If your spouse is disabled when you die, the probate court will

“inherit” the JTWROS property and through a guardianship determine

how and when it is to be used for your spouse’s benefit.

Joint tenancy with right of survivorship includes no tax planning of

any kind. Because of its one-dimensional aspect, JTWROS robs many

people of their ability to reduce the estate tax burden imposed on

their loved ones. For example, upon the death of the first spouse

(assuming you and your spouse do not die together), JTWROS

property passes to the surviving spouse without estate tax. However,

when the surviving spouse dies, the resulting estate is usually larger,

and may all be subject to estate tax. This wastes an opportunity to

pass extra money to your heirs estate tax free.

Probate Awaits. Joint tenancy with right of survivorship passes

outside all your planning and avoids probate - but only on the death of

-26-

the first spouse. When the second spouse dies, there will be a probate.

In situations where both spouses die together, there will be at least

one probate and maybe two. What is worse, if a joint owner becomes

sick and is not able to take care of their financial affairs, it may be

necessary for the probate court to conduct a guardianship proceeding

so the joint asset can be sold. JTWROS does not avoid probate; at

most, it only delays it.

Unintended Taxes. When nonspouses create JTWROS, they often

create a gift tax as well. Frequently, an older parent designates a son

or daughter as a joint tenant on securities accounts and other

property. The moment this is done, the transfer of property may very

well be a gift that might have to be reported to the IRS. In some cases,

a gift tax may have to be paid.

When a nonspouse joint tenant with right of survivorship dies, the

surviving tenant gets the property. A parent with three children may

make one child a joint tenant so that child can “sign on the account”.

When the parent dies, the child inherits all of that property, no matter

what the parent’s will or trust says – JTWROS leap-frogs over your

will or trust. The primary consequences are 1) if the child is selfish,

he or she may legally keep the entire property, or 2) if the child is

generous and shares the inheritance, he or she may have gift tax

consequences.

Excellent for Creditors. Property that is owned in JTWROS may be

subject to being attached by the creditors of a joint owner. Often a

parent will name a child as a joint owner of a bank account or other

property, usually for convenience purposes and to avoid probate on

the parent’s death. Unfortunately, most people do not realize that the

child’s creditors may attempt to attach the part of the property or

asset that the child owns jointly, if the child contributed to or was

gifted any part of the joint property. Only some of the problems

-27-

associated with JTWROS property have been mentioned here. They

can all be avoided, however, through living trust planning.

-28-

ASSET PROTECTION

Although a detailed discussion of asset protection is beyond the scope

of this booklet, being concerned about loss of assets in a lawsuit is

smart. An inadvertent slip by a person in your home, or a sudden car

wreck on the freeway can lead to a potentially devastating legal

meltdown. Crafting a solid Asset Protection plan is wise. As noted

earlier, while a revocable living trust does not in itself provide any

additional safeguards in the event of a lawsuit, combining a living trust

with one or more of the following tools can create a very potent shield:

Annuities

Life Insurance (and the Cash Value)

Family Limited Partnerships (FLP)

Limited Liability Companies (LLC)

Marital Property Agreements

Spousal Protection Trusts

Spendthrift Trusts

Domestic Asset Protection Trusts

Offshore Trusts

Unfortunately, we know that you cannot buy life insurance after you

have just been diagnosed with cancer, in most cases you will not be

able to construct an asset protection plan if a claim against you is

already pending, expected or threatened. So, moving forward to

protect your property, and build a secure fortress to guard your

family’s wealth prior to a problem while the “coast is clear” is vital to

your future financial stability.

-29-

PET PLANNING

Have you ever considered what would happen to your pet in the

event of your disability or death?

 Despite a pet’s short life expectancy, the pet may out live you.

This is especially true now that medical intervention results in longer

life expectances for pets than in the past.

 Proper planning can provide for a care plan in the event of not

only death but also incapacity.

 You can provide for a temporary emergency caregiver in the event

that something unexpected happens to you – providing them with

keys to your home, feeding and care instructions, the name of your

veterinarian, and information about permanent care instructions.

 Planning can lead to peace of mind, reducing the anxiety that

many pet owners experience when they envision their beloved pet

living without them.

 There is no assurance that if you leave money to someone outright

to care for your pet that they will do what they promised to do.

Providing an orderly plan for your pet is the responsible and loving

thing to do.

-30-

MEDICAID AND ELDER LAW PLANNING

Have you ever considered what would happen if you cannot pay for the

cost of long term care for yourself or a loved one?

For many families, there is limited money in savings and the cost of

long-term care is expensive and overwhelming. Public programs like

Medicaid can be a lifesaver — but only if you qualify!

The regulations surrounding Medicaid are complex and the

requirements to qualify for and preserve these benefits change

constantly. Many people who attempt to navigate this web of

Medicaid Planning quickly learn it is not something to approach lightly.

Mistakes can threaten eligibility, causing benefits to be delayed or

denied completely.

It is critical that you work with elder law attorneys that have a

thorough understanding of all the Medicaid program requirements,

including the allowable income and assets levels, penalties for gifting,

exemptions for property transfers, trust planning, and other options

that can be used to achieve and maintain eligibility.

Our attorneys strive to ensure that elders and disabled individuals can

pay for needed services whether that is home care or care in a long

term facility like a nursing home.

-31-

SPECIAL NEEDS PLANNING

Special people need special planning. Many families struggle to find

the best way to leave money to a child or loved one who, due to a

mental or physical challenge, will never be in a position to effectively

manage an inheritance. The creation of a proper plan to ensure that

your special person has the money needed to provide for their care

without jeopardizing the availability of certain governmental benefits

and supplements is critical.

Some of this work may be contained in a properly drafted Will or

Living Trust. Often, a “stand-alone” trust is created so that other

members of the family can name that trust a beneficiary of assets that

will be needed in later years for the care of the special person. In fact,

naming the special person in a Will or Living Trust, or making that

person the beneficiary of an insurance policy or retirement account

can be the absolute worse thing to be done because the money coming

to the special person will almost certainly be enough to disqualify him

or her from most benefit programs! In other words, an inheritance

that is not correctly structured in this setting can be a curse instead of a

blessing. On the other hand, a properly constructed Special Needs

Trust creates a fund that will allow a comfortable, fulfilling life for the

special person and permit access to other resources that may be

available.

Special attention is called for when a family is trying to navigate

through these very complex issues. A properly crafted estate plan

which incorporates Special Needs Planning can provide a lifetime of

assistance for the special person, and ensure that all of the benefits

provided by outside sources are fully accessible. Families enjoy a

substantially heightened sense of peace of mind after this planning is

put into place.

-32-

CHARITABLE GIVING

Charitable Planning may be the most rewarding undertaking of your

life. Everyone is aware of the needs that go unaddressed in our society

and the world daily. You may want to benefit your church, the

homeless, support research into medical cures or create a scholarship

fund at your alma mater. Regardless of what you want to do, HOW you

do it can have a profound impact on your family and your taxes! Estate

taxes are voluntary taxes –the more you are willing to give to charity,

the less you have to pay to the IRS!

There are many ways to benefit charities. Charitable trusts are often

recommended. Some charitable options have “Give and Get” qualities.

A Charitable Remainder Trust, for instance, can allow you to avoid the

immediate payment of capital gains taxes on the sale of stock, real

estate or other property – and you will receive a current income tax

deduction you can use to offset other taxes. A Charitable Lead Trust

trusts can eliminate taxes on even the largest estate at the time of your

death and allow your loved ones to inherit all of your property. The

use of a private Family Foundation also is a popular choice to allow

your charitable desires to continue far into the future, and provide a

mechanism for your loved ones to manage that portion of your estate

for the charitable purposes you have specified. Donor Advised Funds

operate much like private foundations but with often better tax results

and fewer administrative duties. There are a number of other

approaches to accomplish whatever your goals may be.

Charitable planning can be exciting and rewarding for you and your

family. By becoming a Philanthropist, you can change your life and the

lives of your family and countless others. We will look forward to

explaining the vast array of options, and helping you design what

works best for you and the causes you care the most about.

-33-

ESTATE TAXES

We are all familiar with the Ben Franklin quote: “In this world

nothing is certain but death and taxes.” Unfortunately, taxes and

death still go together. Everything you own, that has your name on

it or that you can control is part of your estate.

Many people may not be aware of the true size of their estate. Your

estate includes everything your own or control on planet Earth,

including assets you may not have considered like retirement

accounts and death benefit of your life insurance policies. The

amount of your exemption is currently in flux and will remain

subject to the whims of Congress for the foreseeable future. Married

couples have a particular problem because historically, without

undertaking advanced estate planning they receive only one estate

tax exemption per couple, not two per couple. This “marriage

penalty” often wreaked havoc on an estate that you spent a lifetime

accumulating; this issue is in flux, however, so close attention to

changes in the law is required. There is even a secret, but

extraordinarily brutal tax called the “Generation-Skipping” tax that

heavily taxes grandparents when they leave too much money to

their grandchildren. These taxes fall especially hard on estates that

have large retirement accounts that must also recognize income

taxes.

Estate tax payments are generally due within nine (9) months of

death. This deadline could force your family to borrow, liquidate or

sell assets, such as a business interest, securities, or withdraw assets

from retirement plans to pay estate taxes. Life insurance placed in a

Family Annual Gifting Trust (sometimes called a Life Insurance

Trust) can be a cost effective way of providing the necessary money

for your family to pay estate taxes and other costs. If you do not plan

properly, the IRS could take more of your estate than your loved

ones would receive.

-34-

PET PLANNING

Have you ever considered what would happen to your pet in the event

of your disability or death?

 Despite a pet’s short life expectancy, the pet may out live you. This is

especially true now that medical intervention results in longer life

expectances for pets than in the past.

 Proper planning can provide for a care plan in the event of not only

death but also incapacity.

 You can provide for a temporary emergency caregiver in the event

that something unexpected happens to you – providing them with keys

to your home, feeding and care instructions, the name of your

veterinarian, and information about permanent care instructions.

 Planning can lead to peace of mind, reducing the anxiety that many

pet owners experience when they envision their beloved pet living

without them.

 There is no assurance that if you leave money to someone outright

to care for your pet that they will do what they promised to do.

Providing an orderly plan for your pet is the responsible and loving

thing to do.

-35-

MEDICAID AND ELDER LAW PLANNING

Have you ever considered what would happen if you cannot pay for

the cost of long term care for yourself or a loved one?

For many families, there is limited money in savings and the cost of

long-term care is expensive and overwhelming. Public programs like

Medicaid can be a lifesaver — but only if you qualify!

The regulations surrounding Medicaid are complex and the

requirements to qualify for and preserve these benefits change

constantly. Many people who attempt to navigate this web of

Medicaid Planning quickly learn it is not something to approach

lightly. Mistakes can threaten eligibility, causing benefits to be

delayed or denied completely.

It is critical that you work with elder law attorneys that have a

thorough understanding of all the Medicaid program requirements,

including the allowable income and assets levels, penalties for

gifting, exemptions for property transfers, trust planning, and other

options that can be used to achieve and maintain eligibility.

Our attorneys strive to ensure that elders and disabled individuals

can pay for needed services whether that is home care or care in a

long term facility like a nursing home.

-36-

LIFE INSURANCE TRUSTS

Life insurance and estate planning go hand in hand. It represents a major

building block in the estate planning process – the “fuel” that powers the estate

planning car.

Many times the “fuel” is taxed at the pump before it finds its way into the estate

planning vehicle. Because life insurance is not a probate asset (i.e. does not

pass through probate, but via beneficiary designations), many people assume

that it is not a taxable asset. While the death benefit is usually income tax free,

life insurance proceeds are not estate tax free! Estate taxes are due only 9

months after the date of death (or the second death for most married couples),

regardless of the status of any probate of the estate which may be pending.

Buying life insurance to add to your taxable estate makes little sense. The

solution is to structure your life insurance to be totally free from federal income

and estate taxes. This can be accomplished through a special type of trust

called an Annual Gifting Trust, sometimes also called an Irrevocable Life

Insurance Trust.

An Annual Gifting Trust is an extra trust that you can create as part of your

total estate plan. Through the use of this special trust, three estate planning

objectives can be achieved.

1) Insurance proceeds can be kept both federal income and estate tax free.

2) The terms provided in the trust document allow you to control how the

insurance proceeds are used by the trust’s beneficiaries.

3) The life insurance proceeds received after death by an Annual Gifting Trust

can be used to pay the taxes at death so that the family can inherit the

deceased’s estate without the need to liquidate assets to pay the taxes. This is

especially important in estates with large retirement accounts, a family

business or real estate.

There are even policies for married couples that insure both spouses called

“second-to-die.” Because estate taxes normally are not due until the second

death, this type policy may be more affordable, and can be available even if one

spouse has health issues that might otherwise hinder the accessibility to life

insurance.

-37-

FINDING AN ESTATE PLANNING ATTORNEY

Selecting the right estate planning attorney can be difficult. However,

there are some pointers you can follow to help you select the right

one.

Qualifications. The attorney who assists you in preparing your

estate plan should be on the cutting edge of knowledge in estate

planning law. Be wary of attorneys who practice in a wide variety of

areas of law. It is impossible for an attorney to be an expert in all

areas. A good estate planning attorney will limit his or her practice to

estate planning and related topics. To become board certified in

Texas, an attorney must obtain recommendations from other

attorneys and a judge who attest to the lawyer’s competency and

ethics. The attorney must then take another bar examine which

focuses exclusively on estate planning issues. Because of this

extraordinarily high bar, only about one percent of all Texas lawyers

is board certified in estate planning and probate law.

Find out what type of professional organizations your attorney

belongs to; this is often a good indication of whether he or she is well

versed in estate planning. Keep in mind, however, that few

organizations require that their members demonstrate a minimum

level of professional competence. Investigate the membership

requirements for the organizations to which your attorney belongs. It

is fair to ask your attorney how he or she developed expertise in

estate planning, and how many estate planning continuing education

hours he or she has completed in the past year. You should also ask

to review copies of any articles or publications on estate planning the

attorney has written.

-38-

Attorney Fees. Cost is always an important factor. However, making

your decision based solely on cost may not be wise. Attorneys set

their fees in several ways, although almost all attorneys will consider

the amount of time that they will need to invest, the complexity of the

plan, and the location and type of assets. Also, remember that

attorneys who do not supervise the funding of your trust may charge

less, but an unfunded living trust will not achieve your goals. Having

the attorney who handled your traffic ticket or divorce draft your

estate plan is usually penny-wise and pound foolish.

An experienced estate planning attorney should be able to quote you

a flat fee at the conclusion of the initial interview when the attorney

knows what he or she will need to do to prepare your plan. Be aware

that many attorneys charge an hourly rate for estate planning. This

may be an indication that the attorney does not know how much time

will be required. It also rewards the attorney for taking more time

and being less efficient, by increasing his or her fees. On the other

hand, though, be cautious of attorneys who quote flat fees over the

phone. This is usually an indication that the attorney does not custom

draft documents, but rather uses the same boilerplate document for

every client.

Most qualified estate planning attorneys will charge in the range of

$4,000 to $15,000 for individual living trusts for a husband and wife.

Keep in mind that you get what you pay for. Most people do not shop

for a doctor only on price - quality is the focus. The same principle

should be applied in selecting an estate planning attorney. Think

about it: in the long run, you have not saved any money when you

skimp on your estate plan now, only to force your loved ones to spend

much more money on probate and taxes after your disability or death.

What Should be Included? A properly drafted estate plan should

probably contain the following documents:

-39-

* Revocable Living Trust or Will

* Pour Over Wills that place any assets in your trust which you may

have forgotten to fund

* Durable Power of Attorney

* Special Power of Attorney for trust funding and managing

retirement accounts

* Certificate of Trust to avoid disclosing the particulars of your living

trust during funding

* Medical Power of Attorney to allow a loved one to make health care

decisions for you should you not be able to communicate

* Living Will which directs your physician to discontinue life support

procedures if you are terminally ill

* HIPAA Release which allows your physician to discuss your medical

condition with your loved ones.

Each of these documents should be a part of every estate plan. You

should also determine exactly which services your attorney provides

and whether there is any additional cost for

* Trust Funding,

* Telephone conversations and answering questions,

* Reviewing the estate plan with your successor trustees,

* Reviewing the estate plan with your family in the event of your

disability or death,

* Modifications to your estate plan, and

* Recording and filing fees

-40-

Custom Drafted Documents. A high quality estate plan should be

custom drafted to fit your needs and the needs of your family. Your

estate planning attorney will need to gather detailed information

about yourself and your family. Be wary of attorneys who conduct

initial interviews over the telephone or do not want to meet with you

before preparing your estate plan - this is usually an indication that

they do not custom draft their documents. Your attorney should also

review your trust carefully with you and be willing to answer all your

questions.

Deductibility of Fees. A qualified estate planning attorney should

know exactly what percentages of their fees are deductible for federal

income tax purposes. You should receive a detailed and itemized

statement for verification of the fees.

Designing Your Plan. Your estate planning attorney should take two

to three hours to discuss the design of your plan with you. Your

attorney will need this time to develop a strong understanding of

your family situation. Before your first meeting with an attorney,

establish whether there is a charge for the consultation. Most

attorneys do not charge for initial meetings, but some do.

Document Preparation Time. A good estate planning attorney

should be able to have your documents prepared in 3-4 weeks.

A Long Term Commitment to You. You should consider whether

your attorney is prepared to keep you informed of changes in the law,

new tools in estate planning, and other information you need to keep

your plan current. For your plan to work the way you want it to, you

must be committed to keeping it up-to-date, and you should look for

an attorney who shares that commitment, which is why we have

created our LifePlanning Legal Services™ program.

-41-

LIFEPLANNING LEGAL SERVICES™

Estate planning is not an event; it is a lifelong process. Ongoing

maintenance is vital to the success of any estate plan. Many people

are under the misconception that estate planning is a one-time event,

a legal transaction that never needs revisiting or review. However,

estate planning with a revocable living trust is a strategy designed to

adapt to the client’s changing family and financial circumstances.

Flexibility is a hallmark of the living trust and one of the primary

reasons why clients prefer to plan with it. Our clients are aware that

changes in family and financial circumstances will likely arise and the

law also continues to evolve. They want their planning to adjust to

meet these changing needs.

Over time, it is inevitable that changes in the law, family, and financial

situations may require revision in estate planning documents or may

provide new planning opportunities that benefit our clients. A client’s

estate may outgrow some of the original tax planning contained in

their documents. Clients may acquire new assets that are not titled in

their trusts or are titled incorrectly. With all of the hazards that could

adversely affect a plan’s ability to attain the client’s goals, regular

review and updating of estate plans becomes essential.

Many people are justifiably concerned about the legal fees associated

with estate planning. There are really three types of costs involved in

this process:

* The cost of the initial counseling and drafting the documents

* The cost of updating the plan (or failing to do so, which is more

expensive)

* The cost of settling the estate after disability or death

-42-

When an attorney quotes fees for estate planning work, do those fees

cover all of the costs of the plan? We want to help reduce the total

overall cost of your planning while improving its quality.

We believe that part of improving its quality means creating a team

approach. The team consists of the client (the expert on their family),

the attorney (the expert on the law), the client’s financial advisors and

CPA. When clients have enough education and ongoing counseling,

they can be in control of their planning, and together, the team can

make their goals and hopes for their family a reality, even when

circumstances change. And when successor trustees step in, they

should be familiar with their roles, and have the support of the team

to help them. Under this strategy, planning becomes proactive, fewer

settlement problems occur, the estate plan does what it is supposed

to do, and the overall cost is less than the national average for trust

settlement or probate alone.

For these reasons, we have developed the LIFEPLANNING Legal

Services™ program, a structured maintenance strategy that will help

ensure that your planning works over the long haul. To our

knowledge, few other estate planning firms in the country have made

a commitment of this nature to their clients’ planning. We have

designed the LIFEPLANNING Legal Services™ program to be the most

efficient method of receiving ongoing counseling while at the same

time reducing the total overall cost of estate planning.

LIFEPLANNING Legal Services™ includes a number of elements, all

intended to accomplish the goal of more successful, cost-effective

planning:

* To counsel clients frequently on planning opportunities provided

by changes in the law;

-43-

* To keep abreast of changes in family and financial circumstances

and how those changes may affect your planning;

* To regularly update documents to incorporate improved planning

strategies;

* To help clients fund their trusts correctly and completely;

* To give successor trustees the tools and information they need to

carry out their roles;

* To educate clients on issues which are vital to their estate planning.

We recognize the magnitude of our responsibility to our clients. In

order to carry out our obligations, we ask our clients to make a

similar commitment to the success of their planning. We urge our

clients to devote the energy necessary to ensure that their estate plan

succeeds. We insist that our clients fund their trust completely and

correctly. We ask our clients to keep us informed of changes in their

family or financial circumstances. We expect that our clients

participate in periodic reviews essential to effective planning.

We are committed to the success of every client’s estate plan. We

pledge ourselves to the highest standard of service and to doing the

job right. And we believe that LIFEPLANNING Legal Services

™ is the

best way to achieve that end.

-44-

Epilogue

DO NOT GO GENTLE INTO THAT GOOD NIGHT

By Dylan Thomas

Do not go gentle into that good night,

Old age should burn and rave at close of day;

Rage, rage against the dying of the light.

Though wise men at their end know dark is right,

Because their words had forked no lightning they

Do not go gentle into that good night.

Good men, the last wave by, crying how bright

Their frail deeds might have danced in a green bay,

Rage, rage against the dying of the light.

Wild men who caught and sang the sun in flight,

And learn, too late, they grieved it on its way,

Do not go gentle into that good night.

Grave men, near death, who see with blinding sight

Blind eyes could blaze like meteors and be gay,

Rage, rage against the dying of the light.

And you, my father, there on the sad height,

Curse, bless me now with your fierce tears, I pray.

Do not go gentle into that good night.

Rage, rage against the dying of the light.

-45-

If you have not created a valid Will, the Texas legislature has

drafted one for you. It certainly may NOT be what you want, but

here it is:

Last Will and Testament

(According to the Texas Legislature)

Being of sound mind and memory, I Waited Too Long, make this, my

last Will and Testament:

Separate Property*: If I am married and have children, I will,

bequeath and devise unto my children in equal shares two-thirds of all of

my separate real estate. My spouse shall have a life estate only in the

remaining one-third, and at my spouse’s death that, too, shall be given

equally to my children. My separate personal property shall be given

two-thirds to my children and the remaining one-third outright to my

spouse. If I do not have children, I give half of my separate property

real estate to my spouse and half to my parents. My spouse will inherit

all of my separate personal property. If I do not have children, living

parents, siblings, nieces or nephews, I give my spouse all of my

community and separate property.

If I am not married and have children, I will, bequeath and devise

unto my children all of my property. If I am not married and do not

have children, then I give all of my separate property to my parents. If I

do not have children or living parents, then I give my extended family

(siblings, nieces, nephews, cousins) all of my property even if I do not

like them, and even if I have never met them or know them. If my

extended family cannot be located, I give all of my property to the

Government. Furthermore, even if my property goes where I want it to,

I desire to spend extra money getting it to them, I want them to have to

-46-

hire at least one extra lawyer, and I wish for it to take longer than it

would if I had not waited too long.

*Separate Property is all of your property if you are not married. If you

are married, separate property generally consists of property you owned

before you were married, received by gift, inheritance or a personal

injury settlement or for post-death purposes, assets acquired while

residing in a non-community property state.

II.

Community Property**: If I am married and I have children, I will,

bequeath, and devise unto all my children equally, my entire one-half of

all of the community property, including my half of our home,

furnishings, cars, savings accounts, checking accounts, stocks and all of

my other community property if I have at least one child by a prior

relationship. In other words, I give my children my entire half of

everything that my spouse and I have acquired since we were married.

Only if all of my children are by my current spouse, then my spouse

shall inherit all of my community property.

**Community Property for post death purposes is generally property

acquired by a married person while residing in a community property

state, except assets that are inherited, received by gift or as a result of a

personal injury recovery. Texas, Louisiana, New Mexico, Arizona,

Nevada, California, Washington, Idaho and Wisconsin are the only

Community Property states.

-47-

III.

Financial Guardians for Minors: If I am married with minor children,

my current spouse may be appointed guardian of our minor children’s

assets until they are eighteen years old, but only with the approval of the

court. If I am divorced, my ex-spouse may be appointed as guardian

of the portion of my home, furnishings, cars, savings accounts, checking

accounts, stocks, and all other of my community and separate property

that I leave my children by my ex-spouse. My current spouse may be

appointed guardian only of the portion of my property that I leave our

children. As a further safeguard, I direct my spouse, my ex-spouse, or

whoever the court has appointed guardian of my children, to purchase

for the probate court a performance bond to guarantee that proper

judgment is exercised in the handling, investing and spending of the

children’s money. If I have minor children, the guardians of my

children’s assets must file a complete accounting with the probate

court yearly. The accounting must show, in detail, how, where, and

why every dollar necessary for their proper care was spent during the

previous year.

IV.

Custody of Minors: If my spouse predeceases me while any of my

children are minors, I do not wish to exercise my right to name a

guardian for my children, even though I recognize the probate court

may act on very limited information and may appoint someone whom I

consider totally undesirable to care for my beloved children. I direct

the court, if it considers it in their best interest, to appoint even a

complete stranger as their guardian.

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Money and Property to Children: If I have minor children, then

when my children reach the age of 18, they shall have full rights to

withdraw and spend their entire share of my estate; this includes any life

insurance and retirement accounts, if they are named as the beneficiary.

No one shall have any right to question my children’s action on how

they decide to spend or give away their respective shares regardless of

the maturity of my children. I have decided not to provide any direction

for my children about who should get any particular property; instead, I

prefer that my children fight-it-out over my property regardless of

whether this destroys their relationship and devastates any of my

business interests or investments.

VI.

Bonding: As a further safeguard, I direct my spouse, or whoever the

court has appointed administrator of my estate, to purchase for the

probate court a performance bond to guarantee that proper judgment is

exercised in the handling, investing and spending of the estate’s money.

I want the probate court to feel free to appoint a corporate trust

company as the administrator, even if the fees charged by the company

may be very high.

VII.

Incapacity: I do not wish to exercise my right to select someone I love

and trust to make medical and financial decisions for me if I become

mentally incapacitated. I direct the probate court to appoint two

guardians for me, one for managing my medical care and the other for

managing my money. I understand that this could result in the

employment of perhaps three or more attorneys and that I will have no

control over who the judge appoints. I direct the court, if it considers it

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in my best interest, to appoint even complete strangers as my

guardians, knowing full well that the medical guardian has the power to

put me in any nursing home that he or she may decide is appropriate, and

that the financial guardian, with supervision by the court and the

lawyers, will control how my money is invested and spent.

VIII.

Medicaid: Because I did not buy Long Term Care insurance and failed

to plan for my disability, if I ever receive Medicaid then I give my

house to the State of Texas.

IX.

Taxes and Attorneys Fees: Under existing law, there are certain

legitimate legal avenues open to me to lower the death tax rates, ensure

privacy, reduce court costs, legal fees, and other expenses related to the

administration of my estate and the care of my children. I do not want to

take advantage of any of these avenues. I prefer to pay the maximum

death taxes and attorney’s fees possible, rather than give it to either my

family or my favorite charity. I have signed and set my hand this one day

after my last day to plan - the day after my death.

_______________________________

I Waited Too Long

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GLOSSARY OF ESTATE PLANNING TERMS

ADMINISTRATION

The process by which assets in the name of a Decedent are legally

transferred to the decedent's rightful heirs or beneficiaries.

Administration can either be through a trust or by will.

ADMINSTRATOR

An administrator is appointed by the probate court to administer an estate

where the deceased died without a Will. An administrator’s role is very

similar to that of an Executor.

ADVANCE DIRECTIVE

In Texas, this term refers to a Medical Power of Attorney and/or a

Living Will.

ANNUAL EXCLUSION

An exclusion from gift taxes for gifts by each donor to each donee which

is available on an annual basis. The annual exclusion has been indexed

for inflation, and has grown over the years. The annual exclusion is the

amount that can be given gift tax free per donor, per donee, per calendar

year. In order to qualify for the annual exclusion, the gift must be a

"present interest" i.e., a gift available immediately to the donee as opposed

to one not available until the future or one requiring the consent of some

other person.

APPLICABLE EXCLUSION AMOUNT

The amount "sheltered" from federal tax by the taxpayer's Unified Credit,

which increases as the Unified Credit increases. If the value of the estate

is less than the Applicable Exclusion Amount for the year of death, no

federal estate tax will be due.

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ASSIGNMENT

Transfer of title of an asset from one owner to another, such as from a

person to a Trust.

ATTORNEY-IN-FACT

A person named as an agent in a Power Of Attorney.

BENEFICIARY

A person who is (or will be in the future) a recipient of benefits from a

Will, insurance policy, annuity, retirement account, an Estate or a Trust.

BEQUEST

A gift of property made in a Will or Trust.

BYPASS TRUST

Please see Family/Bypass Trust, below.

BOND

An insurance policy that insures that a Fiduciary will faithfully perform

his or her duties. In Probate, the principal on the bond is the Personal

Representative, the Surety is the insurance company and the insured is

the Estate.

COMMUNITY PROPERTY

Most of the property acquired by a couple during their marriage while

they resided in a community property state. Inheritances, gifts, money

paid as a result of personal injuries and property owned prior to marriage

is typically Separate Property. Under Texas law, most property acquired

during marriage in a non-community property state is Separate Property at

death, but is considered Community Property on divorce. The

Community Property states are: Texas, Louisiana, New Mexico, Arizona,

Nevada, California, Washington, Idaho, Wisconsin, and in limited

situations, Alaska.

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COUNSELING-ORIENTED

A collaborative interaction between clients and their estate planning

lawyer that begins with teaching the basics of the process and the options

available to clients, and then listening to clients describe the unique

dynamics of their family. This exchange defines the clients’ goals and

objectives, fears and concerns, and the standard of success.

CREDIT SHELTER TRUST

Please see Family/Bypass Trust, below.

DECEDENT

A person who has died.

DISABILITY

A condition of helplessness preventing the person from conducting

normal business, financial and personal functions, whether caused by

mental or physical conditions.

DOD

A common abbreviation for Date Of Death.

ESTATE

An entity consisting of a person’s property and all the rights and

responsibilities relating to it usually used in the context of a

guardianship or probate. A trustee agent under a power of attorney

or guardian administers an estate when a person is incompetent or

disabled. A personal representative (an Executor or Administrator in

probate - Trustee if probate is avoided through a Living Trust)

administers the property of a person after death. For Estate Tax

purposes, the estate consists of everything a person owns or controls of

at the time of death anywhere on Earth. This includes life insurance

payable by reason of the person’s death.

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ESTATE TAX

Sometimes used synonymously with the federal estate tax or death tax.

Generically, any tax which is levied upon the estate as a whole which

exceeds the Credit Shelter/Trust Amount. For married couples, the tax

usually is not levied until the second death because of the Marital

Deduction.

EXECUTOR

An executor is someone named by the deceased in a Will and appointed

by the probate court to administer that estate. The executor is under the

ultimate authority of the probate court and can be removed if necessary.

It is important to understand that an executor named in the will is NOT

the executor of the estate until the probate court makes a formal

appointment. Until then, the named executor has no power or control of

the estate or its assets. An Administrator serves in a similar role as an

Executor when the deceased died without a Will.

FAMILY / BYPASS TRUST

A Trust which contains property on which federal taxes are avoided at

the death of the first spouse to die and which typically is not subject to the

estate tax at the second death. Family/Bypass Trusts have historically

been used by married couples to obtain two Unified Credits per couple,

not just one per couple. The trust is sometimes called the Credit Shelter

Trust. Because of changes in the law, the trust is no longer required in

order to save estate taxes, but using this type of planning can also result in

a large degree of protection for the family in the event the surviving

spouse remarries. These type trusts can be used in either a Living Trust

or a Will.

FAMILY LIMITED PARTNERSHIP

Family Limited Partnerships (FLPs) and Limited Liability Companies

(LLCs) are entities or companies which are typically created to shelter

assets from creditors’ claims that result from lawsuits. If very carefully

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crafted, these may also provide some reduction in both gift and estate

taxes.

FIDUCIARY

A person or corporation that occupies a position of trust and

accountability. The word characterizes a relationship such as Trustee-

Beneficiary, Attorney-Client, Doctor-Patient, Bank-Depositor, Principal-

Agent, etc.

FUNDING

The process of transferring ownership or title of a Trustmaker’s assets

into a trust estate by signing a new real estate deed, changing beneficiary

designations, assigning personal property, leases, corporations or

partnerships, changing ownership of financial accounts, etc. Properly

funding a Living Trust is the only way to insure that your family will

avoid a Guardianship of the estate on incapacity and Probate on death.

Failing to “fund” an asset may result in a probate. Please see Pour-Over

Will, below.

GIFT

A gratuitous transfer of property to someone else without receiving

adequate consideration in return.

GIFT PROGRAM

Usually a planned program of making annual gifts to beneficiaries within

the amount of the annual exclusion.

GIFT TAXES

Taxes imposed by the federal government (and some states) on a person

giving money or property to a non-charitable person or entity. The giver

(donor) usually owes tax.

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GRANTOR

In trust usage, the person who creates a trust (also known as Trustor,

Settlor or Trustmaker).

GROSSED-UP GIFT TAXES

If gifts have been made within three years of death on which Gift Taxes

were actually paid out of pocket, those gift taxes will be added back to the

value of the estate for purposes of computing federal estate taxes. This is

called the gift tax gross up.

GUARDIANSHIP

A Probate court proceeding in which the judge considers whether a

person has become so disabled that he/she needs someone else to make

decisions about the person’s care. Generally, the Court appoints a

relative as guardian, with a bond. There are two types of guardian: the

“guardian of the estate” manages money, and the “guardian of the

person” manages medical and personal care.

HEIR

A person who inherits something from a Decedent under the Law of

Descent and Distribution, where the Decedent had no Will, which

means that someone has died intestate. Heirs receive notice of Probate

court actions even if the decedent had a will. See also Beneficiary.

ILIT

A trust designed to hold life insurance so it will not be taxed as part of

the insured’s estate. It is irrevocable.

INCOME BENEFICIARY

The person who will receive the income from a trust for a specified

period of time (e.g., the beneficiary's life). See also, Remaindermen.

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INHERITANCE TAX

Any death tax levied by a non-federal government (e.g. a state) upon the

takers of the property as opposed to the estate as a whole (see estate tax).

Texas does not have a state inheritance tax at this time.

INTER VIVOS TRUST

“During lifetime.” A term used to describe a Trust created during the

lifetime of the Trustmaker, distinguished from a testamentary trust

created by a Will, which only becomes effective at death. Please see

Living Trust, below.

INTESTATE

When one dies without a valid Will, or where a will does not dispose of

all the Decedent’s property. Someone dying intestate gives up all

control of their estate, and is at the mercy of the Law of Descent and

Distribution. In addition, the Decedent’s family will almost always pay

substantially higher attorney’s fees, and perhaps increased taxes.

INVENTORY

In a Probate court case, a list of the assets of the Decedent or disabled

person, prepared and signed by the Fiduciary (Personal

Representative or guardian). This is very personal information. Often

this does not have to be filed with the probate court. If the estate has

unsecured debts (except for taxes and administrative expenses) on the

date the Inventory is due, however, then it, along with the Will, becomes

a public record which is available for inspection and copying by anyone,

and is sometimes available on the internet.

JOINT AND SURVIVOR ANNUITY

This is an annuity payable to two people (e.g. a husband and wife)

through the lifetime of the survivor of the two of them. For qualified

plans, this is the type of distribution mandated by law, unless both spouses

consent to a different form of payment.

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JOINT TENANCY WITH RIGHT OF SURVIVORSHIP

A form of ownership of property among natural persons, characterized

by equality of ownership share and created by the same ownership

document. When an owner dies that person’s interest automatically

transfers to the survivor, who then owns the entire asset.

LAW OF DESCENT AND DISTRIBUTION

A state statute that prescribes the distribution of the property of a

Decedent who died without a valid Will (Intestate) to the decedent’s

heirs.

LIFE INSURANCE GIFT VALUE

The value of a life insurance policy which is given to someone else

normally is its “interpolated terminal reserve value”, which is generally

very close to the cash surrender value. In most cases, this gift value will

be less than the face value of the policy. Where the insured is in bad

health and cannot obtain new insurance within normal cost limits, the gift

value of the policy may be greater.

LIMITED LIABILITY COMPANY (LLC)

Please see Family Limited Partnership, above.

LIVING TRUST

A trust created by agreement currently, as opposed to a testamentary trust

created by a Will. A Living Trust6 can be used to hold assets during a

person's lifetime and thereby remove those assets from probate at the

person's death. Also sometimes called a "revocable living trust" because

the terms of the trust can be changed by the creators of it. It is also known

as an Inter Vivos Trust which means that it is created while someone is

alive, as opposed to a “testamentary trust” which is a trust created by a

Will.

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LIVING WILL

A document telling friends, relatives, and health care providers how you

want your process of dying managed by using or not using artificial

means such as machines or even food and water to speed-up or delay the

natural course of a terminal illness. In some states, the Living Will and a

Medical Power of Attorney taken together are called the Advance

Directives.

LUMP SUM GIFT

Typically a gift which is made on a one-time basis only, as opposed to a

Gift Program which is designed to use the Annual Exclusion on a yearly

basis.

MARITAL DEDUCTION

A federal tax deduction that allows a spouse to transfer all of his or her

assets to the other spouse free of estate taxes.

MEDICAL POWER OF ATTORNEY

A grant of power to a person to make or carry out the decision of the

signor of the document, under terms of a state law, to withdraw food and

water during the final stages of a fatal illness. In some states, the Living

Will and a Medical Power of Attorney taken together are called the

Advance Directives.

NET TAX

Generally the actual amount of tax which is payable in a given situation,

after all deductions, credits and other adjustments have been made.

PER STIRPES

Whenever a distribution is to be made to a person’s descendants per

stirpes, the distribution shall be divided into as many shares as there are

then living children of such person and deceased children of such person

who left then living descendants. Each then living child shall receive one

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share and the share of each deceased child shall be divided among such

child’s then living descendants in the same manner

PICK-UP STATE

A state which does not impose an estate tax or an inheritance tax, but does

"pick up" an amount equal to the federal state death tax credit. This has

now been repealed.

PERSONAL PROPERTY

“Tangible” personal property means anything moveable that you can

touch. “Intangible” personal property refers to financial assets such as

cash, stocks, bonds, bank accounts, insurance, etc. Please see Real

Property, below.

PERSONAL REPRESENTATIVE

A person or institution appointed by the probate court (nominated in a

will, if any) to administer the Decedent’s Estate. Also known as the

Executor (for a will), or the Administrator (without a will). The term

may also refer to a Trustee.

PETITION

A formal request to a court to make a finding of fact and enter an order or

judgment based upon the facts and the law.

P.O.D.

An instruction to a depository institution such as a bank to pay the funds

in the account to the beneficiary named in the document signed by the

account owner.

POUR-OVER WILL

A Will which names an existing Trust as the principal Beneficiary.

Thus, the Probate Estate “pours over” into the Living Trust. It is

usually used when someone who has created a Living Trust failed in

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Funding an asset into the trust. After death, the executor places that

into the trust at the conclusion of probate.

PORTABILITY

The ability to transfer the unused Unified Credit of the first spouse to

die to the surviving spouse, who can then use it for his or her gift or

estate tax purposes; thus allowing a couple to receive two exemptions.

POWER OF ATTORNEY

A grant of power to a person (agent) to make or carry out the decision of

the signer of the document, under terms of a state law, which expires

upon the death or Disability of the signer. A Durable power document

continues in effect during the signer’s disability if and only if it contains

specific language required by state law. A general power document

contains no limitations on the grant of power. A springing power takes

effect only upon the happening of an ascertainable event such as the

declaration of disability of the signer. In Texas it is often difficult to get

a financial institution to recognize a power of attorney. Recent changes

in the law have limited the ability of institutions to reject powers of

attorney, but it can still be a difficult and time consuming process. If it

is not honored, a Guardianship may result. This has increased the

popularity of Living Trusts.

PROBATE

The process of Administration of a Decedent’s Estate under the

authority of the probate court. At the conclusion of the process, the

decedent’s Beneficiaries or Heirs are identified, the debts and taxes are

paid, and the remaining property is distributed to the persons or charities

entitled to it.

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QUALIFIED PLAN ASSETS

Property held in an IRA, 401(k), 403(b) or other pension/retirement plan

on which the owner has not yet paid federal income tax; sometimes called

“tax-deferred.”

QTIP TRUST

Please see Marital Deduction, above.

REAL PROPERTY

Land, and anything permanently attached to it. Please see Personal

Property, above.

REMAINDERMEN

The persons who will receive the benefit from a trust after the death of the

Income Beneficiary.

REQUIRED BEGINNING DATE (RBD)

This is the date on which a retirement plan participant is required to begin

making Required Minimum Distributions from his or her retirement

plan(s), and is April 1st of the year following the year the participant

reaches age 70-1/2.

REQUIRED MINIMUM DISTRIBUTIONS (RMD)

In retirement planning, a participant is required to begin making

withdrawals from his or her retirement plans in the year after the

Required Beginning Date. These withdrawals must meet certain

minimum distribution requirements, based on the payout election the

participant makes at that time. In general, the participant must withdraw

the funds over his or her life expectancy (but may do so more rapidly).

RESIDUARY

The clause in a Will or a Living Trust that disposed of all of the

Decedent’s property not previously mentioned. This clause usually

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begins, “All the rest, residue and remainder of my property, of

whatsoever kind and nature, and wherever situated, I give to . . . ”

REVOCABLE LIVING TRUST

Please see Living Trust, above

ROLLOVER

Please see Spousal Rollover, below.

SEPARATE PROPERTY

A person's earnings while residing in a separate property state or property

owned prior to marriage in a Community Property state, and the assets

acquired with those funds. Also, in separate property jurisdictions and

most community property jurisdictions, property received by inheritance,

gift or personal injury settlement or award is separate property. In Texas,

the income generated from separate property is Community Property.

SETTLOR

Same as Grantor or Trustmaker.

SPOUSAL ROLLOVER

Where retirement plans and IRAs are payable to a surviving spouse, the

survivor will have an option to "roll over" the funds into his or her own

IRA, thereby deferring the income tax on the plan funds.

SURETY

The guarantor of the principal’s performance on a surety bond.

SURVIVOR

Usually referring to the surviving spouse in a husband and wife couple.

TENANTS IN COMMON

A form of ownership in which two or more persons own undivided

interests in property. Each owner has rights to use the property. On the

death of an owner, that owner’s share goes to his or her heirs.

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TENTATIVE TAX

The gross value of the federal estate tax prior to application of the

Applicable Exclusion Amount and the credit for gift taxes paid after

1976 (and any other applicable credits).

TESTAMENT

Same as a Will.

TESTATOR

The person who signs the Will or testament.

T.O.D.

Transfer on death. A legal instrument attached to an ownership

document of non-cash personal property, such as a car title or stock

certificate, signed by the owner which changes title of the property to the

Beneficiary named in the document at the death of the owner.

TRUST

An agreement between the Trustmaker and the Trustee, naming the

trustee to control the trustmaker’s property, or some of it, for the benefit

of a Beneficiary. The trust agreement defines the trustee’s powers and

duties. See also Living Trust, above

TRUSTEE

A person or corporation appointed by a Trustmaker to take control of

Trust property and administer it for the benefit of a Beneficiary named

by the Trustmaker in the trust document. The Trustmaker may also

designate himself or herself as the trustee and beneficiary. The trustee has

a strict duty of accountability (Fiduciary) to the beneficiary.

TRUSTMAKER

The person who creates a trust (also known as a Grantor, Trustor or

Settlor).

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UNIFIED CREDIT

A credit applicable against federal gift and/or estate taxes. In essence, it is

the amount that you can pass tax free to your loved ones other than you

spouse (if your spouse is a US citizen). The amount is always in flux.

Whether Congress will increase it or decrease it has become nothing more

than a guessing game. It is now referred to as the Applicable Exclusion

Amount.

WARD

A person who is the subject of a Guardianship.

WILL

A document (sometimes also called a testament) executed by a Testator,

which sets out the testator’s instructions for winding up his or her affairs

after death. The Will has no effect until the testator dies, and, therefore

does not allow anyone named in the Will to manage the Decedent’s

assets in the event of his or her Disability. Please see Power of

Attorney and Living Trust, above.

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Why Work With The Texas Trust Law

We often get asked what sets The Wiewel Law Firm apart from other

attorneys. Here are a few reasons:

 Complimentary Initial Consultation

 Austin, Georgetown and Highland Lakes Offices

 Prompt Preparation of Plans

 Fixed Planning Fees

 Education Focused Website: www.TexasTrustLaw.com

 Complete, Exclusive Estate Plans

 Wills

 Trusts

 Powers of Attorney

 Living Wills

 Probate

 Asset Protection

 Special Needs Planning

 Elder Law/Medicaid Planning

 Optional LifePlanning™ Updates

 Small and Large Referrals Welcome

 Brad Wiewel is Board Certified in Estate Planning and Probate by the

Texas Board of Legal Specialization. Less than 1% of Texas

attorneys are Board Certified in Estate Planning and Probate Law.

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Notes