AVOIDING CONFLICT – A LOOK AT THE ISSUE OF CLIENT ... · meeting, the importance of respecting corporate formalities, and keeping corporate assets separate from personal assets

AVOIDING CONFLICT – A LOOK AT THE ISSUE OF CLIENT COMPLIANCE

SANTO (SANDY) BISIGNANO, JR. Bisignano & Harrison, L.L.P.

Sterling Plaza, Suite 770 5949 Sherry Lane

Dallas, Texas 75225-8003

KATE HOPKINS Attorney At Law 7016 Lavendale

Dallas, Texas 75230

DEBORAH D. WELCH Law Offices of Deborah D. Welch, P.C.

301 South Polk, Suite 600 Amarillo, Texas 79101

(806) 372-3100 (telephone) (806) 372-3110 (fax)

State Bar of Texas 15TH ANNUAL ADVANCED DRAFTING:

ESTATE PLANNING AND PROBATE COURSE October 28-29, 2004

League City

CHAPTER 1

SANTO (SANDY) BISIGNANO, JR. SANTO (SANDY) BISIGNANO, JR., born, Los Angeles, California, September 23, 1947; admitted to bar, 1978, Texas. Education: University of Notre Dame (B.B.A., 1969; J.D., 1978); University of Chicago (M.B.A., 1971). Beta Gamma Sigma, Associate Editor, Notre Dame Law Review, 1977-78. Fellow, American College of Trust and Estate Counsel. Board Certified, Estate Planning and Probate Law, Texas Board of Legal Specialization. Fellow, Texas Bar Foundation. Chairman of Probate, Trusts and Estates Section of Dallas Bar Association, 1992-1993. President of Dallas Estate Planning Council, 1999-2000. Member of Council of Real Property, Probate and Trust Law Section of State Bar of Texas, 1991-1995.

Avoiding Conflict – A Look At The Issue Of Client Compliance Chapter 1

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TABLE OF CONTENTS

I. INTRODUCTION....................................................................................................................................... 1

II. CLIENT CARE—FROM INITIAL CONTACT TO THE GRAVE................................................................. 1 A. Initial Contact, Signing Documents, and Sending Clients into the World .................................................. 1 B. Follow-up and Implementation.............................................................................................................. 1 C. Ongoing Client Compliance .................................................................................................................. 2

1. Corporations ................................................................................................................................. 2 2. Revocable Trusts........................................................................................................................... 2 3. Family Limited Partnerships ........................................................................................................... 2 4. Crummey Trusts............................................................................................................................ 3 5. Gift Tax Returns............................................................................................................................ 3 6. Second to Die Planning .................................................................................................................. 3 7. Revisiting Estate Plans................................................................................................................... 3

D. Second Marriages................................................................................................................................. 3 E. The Drowning Client ............................................................................................................................ 3 F. Dress Rehearsals for Death.................................................................................................................... 3 G. Important Information for All Clients..................................................................................................... 3

1. Identity Theft ................................................................................................................................ 4 2. Premises Liability .......................................................................................................................... 4 3. Thank You’s ................................................................................................................................. 4

APPENDICES: Appendix A................................................................................................................................................. 5 Appendix B ............................................................................................................................................... 19 Appendix C ............................................................................................................................................... 21 Appendix D............................................................................................................................................... 23 Appendix E ............................................................................................................................................... 29 Appendix F ............................................................................................................................................... 35 Appendix G............................................................................................................................................... 37 Appendix H............................................................................................................................................... 39 Appendix I ................................................................................................................................................ 41 Appendix J ................................................................................................................................................ 51 Appendix K............................................................................................................................................... 53 Appendix L ............................................................................................................................................... 55 Appendix M.............................................................................................................................................. 59 Appendix N............................................................................................................................................... 61


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AVOIDING CONFLICT – A LOOK AT THE ISSUE OF CLIENT COMPLIANCE I. INTRODUCTION

The work we do, as estate planning attorneys, is more than a matter of developing a tax-savings plan for protection of assets and disposition of the estate. In fact, our work places us practically within the client’s family, acquainting us with its concerns, values, hopes, and dynamics, as well as its assets and liabilities. In a very true sense, we become counselors as well as attorneys, from the time of first contact until the client’s death. Our representation often laps into the next generation. Because of this special trust, it is critical to get in control of the data, the documents, and implementation of the estate plan. Moreover, it is essential that we guide our clients, even after the documents are signed, to preserve and maximize the benefits of our planning.

II. CLIENT CARE—FROM INITIAL CONTACT

TO THE GRAVE From the time a client first makes contact with our

firm, we strive to serve their needs—not only in planning their estates but in implementing the estate plans, advising them about ongoing compliance, and seeking to steer them through the changes that might impact their plans over the years.

A. Initial Contact, Signing Documents, and

Sending Clients into the World At our firm, new client calls are routed to a legal

assistant who makes a preliminary determination about the type of work needed. Based on that decision, we e-mail (or fax or snail mail, if the client requests it) an estate planning questionna ire (See Appendix A for the trust questionnaire; See will questionnaire in the November 2002 Advanced Drafting: Estate Planning and Probate article “How to Make Your Office Zing” beginning on page 17). This document allows the client to assemble the data we need as efficiently as possible.

The legal assistant alerts me to special questions and unusual issues before the client’s initial conference. (Additionally, we encourage clients to drop off documents that they want us to review before the first meeting.) Based on this procedure, at the initial conference, I am already in control of the data about the client’s family, his assets and liabilities (including his non-probate assets), the type of planning he has in mind, and the special concerns he may have.

Based on the data and the initial conference, we prepare a set of draft documents for the client, which are forwarded to the client well in advance of the date set for signing. Our goal is for the client to reflect on the documents and contact us with all questions (perhaps even scheduling a conference) before the date set for

signing. We want to be sure that the client has ample time for questions and to understand what we have proposed. For complicated plans that involve several entities, we also prepare charts in VISIO®, software that allows us to depict the various entities and their relationship to each other. Clients find it easier to understand a complicated plan when they can literally “see” it.

When clients arrive for their final meeting to execute their documents, we address all remaining questions first, before any documents are signed. We want to be sure that the client has full opportunity for understanding. Typically, however, there are no questions at this point because they have been answered earlier.

After gathering data, listening to the client’s needs, preparing documents and seeing to their proper execution, we send our client out into the world. But we feel that it is part of our on-going care to school them about potential problems that can destroy the protections and savings we have built into their plans. For example, well-intentioned financial institutions more or less assume that all married couples should have joint tenancy accounts with right of survivorship, but that very type of account can create havoc with pre-marital agreements and other planning. To caution clients about this problem, we provide them with the letter contained in Appendix B.

And because there are always things that the client needs to do, we review them in our signing conference. To emphasize these items, we include a special form, called Client’s Task List, in the client’s signing package. (The Client’s Task List is attached as Appendix C.)

Another step in preparing clients to go out into the world with their new estate planning is to teach them how to respect the various entities we have created, such as trusts, limited partnerships and corporations. In fact, our estate planning often involves several types of entities, many of which are principals in other entities. The signature blocks alone are daunting to the client, who will be expected to execute many documents on behalf of the entities in the future. As a courtesy, we print wallet-sized signature blocks and laminate them for the clients to refer to as they are doing business.

Finally, to give our clients as much support as possible in preserving their estate plans, we provide copies of the pertinent documents to their CPA (either by e-mail or on a CD). This costs us virtually nothing and we have received a surprising number of comments from grateful accountants. This step enlists the help of another professional who has frequent contact with the client—who also understands the estate planning and the importance of preserving it. B. Follow-up and Implementation

In many cases, as you know, creating the estate plan and signing the documents is not the end of the


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story. Increasingly, estate planning options require follow-up transfers, deeds, beneficiary changes, notifications, etc. To relieve the client of responsibility for doing the follow-up work, and to ensure that these follow-up items are completed correctly, we perform them in our office. (We find most of the beneficiary change forms, etc. online.) We approach this task of implementation of the estate plan methodically, with a checklist (See Appendix D), to be certain that all assets are transferred, all notices are sent, all beneficiaries are changed, etc. This checklist goes into the client’s file in our computer, where any staff member can check the status of any item when the client calls in with questions. We assign a diligent employee to the checklist (usually a legal assistant) who follows up religiously until all items are completed. The client’s file cannot be closed until all items, including a thank you note, are checked off the list. In those cases where clients do their own implementation, letters are helpful to instruct them about insurance, IRA, pension plan and other beneficiary designations, as well as how to hold title to properties. Two sample letters of this type are included in Appendix E.

We are grateful for every client’s business and we tell them so, in a thank-you note that they receive when the file is completed. We hope that this courtesy helps cement our relationship. We also use this as a marketing opportunity to ask them for referrals if they are happy with our representation.

C. Ongoing Client Compliance

Once the estate plan is safely implemented—life goes on. But a lot can happen to change the effectiveness of the plans. Fortunately for our clients, most of them go on living—sometimes for years and even decades after the initial planning. In the meantime, so much can happen in their lives! They may experience the death of family members—particularly spouses; they may re-marry and inherit step-children; they may inherit money or property; they may re-structure assets; and at the very least, they are likely to change bank accounts. Any of these life events—large or small—can impact (and sometimes even undo) the estate and business planning we have done. I consider this one of our greatest challenges: How do we avoid those surprises for our clients and their families? How do we take care of them on an on-going basis when so much can happen to disrupt their estate plans?

Depending on the type of entity we have created, we advise clients about ongoing compliance and changing circumstances in several ways:

1. Corporations

Although attorneys take it for granted that a corporation must be maintained to preserve limited liability for its shareholders, clients don’t always fully

appreciate the fine points of doing this. We remind them about the need for their annual shareholders’ meeting, the importance of respecting corporate formalities, and keeping corporate assets separate from personal assets with a letter similar to the one I have included in Appendix F. (We calendar the date for this annual check-up and send the letters as a reminder.)

2. Revocable Trusts

Similarly, our fear with trust clients is that they will die with part of their assets outside the trust. If they do, of course, it is necessary to probate a pour-over will, when avoiding probate may have been one of their motivations for creating a trust in the first place. Therefore, we urge trust clients to review their original planning in light of subsequent events, to be certain that all new assets are titled in the trust, and to contact us for assistance with sorting out ownership issues. A sample of this letter, which is also sent annually, is attached in Appendix G. (We revise this letter periodically, in hopes that clients won’t just discard it without thought because they have seen it before.)

We have also initiated the practice of inviting trust clients in for an annual conference without the meter running (with their CPA or financial planner present, if they choose) to review their trust, their holdings, and any new circumstances in their lives.

3. Family Limited Partnerships

Family limited partnerships are particularly complicated for the client, and, almost by definition, they encompass very large estates. Failure to maintain the limited partnership and general partner properly can cause unexpected results if the IRS challenges their validity. Moreover, it is necessary to make changes as circumstances change and court decisions are made. We recently represented a family after the death of the patriarch. The family had created a family limited partnership in 2001, and done absolutely nothing since then! Even in the face of their father’s declining health and imminent death, they did not do pre-death planning to limit the estate and reduce the amount of tax that would eventually be owed.

To better counsel our FLP clients, we have made a practice (and it has been well received) of inviting them (along with their CPA’s) to lunch in our office, where we review the status of their planning without the meter running. These meetings have helped us identify problems, given us a chance to reiterate important points about ongoing compliance and enabled us to make adjustments where they were needed. They have also been very effective to cement our relationship with our client, who perceives (rightly so) that we care about his well-being.

And since the law is developing rapidly with respect to family limited partnerships, we are careful to inform clients when important cases have been decided,


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and to emphasize what the case means to them. A sample letter about the recent Fifth Circuit Kimbell case is attached as Appendix H.

We analogize these compliance reviews of trusts, corporations, and family limited partnerships to vehicle inspections, tune-ups, annual physicals, and well-baby check-ups, to cement in the client’s mind that it is just good medicine to stay on top of their plans even if no crisis seems imminent. We believe it helps the client stay current with his estate entities (and it is effective marketing for us).

4. Crummey Trusts

Crummey Trusts present special follow-up requirements when later gifts are made to the trust, and the beneficia ry must be given an opportunity to withdraw the gift. Sample letters with instructions to follow upon making subsequent gifts are included as Appendix I.

5. Gift Tax Returns

We calendar notices for gift tax returns, and e-mail a reminder to the client’s CPA, with a copy to the client.

6. Second to Die Planning

We have handled a number of estates for the second spouse to die that were unnecessarily expensive. In each instance, had the surviving spouse contacted an attorney after the first death, there is much that could have been done to simplify the second estate, sometimes making a second probate unnecessary altogether. We felt that this situation deserved special mention so we prepared a letter addressing the issue (See Appendix J), which we sent to all of our clients.

7. Revisiting Estate Plans

We are constantly seeking ways to remind our clients to re-visit their estate plans when major life events occur. Thus, when I write an article for the local paper or some other publication, I make sure that clients receive a copy of the article.

D. Second Marriages

Second marriages (where compliance meets conflict) are fraught with opportunities for wrecking an estate plan, from pre-marital agreements to re-titling bank accounts! We recently represented a couple who made an appointment to “tinker” with their wills. They were in a second marriage, both with children from their first marriage. Both brought separate property to the marriage and both owned assets out of state. Their existing planning called for a long-term trust before the husband’s children got anything after his death. Needless to say, more than simple tinkering with their existing wills was necessary. We talked through various scenarios and developed a more workable plan for all parties.

E. The Drowning Client Finally, there is the Drowning Client. Despite all

of our efforts to educate our clients and caution them about new developments, we occasionally realize that a client is simply not in command of what we have done or that so many changes in his life have muddled our original planning that we feel we must take the initiative. In these cases, we do not hesitate to initiate a special meeting to help the client re-group. For instance, we prepared a revocable trust for one client several years ago and carefully conveyed and re-titled all assets in his trust. Some time later, he re-married and generally ran amuck with his assets, opening joint tenancy accounts and titling new assets in individual names. We met with him and his new wife, and tried to ferret out (the client had become quite elderly) what of the original planning he wished to keep intact and what he had intentionally undone.

We have also taken this step (a meeting to regroup) in cases where a client—once sharp, successful, and insightful—has aged beyond the point where he grasps clearly what needs to be done. In these cases, depending on family situations and potential conflicts, we occasionally engage the children to assist.

F. Dress Rehearsals for Death

We believe strongly that people should think through their estate plans methodically, as if practicing for the many eventualities that could occur. (We refer to this exercise as a Dress Rehearsal for Death—but not within earshot of the client.) (A recent article about this idea is included as Appendix K). Our philosophy is to be proactive, urging clients to deal with the difficult issues now, so there are no unfortunate surprises for their family later.

Thinking through the possibilities of what life may offer is a helpful exercise for all clients—but particularly the ones who contact me to review their existing plans. For example, what if a spouse became disabled? If necessary, could they retire from their jobs and care for the spouse? How many of our clients actually know what their long-term care policies cover? And one of our favorite examples of what not to do is the common practice, in second marriages, of creating a trust for the second wife during her life, and making her step-children the contingent beneficiaries of what is left. We have even seen trusts where the step-children were the trustees during her life! (And the situation is not much happier if the wife is trustee.) Yet, many people put this device in place, never actually contemplating how the second spouse and children will deal with the results. It is always helpful to walk through the potential scenarios and how the planning would work. G. Important Information for All Clients

Occasionally, there are developments in the law or in our business world generally, that we believe are of


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special importance or interest to all of our clients. Consistent with our philosophy to care for our clients on an on-going basis, we alert them and give them as much general advice as practical. We hope that if the issue is especially important to them, they will contact us for more specific advice.

1. Identity Theft

When I became aware of the special problems of identity theft, I alerted all of my clients to the rising number of occurrences, and gave them information about preventing it. This letter (attached as Appendix L) is also supplied to new clients. We update it periodically.

2. Premises Liability

Many of our clients own real estate, and are always concerned about liability for injuries on their property. We get many questions about premises liability. We recently prepared a letter about cases that seem to expand liability exposure in some instances, (Appendix M), which we sent to all clients who own or rent real estate.

3. Thank You’s

We make a special point of thanking our clients and generally write to them at the end of the year, sometimes emphasizing gifting possibilities. One year, we made a small gift of our own, providing them with a document for organizing their estate information (a good way for them to review everything, making sure it is up to date) (See Appendix N).

In conclusion, we feel strongly about caring for our clients from initial contact to their deaths, and even into the generations that follow. Communicating with them can be a challenge after the documents are signed and life goes on. But we make ourselves available for annual reviews, we alert them to the affect of changing circumstances, and we take the initiative any time we suspect that circumstances have undone our original planning. We take better care of our clients if we envision our representation as a continuum from first contact through the client’s death.


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APPENDIX A

COMMONLY ASKED QUESTIONS ABOUT PROBATE AND TRUSTS

WHAT IS PROBATE?

Probate is a court proceeding in which a judge orders that a deceased person’s Will submitted to the court is truly the last wish or "will," of the deceased person. To "probate" means to "prove." Without the probate proceeding, it would be possible for people to advance forged or fraudulent documents, in an attempt to gain the property. Therefore, the law deems it necessary for a judge to examine the Will and find that it is the true Will and thus, the binding document. However, this entire process can be avoided by creating a revocable trust.

WHAT IS A REVOCABLE TRUST?

A revocable trust is a legal document in which you transfer your property to another party (the Trustee) who holds and manages it for the benefit of yet another party (the Beneficiary). A revocable trust becomes effective the moment it is signed. Consider the following analogy. A revocable trust can be compared to a suitcase. In it, you place all of your assets. You carry the suitcase and manage its contents during your life (assuming you are the trustee of your trust) and upon your death, the suitcase and all of its contents are automatically delivered to your loved ones, without court proceedings. Having obtained and filled the suitcase, the analogy continues, you may specify who carries it, including who carries it when you become incompetent or when you die and who receives the contents upon your death, assuming that you want the contents distributed then. The terms of the trust specify what you intend.

WHAT ARE THE BENEFITS OF A REVOCABLE TRUST?

There are many good reasons to form a revocable trust:

• Avoiding probate. By creating a trust and transferring all your assets into it, you can avoid the process of probating a will at the time of your death. (This goal becomes particularly important if you own properties in more than one state. With a trust, you can avoid probating the will in all the states where you own property).

• Privacy. A trust allows you to maintain privacy about your beneficiaries and the assets in your estate. The creation and funding of a trust are private matters and not matters of public record, unlike wills and probate proceedings.

• Trustees. You may want the assistance of another person or institution to manage your assets now or in the future, when you are less able to do so yourself. By the same token, you may want this management assistance for some or all of your loved ones after your death. In your trust, you will be able to set out provisions in which you appoint specific agents to serve in these positions.

• Avoiding will contest. If you have reason to believe that there might be squabbling over your estate, a trust is a strong statement of your intentions, which is harder for contestants to attack.

IF I CREATE A TRUST, DO I STILL NEED A WILL?

When we prepare your revocable trust, we will also prepare a simple will for you as an additional safeguard. If you die without all your property in the trust, this will can then be probated and "pour over" your probate assets into your trust, hence the name "pour-over" will.


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HOW MUCH DOES THE GOVERNMENT GET IN TAXES WHEN I DIE?

The State of Texas and the federal government (the I.R.S.) currently require the payment of death taxes, correctly called inheritance and estate taxes, only upon estates that exceed $1,500,000.00. There is no estate or inheritance tax due upon estates smaller than that amount. In determining the size of the estate, it is necessary to count the value of all assets you own, including life insurance policies and retirement accounts owned by the deceased person, even if they pay directly after death to another person.

OTHER PLANNING DOCUMENTS At the time you write a Trust with a “pour-over” will, there are three other documents to consider: A Health Care Power of Attorney, a Directive to Physicians (some people call this a Living Will), and a General Durable Power of Attorney.

HEALTH CARE POWER OF ATTORNEY This document allows you to appoint the persons who would have authority to make important health care decisions for you, such as surgery, if you were unconscious. It allows the doctors, hospitals and nursing home to rely on the decision of the person you have appointed. You will also be able to appoint alternates who can serve if your first choice is unable to serve for any reason.

DIRECTIVE TO PHYSICIANS (Living Will)

Texas law allows people to decide, in advance, whether they want their lives to be prolonged by heroic measures, when the doctors have determined that death would be imminent without the procedures. This document is a set of instructions from you to your doctor about the kinds of treatment you would want, if you had an irreversible or incurable condition and the treatment would prolong the time of death artificially. In everyday language, this document is about whether you would want to be "kept alive on machines." Examples of the heroic treatment are tubal feeding and mechanical respiration (breathing).

DURABLE SPECIAL POWER OF ATTORNEY This document gives another person the authority to do everything necessary to transfer your interest in assets that you own to your revocable trust. The power of attorney is a valuable tool only if it is held by a trustworthy person, who has your best interests at heart.


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ESTATE PLANNING INFORMATION

I PERSONAL AND FAMILY DATA

Please complete this questionnaire and return it to us. Of course, this information will be kept in strictest confidence. A. Husband and Wife Husband's Name______________________________________________________________________ (First) (Middle) (Last) Wife's Name_________________________________________________________________________ (First) (Middle) (Last) Home Address________________________________________________________________________ (Street Name and Number) _______________________________________________________________________ (City) (State) (Zip) County in Which You Live_____________________________________________________________ Telephone ( ) ( ) ( )_______________________________________ (Home) (Husband's Business) (Wife's Business) (Email) Husband's Social Security Number_____________________ Date of Birth_________________ Wife's Social Security Number_____________________ Date of Birth_________________ Date of your marriage_________________ Place_______________________ Are both of you U. S. Citizens? ______________________________________ B. Children [This Marriage] (Use back of page if necessary) NAME BIRTH DATE SEX 1. ________________________________________ _____________________ ____Male ____Female Home Address ________________________________________________________________________ (Street Name and Number) ________________________________________________________________________ (City) (State) (Zip)


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2. ________________________________________ _____________________ ____Male ____Female Home Address ________________________________________________________________________ (Street Name and Number) ________________________________________________________________________ (City) (State) (Zip) 3. ________________________________________ _____________________ ____Male ____Female Home Address ________________________________________________________________________ (Street Name and Number) ________________________________________________________________________ (City) (State) (Zip) C. Children [If Any from Prior Marriages] (Use back of page if necessary) Husband's children (prior marriage): NAME BIRTH DATE SEX 1. ________________________________________ _____________________ ____Male ____Female Home Address ________________________________________________________________________ (Street Name and Number) ________________________________________________________________________ (City) (State) (Zip) 2. ________________________________________ _____________________ ____Male ____Female Home Address ________________________________________________________________________ (Street Name and Number) ________________________________________________________________________ (City) (State) (Zip) 3. ________________________________________ _____________________ ____Male ____Female Home Address ________________________________________________________________________ (Street Name and Number) ________________________________________________________________________ (City) (State) (Zip)


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Wife's children (prior marriage): NAME BIRTH DATE SEX 1. ________________________________________ _____________________ ____Male ____Female Home Address ________________________________________________________________________ (Street Name and Number) ________________________________________________________________________ (City) (State) (Zip) 2. ________________________________________ _____________________ ____Male ____Female Home Address ________________________________________________________________________ (Street Name and Number) ________________________________________________________________________ (City) (State) (Zip) 3. ________________________________________ _____________________ ____Male ____Female Home Address ________________________________________________________________________ (Street Name and Number) ________________________________________________________________________ (City) (State) (Zip) Are any of your children adopted?________________________________________________________ If there are any special circums tances for a child or grandchild (health status, special education requirements, etc.), please provide the name of the child and the situation. ____________________________________________________________________________________ ____________________________________________________________________________________ Do either of you have any obligations under a property settlement agreement or child support agreement deriving from a prior marriage?__________________________________________________________ Have you and your spouse lived in Texas since your marriage? If not, when did you move to Texas and from where?__________________________________________________________________________ Do you own any property located outside of Texas? If so, please describe. ____________________________________________________________________________________ ____________________________________________________________________________________


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Have you and your spouse entered into any kind of pre-marital or marital property agreement? If so, please provide us a copy.__________________________________________________________________________ Do you have a safe or a safe deposit box? If so, in what bank?______________________________________

II FINANCIAL DATA

Below, please indicate (i) whether any assets were owned by either spouse before marriage or acquired thereafter by gift or inheritance and (ii) the name(s) in which bank accounts, certificates of deposit and securities are registered. A. ASSETS. Approximate Value 1. Average cash balance (including savings, certificate of deposit, etc.) $_________________________ 2. Securities (stocks, bonds, mutual funds, etc.) $_________________________ Any stock in a S corporation ________ 3. Residence (Description) ___________________ Value $__________________ Less Mortgage $__________________ Equity $__________________ 4. Other Real Estate (Description) a)___________________ Value $__________________ Less Mortgage $__________________ Equity $__________________ b)___________________ Value $__________________ Less Mortgage $__________________ Equity $__________________ c)___________________ Value $___________________ Less Mortgage $___________________ Equity $___________________


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5. Autos, Boats or Planes Value Less Mortgage Net Equity _____________________________ ________ ___________ $_________________ _____________________________ ________ ___________ $_________________ _____________________________ ________ ___________ $_________________ _____________________________ ________ ___________ $_________________ 6. Livestock $_________________ 7. Other Assets, including unusually valuable household furnishings, etc. ____________________________________ $_________________ ____________________________________ $_________________ ____________________________________ $_________________ ____________________________________ $_________________ 8. Life insurance on life of Husband

• Insurance Company:____________________________________________________

Policy Number:________________ Face Amount of Policy:____________________

Primary Beneficiary:____________ Contingent Beneficiary:____________________

Date of Issue:__________________ Owner:_________________________________


Policy Number:_______________ Face Amount of Policy:____________________

Primary Beneficiary:___________ Contingent Beneficiary:____________________

Date of Issue:_________________ Owner:_________________________________






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9. Life insurance on life of Wife






Policy Number:_______________ Face Amount of Policy:____________________

Primary Beneficiary:___________ Contingent Beneficiary:____________________

Date of Issue:_________________ Owner:_________________________________





10. Employment Benefits. Please indicate in left column whether the benefits result from Husband's employment (H) or Wife's employment (W). Value, if known Beneficiary _____Pension or Profit-Sharing Plan ________________ _________________ _____Pension or Profit-Sharing Plan ________________ _________________ _____IRA ________________ _________________ _____IRA ________________ _________________ Other (describe)-such as government disability, retirement pay, teacher's retirement, stock options, etc. ______ _______________________ _________________ ________________ ______ _______________________ _________________ ________________ Manner in which such payments are to be made (i.e., lump sum, annuity, etc.): ___________________________________________________________________ ___________________________________________________________________


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11. Inheritances. If either Husband or Wife owns inherited property not previously listed, or expects to inherit any property, please give a general description, source and approximate value. ________________________________________________________________ ________________________________________________________________ 12. Beneficial Interests. If Husband, Wife, or a child is a beneficiary of any trust, has any power or trusteeship position with respect to any trust, has created a trust, or has any estate in property for life, please give a general description of circumstances and approximate value. _________________________________________________________________ _________________________________________________________________ 13. Other Business Interests (partnerships, proprietorships, closely held corporations). Please supply general information relating to ownership, nature and value of business and any plans or arrangements relating to disposition of the interest of a deceased owner, such as stock purchase or buy-sell agreements. _________________________________________________________________ _________________________________________________________________ 14. Gifts. If either Husband or Wife has at any time made gifts other than customary Christmas, birthday or holiday gifts, and if any such gifts were in significant amounts (in excess of $10,000 for example) please indicate the dates, recipients and values of such gifts, the general nature of the gift property, and whether Husband or Wife filed any United States gift tax returns in connection with such gifts. _________________________________________________________________ _________________________________________________________________ B. INCOME Husband's Salary $___________________/year Wife's Salary $___________________/year Any income other than above salaries (describe sources) __________________________________ $___________________/year __________________________________ $___________________/year __________________________________ $___________________/year Total $_____________________ C. Own stock in a S corporation: _______ number of shares at $_______ par value


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D. LIABILITIES 1. Average accounts payable (monthly bills) $_____________________ 2. Any loans or debts other than those mortgages shown above (describe) _______________________________________________ $__________________ _______________________________________________ $__________________ _______________________________________________ $__________________ _______________________________________________ $__________________ Total $_____________________ (Place an asterisk (*) by any debt or mortgage which is covered by credit life insurance.)

III DISPOSITION OF PROPERTY

A. Husband: Whom do you want to receive your property after your death? (Use back of page if necessary.) 1. If your wife survives you, do you want her to receive all of your property? 2. If not, whom?

3. Any specific bequests? 4. If your wife does not survive you, whom do you want to receive your property? 5. If your children or grandchildren receive your property, should it be held in trust?

Until what age? 6. If neither your wife nor your children survive you, whom do you want to receive your

property? B. Wife: Whom do you want to receive your property after your death? (Use back of page if necessary.) 1. If your husband survives you, do you want him to receive all of your property?

2. If not, whom? 3. Any specific bequests?


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4. If your husband does not survive you, whom do you want to receive your property? 5. If your children or grandchildren receive your property, should it be held in trust?

Until what age? 6. If neither your husband nor your children survive you, whom do you want to receive your

property? IV SELECTION OF REPRESENTATIVES Think carefully about the people (or bank) whom you want to serve as trustees, guardians, and executors. Below is a brief, simplified explanation of these three terms.

• A "Trustee" is a person or bank that holds property for the benefit of others (the "beneficiary" of the trust). In most cases, clients choose to be Trustees of their own trusts until their death or incompetence.

• An "Executor" is the person or bank named in a Will to collect the deceased person's assets, to see that the deceased person's debts, including taxes, are paid, and to see that any remaining property goes to the persons named in the Will. Think of the Executor as the business manager of the estate. (Remember, your “pour-over” will is only probated if some of your assets were not transferred into your trust.)

• A “Guardian" looks after the personal care and custody of a child below age 18 (a "minor"). Guardianships last only so long as the child is below age 18. In the absence of this clause in the Will, the probate court will select the guardian.

You can name the same person to be Executor, Trustee, and Guardian, or you can divide the positions among several people on the basis of their qualifications. You should also select alternates for each position, in case your first choice dies or is unable to serve for any reason. These people will serve without bond (to save cost) unless you indicate otherwise. Therefore, the people you choose should be trustworthy. Name the person or the Bank that you wish to serve in the following capacity: A. Revocable Trust Trustee ___________________________________________________________________________________ Name Relationship Address (City & State Only) Alternate Trustee (if the first Trustee cannot serve) ____________________________________________________________________________________ Name Relationship Address (City & State Only) Second Alternate Trustee (if the alternate Trustee cannot serve) ____________________________________________________________________________________ Name Relationship Address (City & State Only)


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B. Husband’s Will Executor ___________________________________________________________________________________ Name Relationship Address (City & State Only) Alternate Executor (if the first Executor cannot serve) ___________________________________________________________________________________ Name Relationship Address (City & State Only) Guardian (if you have minor children) ____________________________________________________________________________________ Name Relationship Address (City & State Only) Alternate Guardian (if the first Guardian cannot serve) _____________________________________________________________________________________ Name Relationship Address (City & State Only) C. Wife's Will Executor ___________________________________________________________________________________ Name Relationship Address (City & State Only) Alternate Executor (if the first Executor cannot serve) ___________________________________________________________________________________ Name Relationship Address (City & State Only) Guardian (if you have minor children) ____________________________________________________________________________________ Name Relationship Address (City & State Only) Alternate Guardian (if the first Guardian cannot serve) _____________________________________________________________________________________ Name Relationship Address (City & State Only)


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V POWER OF ATTORNEY INFORMATION Have you signed a prior Power of Attorney? ____________ Yes; Recorded _______ ____________ No If so, please bring the Power of Attorney with you to the first meeting. Name the person that Husband and Wife wish to appoint: A. Husband's Power of Attorney Agent ___________________________________________________________________________________ Name Relationship Address (City & State Only) Alternate Agent (if the first Agent cannot serve) ___________________________________________________________________________________ Name Relationship Address (City & State Only) B. Wife's Power of Attorney Agent ___________________________________________________________________________________ Name Relationship Address (City & State Only) Alternate Agent (if the first Agent cannot serve) ___________________________________________________________________________________ Name Relationship Address (City & State Only)

VI HEALTH CARE POWER OF ATTORNEY INFORMATION Name the person that Husband and Wife wish to appoint: A. Husband's Health Care Power of Attorney Agent or Personal Representative ____________________________________________________________________________________ Name Relationship Home Address ________________________________________________________________________ (Street Name and Number) ________________________________________________________________________ (City) (State) (Zip)


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Alternate Personal Representative (if the first Personal Representative cannot serve) ____________________________________________________________________________________ Name Relationship Home Address ________________________________________________________________________ (Street Name and Number) ________________________________________________________________________ (City) (State) (Zip) B. Wife's Health Care Power of Attorney Agent or Personal Representative ____________________________________________________________________________________ Name Relationship Home Address ________________________________________________________________________ (Street Name and Number) ________________________________________________________________________ (City) (State) (Zip) Alternate Personal Representative (if the first Personal Representative cannot serve) ____________________________________________________________________________________ Name Relationship Home Address ________________________________________________________________________ (Street Name and Number) ________________________________________________________________________ (City) (State) (Zip)

VII DIRECTIVE TO PHYSICIANS (LIVING WILL) INFORMATION

A. Do you want a Directive to Physicians ("Living Will")? (There is no charge for this document.)

Husband ___Yes ____No Wife ___Yes ____No

B. Do you want to be a tissue and organ donor?

Husband ___Yes ____No Wife ___Yes ____No


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APPENDIX B 301 South Polk, Suite 600 Board Certified: Amarillo, Texas 79101 Estate Planning and Probate Law Phone (806) 372-3100 Texas Board of Legal Specialization Fax (806) 372-3110

The Law Offices of

Deborah D. Welch, P.C.

Date Clients’ Names Clients’ Address Re: Joint Tenancy with Right of Survivorship Dear Clients: Texas law allows a husband and wife to hold community property in a joint tenancy with rights of

survivorship. This means, of course, that upon the death of one of the spouses (a joint tenant), all of the assets

in the account automatically belong to the survivor. This structure may be convenient in many cases, but in

yours, it circumvents the planning intended by your Wills and other estate planning documents (e.g., it may

result in under-funding the bypass trust).

We recommend that you review your bank and brokerage accounts to determine if they have a right of

survivorship feature. Also, as you open new accounts in the future, we recommend that you avoid the right of

survivorship form of account. A "plain vanilla" account with a bank or "tenants in common" account with a

brokerage firm would be preferable. (As a convenience, it may be helpful to maintain one small household

account as a joint tenancy with rights of survivorship and this would not wreak major havoc with your estate

plan. However, I recommend that you keep the balance in this account under $10,000.00.)

I have enclosed a draft of a letter for you to send to your banks and brokerage firms instructing them to

"undo" any joint tenancies with right of survivorship.

Sincerely, Deborah D. Welch Enclosure


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CLIENTS’ NAMES Clients’ Address

Date CERTIFIED MAIL RETURN RECEIPT REQUESTED ______________________________ ______________________________ ______________________________ Re: _____________________ Account No. _____________________

Styled ________________________________________________

Dear Sir/Madam: We hereby notify you that, regardless of the style or structure of this account according to your books and

records, we do not wish this account to be treated as a “joint tenants with right of survivorship” or “community

property with right of survivorship account.” Please change this account to a tenants-in-common account.

If you have any questions, please contact us. Sincerely, ___________________________________

Male Client’s Name ___________________________________

Female Client’s Name


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APPENDIX C 301 South Polk, Suite 600 Board Certified: Amarillo, Texas 79101 Estate Planning and Probate Law Phone (806) 372-3100 Texas Board of Legal Specialization Fax (806) 372-3110

The Law Offices of

Deborah D. Welch, P.C. Congratulations! By signing your trust, you have completed the key component of your estate plan.

However, in order for your trust to function properly, all of your remaining assets must be transferred into it. The following checklist will assist you in finalizing those transfers.

_____ Real Estate insurance : Because we have are transferring real estate into the trust, you need

to update the insurance as well. See the letter regarding insurance (located behind the transfer tab) for instructions.

_____ Brokerage/Bank accounts : The institutions that hold your bank, brokerage, and stock

accounts should be notified that you wish to change the name on your accounts to the trust. I have included a form letter (located behind the transfer tab) for you to send.

_____ Beneficiary changes: Your life insurance and retirement plans should be changed to

appoint the appropriate beneficiaries. Your beneficiary letter (located behind the beneficiary tab) provides sample language and instructions.

Failure to title assets properly or failure to coordinate your non-probate assets will defeat the very

reasons you elected to set up a trust in the first place. If you have any questions or concerns, please contact me or my legal assistant, Sarah Bass.

Sincerely, Deborah D. Welch


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APPENDIX D CLIENT:

WILL CHECKLIST October 14, 2004

Needs Completed Blessed

SET UP:

1. Engagement Agreement

2. Thank you Note: Written to: on .

3. Enter into RTG:

Flat Fee: $ and description (edit description if necessary).

Tax Macro: $

Filing Fees: $

4. Confirm that client has been added to the proper category in Contacts.

5. Execution Appointment

• If appoint has been set, put it on Calendar: Date: Time:

• If no appointment has been set, put on the calendar for Sarah to call Client 3 weeks

from the day you send drafts.

6. Send an Identity Theft Letter.

NOTES:

INTERVIEW SHEETS:

7. Powers Interview Sheet

8. Will Interview Sheet

9. Are the provisions in the spouse’s will the same? Yes No

10. How will the Clients’ names appear in all documents?

NOTES:

POWERS:

11. Directive to Physicians: Organ Donor: Yes No

12. Power of Attorney:

• Type: Special General (if the POA is general, send statutes with drafts)

• Effective: Immediately Upon Disability

• POA waiver – ALWAYS required when doing a POA.

13. Medical Power of Attorney

14. Cremation Form

NOTES:

WILL:


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15. Will Form # :

After DW blesses Will, check that the terms defined in Definitions Article are used in

the document. (Use find feature.) If term is not in document, notify DW for revision.

NOTES:

ADDITIONAL DOCUMENTS:

16. Transmittal Letter

17. Beneficiary Letter: Standard Needs modifications (see questionnaire)

18. Second Marriage Letter: Check ONE of the following:

Divorce-Impact on naming stepchildren

Options-Outright vs. Irrevocable trust

19. Joint Tenancy with Right of Survivorship Letter

20. Visio Chart

NOTES:

TRANSMITTAL:

21. Documents mailed to Client on:

22. Unique Client Documents moved on: .

SIGNING:

23. Near day of signing, notify Office Manager to prepare a bill for Client.

Notified on .

24. Prepare folder for client’s documents.

NOTES:

CLOSING:

25. Send “General Thank You Letter” (located in I:/Firm/Client/Letters/General Thank you Letter) to Client(s).

26. Clean up file – Make sure that: • Client’s work file on computer is empty • All items on the Client’s To-Do List are complete

27. File Closed by: on .

ADDITIONAL

NOTES:


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CLIENT: LIVING TRUST CHECKLIST

October 14, 2004 Needs Completed Blessed

SET UP:

1. Engagement Agreement

2. Thank you Note: Written to: on .

3. Enter into RTG:

Flat Fee: $ and description (edit description if necessary).

Tax Macro: $

Filing Fees: $

4. Execution Appointment

• If appoint has been set, put it on Calendar: Date: Time:

• If no appointment has been set, put on the calendar for Sarah to call Client 3 weeks

from the day you send drafts.

6. Send an Identity Theft Letter.

7. Confirm that client has been added to the proper category in Contacts.

NOTES:

INTERVIEW SHEETS:

8. Powers Interview Sheet

9. Trust Interview Sheet

NOTES:

POWERS:

10. Directive to Physicians: Organ Donor: Yes No

11. Power of Attorney

• Type: Special General

• Effective: Immediately Upon Disability

12. Medical Power of Attorney

13. Cremation form

NOTES:

POUR-OVER WILL:

14. Pour-Over Will

NOTES:

TRUST:

15. Living Trust Form # :

16. Schedule A to Trust Agreement listing all property going into Trust. (Confirm no S


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corporate stock is being transferred to an irrevocable trust.)

NOTES:

ADDITIONAL DOCUMENTS:

17. Transmittal Letter

18. Beneficiary Letter: Standard Needs modifications (see questionnaire)

19. Second Marriage Letter: Check ONE of the following:

Divorce-Impact on naming stepchildren

Options-Outright vs. Irrevocable trust

20. Visio Chart

21. Notebook Cover Sheet

22. Guardianship Designation (We must draft this form if Client has Minor Children.)

23. Affidavit of Trust Status with letter

24. Insurance Letter for Real Estate

25. Client’s Task List

NOTES:

TRANSFERS:

26. Personal Property Transfers

Letter to transfer brokerage and bank accounts

Assignment: Notes Entity interest Other:

ü IF Entity Interest, obtain the following info for Sarah to do transfers:

• Name of entity:

• Amount owned by each person that is transferring interest:

• For an LLC or Ltd., get a copy of the regulations or partnership agreement.

• Address of Client

• Name of Trust

27. Real Estate Transfers

• First Warranty Deed

Type of Deed:

Combined General Mineral w/war. Mineral w/o war.

Proofed by someone other than typist on:

(metes and bounds descriptions should be proofed orally)

Mail deed to County Clerk (have returned to us after recording).

Scan in recorded deed for Client's file.

Mail copy of recorded deed to Trustee (if not Client).

Return original recorded deed to Client.

• Second Warranty Deed


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Type of Deed:

Combined General Mineral w/war. Mineral w/o war.

Proofed by someone other than typist on:

(metes and bounds descriptions should be proofed orally)

Mail deed to County Clerk (have returned to us after recording).

Scan in recorded deed for Client's file.

Mail copy of recorded deed to Trustee (if not Client).

Return original recorded deed to Client.

• IF Mortgage—Consent to transfer from lender

NOTES:

AFTER TRUST IS BLESSED:

28. If Trust is irrevocable, prepare Distribution of Income Letter. DON'T save it in

Client's file. Save in folder for month of Trust date. The folders are under F:\Scheduled

Letters to Client\Irrevocable Trust Letters. Save as name of Client and year of signing.

29. After DW blesses Trust, check that the terms defined in Definitions Article are used

in the document. (Use find feature.) If term is not in document, notify DW for

revision.

NOTES:

TRANSMITTAL:

30. Drafts mailed to Client on: .

ADDITIONAL TASKS:

32. Mark in Contacts that the Client is to receive a Living trust Letter in the Month of

their document execution and the Trust Form used. (Contact/ All Fields/ User-

defined Fields in Folder/Monthly Client Letter Sent in or Trust Form)

33. If Client is not Trustee, prepare IRS Form SS-4 for trust.

[SS-4 must be blessed by DW]

Faxed to IRS on: .

34. Transfer ownership in LLC, Inc, or Ltd to Trust

NOTES:

SIGNING:

35. Prepare folder for Client. This includes preparing the following and assembling them in

the folder: cover sheet and page protector pockets.

36. Notify Office Manger to prepare a bill for Client. Notified on .

37. Trust is fully funded.

CLOSING:

38. Unique Client Documents moved on: .


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39. Send “General Thank You Letter” (located in I:/Firm/Client/Letters/General Thank you Letter) to Client(s).

40. Clean up file – Make sure that: • Client’s work file on computer is empty • All items on the Client’s To-Do List are complete

41. File Closed by: on .

ADDITIONAL

NOTES:


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APPENDIX E

EXAMPLE OF BENEFICIARY DESIGNATION AND TITLE TO PROPERTY RECOMMENDATIONS IN AN ESTATE PLAN USING POUR OVER WILLS AND A REVOCABLE INTERVIVOS TRUST

M E M O R A N D U M TO: [Husband] and

[Wife] FROM: [Attorney] SUBJECT: Recommended Beneficiary Designations and Advice Regarding Title to Property DATE: [date]

A. Suggested Beneficiary Designations. [H-Name] and [W-Name], we recommend the following beneficiary designations for life insurance proceeds (on policies owned by either of you) and death benefits payable under IRA's, pension plans, profit sharing plans, Keogh Plans and other similar qualified plans, nonqualified deferred compensation plans and other similar benefits. Beneficiary Designation For Life Insurance and Nonqualified Deferred Compensation Plan Benefits Payable at [H-Name]'s Death: Proceeds shall be paid to the then serving Trustee(s) of the [Last Name] Family Trust

created under agreement dated [Date of Trust], if it is in existence at the death of [Husband]; otherwise payment shall be made to the executor(s) or administrator(s) of the estate of [Husband].

Beneficiary Designation for Qualified Plan Benefits Payable at [H-Name]'s Death (including benefits payable under any IRA's, pension plans, profit sharing plans, Keogh plans, and other qualified plan benefits):

Primary Beneficiary: Proceeds shall be paid to [Wife], wife of [Husband], if she is living immediately after the death of [Husband]; otherwise to the Secondary Beneficiary described below.

Secondary Beneficiary: If [Wife] is not living immediately after the death of [Husband], or as to any portion disclaimed by [Wife] in accordance with Section 2518 of the Internal Revenue Code of 1986, as amended, proceeds shall be paid to the then serving Trustee(s) of the [Last Name] Family Trust created under agreement dated [Date of Trust], if it is in existence at the death of [Husband]; otherwise payment shall be made to the executor(s) or administrator(s) of the estate of [Husband].


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ALTERNATIVE: OUTRIGHT TO CHILDREN TO OBTAIN BENEFITS OF STRETCH PAYMENTS

[Primary Beneficiary: Proceeds shall be distributed, in equal shares, to the children of [Husband], namely, [Children]. Provided, however, if any such child does not survive [Husband], but leaves descendants who survive [Husband], such deceased child=s descendants shall receive the share such deceased child would have taken if living, by right of representation.

Distributions by Right of Representation: Any proceeds distributable hereunder to the surviving descendants of a deceased person Aby right of representation@ shall be divided and distributed as follows: (a) one (1) share for each then living child of that deceased person and (b) one (1) share for each deceased child of that deceased person who leaves descendants then living. Each then living child of that deceased person shall take one (1) share and the share of each deceased child of that deceased person shall be divided among the deceased child=s then living descendants in the same manner.]

Beneficiary Designation for Life Insurance and Nonqualified Deferred Compensation Plan Benefits Payable at [W-Name]'s Death: Proceeds shall be paid to the then serving Trustee(s) of the [Last Name] Family Trust

created under agreement dated [Date of Trust], if it is in existence at the death of [Wife]; otherwise payment shall be made to the executor(s) or administrator(s) of the estate of [Wife].

Beneficiary Designation for Qualified Plan Benefits Payable at [W-Name]'s Death (including benefits payable under IRA's, pension plans, profit sharing plans, Keogh plans, and other similar qualified plan benefits):

Primary Beneficiary: Proceeds shall be paid to [Husband], husband of [Wife], if he is living immediately after the death of [Wife]; otherwise to the Secondary Beneficiary described below. Secondary Beneficiary: If [Husband] is not living immediately after the death of [Wife], or as to any portion disclaimed by [Husband] in accordance with Section 2518 of the Internal Revenue Code of 1986, as amended, proceeds shall be paid to the then serving Trustee(s) of the [Last Name] Family Trust created under agreement dated [Date of Trust], if it is in existence at the death of [Wife]; otherwise payment shall be made to the executor(s) or administrator(s) of the estate of [Wife].


[Primary Beneficiary: Proceeds shall be distributed, in equal shares, to the children of [Wife], namely, [Children]. Provided, however, if any such child does not survive [Wife], but leaves descendants who survive [Wife], such deceased child=s descendants shall receive the share such deceased child would have taken if living, by right of representation.


31


B. Advice Regarding Title to Property.

i) Avoidance of Certain Types of Joint Accounts. We also recommend that you avoid

holding more than 10% of your total estate as "joint tenants with rights of survivorship" or "pay on death arrangements." These ownership arrangements are often associated with joint bank accounts, certificates of deposit, money market accounts, and brokerage accounts. Under these arrangements, property passes automatically to the surviving co-owner without regard to the terms of the deceased owner's will. Since your documents are designed to divide property in a way that maximizes tax savings, such ownership arrangements can actually result in more ultimate taxes. We suggest that no more than 10% of your total estate be held under such ownership arrangements. That 10% amount should be more than sufficient to maintain the surviving spouse's standard of living and pay bills until the deceased spouse's will is probated.

If you wish to hold property jointly, we recommend that you hold such property as "tenants

in common." Alternatively, part of such property can be held solely in one spouse's name and solely in the other spouse's name. Under Texas law, this should not change the character of property as between community and separate, but it does avoid the problem described earlier.

We urge you to survey the title arrangements on your existing bank accounts, CD's, money

market accounts, brokerage accounts and real estate. With respect to the real estate, please provide us with a copy of the deed evidencing title and we will advise you as to whether a retitling is necessary. With respect to the other accounts, we simply suggest that you own such property as tenants in common or split title between the two of you. This advice does not pertain to IRA accounts and Keogh accounts since those accounts, by definition, will only be in the name of the participant. The disposition of those accounts at the participant's death are to be handled in accordance with the beneficiary designations described earlier.

ii) Transferring Property to Family Trust. It may be advantageous to transfer certain

property to the Family Trust (e.g., non-Texas real estate). To do so, simply retitle the property as follows:

[Husband] and [Wife], and Successor(s), as Co-Trustees of the [Last Name] Family Trust UTD [Date of Trust].

Use [H-Name]'s social security number as a Tax I.D. number for the trust.


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EXAMPLE OF BENEFICIARY DESIGNATION AND TITLE TO PROPERTY RECOMMENDATIONS IN AN ESTATE PLAN USING TESTAMENTARY TRUSTS

M E M O R A N D U M TO: [Husband] and

[Wife] FROM: [Attorney] SUBJECT: Recommended Beneficiary Designations and Advice Regarding Title to Property DATE: October 14, 2004

A. Suggested Beneficiary Designations. [H-Name] and [W-Name], we recommend the following beneficiary designations for life insurance proceeds (on policies owned by either of you) and death benefits payable under IRA's, pension plans, profit sharing plans, Keogh Plans and other similar qualified plans, nonqualified deferred compensation plans and other similar benefits. Beneficiary Designation For Life Insurance and Nonqualified Deferred Compensation Plan Benefits Payable at [H-Name]'s Death:

Proceeds shall be paid, in one (1) lump sum, to the Trustee(s) or successors in trust, as are designated in and duly qualified as such under the trust or trusts created by the terms of the Last Will and Testament of [Husband], in trust for the purposes provided therein, or to be distributed as provided therein, but if no such Trustee(s) shall qualify within six (6) months after the death of [Husband], payment shall be made to the executor(s) or administrator(s) of the estate of [Husband].

Beneficiary Designation for Qualified Plan Benefits Payable at [H-Name]'s Death (including benefits payable under any IRA's, pension plans, profit sharing plans, Keogh plans, and other similar qualified plan benefits):

Primary Beneficiary: Proceeds shall be paid to [Wife], wife of [Husband], if she is living immediately after the death of [Husband]; otherwise to the Secondary Beneficiary described below.

Secondary Beneficiary: If [Wife] is not living immediately after the death of [Husband], or as to any portion disclaimed by [Wife] in accordance with Section 2518 of the Internal Revenue Code of 1986, as amended, proceeds shall be paid to the Trustee(s) or successors in trust, as are designated in and duly qualified as such under the trust or trusts created by the terms of the Last Will and Testament of [Husband], in trust for the purposes provided therein, or to be distributed as provided therein, but if no such Trustee(s) shall qualify within six (6) months after the death of [Husband], payment shall be made to the executor(s) or administrator(s) of the estate of [Husband].


33


[Primary Beneficiary: Proceeds shall be distributed, in equal shares, to the children of [Husband], namely, [Children]. Provided, however, if any such child does not survive [Husband], but leaves descendants who survive [Husband], such deceased child=s descendants shall receive the share such deceased child would have taken if living, by right of representation.


Beneficiary Designation for Life Insurance and Nonqualified Deferred Compensation Plan Benefits Payable at [W-Name]'s Death:

Proceeds shall be paid, in one (1) lump sum, to the Trustee(s) or successors in trust, as are designated in and duly qualified as such under the trust or trusts created by the terms of the Last Will and Testament of [Wife], in trust for the purposes provided therein, or to be distributed as provided therein, but if no such Trustee(s) shall qualify within six (6) months after the death of [Wife], payment shall be made to the executor(s) or administrator(s) of the estate of [Wife].

Beneficiary Designation for Qualified Plan Benefits Payable at [W-Name]'s Death (including benefits payable under IRA's, pension plans, profit sharing plans, Keogh plans, and other similar qualified plan benefits):

Primary Beneficiary: Proceeds shall be paid to [Husband], husband of [Wife], if he is living immediately after the death of [Wife]; otherwise to the Secondary Beneficiary described below.

Secondary Beneficiary: If [Husband] is not living immediately after the death of [Wife], or as to any portion disclaimed by [Husband] in accordance with Section 2518 of the Internal Revenue Code of 1986, as amended, proceeds shall be paid to the Trustee(s) or successors in trust, as are designated in and duly qualified as such under the trust or trusts created by the terms of the Last Will and Testament of [Wife], in trust for the purposes provided therein, or to be distributed as provided therein, but if no such Trustee(s) shall qualify within six (6) months after the death of [Wife], payment shall be made to the executor(s) or administra-tor(s) of the estate of [Wife].


[Primary Beneficiary: Proceeds shall be distributed, in equal shares, to the children of [Wife], namely, [Children]. Provided, however, if any such child does not survive


34

[Wife], but leaves descendants who survive [Wife], such deceased child=s descendants shall receive the share such deceased child would have taken if living, by right of representation.


B. Advice Regarding Title to Property. We also recommend that you avoid holding more than

10% of your total estate as "joint tenants with rights of survivorship," "pay on death arrangements," or in "trustee accounts." These ownership arrangements are often associated with joint bank accounts, certificates of deposit, money market accounts, and brokerage accounts. Under these arrangements, property passes automatically to the surviving co-owner without regard to the terms of the deceased owner's will. Since your wills are designed to divide property in a way that maximizes tax savings, such ownership arrangements can actually result in more ultimate taxes. We suggest that no more than 10% of your total estate be held under such ownership arrangements. That 10% amount should be more than sufficient to maintain the surviving spouse's standard of living and pay bills until the deceased spouse's will is probated.

If you wish to hold property jointly, we recommend that you hold such property as "tenants in common." Alternatively, part of such property can be held solely in one spouse's name and solely in the other spouse's name. Under Texas law, this should not change the character of property as between community and separate, but it does avoid the problem described earlier.

We urge you to survey the title arrangements on your existing bank accounts, CD's, money market accounts, brokerage accounts and real estate. With respect to the real estate, please provide us with a copy of the deed evidencing title and we will advise you as to whether a retitling is necessary. With respect to the other accounts, we simply suggest that you own such property as tenants in common or split title between the two of you. This advice does not pertain to IRA accounts and Keogh accounts since those accounts, by definition, will only be in the name of the participant. The disposition of those accounts at the participant's death are to be handled in accordance with the beneficiary designations described earlier.


35

APPENDIX F

301 South Polk, Suite 600 Board Certified: Amarillo, Texas 79101 Estate Planning and Probate Law Phone (806) 372-3100 Texas Board of Legal Specialization Fax (806) 372-3110

The Law Offices of


Date

Client’s Name Client’s Business Address Re: ___ Name of Entity ___'s annual meeting Dear Client: I am writing to you about your corporate annual meeting, which is to be held in ___________,

according to your by- laws. As I have cautioned you, it is very important to respect all corporate formalities

such as the annual meeting and to document them properly, lest at some future time your corporate

structure be viewed as a sham. Penetration of the corporate structure could result in your personal liability

to corporate creditors and the IRS.

The annual meeting of the corporation is a meeting of the shareholders. At this meeting they elect

the directors of the corporation and attend to any other business that might be raised. It is important to give

notice of the meeting as required by your by-laws.

After the shareholders’ annual meeting, the directors should meet to elect officers, set salaries, and

attend to any other business that might come before the meeting.

There are some transactions that virtually demand documentation in your corporate records.

Examples are:

§ Major financial transactions; loans or leases to or from shareholders; substantial charitable

contributions; and buying or selling major assets outside the ordinary course of business;

§ Salaries or bonuses to corporate employees that exceed the norm for your line of business;

§ Dividends in any amount;

§ Particularly high expenses;

§ Insider transactions (dealings between the corporation and its shareholders, directors,

officers, or employees; i.e. the corporation leases a building from you or you drive a

corporate vehicle for personal as well as business purposes);

§ Buying or selling stock.


36

If you contemplate any of these types of transactions for the coming year, or if you have already

engaged in them, please document them in the appropriate minutes. If you have not already done so, it

would be wise to advise your accountant about them also.

Both the shareholder and directors’ meetings may be conducted on paper (without an actual

meeting) if all of the shareholders and directors sign a consent form for their respective meeting. The

unanimous consent includes minutes of the business transacted.

If we can help you with the meeting, the minutes of the meeting or the notice requirements, please

call Sarah in our office.



37

APPENDIX G 301 South Polk, Suite 600 Board Certified: Amarillo, Texas 79101 Estate Planning and Probate Law Phone (806) 372-3100 Texas Board of Legal Specialization Fax (806) 372-3110

The Law Offices of


Date Client’s Name Client’s Business Address Re: Your Living Trust Dear Client: It has been some time since you created your living trust. As time goes by, circumstances change in your life and you buy and sell assets. We are always concerned that these normal changes will, in some way, disrupt the planning we accomplished with your trust. As I have said before, it is always a good idea to give your living trust (and the rest of your estate planning) an annual check-up. To accomplish this very thing, we invite you to come in for a meeting in our offices without the meter running! We will go over your trust, talk about any changes in your family situation, and review your current assets. If you like, you are welcome to invite your CPA or financial planner to meet with us. There may have been several reasons for you to form a trust when we planned your estate. Let’s be sure that they all still apply and that the trust will still serve its intended purposes. First, you may have elected a living trust because you want to avoid the process of probating a will at the time of your death, particularly if you own properties in more than one state. And you may have preferred the privacy of a trust, since no probate (and probate filings in the public records) is necessary with a properly maintained living trust. Similarly, you may have sought the management benefits of a trust. You can manage it yourself, and provide who will manage it if you become incompetent or at your death. For a trust to accomplish these ends, however, it is absolutely critical that all of your assets be carried in the name of the trust. (Otherwise, when you die with assets in your individual name, it will be necessary to probate a will for your estate.) While you are giving your estate its annual check-up, you should double -check that you have purchased no assets in your individual name! • Have you purchased real estate since you created the trust? • Have you purchased stock or opened or transferred custodial accounts? • Are the casualty insurance policies that protect your trust assets payable to your trustee in the event of

loss? • Have you coordinated non-probate assets with the trust, including your life insurance, retirement plans

and annuities? • Have you changed banks and opened new accounts? Are they carried in the name of the trust? It is also important to review whether your circumstances, or those of your loved ones and beneficiaries, have changed since you prepared your trust. Have you divorced? If you were single at the


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time we prepared your estate, have you remarried? Have you opened new bank accounts? There may have been fundamental changes in your life that require you to make some revisions. If this annual exam raises questions, or if you would like to meet with us, please call us. We always enjoy hearing from you and we look forward to a visit. Sincerely, Deborah D. Welch


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APPENDIX H 301 South Polk, Suite 600 Board Certified: Amarillo, Texas 79101 Estate Planning and Probate Law Phone (806) 372-3100 Texas Board of Legal Specialization Fax (806) 372-3110

The Law Offices of


Date

Client’s Name Client’s Address Dear Client:

The Fifth Circuit Court of Appeals has just decided the case of Kimbell v. United States, which is a limited partnership case we have been watching. I am writing to make you aware of it. The Kimbell court gives us comfort because, once again, family limited partnerships (if correctly created and managed) have weathered an attack by the IRS.

The Kimbell case involved a Texas limited partnership created by a taxpayer who was 96 years old.

Her revocable living trust was the limited partner, and a Texas LLC was the 1% general partner. The taxpayer owned 50 % of the LLC (the general partner) and family members owned the remainder. Her son was manager of the LLC. Her son was also trustee of the revocable living trust (the limited partner). Upon the taxpayer’s death two months after the limited partnership was formed, the estate contended that the value of the limited partnership interest should be discounted, but the IRS disagreed and litigation ensued. The challenge arose under Code Section 2036 (a). The IRS contended that the limited partnership property was still a part of the taxpayer’s estate, the transfer to the limited partnership being a sham.

The lower court agreed with the IRS, holding that there was no evidence of an arms’ length

transaction in forming the limited partnership and that the transaction was essentially a paper transaction, in which asset values had merely been “recycled.” According to the lower court, it was difficult to even find two separate parties, and further, there had been no adequa te consideration paid for the partnership interests. Therefore, transfers to the limited partnership could not be a bona fide sale (an exception to Section 2036 (a)).

The Fifth Circuit rejected the lower court’s holding, stating that: 1. Transactions between family members can be bona fide transfers and thus, exempt from

Section 2036 (a) (although family transfers are subjected to greater scrutiny).

2. A transfer of assets to a family limited partnership in return for a partnership interest can be

adequate cons ideration.

This language from the Fifth Circuit is reassuring and it underscores the importance of creating and managing the limited partnership properly. As a practical matter, the family members in the Kimbell case had handled their partnership in accordance with all applicable guidelines: they had not commingled partnership assets with personal property; they had respected all the formalities; the taxpayer actually assigned assets to the partnership (receiving a partnership interest in return) and family members paid cash for their LLC interests; the taxpayer retained some assets outside of the limited partnership (thereby avoiding the inference that she must be exerting some control over the partnership property for her living expenses); the partnership did not pay personal expenses; some of the partnership property (working


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interests in oil and gas leases) actually required ongoing management and benefited from creditor protection so there were business reasons to create a partnership (the business purpose is important in analyzing whether the sale is bona fide).

As helpful as the Kimbell case is, however, it does not enlighten us about the extent of control that a

taxpayer may exert over the general partner. The taxpayer in Kimbell owned only a 50% interest in the LLC general partner and her son was its manager, so the lack of control was clear. Therefore, the Court was not called upon to analyze other arrangements in which the taxpayer has more control in the general partner. Until a more definitive ruling is issued on this issue, I recommend that taxpayer control of the general partner be minimized.

In light of the Kimbell case, we recommend that you continue to diligently manage your

partnership, respect its formalities and maintain its separate character. Despite this reassuring case from the Fifth Circuit, the IRS will continue to scrutinize family partnerships. If you have questions about the Kimbell case (or about your partnership generally), please call me.

Sincerely,

Deborah D. Welch


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APPENDIX I EXAMPLE OF ADMINISTRATIVE GUIDE FOR A SPOUSAL ILIT

[NAME OF TRUST] DATED [DATE OF TRUST]

Important Administration Information for the Trustee(s) to Learn and Master

Read the Trust. The Trustee must read the trust! Ownership and Beneficiary Designations for Life Insurance. It is expected the trust will own a life insurance policy or policies on [H-Name]'s life. Prior to the transfer of the policies to the trust, [W-Name] and [H-Name] will partition the policies and other property so that the policies are owned by [H-Name] as his separate property. Once [H-Name] transfers the policies to the trust, the ownership and beneficiary designations for the policies should be as follows:

[Name of Trustee], and Successor(s), as Trustee of the [Name of Trust] dated [Date of Trust]

Tax Identification Number for Trust. _________________. Bank Account(s) for Trust.

1. Need for Account. The trust will need a bank account in order to pay bills, deposit gift checks, pay life insurance premiums, etc.

2. Style of Account. Each bank or similar account owned by the trust should be styled as

follows:


3. Who Should Sign on the Account. The then serving Trustee(s).

Procedure the Trustee Must Follow Each Time a Cash Gift is Made to the Trust (including initial gift to open bank account).

Step 1. Deposit cash gift into main trust bank account. These cash gifts must be only [H-Name]=s separate property. They will have become [H-Name]=s separate property as a result of partition agreements entered into between [H-Name] and [W-Name] prior to each gift being made.


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Step 2. Determine the number of trust beneficiaries who have withdrawal rights under the trust. If a Notice of Gift has been delivered to the trustee at the time of the contribution, the beneficiaries with withdrawal rights are those indicated on the Notice. A non-exclusive example of a Notice of Gift is attached hereto as Exhibit A.

Step 3. Determine the current age and address of each beneficiary.

Comment : Under the [Name of Trust], all of [H-Name]'s then living children and grandchildren have withdrawal rights over each gift made to the trust. The current "withdrawal right beneficiaries" are [Names of Children and Grandchildren].

Step 4. Determine the amount of withdrawal right.

Formula. The amount of each beneficiary's withdrawal right as to each cash gift is (a) the amount of the gift (b) divided by the number of then living withdrawal right beneficiaries.

Limits. The maximum amount of property that may be withdrawn by a withdrawal right beneficiary in a calendar year is limited to $11,000 per donor (reduced by the value of other gifts made by that donor to that beneficiary during that year).

Step 5. Notify each beneficiary, in writing, of his or her withdrawal right.

1. Adult Beneficiaries. Promptly after the cash gift is made to the trust, and the

amount of each beneficiary's withdrawal right is determined, each adult beneficiary should be sent a letter informing him or her of the gift and the amount subject to a withdrawal right. A form of letter to be sent to an adult beneficiary is attached hereto as Exhibit B.

2. Minor Beneficiaries. If a beneficiary is under the age of eighteen (18), the

withdrawal right letter should be sent to his or her parent. A form of a letter to a minor beneficiary is attached hereto as Exhibit C.

Step 6. After a withdrawal right lapses, or after a beneficiary informs the Trustee(s), in

writing, of an intention to allow a withdrawal right to lapse, the Trustee can pay insurance premiums, invest the money, etc.

Keep Adequate Records. The Trustee should keep accurate records of all receipts and disbursements. The Trustee should also keep copies of all correspondence received and sent by the Trustee. Gift Tax Return. The initial gift of the life insurance policies will be worth approximately [Value of initial gift]. [Therefore, a gift tax return will need to be filed, utilizing a portion of [H-Name]'s unified credit amount. **OR** Therefore, if the notice procedure described above is properly complied with, no gift tax return will need to be filed, reflecting the initial gift of the policies to the trust.]


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Exhibit A Notice of Gift

On the date noted below by the Trustee, I, [Husband], have made a gift of [TTL-AMT] cash to the [Name of Trust]. In accordance with the terms of that trust, [Name of Trustee], as Trustee of that trust, is hereby notified that the following beneficiaries may withdraw a portion of such gift in the amounts hereinafter indicated:

[Name 1] $[AMT 1]

[Name 2] $[AMT 2]

[Name 3] $[AMT 3]

[Name 4] $[AMT 4]

[Husband]

I, [Name of Trustee], acknowledge that I, in my capacity as Trustee of the [Name of Trust], received the foregoing described gift and this Notice of Gift on this day of __________________, 20______.

[Name of Trustee]


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Exhibit B Notice to an Adult Beneficiary [NAME OF TRUSTEE], TRUSTEE [NAME OF TRUST] [Address of Trust] [DATE] [Name of Adult Beneficiary] [Address of Adult Beneficiary]

RE: Gift to [Name of Trust] dated [Date of Trust] Dear 1 :

A $ 2 gift was made on 3 to the [Name of Trust] dated [Date of Trust], of which I am the Trustee. Under the terms of the trust, you may withdraw a portion of the gift equal to $ 4 . You may exercise this withdrawal right within thirty (30) days from the date you received this letter. Otherwise, the withdrawal right with respect to this gift shall lapse to the extent provided in the trust instrument.

Very truly yours,

[Name of Trustee], Trustee 1. Insert name of adult beneficiary (i.e., beneficiary who is 18 or older). 2. Insert total gift. 3. Insert date of gift. 4. Insert lesser of gift or annual gift tax exclusion not used that year for that beneficiary.


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Exhibit C Notice to a Minor or Incapacitated Beneficiary [NAME OF TRUSTEE], TRUSTEE [NAME OF TRUST] [Address of Trust] [DATE] Mr./Ms. [Parent] In behalf of [Name of Minor Beneficiary] [Address of Minor Beneficiary]


A $ 2 gift was made on 3 to the [Name of Trust] dated [Date of Trust], of which I am the Trustee. Under the terms of the trust, as the parent or guardian of the referenced child, you may withdraw, in the child's behalf, a portion of the gift equal to $ 4 . You may exercise this withdrawal right within thirty (30) days from the date you received this letter. Otherwise, the withdrawal right with respect to this gift shall lapse to the extent provided in the trust instrument.

Very truly yours,

[Name of Trustee], Trustee 1. Insert name of parent or guardian. 2. Insert total gift. 3. Insert date of gift. 4. Insert lesser of gift or annual gift tax exclusion not used that year for that beneficiary.


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EXAMPLE OF ADMINISTRATIVE GUIDE FOR A STANDARD OR GST ILIT (SPOUSE NOT A BENEFICIARY)

[NAME OF TRUST] DATED [DATE OF TRUST]

Important Administration Information for the Trustee(s) to Learn and Master

Read the Trust. The Trustee must read the trust! Ownership and Beneficiary Designations for Life Insurance. It is expected the trust will own a survivorship life insurance policy on the lives of [H-Name] and [W-Name]. If that life insurance is acquired, the ownership and beneficiary designations for each policy should be as follows:


Tax Identification Number for Trust. _______________. Bank Account(s) for Trust.

1. Need for Account. The trust will need a bank account in order to pay bills, deposit gift checks, pay life insurance premiums, etc.

2. Style of Account. Each bank or similar account owned by the trust should be styled as

follows:


3. Who Should Sign on the Account. The then serving Trustee(s).

Procedure the Trustee Must Follow Each Time a Cash Gift is Made to the Trust (including initial gift to open bank account).

Step 1. Deposit cash gift into main trust bank account.

Step 2. Determine the number of trust beneficiaries who have withdrawal rights under the trust. If a Notice of Gift has been delivered to the trustee at the time of the contribution, the beneficiaries with withdrawal rights are those indicated on the Notice. A non-exclusive example of a Notice of Gift is attached hereto as Exhibit A.

Step 3. Determine the current age and address of each beneficiary.

Comment : Under the [Name of Trust], all of [H-Name]'s and [W-Name]'s then living children and grandchildren have withdrawal rights over each gift made to the trust. The current "withdrawal right beneficiaries" are [Names of Children and Grandchildren].

Step 4. Determine the amount of withdrawal right.


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Formula. The amount of each beneficiary's withdrawal right as to each cash gift is (a) the amount of the gift (b) divided by the number of then living withdrawal right beneficiaries.

Limits. The maximum amount of property that may be withdrawn by a withdrawal right beneficiary in a calendar year is limited to $11,000 per donor (reduced by the value of other gifts made by that donor to that beneficiary during that year).

Step 5. Notify each beneficiary, in writing, of his or her withdrawal right.

1. Adult Beneficiaries. Promptly after the cash gift is made to the trust, and the

amount of each beneficiary's withdrawal right is determined, each adult beneficiary should be sent a letter informing him or her of the gift and the amount subject to a withdrawal right. A form of letter to be sent to an adult beneficiary is attached hereto as Exhibit B.

2. Minor Beneficiaries. If a beneficiary is under the age of eighteen (18), the

withdrawal right letter should be sent to his or her parent. A form of a letter to a minor beneficiary is attached hereto as Exhibit C.

Step 6. After a withdrawal right lapses, or after a beneficiary informs the Trustee(s), in

writing, of an intention to allow a withdrawal right to lapse, the Trustee can pay insurance premiums, invest the money, etc.

Keep Adequate Records. The Trustee should keep accurate records of all receipts and disbursements. The Trustee should also keep copies of all correspondence received and sent by the Trustee.


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Exhibit A Notice of Gift

On the date noted below by the Trustee, we, [Husband] and [Wife], have made a gift of [TTL-AMT] cash to the [Name of Trust]. In accordance with the terms of that trust, [Name of Trustee], as Trustee of that trust, is hereby notified that the following beneficiaries may withdraw a portion of such gift in the amounts hereinafter indicated:

[Name 1] $[AMT 1]

[Name 2] $[AMT 2]

[Name 3] $[AMT 3]

[Name 4] $[AMT 4]

[Husband]

[Wife]

I, [Name of Trustee], acknowledge that I, in my capacity as Trustee of the [Name of Trust], received the foregoing described gift and this Notice of Gift on this day of _______________, 20_____.

[Name of Trustee]

1. Enter amount of gift. 2. Enter date of gift. 3. Enter amount obtained when amount of gift is divided by number of beneficiaries with withdrawal

rights.


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Exhibit B Notice to an Adult Beneficiary [NAME OF TRUSTEE], TRUSTEE [NAME OF TRUST] [Address of Trust] [DATE] [Name of Adult Beneficiary] [Address of Adult Beneficiary]


A $ 2 gift was made on 3 to the [Name of Trust] dated [Date of Trust], of which I am the Trustee. Under the terms of the trust, you may withdraw a portion of the gift equal to $ 4 . You may exercise this withdrawal right within thirty (30) days from the date you received this letter. Otherwise, the withdrawal right with respect to this gift shall lapse to the extent provided in the trust instrument.

Very truly yours,

[Name of Trustee], Trustee 1. Insert name of adult beneficiary (i.e., beneficiary who is 18 or older). 2. Insert total gift. 3. Insert date of gift. 4. Insert lesser o f gift or annual gift tax exclusion not used that year for that beneficiary.


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Exhibit C Notice to a Minor or Incapacitated Beneficiary [NAME OF TRUSTEE], TRUSTEE [NAME OF TRUST] [Address of Trust] [DATE] Mr./Ms. [Parent] In behalf of [Name of Minor Beneficiary] [Address of Minor Beneficiary]


A $ 2 gift was made on 3 to the [Name of Trust] dated [Date of Trust], of which I am the Trustee. Under the terms of the trust, as the parent or guardian of the referenced child, you may withdraw, in the child's behalf, a portion of the gift equal to $ 4 . You may exercise this withdrawal right within thirty (30) days from the date you received this letter. Otherwise, the withdrawal right with respect to this gift shall lapse to the extent provided in the trust instrument.

Very truly yours,

[Name of Trustee], Trustee 1. Insert name of parent or guardian. 2. Insert total gift. 3. Insert date of gift. 4. Insert lesser of gift or annual gift tax exclusion not used that year for that beneficiary.


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APPENDIX J 301 South Polk, Suite 600 Board Certified: Amarillo, Texas 79101 Estate Planning and Probate Law Phone (806) 372-3100 Texas Board of Legal Specialization Fax (806) 372-3110

The Law Offices of


Date Client’s Name Client’s Address Dear Friend:

Recently, I have encountered an unfortunate situation and, because it occurs all too often, it has

prompted me to emphasize how important it is to re-visit estate plans. I recently represented the daughter of a deceased woman. Her mother was the second of her parents to die. And although there was plenty of time between her parents’ deaths to make arrangements to avoid probate, it was necessary, finally, to probate her mother’s will. The family could have saved approximately $1,500, had they updated the mother’s estate plan after the father’s death. This case, and others I have encountered recently, reminds me of the important question I am often asked:

“WHEN SHOULD WE UPDATE OUR ESTATE PLANNING?”

• After the first spouse has died

I encourage surviving spouses (or their adult children) to review the family’s estate plan with their attorney after the death of the first spouse. The spouses (especially widows) sometimes think that they should change nothing in the plan their spouse put in place. In fact, however, there are many things that can be done after the first death to save money in the long run, sometimes making it unnecessary to probate the second will at all. • If there is a change in the law or your financial circumstances

Recent changes in the estate tax laws have rendered many estate plans unwieldy. For example, “bypass trusts,” designed to take advantage of a smaller lifetime exemption against estate taxes, may be unnecessary now that the lifetime exemption has been increased. By the same token, many estates have dramatically depreciated in value because of the declining stock market and the sluggish economy. Bypass trusts and other tax-savings devices made sense in estate plans prepared in better economic times. But now they may saddle the executor and beneficiaries with time-consuming work to maintain unnecessary trusts. You should automatically have your estate plan reviewed if your personal financial situation changes dramatically. If, for example, you receive a large inheritance, if you are awarded a financial settlement for personal injury, or if you should be so fortunate as to win the lottery, you should immediately consult your attorney and accountant! • After a divorce

If a couple divorces, it is critical to reexamine the existing estate plan. Texas law provides that a divorce cancels any gifts made to the former spouse under a will, and that the former spouse is not an attorney- in-fact under previously executed powers of attorney. However, the law makes no provisions concerning former spouses under revocable trusts. Therefore, a divorced spouse could remain as a trustee or beneficiary of a revocable trust! And, regardless of whether the earlier planning involved wills or trusts


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or both, the nature and extent of the estate is likely to change after a divorce, so estate plans should be re-visited. • If there is a change in the intended beneficiary

This point hardly needs to be emphasized. However, it is surprising that some people fail to update their estate plans even after a major change in beneficiaries. I once represented an estate in which a woman’s assets passed to a long- lost boyfriend because she failed to update her will!

• If you move from one state to another

Every state has different property and probate laws. If you move from one state to another, it is essential to have your estate plan and your wills or trust reviewed. • When 5 or more years have passed since the last review

In these turbulent times, I recommend that every family arrange for a review of their wills and other estate planning documents every 5 years. If you find yourself in any of these categories, we would be happy to visit with you at the Welch Law Firm, Amarillo, Texas - (806) 372-3100.



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APPENDIX K

301 South Polk, Suite 600 Board Certified: Amarillo, Texas 79101 Estate Planning and Probate Law Phone (806) 372-3100 Texas Board of Legal Specialization

Fax (806) 372-3110

The Law Offices of


Date

Client’s Name Client’s Address Dear Client:

Dress Rehearsals

Some events in life are so important that we practice them in advance—to be sure we are prepared! We rehearse our lines if we are in a play; we practice walking down the aisle before our wedding; and if we are nervous about asking our boss for a raise, we plan our remarks (and overcoming her objections) in our minds. What more joyous (and painstaking) process is there in life than preparing for our first baby’s arrival? A dress rehearsal automatically signals that we must be on time, focused on the job at hand, fully prepared to play our part, and open to making changes if adjustments are needed.

I believe that people should rehearse, step-by-step, how they would respond to unexpected turns in life and whether they are prepared to do so. This kind of rehearsal goes beyond simply buying financial products (although they may be indicated) and it is more intensive than having a will prepared (although this is always a good idea). I counsel my clients to play out—mentally—what would happen if....

There are several occurrences that I see fairly often, many times after it is too late to prepare

properly. Often, they result from simple lack of forethought.

For example, although many people have disability insurance as part of their employment benefits, and although long-term care insurance is becoming popular, I find that many folks don’t know what they actually cover and how the insurance would help them in certain events. I pose this question: If your spouse became completely disabled or suffered from a debilitating illness—what would you do? Could you afford to quit work and be a caretaker? Or, do you actually know if your insurance will provide convalescent or nursing care on a long-term basis? Second marriages, in particular, can create unexpected and unfortunate results. For example, it is a fairly common planning device to include a trust in the wills of spouses in a second marriage. The surviving spouse has the use of the estate assets during life and, upon death of the surviving spouse, the remainder goes to the children from the first marriage. On paper, this trust makes sense: the surviving spouse has a means of support during life, but the stepchildren are certain to receive whatever is left of the assets when the surviving spouse dies. In reality, however, this trust may be a recipe for hard feelings, distrust, and family fractures. (It is potentially even more disastrous when the surviving spouse or the children are the trustees of the trust!) It is sad, in a time when the survivors could comfort each other about their mutual loss, that many completely sever communication and hire lawyers to do battle over the will! If only the spouses had rehearsed and recognized the simple question, “If I am deceased, and my spouse is spending these assets, how will my children feel? Won’t they think she is spending their money?”


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In short, it is a pleasure to rehearse for happy events, but we are all shy of contemplating illness, tragedy and death. As a practical matter, however, we may make more prudent decisions if we think through the possibilities as if they were real. With forethought, we can even minimize the burden on our loved ones when life takes an unexpected turn.

If I can help you with a check-up on your plans, please call me at the Welch Law Firm (806) 372-

3100. Sincerely, Deborah D. Welch


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APPENDIX L 301 South Polk, Suite 600 Board Certified: Amarillo, Texas 79101 Estate Planning and Probate Law Phone (806) 372-3100 Texas Board of Legal Specialization Fax (806) 372-3110

The Law Offices of


Date

Client’s Name Client’s Address Dear Client: I am writing to alert you about Identity Theft. I’m sure you have heard about it in the news and in commercials on TV. According to the FBI, Identity Theft is the fastest growing crime in the nation, with an estimated 500,000-700,000 victims every year. Chances are that you already know someone who has been a victim.

Although we all benefit from the convenience of modern commerce and technology, we must be

increasingly vigilant about someone else using our identity. There is a whole new breed of criminals who profit from using our name, our address, our social security number, our bank and credit card numbers, and our good credit. They get the essential information in various ways: They “dumpster dive,” obtaining information from our trash; they steal credit card informa tion while we are using our card (with a device known as a “skimmer”); they steal mail to obtain bank account and credit card numbers (they may even file a change of address card and divert our mail to a location where they can monitor it); they steal information from our home; they steal information we have given to their employers for legitimate reasons; they pose as government workers or salesmen and trick us into divulging the information; and they still steal purses and wallets.

Using this information, the thieves can generate bogus documents (including driver’s licenses and

checks); buy things with our credit card numbers; take out loans in our name; subscribe to wireless telephone services; obtain more credit cards, and drain our bank accounts. There are even reported cases where the thief has filed for bankruptcy in the stolen name to avoid the debts he has incurred in that name!

How To Prevent It

The simple truth is that an identity theft may occur, despite everything we do to prevent it. But you can minimize your risk by taking practical steps, such as the ones in the checklist I have enclosed for your use.

How To Recognize It In some cases, fraudulent name and credit use has gone on for months or even years without the

owner suspecting it. So, you should be vigilant for any signs that your identity is being used: • Order a copy of your credit report now (if you have not already done so) and order a new

one once a year. This should tell you all accounts that have been opened in your name, the credit reports that have been requested in your name, and, in the extreme case, whether bankruptcies or arrests have been logged in your name.


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• Monitor your bank account. Review all financial reports and invoices immediately when you receive them. You should recognize immediately if there are charges you do not recognize or withdrawals or transfers that you did not authorize.

• Be alert to your regular billing cycles. If you have not received a bill on time—it could mean that your address has been changed, or that your mail has been stolen or diverted.

• For the same reasons, be alert if you notice that the volume of your mail decreases.

What to Do If It Happens If you suspect that your identity is being used or if your credit or debit cards, checks, purse or wallet

is lost or stolen:

• Call any one of the three major credit bureaus and place a fraud alert on your credit report (Phone numbers are included in the attached checklist.) This should prevent a thief from opening additional accounts in your name. Any one of the three major bureaus will notify the other two and you should receive a credit report from all three, at no charge.

• Notify the bank, credit card company, etc., immediately. They can stop charges on your account, close it and open a new account for you. They can also close accounts that have been opened fraudulently.

• File a police report if the theft appears to be a major scheme (affecting more than one account or creditor). Send a copy of the police report to the major credit bureaus and offer to send it to any creditor who may have been affected.

• Obtain a copy of any fraudulent credit applications from the business affected. Under new federal laws, they have to provide these copies to you, free of charge.

As the reports roll in, it is clear that identity theft is a modern crime to which any of us may fall

victim. However, we can be pro-active in some areas and we can be alert to the first signs of a problem. I hope this information is helpful and that it may prevent the nightmare of identity theft for you. If you have any questions about it, you are welcome to call me.



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Prevention of Identity Theft-- A Checklist

1. Shred all financial documents and pre-approved credit card applications before you put them in the

garbage.

2. Do not carry your social security card, passport or birth certificate with you unless you will need it.

3. Do not have your social security number or driver’s license number printed on your checks.

4. On the back of your credit cards, instead of signing your name, write “Request ID.”

5. Be cautious of giving your social security number out: determine why it is needed.

6. Don’t use passwords or PIN numbers based on information that can be obtained from other sources,

such as yours or your mother’s maiden name, the last four digits of your social security number, or

your birth date.

7. Don’t give out sensitive, personal information over the telephone or on the computer unless you

have initiated the contact.

8. Make a copy of the contents of your wallet (front and back) and other financial information that you

may keep in your purse. (Keep these copies in a safe place in your home.) This will give you the

account numbers and phone numbers if you need to report stolen or lost cards.

9. Don’t leave bill payments in your mailbox with the flag up for any length of time.

10. The FTC has a combined form for alerting the three major credit agencies and major financing

companies of a theft or fraud. (See www.consumer.gov/idtheft/affidavit or call 877-438-4338.)

Even if you use this affidavit, however, you will still be responsible for making sure the fraudulent

charges and bad credit information are removed from your record.

11. The three national credit reporting organizations will call you before approving credit based on your

name or social security number, if you alert them to possible fraud or theft.

Equifax—800-525-6285

Experian—888-397-3742

Trans Union—800-680-7289

Social Security Fraud line—800-269-0271

12. Credit reporting bureaus are allowed to release your name, address, telephone number, etc. to

anyone who requests it. But you can instruct them not to do so by calling 888-567-8688 and

following the steps in the menu. Taking this step should reduce the number of pre-approved credit

card applications you receive in the mail and, perhaps, avert other problems.

13. Keep information secure in your home; after all, most of us have other people in our homes for

services, repairs, etc.


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14. If you work, keep your purse and other confidential items in a secure place. Also, inquire about

security measures for confidential information at your place of business, and particularly, how it is

disposed of.

If you use a computer:

15. Update your computer virus protection software regularly. Be alert for updates that you can

download.

16. Don’t download or open files sent to you by strangers.

17. Use a firewall program, especially if your computer stays connected to the Internet all the time.

18. Use a secure browser, which is software that encodes or encrypts information you send over the

Internet.

19. Be especially careful of your laptop. It is best not to store confidential data on it. If you do, use a

unique password that must be entered every time you log on. Theft of a laptop is tragedy enough

without also losing important confidential data.

20. When you discard a computer, be sure that all confidential information is deleted. Use a utility

program to overwrite the entire hard drive.

21. Be especially careful of wireless technology, particularly in public places. Thieves once used

binoculars to watch someone enter his telephone credit card number. Now, if you are using a

wireless connection to your computer (say, in a hotel) thieves can highjack all of your information

from a remote location, with little trouble.


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APPENDIX M 301 South Polk, Suite 600 Board Certified: Amarillo, Texas 79101 Estate Planning and Probate Law Phone (806) 372-3100 Texas Board of Legal Specialization Fax (806) 372-3110

The Law Offices of


Date Client’s Name Client’s Address Dear Client: I am often asked about potential liability for persons injured on a landowner’s property. In these litigious times, it is prudent to be concerned about this exposure, which is called “Premises Liability”. Texas law is expanding beyond traditional concepts in this area and I am writing to you because our files indicate that you own or lease real property. This letter is not an exhaustive guide to Premises Liability, but it highlights some new areas of potential liability that deserve your attention and further investigation.

Traditionally, Texas law on this subject has been consistent with the following common law principles (although the law is being eroded with many exceptions):

(1) a landowner is not liable for injuries occurring on his property simply because he owns the land; and

(2) a property owner’s duty to persons on his property depends on the persons’ status: • If they are trespassers, he owes no duty except to refrain from willful or grossly

negligent harm;

• If they are licensees (present with permission, but of no particular benefit to the

property owner), he owes the duty to inspect for and warn about hidden dangers;

• If they are business invitees (such as customers, present at the invitation of the

owner), he must exercise ordinary care to make the property reasonably safe.

However, an emerging body of law, called “Premises Security Liability,” expands the traditional concepts and imposes higher duties on property owners (and tenants of commercial property) in some cases. Premises Security Liability is concerned with a property owner’s duty to protect an entrant on his property from the harmful acts of third parties. In fact, according to recent, perplexing cases, a person in control of the premises is required to reasonably protect entrants on and occupants of the property from acts of third parties, if there is a foreseeable and unreasonable risk of harm. One case (the Nixon case) serves as a perfect example: in it, a child was abducted, dragged to an abandoned building and assaulted. Later, the Texas Supreme Court held that the owner of the abandoned building could be liable for civil damages to the child’s mother, because the building was not properly secured according to city codes. The Nixon case was decided without regard for the legal status of the injured person because of the City ordinance violation.

Every case depends on its unique facts and it is impossible to describe every situation in which

Premises Security Liability might be imposed, but some generalizations are worth considering.


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• Stay informed about criminal activity in the area where your property is located. The law

does not strictly require you to stay informed, but the courts consider criminal activity in the

area as pertinent to foreseeablility of violence on your property. Therefore, you should be

especially vigilant if your property is at risk for crime.

• Be sure that you are complying with laws, regulations and ordinances that are meant to deter

criminal activity on your property (whether commercial or residential). There may be city

ordinances relating to safety that are extremely important. The Nixon case states, “The

unexcused violation of a statute or ordinance constitutes negligence as a matter of law if

such statute or ordinance was designed to prevent injury to the class of persons to which the

injured party belongs.” According to this reasoning, you can be liable for damages to an

injured party, regardless of the injured party’s status as trespasser, licensee or invitee, if

your property is in violation of existing laws or ordinances.

• In 1993, the Texas legislature enacted a series of laws pertaining to locks, security devices,

smoke detectors, etc. for landlords of residential properties. If you own residential rent

property, you must be familiar with these laws and comply.

• If you hire outside firms to manage your property, guard your property or provide security

services, be certain that your relationship with them is that of independent contractor and not

employee. Any negligent or criminal acts that they commit should not be attributed to you if

they are independent contractors.

• If your property has a parking lot or parking garage, be very vigilant about unsafe

conditions. (Parking facilities are almost inherently dangerous—both for criminal acts and

for other kinds of injuries.) Be certain that your liability insurance coverage includes the

parking lot.

• If you are a property owner or if you lease commercial property, it is essential to carry

liability insurance. Talk with your agent and review your policies carefully. Be certain that

your coverage insures against as many risks as possible.

Of course, it is impossible to predict or foresee every crime or injury that might occur on property.

But prudence and reasonable care dictate that we manage property as safely as we can in the circumstances, particularly in light of this developing law. If I can be of further assistance in this area, please feel free to contact me.



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APPENDIX N 301 South Polk, Suite 600 Board Certified: Amarillo, Texas 79101 Estate Planning and Probate Law Phone (806) 372-3100 Texas Board of Legal Specialization Fax (806) 372-3110

The Law Offices of


Date Client’s Name Client’s Address Dear Client:

As the year draws to a close, we all think about our blessings and consider the year in retrospect. We,

at the Welch Law Firm are so very grateful for each of you and our acquaintance. Thank you for your

business.

And as we all contemplate gifts for our loved ones—I thought of a special gift that each of you could

prepare. You will find a checklist enclosed, with information that would be helpful to your family and

loved ones in the event of your incapacity or death. I know from years of experience that this is one of the

most thoughtful (and practical) things you can do for your family. The checklist contains some highly

confidential information—so store it in a safe place and let your family know where it can be found in the

event of an emergency. If you would like this emailed so you can complete it on the computer, please

email [email protected].

Then, relax and reward yourself for this kind gesture. We hope you have a safe and happy holiday

and a peaceful, prosperous new year!



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PERSONAL FINANCIAL PLANNING FOR __________________ Information Checklist

Date Last Revised__________________

BANK ACCOUNTS AND SAFE-DEPOSIT BOXES

• All bank names and account numbers:

• Personal contact, if available:

• Location of safe-deposit box:

• Contents of box:

• Location of box key:

CREDIT CARDS

• Issuers, account numbers and expiration dates:

INSURANCE (Home, auto, life, health, long-term care)

Home • Issuer and account number:

• Agent:

• Premium due date or escrowed with lender:

Auto • Issuer and account numbers:

• Agents:

• Premium due dates:

Life • Issuer and account numbers:

• Agents:


Health • Issuer and account numbers:

• Agents:



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Long-Term Care • Issuer and account numbers:

• Agents:


HEALTH CARE

• Physician’s contact information:

• Current medications and dosages:

• Medicare claim number:

• Medigap policy number:

TAXES

• Accountant:

• Location of past filings:

INVESTMENT AND RETIREMENT ACCOUNTS

• Names of brokerage or plan administrators and account numbers:

• Pin numbers:

• Broker’s or banker’s name:

LEGAL DOCUMENTS

• Location of wills:

• Location of trusts or copies:

• Location of Powers of Attorney:

• Location of Medical Powers of Attorney:

• Location of Directives to Physicians:

• Contact information for lawyer:


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HOUSE

• Amount of mortgage payment or rent:

• Due date:

• Location of deeds and title policy:

• Contact information for service people:

LAST WISHES

• Arrangements for funeral and burial:

• Organ donation wishes:

MISCELLANEOUS

• Driver’s license number and expiration date:

• Vehicle registration information:

• Any items in storage:

• Storage company phone number:

• Contact information for neighbors and friends :

• E-mail accounts and passwords: