ESTATE PLANNING TECHNIQUES
FOR
FARMERS & RANCHERS
DANIEL J. HOLLMANN
I.
INTRODUCTION
To many people the concept of estate planning is a pro-
cess by which one attempts to accumulate the maximum possible
wealth, while paying the least amount of federal, and
estate and inheritance tax.
s~ate,
Naturally the minimization of
estate and inheritance tax should playa major role in the
estate planners attack on any given problem.
Nevertheless,
there are other equally important considerations which, in
some instances, may outweigh the tax avoidance motive.
One very important factor, especially to the farmer
rancher, is the perpetuation of the family business.
With
the high cost of good land, and the continuing demise of
the small farm, it has become almost a relic of the past
for an individual to hav.e the financial ability to purchase a profitable farm or ranch.
Todays farmer, in the
usual case, has had his land passed down to him, possibly
through several generations.
If he has children, it is un-
likely that the farmer/rancher will want to break this
chain of family ownership.
For this reason, it will be
necessary for the attorney to structure a plan which will
provide for the transfer and continuation of the farm or
ranch, to the objects of the owners bounty, wiltlll the least
possible tax.
There are several methods which make the
transfer and continuation of the business a rather simple
matter.
However, some of these methods entail absolutely
no tax advantages.
Before designing any estate plan the
attorney should be certain of exactly what the client is
trying to accomplish.
If his major motivation is tax
-1-
as Texas.
For this reason most of the material wri tten i s
designed for common law states.
In many areas of the common
law al'ld -eommunity property systems, farmers/ranchers will
have basically the same estate plan.
However, there are
several areas wher e differences will arise.
I will attempt
to highlight these areas in this paper.
II.
LIFETIME GIFTS
A major device available
use of lifetime gifts.
~o
the estate planner is the
Gifts are one method which result
in an estate tax savings, as they ar e removed from the estate.
However, the attorney should be cert a in that the client's
estate is secure, absent the property given away.l The
client's motive should be that of tax savings before gifts
are used , as the effective use of gifts entails absolute
divestment of all control and interest. 2 Also, because of
the type of assets dealt with, ie. large parcels of appreciated
land, the use of gifts by a farmer/rancher may not always
result in total gift and estate tax savings.)
A word of
caution here is that cash should probably not be given in
any large amounts, as estate taxes must be paid, and selling
t h e farm is probably not in the clients plan.
This problem
of liquidity will be discussed in a later paper.
Moving to the positive side of lifetime gifts, we will
assume that the
clie~t
has a good retirement plan set up
and desires only to reduce his estate tax burden, and a l so
to pass part of his estate along to his heirs.
The Internal
Revenue Code provides for a one time specific exemption of
-)-
from the donor's gross estate. these taxable gifts will be
taxed at a rate lower than the comparable estate tax rates. ll
A comparison of the two shows that the gift tax is t hreefourths of the corresponding estate tax. 12 One other
hidden benefit is that the gift comes off the top of the
estate tax and on to the bottom of the gift tax computation.
An example of this is as follows:
Farmer Jones has a taxable estate of $500.000.
If
no gift is made the total taxes payable will be:
Gift tax
Estate tax
Total tax
If Farmer Jones mru{es a gift of $lOO pO OO. and assum i ng
the specific and annual exemptions have all been used, the
total taxes payable will bel
14
Gift tax (on $100.000)
$ 15. 52515
Estate tax (on $400,000)
ll~ 700
Total tax
$12:225
_ I
Total tax savings ($145.700 - $129.225)
= $16.475
Of course, there are several other factors which could come
into play in a transaction involving a large gift, and the
above example is probably over
s~plified.
However, it does
serve to show the kind of tax savings which can be had through
the use of lifetime gifts.
In order to provide the common law states with some of
the same tax advantages which the community property states
enjoy, Congress instituted a marital deduction section in
the gift tax law. 16 This deduction applies only when the
gift is of an interest other than a "terminable interest".
and the donee and donor are married at the time of the gift. 17
-5-
spouse. 24
The us e of .. t his concept, will result in spreading
the taxable gift between two taxpayers and thereby result in
lower rates being applied.
Like the marital deduction,
it to is available in community property states where s ep arate property is bei ng transferred.
The farmer/ranCh er who desires to perpetuate family
ownership while saving es t ate taxes, may be faced with
difficulty in making lifetime gi fts to his minor childr en .
First of all, the child may not be mature enough to really
understand the responsibilities i nvolved with the gift. 25
It may be necessary, therefore, to pl a c e the gifts in t rus t
for the child.
As discussed earlier the Code requires that
a present interest be given in order to qual ify for the annual
$ 3,000 exclusion. 26 The one exception to this rule is where
the gift is to a person who has not reached 21 years of age
on the date of the transfer and the property or income may
be expended by, or for the benefit of, the donee before he
reaches 21.
In addition, if not expended, the property must
pass to the donee when he reaches 21, or to his estate in t he
event he should die before that time. 27
Besides the gift tax considerations, there are some
very important things to remember about the estate tax
complications of the § 2503(c) trust.
The donor/parent
must not appoint himself trustee or custodian over the transferred property, if he desires to keep the propert y out of
his estate at his death. 28 In order to remove the property
from the donors estate and put it into the minor donee's estat e,
the spouse of the donor, or some other interested and competent
-7-
ment. 36
The fact remains that the transfer of the family
residence can provide a very sound estate planning tool.
There is one more point which should be touched on before leaving the area of lifetime gifts.
The tax concept
of gifts in contempl ation of death seems to strike fear
into the hearts of mar.y taxpayers.
The Code imposes a
re~ ·
buttable presumption that a transfer within 3 years preceding
death, is in contemplation of death, and throws the gift
back into the estate. 37 Actually a gift in contemplati on
of death can result in a tax savings.
This is illustrated
by the following:
(a)
If no gift:
Taxable estate
less: Estate tax
Net estate after taxes
(b)
$.500 »000
14 5 . 700
S; 354 , 300
If gift of $250,000 in contemplation of death:
Estate
$.500,000
(This includes the gift as
it was in contemplation
of death)
less: Cash paid out as
gift tax
49.275
Taxable estate
$4.50,72.5
Estate tax
$129,932
less: credit for
gift tax
49.275
Net estate after taxes
The gift in contemplation of death in the above example
results in a tax savings of $1.5,768 • . Of course, it is hard
to plan on a gift in contemplation of death, but the point
of this illustration is to demonstrate that they can actually
be profitable.
The tax savings result from what can tech-
nically be called a double deduction.
-9-
That is, the amount
achieved by the use of intervivos trusts.
shoulli be set up with the purpose in mind.
The trust. however.
Discussed below
are revocable and irrevocable trusts. their advanta ges and
the purposes for which they are used.
A.
Revocable Trusts
One way in which t he farmer/rancher can provide income
to himself and pass the farm to family members during his
lifetime is through the use of the revocable
trus ~ .
Th is
type trust. while not taking the a ssets out of the farmer
ranchers estate,42 will give the fanner/rancher an opportunity to keep control over the estate until the beneficiaries
learn how to manage it.
Also, no gift t~x is payable upon
creation of a revocable trust. 43 Of course p the income from
the trust will be taxed to the grantor. and t his is one point
should be remembered.
wh~ch
Should community property
be placed in a revocable trust. both spouses should join in
the transfer.
This is necessary in order to prevent the
courts from later striking the trust as a fraud on the nontransferring spouse. 44
A common method in funding a revocable trust is to transfer only a nominal amount at the outset. with the remainder
to be "poured over" from the estate after the settlor's
death.
The Texas Probate Code provides as follows: 45
"By a will duly executed pursuant to the provisions of
this code, a testator may devise or bequeath property
to the trustee of any trust (including an unfunded lif e
insurance trust, even though the trustor has res erved
any or all rights D~ ownership in the insurance contracts) the terms of which are evidenced by a written
instrument in existence before or concurrently wi t h
the execution of such will and which is identified in
-11-
or income from it.4?
A further restriction of this right to
retain enjoyment is found in the Estate Tax Regulations,
"The "use, possession, right to the income, or other . enjoyment of the transferred property" is considered as having
been retained by or reserved to the decedent to the extent
that the use, possess i on, right to the income, or other
enjoyment is to be applied toward the discharge of a legal
obligation of the decedent, or otherwise for his pecuwiary=.r
benefit.
The term "legal obligation' includes a lega.l obli-
gation to support a dependant during the decedent's lifetime.,,48
This regulation can impose serious limitation upon the use
of the irrevocable trust.
Also to be remembered, the settlor
may not retain a reversionary interest in the property,and
the transfer must not be conditioned upon the donee surviving
the donor. 49
Such a retention,) will cause the property to be
included in the estate of the donor for tax purposes.
Finally, the settlor of the trust must not retain any power
of revocation. 50 Provided these -three tests are met, and
the transfer is not in contemplation of death, the planner
will have succeeded in removing the property from the settlors
estate.
In order to assure compliance with the Code, an independant trustee should always be used. 51
§ 2503(c) trusts, and their advantages, have already
been discussed in this paper.
One other special form of
trust which can be utilized, although not so much for estate
tax savings, is the short term or Clifford Trust. 52 The
purpose of these short term trusts is to shift income from
the grantor to the beneficiary.
-13-
Por this reason, the only
assets from the sole owner to the corporation. 54
In addition,
incorporation can make it easier to make gifts to the family.
Finally, the Code provides that · shares of stock may be redeemed to pay death taxes, at full capital gains rates. 55
However, aside from these advantages, and others such as
easy credit, the incorporation of a family farm can cause
several problems.
First of all, and probably unrelated to
the estate plan, is the likelihood of double taxation of
the income.
Also, the valuation of the shares will prove
very difficult to establish for estate tax purposes. 56
In any case, the incorporation of the farm can prove
to be very advantageous.
It provides for easy transfer of
the farm and perpetuation of the family enterprise.
Weigh-
ing all the pros and cons, the planner may find that incorporation is not the most attractive alternative, but
it should always be explored.
B.
Partnership
The partnership can be used as a method of assuring
that the farm/ranch will remain in the family.
There are
several other advantages such as allocation of income throughout the family, etc., which results from forming a partnership .
One requirement which must be met, however, is that a bona
fide transfer be made. 57
This means that the person must
have a real ownership interest in the partnership.5 8 If
this interest results from a gift, the donor will have to pay
a tax on the fair market value of the interest, but the
interest transferred will be removed from his estate.
-15-
There-
In any event, when separate property is being dealt
with, the use of the marital deduction should not be overlooked by the estate planner.
An example of how to incorp-
orate this into a will by the mast effective means is illus trated in a later section.
B.
Life Insurance
One of the major problems facing the estate planner,
when dealing with the farmer/rancher, is having enough
liquid funds on hand to pay the estate taxes, without having
to sell the es t ate assets.
This problem can be solved
through the use of life insurance.
Of course, if the i n-
surance is payable to the estate, then t he proceeds will
be included in the gross estate for tax purposes. 62 Also,
if the decedent possessed any of the incidents of ownership in these policies at his death, the proceeds will be
included in thegrOssestate. 63
In addition, if the pro-
ceeds are payable to a beneficiary who must use them for
the benefit of the estate, the insurance is included in the
decedents estate. 64
In order to remove the incidents of Ii/ownership from the
insured, a gift of the policy can be made to the beneficiary,
or to a trust set up for the beneficiary.
Although such a
gift will defeat the liquidity value of having life insurance,
it will remove the proceeds from the estate.
transfer is subject to gift taxation.
Of course, the
The amount taxed is
the value needed to replace the policy and is usually very
small. 65
The regualtions provide for valuation of the policy
-17-
(or entity) not in the business of selling annuities in exchange for the transferee's promise to make periodic payments
in fixed amounts to the transferor for the remainder of the
transferor's life."?'+
This private annuity can be used to
transfer assets from the estate of the farmer/rancher, while
assuring him of a continued income.
Also, appreciated pro-
perty can be transferred ro1d the gain deferred over a number
of years.
There are several other estate planning ad-
vantages of using the private annuity.
At the death cf the
transferor, the asset is removed from his estate.
One
disadvantage, which should be mentioned at this point, is
that the transferee's basis in the property can be very
seriously effected by the transferors death shortly after
the annuity contract is entered into.
The initial basis of
the transferee is the value of the annuity promise as
of
the
date the agreement is executed, determined under the Services
rules. 72 In .addition, each payment made to the transferor
is added to the initial basis. 73
As can be seen, should
the transferor die immediately after the annuity is executed ,
then the transferee will have a relatively low basis in the
assets.
One risk which the transferor must bear is that of nonpayment by the transferee.
The transferor should never re-
tain a secured promise from the transferee that payments
will be made, as this could possibly trigger the provisions
of §2036. 74 Viewing this, it can be seen that the transfer
should be made to someone
tr~sted ~~d
feror.
-19-·
close to the trans-
throughout the years for the seller of the farm, and of course
the removal of the assets from the gross estate.
Also, should
he elect to reinvest the proceeds in another farm, or in a
home in the city, then the farmer/rancher will not have t o
pay tax on that portion of the gain allocable to his residence. 78
The estate OD the seller will have a right to receive
continued payments from the buyer, unless a partial forgiveness of the indebtedness is provided for. 79 This results in
all the beneficiaries being treated more fairly than in the
case of the private annuity.
An example of how this would
work is where F sells his farm to A and elects the installment method.
It is provided that upon his death, A will pay
one-third to his brother B and one-third to his sister C, of
the
bal~~ce owe~ng '
on the note.
The probable result is that
B and C will have to recognize the income each year as income
in respect of a decedent. 80 It appears that there will not
be an immediate recognition of all income, as would normally
happen upon th·e t rans f er
0f
" ta 11men t
an 1ns
0 bl"19a t"1on. 81
Also, A would probably be required to reduce his basis by
the amount of debt forgiven, which would be similar to the
case of the adjustment made under a private annuity where
the annuitant dies early.82
One further point to consider when selling the farm, is
that if a fair price is received for the farm, plus any unharvested crops, what would otherwise be ordinary income
from the sale of these crops will be converted into capital
-21-
be helpful when drafting one's own will. 86
"Article II. If my son, junior. survives me I devise
and bequeath to Junior as', Trustee, under the rrrust
provi sions set forth in Article III infra, all of my
interest in the real and personal property which
conprise my farm business conducted on the follow ing
described land'
(Legal Description)
. This gift is i ntended to include all my interest in
agricultural real estate acquired after the making of
this will, includir.g leaseholds and lands being
purchased by me on contract at the time of my death.
Also intended to pass under this gift is my interest
in crops growing at the t ime of my death, build i ngs
and other property permanent ly affixed to my agricultural real estate. In addition, this gift is intended to pass all tangible personal property regularly
used in the farming busines s including all vehicles,
machinery , equipment, livestock , harvested creps, feed
and supplies, except that vehicl es used primarily
for personal use and the personal property regularly
used in connection with my dwelling house shall not
pass under this gift. This gift shall also pass
contra~tual rights and torts claims pertaining to my
farm business, including insurance policies protecting
buildings and other property and the right to collect
insurance proceeds on property used in the farm business whiCh was damaged or destroyed prior to my death,
and accounts and notes receivable representing sales
of livestock, crops, other produce, and any personal
property formet~y used in the farm business. My cash,
securities, ank !personal accounts with banking institutions do not pass under this gift.
If there are outstanding incumbrances against any properties passing under this article, amounts remaining
unpaid on land qontracts or any other contracts of
current indebttdness, these obligations shall not be
exonerated but my son, Junior, as Trustee, shall take
all properties subject to them."
By no means does the above clause meet every possible
situation.
However, it can be seen that it covers such things
as growing crops, insurance policies, and bank accounts,
specifically.; thereby removing any possible dispute as to
their disposition.
Combining a clause such as this, with
the will at Appendix B, a very comprehensive and quite de-
-23-
surance policy.
8.
If my wife and I shall die under such circums t ances
that the order of our deaths cannot be determined
by proof, it shall be considered for all purposes
her eunder that she survived me. If any other benefici ary hereunder shall die within ninety (90 ) days
after my death, it shall be considered for all purposes hereunder, other than ~aragraph 6, that such
person predeceased me. The provision of this paragraph shall apply anything to the contrary herein notwithstanding.
The reason for the use of the above clause, when seperate property is involved, is to assure that the marital
deduction will be
a~ailable.
Remembering back, one of the
conditions of the marital deducti on is that the spouse survive the decedent.
The use of the above clause will accomp-
lish just that result for estate tax purposes and the marital deduction will be available.
I recommend that the
marital deduction clause be used in most wills.
This will
insure the deduction where the planner is not sure as to
whether or not the property transferred is seperate or
communi ty.
VII.
CONCLUSION
The methods and techniques outlined in this paper may
be of only brief use to the estate planner.
President Ford
in his State of the Union Speech, January 19, 1976 stated that
he was going to propose legislation for easier and cheaper
transfer of family businesses and farms.
Until such leg-
islation is a reality, however, the rules above will have
to be reckoned wi th.
in this paper,
~~ere
In addition to all that was mentioned
are several collateral matters involved
with some estate planning techniques which were not really
-25-
APPENDIX A
Trustee's Powers Clause
The trustee shall have the full power, without order 0:
court, to continue and car-,:y on any farming enterprise which
may at any time be included among the trust assets, and in
so d0ing. by way of illustration and not limitation of such
powers I
(l)to retain indefinitely any land, tangible personal
property, securit i es ~ and any other assets or investments, notwithstru~ding the fact that but for
this express authori t y, such property, assets or
investments would not be considered proper for
trustees;
(2)to operate the farm in, or t o terminate the operation
of, any form of business organization which the
trustee considers appropriate including the formation
of a partnership or limited par tnership, or incorporation of all or part of the business;
(3)to operate the farm with hired labor, tenants , and
sharecroppers, to engage such agents, managers (including farm management service), attorneys and
employees, and to delegate any of i ts power to any
such agent, manager, attorney, or employee as t he
trustee shall deem advisable;
(4)to sell, exchange, mortage, lease, make contracts concerning or purchase land used or to be used in the
farm enterprise and upon such terms as to credit or
otherwise as the trustee may determine; to subdivide
land and sell specific portions thereof; to lease
for cash or on shares;
(5)to sell, purchase, pledge, exchange, mortgage, lease,
make contracts concerning or otherwise acquire or
dispose of farm machinery, equipment, livestock,
farm products, and other personal property, supplies,
and services used in connection with the farm
business; to breed or raise livestock of any type;
to plant and harvest all types of crops;
(6)to construct ,repair, improve, and remove buildings ,
fences, and other structures of all types on the
premises;
(7)to follow approved soil conservation and other practices
such as fertilizing. terracing. and irrigation designed
t o improve and maintain the fertility and productivi ty of the soil; to convert any property to new
uses;
(8)to employ such farming methods and practices as are
in common use in the community, or recommended by the
state agricultural college;
(9)to develop, sell. or lease natural resources such as
timber. oil. gas, or other minerals when it is in the
-27-
APPENDIX B
LAST WILL AND TESTAMENT
OF
JOHN DOE
I, JOHN DOE, of Lubbock County, Texas, declare a nd publish
this to be my Last Will, hereby revoking all Wills and Cod i c i ls
previously made by me.
PART ONE
BEQUESTS AND DEVISES
1.
I hereby give, devi se and bequeath my entire estate (which
shall not include my surviving wife's one-half (1/2) of ou r community
estate) as follows:
(a)
All of my personal effects (which shall include
automobiles, household goods, furniture, jewelry,
clothing and any other simi l ar items), I give
to my wife, JANE DOE, herein referred to as "my
wife", but if she shall not survive me, such
gift shall lapse. The determination by my Executr i x
shall be conclusive as to what items are personal
effects.
(b)
All the rest and residue of my estate I give
as follows:
(I)
If my wife shall survive me, I give to her,
outright, an undivided one-half of all separate
property in my residuary estate.
(2)
All the remainder of my residuary estate,
or all of my residuary estate if my wife
shall not survive me, I give to the Trustee ,
hereinafter named, of "THE JOHN DOE ESTATE
TRUST", herein referred to as the "Estate
Trust", and her substitute or successor
trustees, in trust under the provisions
herein set out.
PART TWO
CONCERNING THE TRUSTS
2.
The property given to the Trustee of the Estate Trust
shall constitute the Trust Estate of a Trust for my wife and
my issue. Such Trust, if not sooner fully distributed under
the provisions of Paragraph 3 shall terminate when my wife and
I have both died and when all of my children have attained twentyone (21) years of age or died, and such Trust Estate, if any,
-29-
therefor, to maintain such person in the standard of living to
which such person is accustomed when such person commences so
to act.
4.
If any portion of my estate or a Trust Estate would other-wise be distributed under the provisions of Paragraph 2 to one
of my issue who has not attained twenty-five (25) years of age,
such portion shall continue to be held by the Trustee as a separate
and distinct Trust for such person until such person attains
twenty-five (25) years of age, whereupon such Trust Estate shall
be distributed, outright, to such person, but if such person
shall die prior to attaining twenty-five (25) years of age, upon
such person's death such separate and distinct Trust Estate shall
be distributed, outright, to such person's issue, but if none
of such person's issue is then living, to the issue of such person's
parent, which parent was one of my issue, but if none of such
parent's issue is then living, to my issue, but if none of my
issue is then living, to my heirs-at-Iaw. Anything to the cont rary
in this paragraph notwithstanding, any portion of a Trust which
terminates under the provisions of this paragraph by reason of
the death of the person for whom it was continued, which portion
would otherwise be distributed to a person for whom a Trust created
or continued hereunder is in force and effect shall, instead,
be distributed to the Trustee of such Trust for the uses, purposes ,
terms and conditions herein set out for such Trust. While each
such separate and distinct Trust is in existence the Trustee
may distribute to the person for whom such Trust was continued
such amounts of such Trust Estate as the Trustee considers to
be in the best interests of such person.
5.
Anything to the contrary herein notwithstanding, no Trust
created or continued herein shall continue in force and effect
for longer than twenty-one (21) years after the death of the
last to die of my wife and all of my issue living at lny death.
If at the end of such maximum term any such T.r ust is still in
force and effect, such Trust shall terminate and such Trust Estate
shall be distributed, outright, to the person for whom such Trust
was continued.
PART THREE
ADMINISTRATIVE PROVISIONS AND POWERS
OF THE EXECUTRIX AND TRUSTEE
6.
I appoint my wife Independent Executrix under this Will
and of my Estate and Trustee of all Trusts created herein. Should
my wife for any reason, fail or cease to act, my son, JOHN DOE, JR.
-31-
8.
If my wife and I shall die under such circumstances that
the order of our deaths cannot be determined by prooi , it shall
be considered f or all purposes hereunder that she survive d me.
If any other beneficiary hereunder shall die within ninety ( 90)
days after my death, it shall be considered for all purposes
hereunder, other than Paragraph 6, that such person predeceased
me. The provisions of this paragraph shall apply anything to
the contrary herein not\"lit,hstanding.
9.
Final distribution of my estate shall be made as soon
as is expedient in the discretion of the Executrix. Prior thereto,
partial distributions may be made in the discretion of the Executrix;
therefore, the executorship and any Trust created herein may
exist contemporaneously. Any distribution may be made subject
to any indebtedness or liability of my estate. The income from
such portion of my estate as shall n ot have been distributed
shall accrue as if it has been distribute d and may , from time
to time, be paid, in whole or in part, to the persons who woul d
be entitled thereto if my estate were then distributed.
10.
No Executrix or Trustee shall be respo n sible or held liable
for any loss or depreciation in value of ~he property of my estate
or any Trust Estate unless such loss or depreciat i on i n value
is due to the gross neglect, bad faith or fraud of such Executrix
or Trustee. No Trustee shall be accountable or held liable for
any act or failure to act by any former Trustee.
11.
No part of any 'l'rust Estate, under any circumstances,
shall ever be liable for or charged with any of the debts, liabil i ties
or obligations of any beneficia~y, or subject to seizure by any
claimant or creditor of any beneficiary; no beneficiary, under
any circumstances, shall have the power to assign, convey, pled9'e,
charge or otherwise en1~er or in any manner anticipate or dispose
of his or her interest in any Trust Estate until the same shall
have been actually transferred, conveyed or paid over to him
or her free and clear of such Trust.
12.
When distribution from any Trust created hereunder is
to be made to a person under any legal disability, the Trustee
may make such distribution directly to such beneficiary, to the
person furnishing support, maintenance or education for such
beneficiary, to any parent or guardian of such beneficiary, to
a custodian for such beneficiary under the Texas Uniform Gi fts
to Minors Act (or under similar legislation in the state where
such beneficiary then re~ides), or to any person ..lith whom such
beneficiary may be residing, or the Trustee may apply such
-33-
14.
To carry out the purposes of the separate Trusts created
and continued herein, and subject to any limitations stated elsewhere
herein, in addition to the rights, privileges, and powers elsewhere
herein conferred upon and vested in the Trustee, and those now or
hereafter conferred by law, the Trustee of such Trusts, respectively
and separately as to each Trust, shall have the power to sell (for
cash or on credit, or both), exchange or otherwise dispose of, all
or any part, of the Trust Estate, publicly or privately, and to lease,
rent, loan, mortgage (including purchase money mortgages), pledge or
otherwise encumber the whole or any part of the Trust Estate~ the
power to invest and reinvest in property of any description whatsoever including, but not limited to, oil, gas and mineral interests,
common stock, shares of investment trusts or companies, unsecured
obligations, non-income producing and wasting property and property
outside of Texas, and all of .the righ~s, powers, options and privileges now or hereafter granted to, provided for or vested in trustees
under the Texas Trust Act~ the power to partition any part, or all,
of any interest (including, but not limited to, property held in
common or jointly with any person or entity) and to payor recelve
such moneys or other properties as may be necessary or advisable to
equalize differences~ the power to make any distribution in cash or
property, or both, or in any manner whatsoever (including composing
shares differently)~ the power to buy from, sell to, borrow from,
loan to ana/or otherwise deal with any person or entity regardless of
any relationship of a Trustee to, or identity of a Trustee with, such
person or entity. The investment powers given the Trustee hereunder
shall not be restricted to any class of investment which fiduciaries
under any character of Tr~st are permitted by law or any regulation to
make, and may be exercijed without regard to any requirement of diversification as to kin~ or amount. Specifically, but not by way of
limitation, the Trustee may invest any part of the Trust Estate in
insurance on the lives of any persons. The Trustee may commence
and/or continue operation of any business, partnership or otherwise,
with any part, or all, of the Trust Estate and may incorporate such
business and mayliquidtte any such entity. All privileges and
powers set forth in thi1 instrument may be exercised upon such terms,
regardless of the durat~on of the Trust, as the Trustee may deem
advisable. No subsequent legislation or regulation shall be in limi tation of the rights, powers, options and privileges granted to
trustees under the Texas Trust Act, or the laws of Texas, as they
exist at the execution of this Will.
This instrument shall always be construed in favor of the
validity of any act or failure to act by or of the Trustee and all
of the rights, privileges and powers given the Trustee may be exercised without application to any court. Generally, and except as
limited by the foregoing, the Trustee shall hold, manage, control, use,
invest and reinvest, and dispose of each Trust Estate in all things,
under all circumstances and to the same extent as if the Trustee
were the owner thereof in fee simple subject only to the terms hereof.
-35-
THE STATE OF TEXAS
§
COUNTY OF LUBBOCK
§
BEFORE ME, the undersigned authority, on this day personally
appeared JOHN DOE,
and
, known to me to be the Testator and the
~~--------------~~~-witnesses,
respectively, whose names are subscribed to the annexed
or foregoing instrument in their respective capacities, and all
of said persons, being by me duly sworn, the said JOHN DOE, Testator,
declared to me and to the said witnesses in my presence that said
instrument is his Last Will and Testament, and that he had willingly
made and executed it as his free act and deed for the purposes
therein expressed; and the said witnesses, each on his oath stated
to me in the presence and hearing of the said Testator, that the
said Testator had declared to them that said instrument is his
Last Will and Testament, and that he executed same as such and
wanted each of them to sign it as a witness; and upon their oaths
each witness stated further that they did s i gn the same as wit~esses
in the presence of the said Testator and at his request; that
he was at that time eighteen years of age or over (or being under
such age, was or had been lawfully married, or was then a member
of the armed forces of the United States or of an auxiliary thereof
or of the Mar i time Service) and was of sound mind; and tha.t each
of said witnesses was then at least fourteen years of age.
JOHN DOE
WITNESS
WITNESS
SUBSCRIBED AND ACKNOWLEDGED BEFORE ME by the said JOHN DOE ,
Testator, and SUBSCRIB~D AND SWORN TO BEFORE ~.E by the said
, witnesses,
and
~t~h-i-s~t~h-e---------d~a-y--~of _________________
----------------~~~---, 1976.
Notary Public in and for Lubbock
County, Texas
-37-
24.
I.R.C. § 2513(a).
25.
Streng
26.
I.R.C. § 2503(b).
27.
I.R.C. § 2503(c).
28.
Estate of Varifu~, 47 T.C. 34 (1966), aff'd 396 F. 2d 753
(9th Gir. 1968) ; Rev. Ru1. 70-348, 1970-2 C.B. 193.
29.
Rev. Ru1. 59-357, 1959-2 C.B. 212.
30.
Regs. § 25.2503-4(b)(1). See also, Williams v. U. S.,
378 F 2d 693 (Ct. C1. 1967).
31-
Streng, supra., A-12; I.R.C. § 2036.
32.
Est. of Allen D. Gutchess, 46 T.C. 554 (1966), acq.,
1~67-1 C.B. 2.
33.
Streng, supra., A-13.
34.
Regs. § 20.2036-1(a).
35.
Est. of Allen D. Gutchess, supra.
36.
Guynn v. U.S., 437 F. 2d 1148 (4th Cir. 1971); Rev .
70-155. 1970-1 C.B. 189.
37.
I.R.C. § 2035; Regs. § 20.2035-1(d).
38.
I.R.C. § 2012.
39.
N. William Hines, supra., at
40.
Id. '
41.
This clause is adopted from, N. William Hines, supra., at
~ 73.1104.5.
42.
I.R.C. § 2038.
43.
Charles A. Saunders, supra., at 107.
44.
Land v. Marshall, 426 S.W. 2d 841 (Tex. 1968).
45.
Vernon's Ann. Probe Code, § 58a.
46.
Charles A. Saunders, supra., at
47.
I.R.C. § 2036.
48.
Regs. § 20.2036-1(b)(2).
p
supra., at A-8.
~
R~l.
73.1104.5.
125~
76.
Id.
77.
I.R.C. § 453(b)(l).
78.
I.R.C. § 1034.
79.
N. William Hines, supra., at
80.
I.R.C. § 691(a)(4).
81.
I.R.C. § 453(d)(3 ).
82.
Helvering v. American Dental Co., 318 U.S. 322; Example
adopted from N. William Hines, supra.
83.
William J. Casey, supra., at
84.
O' Bryne, Devise of Farm Land, 49 ILL. B. JOUR. 122 (1960) .
85 .
N. William Hines, supra., at
86.
Id.
~
~
~
73.1104.9.
17.609.1.
73.1104.2.