INTRODUCTION

The most basic and sometimes the most difficult requirement of developing an estate plan for a client is ascertaining the facts as to the client's family situation and assets together with his or her estate planning objectives.

This inventory is designed to give us an accurate and complete picture of your assets, what you have previously done, and your objectives. With the facts called for by this questionnaire, it is possible to project the probable growth of your estate, determine how tax liabilities against it may be minimized, estimate how much income your assets can be expected to produce for your family after death, measure future needs, and propose methods of bridging any gaps between future income and future needs. It will give us, as your attorneys, your complete financial and family picture and will be of great assistance to us in recommending an estate plan which will provide for the disposition of your estate as you desire, care for your family, and help to minimize the tax burden to you and your family.

We recognize that you may not be able to complete all of the inventory prior to our conference. If any part of the inventory does not apply to your situation, disregard it. If you are not sure of any answer, make a notation and we will discuss it. You may wish to complete some portions after discussing them with your attorney.

To the extent that you can furnish us the information requested in the inventory, the meaningfulness of our initial conference will be increased, and the information gathered will be more accurate, the resulting savings in conference time will help reduce the cost of your estate plan.

Before completing the inventory, please take a moment to review the following general information concerning estate planning and taxation. Many of the questions frequently asked by our clients are answered here.

WHAT IS A WILL?

A will is a legal document by which you may direct the distribution of your property upon death in an economical and efficient manner. Bequests under a will may pass either outright to a beneficiary or in trust for a beneficiary.

To draft a will in Texas, you must be eighteen (18) years of age, or married or in the military. A formal will requires two witnesses, each of whom must be at least fourteen (14) years of age and not a beneficiary under the will. The will should be "self-proven." The "self-proving" affidavit obviates the necessity to have the witnesses appear at probate to testify as to the signing of the will with the proper formalities.

HANDWRITTEN WILLS

A hand written will (holograph) is valid in Texas. It must be all in the testator's handwriting and signed by the testator. Although not required by statute, it would be a good idea to date the document and to make a statement that it is intended as a will. Somewhat like "do-it-yourself brain surgery" holographs are probably a poor idea unless the testator is knowledgeable concerning what should and should not be included in such an undertaking.

WHY SHOULD YOU HAVE A WILL?

If you die without a will, you will have no choice as to how your property will be distributed. Upon your death the rules of intestate distribution will be substituted for your wishes. In other words, the State will write a will for you. It may or may not be what you desire. Furthermore, your estate may be frozen or encumbered with legal expenses and delays during the probate process if you do not have a will. If you have minor children or substantial real property, a will is a necessity.

WHAT IS AN INDEPENDENT EXECUTOR?

An executor is the person appointed in your will to be the primary representative of your estate. Because of a provision somewhat unique to Texas law, you can make your executor "independent." That is, the executor can act free of control by a court, except for only a few essential matters. Without this independence, virtually all of the executor's actions will be subject to prior approval by the court, an obviously cumbersome and expensive procedure.

Your executor will be responsible for administering your estate. This includes ascertaining your properties and your liabilities. He must prepare a list of your properties and submit them to the court. After debts have been paid (including estate and inheritance taxes) the executor gives his final accounting and makes distributions to the beneficiaries in your will. The administrator of your estate will be required to post a bond assuming the faithful performance of his duties. This bond may be waived in your will.

WHAT IS COMMUNITY PROPERTY?

In Texas, you may leave your property to whomever you please. You can disinherit your children or your spouse. But you can only leave by will that which is yours. The property of your spouse is not yours to deal with in this instance.

Texas (along with seven other states) has a community Property System as its basic property law. To determine what community property is, it is first necessary to consider what it is not. Property owned by a husband or wife before marriage is that person's separate property. Property received after marriage by gift or inheritance is separate property, as is a judgment for pain and suffering following an injury to either spouse. Community property is what is left. That is, community property in Texas is all property acquired by either spouse during marriage except by inheritance or gift. The income from separate property is Community property unless the couple make a formal, written, declaration to the contrary.

WHO WILL RAISE MY MINOR CHILDREN AFTER MY DEATH?

The surviving parent remains the natural guardian of the children. But if the other parent is not living, the appointment of a "guardian of the person" for the minor children is a selection you can make in your will. If you fail to do so, the probate court will make the choice for you.

The "guardian of the person" is the "substitute parent" of the children. This guardian does not control or have possession of the children's estate unless also appointed "guardian of the estate" by the probate court. In order to avoid the creation of such a court supervised guardianship we recommend the creation of a trust to care for the estate of the minor children. The trustee would be directed to make distributions to the guardian of the children for their support and later to distribute the remainder of the fund to the children at an age selected by you.

HOW WILL MY ESTATE BE TAXED AT MY DEATH?

Your estate may be subject to at least two taxes: the federal estate tax and a state inheritance tax. In Texas, a state inheritance tax will be due only if federal estate taxes are due and is equal to the amount of the maximum allowable federal credit for state death taxes under 2011 of the Internal Revenue Code.

There is a tax on lifetime transfers (gifts) as well as on property distributed at death. The Federal gift tax is "unified" with the estate tax - tax is paid on total taxable gifts plus property which passes at death. Every estate is entitled to a "unified credit" which is subtracted from the tentative tax to arrive at the final estate tax owned. That credit in 2000 is set at $220,550 which exempts estates of up to $675,000. Under newly signed legislation, the amount excluded from estate taxation will rise over the years as follows:

The estate and gift tax rates are graduated, beginning at 37% for estates of $675,000 and increasing to 50% on taxable transfers over $3,000,000, though the maximum rate will eventually decrease to 45%.

Although the estate tax is scheduled for repeal in 2010, there is ample opportunity for Congress to change its mind between now and then. In fact, the statute which repeals the estate tax is itself scheduled to expire in 2011, so the future of the estate tax is uncertain.

Lifetime gifts may qualify for the "annual exclusion." The annual exclusion allows you to make tax-free gifts of $10,000 per donee to an unlimited number of recipients. A married donor can exclude $20,000 if his or her spouse consents. A cost of living adjustment rounded to the next lowest multiple of $1,000 will be made annually to the annual exclusion. Additionally, an individual may make unlimited tuition or medical expense payments on behalf of another, if made directly to the providing institution. A program of regular gifts can lower the ultimate estate tax due.

Married couples can make use of an unlimited marital estate and gift tax deduction. This means that almost all transfers between spouses are tax free. There is no tax when you leave everything to your spouse at your death. But when your spouse dies, a large tax - maybe larger than necessary - may be due. Use of the marital deduction and a bypass trust plan can maximize tax savings.

WHAT IS A "DURABLE" POWER OF ATTORNEY?

A power of attorney is an instrument in writing by which one person, as principal, appoints another his agent and confers upon him the authority to perform certain specified acts on behalf of the principal. The person holding a power of attorney is known as an attorney-in-fact. A "durable" power of attorney is one which remains in effect if the principal is in someway incapacitated and because of this survival feature it helps to provide an informal and inexpensive alternative to a court supervised guardianship.

WHAT IS A "LIVING WILL"?

In Texas "The Natural Death Act" allows any adult person to sign a directive instructing any attending physician to withhold or withdraw life sustaining procedures in the event of a terminal condition. These directives are popularly known as "Living wills."

HOW CAN I MAKE AN ANATOMICAL GIFT?

Any individual who has testamentary capacity may give all or part of his body for specified purposes. The gift will take effect upon the donor's death.

An anatomical gift may be made by will or by another document such as a donor card. The gift becomes effective upon the death of the donor. If made by will, the gift is effective immediately upon death, even if the will is not probated or is declared invalid.

Perhaps the simplest way to make an anatomical gift is to utilize the form on the back of one's Texas driver's license. This method has been specifically sanctioned by the Texas Legislature. However, use of the driver's license limits one's flexibility because of the limited space for specific designations. Further, the form is generally valid only so long as the license is valid. Thus, the gift is invalid on the expiration, cancellation, revocation or suspension of the license.

Another possibility is registration with the Living Bank International. This organization serves as a referral service to match available organs with recipients.

WHAT IS A "MEDICAL POWER OF ATTORNEY"?

This document gives the person you name as your agent the authority to make any and all health care decisions for you in accordance with your wishes, including your religious and moral beliefs, when you are no longer capable of making them yourself. Because "health care" means any treatment, service, or procedure to maintain, diagnose, or treat your physical or mental condition, your agent has the power to make a broad range of health care decisions for you. Your agent may consent, refuse to consent, or withdraw consent to medical treatment and may make decisions about withdrawing or withholding life sustaining treatment. Your agent may not consent to voluntary inpatient mental health services, convulsive treatment, psychosurgery, or abortion. A physician must comply with your agent's instructions or allow you to be transferred to another physician.