on of A g 
 
 r i c u i t u 
 
 r a I Sciences 
 
 UNIVERSITY OF CALIFORN 
 
 ESTATE PLANNING 
 
 ALIFORNIA AGRICULTURAL 
 xperirnent Station 
 xtension Service 
 
 CIRCULAR 461 
 
 REVISED 
 
Mr. and Mrs. Farmer — ask yourselves these questions: 
 
 1. How is my property held? Joint tenancy? Community 
 property? Separate property? 
 
 HUSBAND: ^- Is this the safest, most efficient way to hold that prop- 
 erty? 
 
 3. Could my farm operation be more efficient from a tax 
 standpoint, and offer greater security for my family, 
 if I used a partnership or corporate business organiza- 
 tion? 
 
 4. How can I arrange the disposition of my property so 
 that I provide lifetime security for myself and future 
 security for my wife and children? 
 
 5. Is my will in proper form? 
 
 1. How much property do we have — land, equipment, 
 insurance, cash — and how is it owned? 
 WIFE: ^" What are the terms of my husband's will, and where is 
 the document kept? 
 
 3. Should I make a will, too? 
 
 4. Who is our attorney? 
 
 5. How much do I know about our farm business, records, 
 debts, bank affiliations, and the like? 
 
 If you can answer all these questions to your own satisfaction, you 
 are in good shape at present and you have a sense of security for the 
 future. If you are in doubt about some of the answers, you probably 
 need help. 
 
 ISTATE PLANNING is the forming of a plan for economic management 
 of your property so that it will provide present enjoyment 
 for you and future security for your heirs. 
 
 Whether the property you own is large or small it must 
 be disposed of in some way in the event of your death, 
 and if it is valued over a certain amount it will be taxed. 
 The state inheritance tax must be met by the person re- 
 ceiving the property; the federal estate tax must be met 
 by the estate of the deceased person. Both taxes tend to 
 reduce the property in the hands of future generations. 
 
 [2] 
 
Legal arrangements to save taxation are not wrong nor 
 immoral. In fact, both federal and state governments 
 encourage the taxpayer to use the law in his favor, but 
 he must take the first steps in so doing. 
 
 But taxes are not the sole concern in planning the estate. 
 Preservation of the property as a continuing, functioning 
 unit following disability or death of its owners, and trans- 
 fer of that property to the advantage of its future owners 
 must also be considered. 
 
 This circular outlines the various ways of owning prop- 
 erty, and suggests methods by which you can legally re- 
 duce the tax burden on your estate. Actual cases from 
 attorneys' files showing problems which could have been 
 avoided are described, beginning on page 31. 
 
 THE CALIFORNIA FARMER spends time and money to increase the 
 value of his estate by good management practices. Unfor- 
 tunately, what he has built up is sometimes devaluated at 
 his death because he failed to plan for the future. 
 
 This circular is intended to make the California farmer 
 and his wife aware of problems involved in ownership and 
 disposition of property, and to suggest some ways by which 
 those problems can be solved. It is not intended as a sub- 
 stitute for competent legal counsel, and should not in any 
 circumstances be so construed. It cannot be emphasized too 
 strongly that estate planning is an ever-changing legal con- 
 cept which must be viewed not only in the light of the ap- 
 plicable tax and general laws, but also from the standpoint 
 of human relations. Therefore, this circular should be used 
 only as a possible source of ideas for securing advice from 
 legal counsel. 
 
 The circular was prepared as a joint effort in which the 
 Agricultural Extension Service is happy to share, together 
 with the University of California's School of Law, the Cali- 
 fornia Farm Bureau Federation, and a group of practicing 
 estate attorneys. 
 
 Director, Agricultural Extension Service 
 
 [3] 
 
CONTENTS 
 
 Ways of owning farm property 5 
 
 Death tax impact 6 
 
 The income tax aspect of property ownership .... 13 
 
 Ways to reduce the impact of death taxes 16 
 
 How to make a will 23 
 
 Pointers for estate planners 25 
 
 Family business organizations 25 
 
 The choice is yours 31 
 
 I. The mutilated will 31 
 
 II. The out-of-date will 32 
 
 III. The three-way joint tenancy 32 
 
 IV. The bachelor brothers who did not 
 
 believe in wills 33 
 
 V. The philanthropic bachelor 33 
 
 VI. The integrated estate and farm-operation plan . 34 
 
 Acknowledgments 35 
 
 MAY 1968 
 
 [4] 
 
Ways of owning farm property 
 
 Before you can plan your estate from an income and 
 death tax point of view, you will need to understand the 
 types of property ownership. In California, there are four 
 usual ways of holding title to property: (1) tenancy in 
 common; (2) joint tenancy; (3) separate property; and 
 (4) community property. 
 
 Tenancy in common ownership between a husband and 
 wife is not used to any large extent in estate planning at 
 the present time. Tenancy in common property has been 
 of little importance except possibly in connection with 
 stock certificates of eastern companies, in which case a com- 
 munity property agreement is desirable to identify prop- 
 erty as community property. This type of ownership will 
 not be discussed further. 
 
 Joint tenancy applies to property held by more than 
 one person (generally by a husband and wife). On the 
 deed of conveyance or in the agreement between the 
 spouses it is provided that such property is held by the 
 husband and wife as joint tenants. In addition, in some 
 instances there is added the phrase, "with right of sur- 
 vivorship." The main incidence of joint tenancy property 
 is the fact that where there are two such persons, each 
 joint tenant owns an undivided, equal one-half interest, 
 and that on the death of the first joint tenant, all of the 
 property goes to the surviving joint tenant without neces- 
 sity of probate administration. In some counties, court 
 proceedings are required to terminate joint tenancy own- 
 ership of real property; in others, a mere affidavit of the 
 surviving joint tenant is sufficient. The procedure depends 
 upon the practice acceptable to the title insurance com- 
 panies in a particular area. 
 
 Separate property is that which is owned by a spouse 
 prior to marriage or which arises after marriage by gift 
 or inheritance. It includes also all the rents, issues, and 
 profits from such property. In case either spouse dies leav- 
 ing separate property, it is necessary to administer the 
 same in the probate court of the county of residence. 
 
 Community property is all property that arises out of 
 the earnings and efforts of the husband and wife during 
 marriage, and the rents, issues, and profits from such 
 property. Where the spouses own only community prop- 
 erty, no probate administration is required in case of the 
 death of the wife if she dies without a will. If she should 
 leave a will, it has been the general practice to probate 
 
 [5] 
 
 You must know 
 how property 
 is owned 
 
 Joint tenancy 
 property is held by 
 more than one 
 person 
 
 Separate property 
 
 belongs to 
 
 one person only 
 
and does not become 
 
 community property 
 
 when you marry 
 
 Property acquired 
 
 before moving to 
 
 California 
 
 her half of the community property. If the husband dies, 
 all community property is subject to probate administra- 
 tion. However, by use of proper language in a wife's will, 
 if the wife dies first probate may be avoided as to her 
 half of the community property. 
 
 One common misunderstanding should be corrected 
 here. Separate property does not become community prop- 
 erty upon the marriage of two individuals. 
 
 Quasi-community property is property acquired by 
 either spouse while residing outside California which 
 would have been their community property had they been 
 residents of California at time of acquisition. On moving 
 to California the property would remain the individual 
 property of the acquiring spouse, and the other spouse 
 would have no rights or interests in the property until 
 death of the acquiring spouse. On death of the acquiring 
 spouse, the property is treated in most instances in the 
 same manner as community property. Quasi-community 
 property includes rents, issues and profits of such prop- 
 erty, and property acquired in exchange for such property. 
 
 An estate can be hit hard by death taxes. 
 
 Death tax impact 
 
 When you inherit 
 
 property, you pay a 
 
 state inheritance 
 
 tax on part . . . 
 
 Two death taxes are imposed upon residents of Califor- 
 nia: the California inheritance tax, and the federal estate 
 tax. 
 
 The state inheritance tax is imposed upon the people 
 who inherit property. It is not imposed on the gross estate 
 except under peculiar circumstances not important here. 
 In other words, it is a graduated tax that is assessed against 
 particular individuals who inherit from the decedent. 
 However, it is possible to shift the tax burden among 
 legatees by an appropriate will provision. The table on 
 page 8 will give you some idea of this tax. 
 
 The rules on inheritance taxation of property passing 
 from a decedent to his or her surviving spouse have been 
 subject to several recent legislative changes. Under the 
 present law, when either spouse dies, his or her one-half 
 of their community property can pass outright to the 
 surviving spouse free of inheritance tax. If the decedent's 
 
one-half of the property is left to a trust, the value of the 
 surviving spouse's interest in the trust likewise passes free 
 of inheritance tax. A surviving spouse has an exemption 
 of $5,000; a minor child, $12,000; and an adult child, 
 $5,000. 
 
 The federal estate tax is an entirely different tax. The 
 federal government is interested primarily in the size of 
 the gross estate. It is not interested in who inherits a partic- 
 ular property, except in the case of charitable bequests and 
 in the case of a marital deduction (to be mentioned later). 
 For purposes of computing the federal estate tax liability, 
 the entire estate of the decedent is thrown into a common 
 pot. Many people believe that insurance is not taxable 
 for federal estate tax purposes. This is not true. In case 
 the decedent has an ownership interest in the policy, the 
 proceeds of the policy are included in his estate for federal 
 death tax purposes. It is true that there are provisions, 
 under the federal Internal Revenue Code, which would 
 exempt life insurance and life insurance portions of acci- 
 dent insurance policies under certain circumstances where 
 the ownership of the policy has been transferred out of 
 the hands of the decedent; it is a common estate planning 
 device for each spouse to own the life insurance of the 
 other spouse. 
 
 The federal estate tax is a graduated tax also. In order 
 to be taxable, the decedent's estate must be in excess of 
 $60,000. This estate then moves into higher brackets as 
 follows: 
 
 and a federal estate 
 tax on all the 
 property involved 
 
 But you pay the 
 federal tax only if 
 the estate is over 
 $60,000 
 
 Taxable estate 
 
 
 (before $60,000 exemption) 
 
 Tax 
 
 $ 60,000 
 
 $ o 
 
 70,000 
 
 500 
 
 80,000 
 
 1,600 
 
 100,000 
 
 4,800 
 
 120,000 
 
 9,500 
 
 150,000 
 
 17,900 
 
 200,000 
 
 32,700 
 
 300,000 
 
 62,700 
 
 500,000 
 
 126,500 
 
 As can be seen, this tax is extremely heavy after $100,000 
 is reached. The tax on the first $100,000 is only $4,800, 
 whereas, on the next $50,000, it jumps to $17,900, an in- 
 crease of approximately $13,100. On $200,000, it jumps 
 to $32,700. Thus, on the second $100,000, the tax is 
 roughly $27,900, and this situation continues as the tax- 
 able estate value rises. 
 
 Under federal law, it is well established that only one 
 half of the community property is taxable in case of the 
 
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death of either the husband or the wife. That is to say, if 
 the husband and wife have a $100,000 community property 
 estate, only $50,000 is taxable on the first death. If they 
 have a $200,000 community property estate, only $100,000 
 is taxable on the first death. The table above shows that, 
 in case of a $100,000 community property estate, there 
 would be no federal tax on the first death because of the 
 $60,000 exemption; in case of a $200,000 community 
 property estate, the federal tax would amount to $4,800 
 on the first death. The federal estate tax on a $300,000 
 community property estate would amount to $17,900 
 on the first death; on a $400,000 community property 
 estate, $32,700 on the first death. 
 
 If a decedent owned separate property at death, such 
 property is taxable in his estate except that he is entitled 
 to a deduction for the value of property he leaves to his 
 wife, either by his will or through operation of law. The 
 deduction, however, cannot be more than 50 per cent of 
 the decedent's adjusted gross estate. To obtain this mar- 
 ital deduction, the property which passes to the surviving 
 spouse must pass outright or into a trust with provisions 
 written specifically to take advantage of the marital deduc- 
 tion. Simply stated, if a husband has $100,000 of taxable 
 separate property and leaves at least $50,000 to his sur- 
 viving wife outright or in one of these special trusts, only 
 the remaining $50,000 would be taxable in the husband's 
 estate. This would be true whether the $50,000 passed to 
 the surviving wife under the husband's will or because 
 of joint tenancy ownership of property between husband 
 and wife. In other words, the surviving widow would get 
 a marital deduction equal to roughly one-half of the tax- 
 able separate property. The deduction can be obtained 
 with separate property or community property which 
 passes to the surviving spouse, so long as the decedent's 
 estate includes separate property; the separate property 
 serves only as the measure of the deduction. The marital 
 deduction is a complex legal concept, but in general it 
 may be stated that the decedent's estate will get a marital 
 deduction equal to up to one-half of the value of the 
 decedent's separate property if the amount claimed as a 
 deduction is left to the surviving spouse. If the decedent's 
 property is left to someone else, there would be no deduc- 
 tion. The surviving spouse has to inherit or receive some 
 property from the decedent in order to obtain the benefits 
 of the marital deduction. 
 
 A word of caution is necessary here. Merely leaving the 
 surviving spouse a life estate in particular property will 
 not authorize tax saving by the marital deduction. The 
 full fee title or its equivalent must be left to her. 
 
 [9] 
 
 Only one half of 
 community property 
 is taxable at 
 death of one owner 
 
 But all his separate 
 property may be 
 taxable to his estate 
 
 unless there is a 
 marital deduction 
 
 The marital 
 deduction of up to 
 one half the estate 
 
 may be claimed only 
 if the property is 
 willed to the 
 surviving spouse 
 
However, 
 
 "aggregation of the 
 
 estate" in the hands 
 
 of the surviving 
 
 spouse 
 
 may result in 
 
 very heavy estate 
 
 taxes upon his or 
 
 her death 
 
 It is therefore 
 
 advisable 
 
 to break up 
 
 large estates 
 
 From the analysis above, it can be seen that there is 
 not a great deal of difference between the taxation of com- 
 munity property and separate property for death tax pur- 
 poses when each spouse, in effect, is the heir of the other — 
 the normal, natural condition. In other words, on the first 
 death, only one half of the property will be taxable. Con- 
 sequently, on smaller estates, no great problem is pre- 
 sented because the tax impact is relatively light. Until an 
 estate of $120,000 is reached, no federal estate tax is due, 
 and the impact of the state inheritance tax is not very 
 great. It is on this basis that some attorneys have recom- 
 mended the placing of smaller estates in joint tenancy 
 ownership. On the other hand, if there are other factors, 
 such as a low-cost basis, for income tax purposes, or if the 
 decedent wants to protect children of a prior marriage, 
 the property should not be in joint tenancy. 
 
 When the $120,000 figure is reached, however, other 
 problems are presented that require more detailed dis- 
 cussion. These problems arise mainly out of what might 
 be called the "aggregation of the estate" in the hands of 
 the surviving spouse. In most cases, the wife generally 
 outlives the husband. Therefore, she will collect any in- 
 surance that the husband may have carried, together with 
 the other estate that both spouses may have accumulated. 
 
 Before any Federal tax is incurred on the death of the 
 first spouse, the property of husband and wife must have 
 a value of at least $120,000 provided that at least one- 
 half thereof belongs to or passes to the surviving spouse. 
 
 Let us assume that such an estate is held in joint ten- 
 ancy ownership. In the case of the first death, there is no 
 tax. In case of the second death, however, there is a tax 
 of $9,500. If the estate is $200,000 on the first death, the 
 tax is $4,800, and on the second death, $32,700. On a 
 $300,000 estate, the tax is $17,900 on the first death, and 
 $62,700 on the second. These figures indicate that it would 
 not be wise to leave these larger estates to the surviving 
 spouse because of the heavy impact of death taxes on the 
 second death. Note that on a $120,000 estate, the $20,000 
 over $100,000 produces a tax of about $4,700 upon death 
 of surviving spouse. If that $20,000 could be removed, the 
 tax due would be only $4,800, or if some device could be 
 worked out whereby the second $60,000 (or perhaps 
 $40,000 of it) were held back in some manner, there would 
 be practically no death tax impact. As the brackets become 
 higher, the death tax impact becomes very great. Conse- 
 quently, attorneys have recommended breaking up these 
 larger estates to prevent an aggregation of estates. This is 
 especially true in view of the many common accidents and 
 disasters that occur today. If a husband and wife are driv- 
 ing along the highway and both are killed, and if one sur- 
 
 [10] 
 
vives the other by a period of an hour, a day, a month, et 
 cetera, it would be necessary to probate the estate of each, 
 and to pay the heavy tax burden set forth above on the 
 second death. (There is some previously taxed property 
 credit, which may make a slight difference in the above 
 figures.) 
 
 Accordingly, if the estate is over $100,000, it may be 
 preferable to establish a trust device under the will of the 
 spouse first to die whereby the surviving spouse is trustee, 
 for himself, of the deceased spouse's share of the com- 
 munity property. In that way, there is no aggregation of 
 estates. The trust that is set up is one that enables the 
 surviving spouse to treat the property much as his own 
 except that he cannot use any of the principal, unless the 
 Court determines that a portion is needed for special rea- 
 sons. (The trust could even provide for use of principal, 
 if ascertainable standards were provided.) He is entitled 
 to all of the income from it so long as he lives. In this way, 
 on a $200,000 estate, there are only two taxes of $4,800 
 each on the first and second deaths, instead of $4,800 on 
 the first and $32,700 on the second. On a $300,000 estate, 
 the saving is even more marked. If the estate is divided 
 through the trust device, there would be two taxes of 
 $17,900. If the estate went in its entirety to the surviving 
 spouse, however, the tax on the second death would be 
 $62,700. In this case, there is a possible tax saving of 
 approximately $44,800. 
 
 Another, non-tax factor must be considered with regard 
 to these larger estates if children are involved. Each spouse 
 would like to be sure that, in case anything should happen 
 to him, his one half would go to the children. In many 
 instances of a second marriage, the children of the first 
 marriage have been cut off from the will or have lost 
 their father's or mother's share of the property. The trust 
 device mentioned above is a vehicle for preventing such a 
 happening. Under this device, the surviving spouse has a 
 life interest only in the income, and cannot use the corpus, 
 or principal, of the deceased spouse's one half. This means 
 that the corpus, or principal, under the terms of the de- 
 cedent's will, goes directly to the children upon the death 
 of the surviving spouse, or continues in trust for their 
 benefit until they reach a specified age. This does not 
 imply suspicion between the spouses, but merely takes 
 care of something of which all are cognizant. 
 
 The paragraph above has explained the trust device in 
 an oversimplified manner in order that it might be more 
 easily understood. Many tax and non-tax problems arise 
 when the surviving spouse is named both as trustee and 
 as beneficiary, and it is for this reason that the use of 
 banks as trustees is widely accepted. There are also sub- 
 
 [ii] 
 
 This may be done 
 by establishing 
 a trust device 
 
 Such a device also 
 protects the 
 children 
 
 A bank is a good 
 trustee because 
 
it can effect tax 
 savings 
 
 A "spendthrift 
 
 trust" protects 
 
 the survivor's 
 
 old age security 
 
 stantial advantages from a tax standpoint. For instance, 
 if the surviving spouse were the trustee, he could not be 
 given any discretion as to how to pay out income without 
 having to pay all of the income tax on all of the income, 
 except where the discretion is tied to an ascertainable 
 standard. A bank, on the other hand, can be vested with 
 this discretion to divide income as it is needed in any par- 
 ticular year, and thus can divide the income tax among 
 the beneficiaries to whom it is allocated. Also, a bank may 
 be given a discretion to invade the principal to pay any 
 unusual expenses, such as doctor bills or hospital bills; 
 but this discretion may not be granted in an unlimited 
 manner to the surviving spouse where he is also a bene- 
 ficiary without the danger of having the entire principal 
 of the trust taxed in his estate on his death, thus nullifying 
 the benefit of the trust from an estate tax standpoint. 
 
 Although there are distinct tax and non-tax advantages 
 in using a bank trustee, there may be offsetting disadvan- 
 tages. Banks are not usually in a position to undertake 
 active farming operations on property owned by the trust. 
 The bank may wish to dispose of the farm properties and 
 invest the proceeds in securities or similar investments or 
 lease out the farm property for operation by an indepen- 
 dent party. One way to guard against possibilities like this 
 is to appoint a bank and the surviving spouse as co-trus- 
 tees, giving the bank the discretionary powers over income 
 which are needed to achieve the desirable tax results while 
 giving the surviving spouse some ultimate control with 
 the bank over the trust assets. 
 
 Another factor of importance in some instances is that 
 the trust set up in the decedent's will for the surviving 
 spouse is known as a "spendthrift trust," both the prin- 
 cipal and income of which are exempt from the attach- 
 ment of creditors. This means that the deceased spouse is 
 really protecting the surviving spouse so that if any un- 
 toward event or accident should occur, subjecting the 
 surviving spouse to liability, the creditors of the surviving 
 spouse cannot reach this property. Thus, the surviving 
 spouse is protected and will have enough to live on in 
 old age. 
 
 When property of the deceased spouse is separate prop- 
 erty, the problem of setting up a trust for the surviving 
 spouse may create some difficulty if it is also desired to 
 secure the marital deduction. The life income trust de- 
 scribed above will not entitle the surviving spouse to the 
 marital deduction on separate property. However, this 
 matter can often be worked out by making certain out- 
 right bequests to the surviving spouse and then placing 
 the balance of the estate under the lifetime trust, or by 
 using separate trusts — one for the marital reduction 
 
 [12] 
 
money and the other for the balance of the estate. 
 
 Where property is held in joint tenancy, it must be 
 remembered that the will of the first joint tenant to die 
 is of no effect with respect to the joint tenancy property. 
 The characteristic of joint tenancy property is that it auto- 
 matically goes to the surviving joint tenant regardless of 
 the provisions of the will of the deceased joint tenant. In 
 such instance, the surviving joint tenant is the absolute 
 owner of the entire estate, whether it originally was com- 
 munity or separate property. From this factor, the aggre- 
 gation of estates problems described above can arise. 
 There is no means of preventing such aggregation of 
 estates when property is held in joint tenancy. This is 
 one of the reasons why tax counsels advise against the 
 placing of large estates in joint tenancy ownership. An- 
 other factor against joint tenancy is that there is no pro- 
 tection to the children of the deceased spouse. Automati- 
 cally, the surviving joint tenant receives the entire estate 
 and it is his to will away, to give away, or to treat in any 
 manner that he so desires. For these two reasons, joint 
 tenancy should not be used in large estates except as a 
 vehicle in the estate planning if there is a particular item 
 of property that should go to the surviving spouse. 
 
 Special consideration must be given to a farm-holding 
 which during the lives of husband and wife exceeded 160 
 acres. Such consideration is required whether or not the 
 farm was held in joint tenancy or as community property. 
 For example during their lives the Federal laws permitted 
 them to receive water sufficient to irrigate not to exceed 
 320 acres. Upon death of either the husband or wife, land 
 in excess of 160 acres cannot be placed in a trust or held 
 by the surviving joint tenant for a period longer than 5 
 years and still receive water. 
 
 Joint tenancy 
 ownership is not 
 a good idea for 
 large estates 
 because . . . 
 
 it results in the 
 aggregation of 
 estates 
 
 it does not protect 
 the children 
 
 160 -acre limi- 
 tation 
 
 How you own property affects the income tax you pay. 
 
 The income tax aspect of property ownership 
 
 Under the income tax law, both state and federal, each 
 item of property has a cost basis for tax purposes. This 
 cost basis, in general, is the cost of acquisition, plus per- 
 manent improvements, less depreciation. In case of death 
 of one of the spouses, an appraisal has to be made by 
 
 [13] 
 
Every item of 
 
 property has a cost 
 
 basis for tax 
 
 purposes 
 
 This is usually 
 
 original cost plus 
 
 permanent 
 
 improvements 
 less depreciation 
 
 The cost basis for 
 community property 
 is more advanta- 
 geous than . . . 
 
 agents of the state and federal governments. This ap- 
 praisal is based upon the fair market value of the property 
 as of the date of death of the decedent or, in the case of 
 the federal government, if so desired, one year after the 
 date of death. Under the income tax law, it is provided 
 that a new cost basis is acquired on property at the value 
 set forth in the Federal Estate Tax Return or the In- 
 ventory and Appraisement that are set up in the estate of 
 the decedent for federal and state tax purposes, respec- 
 tively. This cost basis is in varying amounts depending on 
 type of ownership existing between the spouses at time of 
 death. 
 
 In the case of community property, there is a new cost 
 basis equal to 100 per cent of the value at which such 
 property is appraised in the estate of the decedent. This is 
 true in spite of the fact that only 50 per cent of the com- 
 munity property is taxable in the decedent's estate. In the 
 case of joint tenancy property, the decedent's share only 
 receives a new cost basis. In the case of separate property 
 of decedent, 100 per cent of the separate property would 
 receive a new cost basis. 
 
 To clarify this situation, the following is a specific ex- 
 ample. Suppose that, many years ago, a husband and wife 
 acquired a 40-acre vineyard at a cost of $10,000, and that 
 the improvements and depreciation about equaled each 
 other, so that net cost basis of the husband and wife as of 
 the date of the husband's death aggregated $10,000. As- 
 sume that this 40-acre tract is now worth $50,000 and is so 
 appraised for federal and state death tax purposes. If the 
 property is held as community property, the surviving 
 spouse will get a new cost basis on the 40-acre piece up to 
 $50,000. This means that if she wants to sell the property, 
 she will have no capital gains tax to pay unless she receives 
 in excess of $50,000. If she decides that she does not wish 
 to sell, but wants to retain, develop, and continue to farm 
 the property, she will set up her vines, trees, wells, pump- 
 ing plants, and other permanent improvements on a rea- 
 sonable value and start redepreciating the property. This, 
 of course, would have a very decided effect upon her an- 
 nual income tax. 
 
 There is another income tax factor in favor of com- 
 munity property ownership as opposed to joint tenancy 
 which follows from the new cost basis given community 
 property. The income tax laws now provide for recapture 
 of certain prior depreciation which requires that a portion 
 of the proceeds be reported as ordinary income if the 
 property is sold at a gain. Where the property is held as 
 community property the new cost basis received on the 
 death of one spouse will tend to eliminate gain that might 
 be otherwise subject to ordinary income tax rates. 
 
 [14] 
 
If the property were held in joint tenancy and had been 
 derived from community funds, so that only one half is 
 taxable in the estate of the decedent, the surviving spouse 
 would receive a new cost basis only on the decedent's one 
 half of the property — in this instance, $25,000 — and re- 
 tain the cost basis on her half of $5,000. This means that 
 she would have a capital gains tax to pay in the event that 
 she sold the property for more than $30,000. Also, the 
 total value upon which the property could be set up for 
 depreciation would be $30,000 as contrasted with $50,000 
 under a community property arrangement. 
 
 On this new cost basis, another important factor arises 
 in connection with any crop that is on the property. In 
 the instance above, if the decedent spouse should die any 
 time after May 1, when the grape crop is set, an appraisal 
 can be secured of the crop as distinguished from the land 
 and improvements. A new cost basis is thereby secured on 
 the crop, which becomes a cost item just like any other 
 item of expense of the surviving spouse, and she should 
 be able to offset such expense against her gross income. 
 In other words, if the crop on the 40-acre piece held as 
 community property amounted to a net of $10,000, the 
 surviving spouse would pay only a very small death tax 
 liability on $5,000, and by so doing, should secure a new 
 cost basis of $10,000 on the crop. If, however, the property 
 were held in joint tenancy, the surviving spouse would 
 still pay a death tax on $5,000 of the $10,000 crop, but 
 would have a cost basis of only $5,000 against the crop, 
 and would have to pay an income tax on the second $5,000. 
 
 In larger estates, another factor also points up why it is 
 preferable to hold property as community property rather 
 than as joint tenancy. This arises out of the graduated na- 
 ture of the income tax law. It is well known that the 
 higher the income, the higher the tax bracket; the lower 
 the income, the lower the tax bracket. In other words, the 
 more taxpayers in any particular situation, the lower the 
 tax. A husband and wife are two taxpayers. When prop- 
 erty is held in joint tenancy ownership, and the husband 
 dies, the wife is automatically entitled to the entire joint 
 tenancy estate and she is taxed on all of the income aris- 
 ing after the date of the husband's death. A joint return 
 can be filed in behalf of the husband and the wife in the 
 year of his death, splitting the income, in effect, between 
 the two of them. However, in the next year, the wife is a 
 sole taxpayer, and is taxable upon the entire amount. 
 
 When property is held as community property, and a 
 will is left by the decedent spouse, the husband and wife 
 can file a joint return in the first year with respect to her 
 income and to his income down to date of his death. After 
 the date of his death, the estate of the decedent husband 
 
 that for joint 
 tenancy property . 
 
 especially where a 
 crop is involved 
 
 To summarize: 
 for large estates, 
 and perhaps even 
 for smaller ones, . . . 
 
 community property 
 ownership 
 
 [15] 
 
would be taxable on his share of the income from his one 
 half of the community property. The estate is also a tax- 
 payer in the second year, and under the law, one half 
 would be taxed to the wife. The estate can be kept open 
 
 is better than for a period of two or three years without any great addi- 
 tional cost to the surviving widow, and in this way can 
 assure her of the income tax splitting benefits of the state 
 and federal laws. 
 
 From the above, it can be seen that joint tenancy owner- 
 ship of property under the present law is something to be 
 
 joint tenancy avoided except in smaller estates. Even in the latter, joint 
 ownership tenancy should be used only when the estate picture is not 
 complicated by other factors, such as low cost basis, or by 
 non-tax problems, such as family relationships. In these 
 cases, as with the larger estate, a will is mandatory in terms 
 of protection for both tax and non-tax problems. 
 
 You can lessen the impact of taxes on your estate. 
 
 Ways to reduce the impact of death taxes 
 
 Sometimes it is 
 
 better to dispose of 
 
 property than to 
 
 hold it 
 
 But . . . 
 
 before you act, 
 
 consult an attorney 
 
 So far the farmer's estate problem has been viewed from 
 the standpoint of the consequences of holding the farm 
 property in various ways. In this section some attention 
 will be given to the devices which might be used to reduce 
 the impact of death taxes (estate and inheritance taxes) 
 by disposing of property in a certain manner. Admittedly, 
 some ways of "holding" property can be accomplished 
 only by disposing of that property to others, but that is 
 not the central purpose of disposal devices. 
 
 As you read this section, remember: The disposal de- 
 vices suggested are not difficult to understand . . . BUT 
 because of the details of their operation, and their far- 
 reaching effects, it is absolutely necessary that you consult 
 a competent attorney before deciding to use such devices. 
 
 Obviously, estate and inheritance taxes can be reduced 
 by reducing the amount of property which will be in- 
 cluded in the estate at death. It is equally obvious that one 
 of the easiest ways to reduce the estate is to give away part 
 of one's property during life. This is easier said than done. 
 The individual must figure his financial needs for the re- 
 mainder of his life and make provision for the many un- 
 certainties of later years. Such predictions are not simple, 
 
 [16] 
 
and the giver takes a calculated risk on the future. 
 
 The first concern is that of how much the giver may give 
 without subjecting himself to gift taxes — both federal and 
 state. (The giver usually pays the tax.) While the gift tax 
 is designed to keep a person from escaping estate taxes, he 
 is allowed to make a certain amount of gifts before the 
 gift tax applies. The federal law allows the donor (the 
 giver) to make tax-free gifts of $3,000 per year per donee 
 (the person receiving the gift). This means that a husband 
 and wife together may make gifts of $6,000 per year to as 
 many different donees as they wish without incurring any 
 gift tax liability. In addition, the federal law allows each 
 donor a lifetime gift exemption of $30,000, so that a hus- 
 band and wife together may make lifetime gifts of $60,000 
 plus annual gifts of $6,000 per donee. The married donor 
 may give $60,000 to his spouse, using his $30,000 exemp- 
 tion, and he may give her $6,000 annually, using his $3,000 
 exclusion, because the federal gift tax law permits the 
 deduction of one half of any gift to a spouse, under cer- 
 tain circumstances. This is called the gift tax marital de- 
 duction. The California gift tax law permits an annual 
 exclusion of $4,000 per donee and a lifetime exemption of 
 varying amounts depending on the relationship of the 
 donor to the donee. 
 
 California does not allow a marital exemption for gift 
 tax purposes although a transfer of community property 
 between the spouses is exempt. 
 
 Under some circumstances, lifetime gifts may not be ex- 
 cluded from the impact of estate taxes. Such an instance 
 is one in which the gift is made "in contemplation of 
 death." While often called the "deathbed gift," "in con- 
 templation of death" is not restricted to deathbed situa- 
 tions. Any gift made less than three years before the death 
 of the giver will be considered to have been made in con- 
 templation of death, and that amount will be included in 
 the giver's estate for tax purposes unless it can be proved 
 that the giver actually made the gift for a "life motive." 
 Motives which have been regarded as "life motives" in- 
 clude the following: to save income tax; to help estab- 
 lish relatives or friends in business or to make them 
 financially independent; to induce a son to remain at 
 home; to provide funds for education of the donee; to 
 equalize the financial condition of children. Gifts made in 
 all these instances were held not to be in contemplation of 
 death and were excluded from the donor's estate. Any gifts 
 made more than three years before the death of the giver 
 are not regarded as having been made in contemplation 
 of death, and will not be included in the giver's estate for 
 tax purposes. 
 
 [17 1 
 
 You may give away 
 varying amounts 
 
 ivithout paying 
 gift taxes 
 
 Gifts made within 
 three years of 
 the giver's death 
 may not necessarily 
 be tax free 
 
From a tax 
 
 standpoint, gifts 
 
 to the children 
 
 are better than 
 
 gifts to a spouse 
 
 Other lifetime transfers may also be included in the 
 decedent's estate if the donor does not completely relin- 
 quish control over the transferred property. If, for in- 
 stance, the donor retains a power to use the income for 
 life, or to revoke the gift, or even the power to designate 
 the eventual recipient of the property, such a transfer will 
 not be effective to avoid inclusion of the property in the 
 gross estate. 
 
 Some consideration should also be given to the selec- 
 tion of the person to receive the gift. If gifts are made to 
 the giver's spouse, they will be included in the receiving 
 spouse's estate unless he (or she) has disposed of the prop- 
 erty before death. This enlarges the receiving spouse's 
 estate, and the saving realized by the giving spouse in 
 making the gift may be offset by the tax on the enlarged 
 estate of the receiving spouse. (Of course, if the receiving 
 spouse lives for some time after the death of the giving 
 spouse, or after the gift, he or she may, during that time, 
 dispose of the property so that it will not be included in 
 his or her estate.) That is why it is generally desirable to 
 make gifts to one's children rather than to the spouse. As 
 stated before, the use of the gift device requires the giver 
 to take a calculated risk unless he is a flawless predictor of 
 the future. 
 
 One simple method for making gifts to children of 
 assets other than real estate is under the California Uni- 
 form Gifts to Minors Act. The gift can be made by trans- 
 ferring the property to either parent or a third person as 
 "Custodian" under the Act. In order to make certain that 
 the property will not be taxed in the estate of the parent, 
 it is advisable to name a relative or some other third per- 
 son as Custodian. In any event, the child is entitled to 
 receive the property from the Custodian when he reaches 
 the age of twenty-one. 
 
 Certain practical considerations are involved in the use 
 of the lifetime gift. There is seldom any substantial tax 
 advantage gained from making lifetime gifts to the extent 
 of disposing of all property. Nor will the lifetime gift 
 device be especially useful to the person with limited 
 property, who would not be affected by the estate tax. The 
 question of whether a particular person would be wise to 
 begin giving his property away is one which he should 
 decide only with the aid of a competent attorney. It should 
 also be remembered that the gift may be in the form of 
 cash, stocks, bonds, land, anything — the value for gift 
 tax purposes being determined by the fair market value 
 of the property at the time of the gift. 
 
 For the farmer desiring to retire or enter semi-retire- 
 ment, the private annuity or "support contract" has been 
 suggested as a solution which, while providing for the 
 
 [18] 
 
transfer of the farm property to the next generation with- 
 out probate, can result in tax savings. Under this device, 
 he transfers the farm property to the next generation in 
 return for a promise that the son (in the usual case) will 
 support the parents for the rest of their lives. Alterna- 
 tively, the agreement may call for cash payments. 
 
 Such a plan has, perhaps, some benefits to commend it. 
 There are, however, many dangers. If the agreement calls 
 upon the son to pay the parents' living expenses, it auto- 
 matically follows the cost of living. Probate expense is 
 saved, that is, if the farm property is the sum total of the 
 parents' property. The son is assured the property and will 
 have more years to enjoy and improve it. The need for 
 liquid assets is reduced. The property will be removed 
 from the parents' estate and freed from estate taxes. To 
 the unwary and unrealistic this support contract plan 
 would appear to be the perfect solution to his estate prob- 
 lems, but he should not be misled. 
 
 There are some very real disadvantages to the plan. It 
 is sad but true, and often tragic, that such support agree- 
 ments can lead to family friction. Disagreements between 
 the parent and son about the management of the farm 
 commonly arise. Other heirs resent the favoritism. The 
 parents are made to depend completely on the children; 
 the property can be sold or conveyed away by the son, and 
 is subject to the claims of his creditors. In addition to 
 these intangible disadvantages, there are monetary pitfalls 
 in this "perfect solution." If the parents are long-lived, 
 the son may end by paying out much more than the 
 property is worth. The son must pay income taxes on the 
 income from the property, yet he can take no deduction 
 for the payments he makes to the parents. During periods 
 of declining farm income the son may have some difficulty 
 maintaining support or payments. The tax consequences 
 of a sale by the son after the death of the parents are 
 difficult to determine. If the parents die before the son 
 has paid the equivalent value of the property, the "wind- 
 fall" may be taxable as ordinary income or the son may 
 not have to pay a tax until he sells. In so far as the tax 
 effect on the parents is concerned, they would pay an in- 
 come tax each year, calculated by using a special formula 
 designed to set aside a portion of the annual income as 
 repayment of their investment. They would pay no tax on 
 the portion set aside. Any consideration of this annuity 
 or support plan should be tempered by the fact that there 
 is a chance the taxing authorities will regard the plan as 
 a sale of the property by the parents to the son, and assert 
 a capital gains tax at the beginning in addition to the 
 yearly tax on the income. Further gift tax problems arise 
 if there is a difference between the value of the annuity 
 
 [19] 
 
 A "support contract" 
 has some advantages 
 and . . . 
 
 many disadvantages 
 
 It may cause 
 family squabbles 
 
 Parents are made 
 completely 
 dependent upon 
 their children 
 
 The tax status 
 is not always clear 
 
The trust is a 
 
 good solution 
 
 for some estates 
 
 The trust is 
 
 flexible and 
 
 complex 
 
 It is best applied 
 
 only to certain types 
 
 of property 
 
 and the fair market value of the property. 
 
 Clearly, the use of the private annuity or support plan 
 should not be made hastily. As with any estate plan, a de- 
 cision should be made only after careful examination of 
 all the factors, not just those concerned with dollars and 
 cents. 
 
 The trust represents another means of disposing of 
 property in such a way that substantial tax savings can be 
 realized, but this is not its only purpose. The trust will 
 also provide a way to protect property and assure contin- 
 ued income to the family of the settlor (the person placing 
 property in the trust). In the typical trust, the settlor trans- 
 fers property to the trustee (holder of the trust property) 
 who is under a duty to preserve the trust property and use 
 it for the benefit of the trust beneficiaries (persons for 
 whose benefit the settlor sets aside the trust property). For 
 example, Brown may transfer 100 shares of stock to Jones 
 with instructions for Jones to pay the income from the 
 stocks to Brown's son for 10 years and, after 10 years, to 
 give the shares to the son. This is an express private trust, 
 Brown being the settlor, Jones the trustee, and Brown's 
 son the beneficiary. If this arrangement is made to take 
 effect during Brown's life the trust is called a living trust. 
 Brown may set up the trust in such a manner that he can- 
 not change it, or he may retain the power to change it or 
 to destroy it. By making the trust unchangeable, Brown 
 creates what is termed an irrevocable trust. Reserving the 
 power to make changes in the trust results in a revocable 
 trust. In California, all trusts are revocable unless the 
 terms state otherwise. Trust law, and the tax laws con- 
 nected with trusts, make up some of the more complicated 
 sets of rules in the law — too complex to be discussed here 
 in detail. But some general observations may be made. 
 
 Aside from the tax aspects, while the trust is flexible, it 
 is best limited to certain types and quantities of property. 
 Placing farms in trust gives rise to managerial difficulties 
 because land management is a job calling for full atten- 
 tion. Personal property, such as cash, stocks, bonds, and 
 the like, is more easily managed. Some types of personal 
 property, such as jewelry, clothing, family silverware, heir- 
 looms, family automobile, and the like, are obviously un- 
 suited as trust property. These things are best disposed 
 of by will. Certain types of trusts would not be in the best 
 interest of the person with only moderate means. Where 
 the trust is used, however, it can be formed to provide for 
 the needs of several persons (beneficiaries) with a mini- 
 mum amount of effort, or none at all, on the part of the 
 settlor. 
 
 A number of tax savings are available through the use 
 
 [20] 
 
of the trust. In the case of the irrevocable living trust, for 
 example, the property placed in the trust will not be in- 
 cluded in the settlor's estate — if the trust is well planned. 
 The settlor must pay a gift tax on the property given to 
 the trust, subject, of course, to the exemptions or exclu- 
 sions discussed in the section on the gift device. It should 
 be remembered that even if the gifts to the trust exceed 
 the exemptions and exclusions, gift tax rates are usually 
 lower than estate tax rates. The settlor also obtains in- 
 come tax savings with the irrevocable trust. The income 
 from the trust property is not taxed to him, but is taxed to 
 the beneficiaries and is made available to them. In this 
 way the income of the property is split into more parts, 
 resulting in a lower total income tax paid by all the bene- 
 ficiaries than would be paid if the income from the prop- 
 erty were taxed all in one piece. Estate tax savings are 
 possible since the settlor of a living trust can remove prop- 
 erty from his estate, thus avoiding death taxes and keeping 
 the trust property out of the beneficiary's estate while still 
 giving the benefits of the trust to him during his life. 
 
 A special type of trust is the so-called "Clifford" trust. 
 This type of trust normally must be for a period of ten 
 years or more, or for the life of the beneficiary. During the 
 term of the trust, all of the income is distributed to the 
 beneficiary or accumulated for his benefit. Upon expira- 
 tion of the trust, the principal reverts to the settlor. The 
 major advantage of a Clifford trust is the ability to trans- 
 fer income from a higher bracket taxpayer to a low 
 bracket taxpayer for a number of years without perma- 
 nently giving away the underlying trust property. Al- 
 though there are also savings in estate taxes, they are 
 smaller than can be realized from outright gifts or gifts to 
 irrevocable trusts. 
 
 Obviously the trust is not a simple device but, when 
 carefully planned, it can be a real benefit to all concerned. 
 Setting up the plans for a trust calls for great skill and 
 imagination as well as recognition of the practical factors 
 of family needs, personalities of the parties concerned, and 
 so on, without undue emphasis on the tax saving aspects. 
 Like other estate planning devices, the trust plan must be 
 reviewed from time to time to> take into account changes 
 in the family circumstances and changes in the law. 
 
 It has been common practice in farming communities 
 for husbands and wives to make cross deeds to each other 
 and then, in the case of the death of either, for the survi- 
 vor to record the deed which he or she holds. It should 
 be mentioned that these cross deeds are really not legal, 
 and have been disregarded by the California Supreme 
 Court. Title companies have taken the position that such 
 deeds are of no use and effect, and consequently the prop- 
 
 [21] 
 
 When properly 
 planned it can result 
 in numerous tax 
 savings 
 
 Planning a trust 
 requires skill and 
 imagination 
 
 Cross deeds between 
 spouses are not 
 legal 
 
Deeding property to 
 
 a spouse for a life 
 
 estate is impractical 
 
 Insurance is good 
 
 but it's not the 
 
 only answer 
 
 Insurance can 
 
 provide cash for 
 
 death expenses 
 
 It can result in tax 
 
 savings if the policy 
 
 has been chosen 
 
 carefully 
 
 Review the 
 
 insurance you 
 
 now hold . . . 
 
 erty still would have to be probated. Because of the 
 trouble they cause, cross deeds should not be used between 
 the spouses. 
 
 It should also be mentioned that, under either the deed 
 method or the will method, some people believe that they 
 should use an ordinary life estate for the disposition of 
 real property. In other words, the decedent spouse would 
 make a deed outright to the other spouse, wherein he or 
 she would have a life estate, or, under the terms of the 
 will, would directly provide that the surviving spouse 
 have a life estate in the property. This is impractical in a 
 farming community because of the difficulty of securing 
 any financing where an individual has only a life estate. 
 The bank or other financing institution would require the 
 signatures of both the life tenant and the remainderman, 
 that is, the ultimate owner, to be sure of protection under 
 all circumstances, and this, in some instances, has proved 
 to be impossible for various reasons. Furthermore, the sur- 
 viving spouse should never be placed in this position. 
 
 Various types of insurance form the basis for almost 
 every family's plan for security. Often insurance is the 
 only planning. What too few people realize is that insur- 
 ance is not a cure-all for their estate problems. Insurance 
 purchased without proper attention to the total family 
 needs and the total estate plan can do more harm than 
 good. 
 
 The intricate workings of insurance contracts and the 
 variety of insurance plans prevent a complete discussion 
 here, but some general observations can be made. To a 
 great extent, insurance can protect against forced sale of 
 property by providing "liquidity" — cash to pay tax, ad- 
 ministrative, and other expenses at death — and so pre- 
 serve the estate. To a lesser extent, proper use of insurance 
 can result in tax savings. Payments made to the beneficiary 
 under the usual life insurance policy are not subject to 
 income tax, although the proceeds of the policy may be in- 
 cluded in the taxable estate of the deceased insured. This 
 inclusion can be avoided, however, if the insured takes 
 special precautions by making an irrevocable assignment 
 of all the incidents of ownership in the policy. Thus, by 
 careful planning, funds may be set aside for family secur- 
 ity without payment of income tax by the beneficiary or 
 estate tax by the insured. In the case of the endowment 
 policy, the insured faces some special problems, but he can 
 meet these by careful selection of his policy provisions. 
 
 Examine the policies you have or the policies you plan 
 to buy. If you cannot fully understand their provisions, 
 ask the advice of a competent attorney. Check the settle- 
 ment provisions, the cash surrender provisions, the sav- 
 ings features, the renewal clauses, the reliability of the 
 
 [22] 
 
company and its agents. Find out how the insurance pro- 
 gram you are considering fits in with any other security 
 plans you have — social security and others. 
 
 A good insurance program forms an important part of 
 the estate plan, but the limitations of insurance should be 
 recognized. The few tax saving features of insurance are 
 secondary in most instances, the principal function of in- 
 surance being to accomplish some degree of security as 
 well as to provide cash reserves for expenses arising as a 
 result of death. 
 
 Get competent 
 advice on any you 
 may be planning 
 to buy 
 
 To make a will is to do something about the future. 
 
 HOW TO MAKE A WILL 
 
 As stated earlier, the purpose of estate planning is more 
 than the reduction of tax liability. The property owner — 
 farmer or otherwise — is also concerned with providing for 
 the welfare of his family while at the same time avoiding 
 as much conflict and confusion as possible. This can be 
 achieved only if the property owner does something about 
 the disposition of his property himself. There are laws 
 which provide for the distribution of property when no 
 action has been taken by the property owner before his 
 death. While these laws generally protect the surviving 
 spouse and children, they may operate contrary to the 
 owner's desires. 
 
 Every property owner has the right to control the dis- 
 tribution of his property after death, with some limita- 
 tion. He exercises this right by the preparation and execu- 
 tion of a will. If one child needs more help than another, 
 if the wife would rather have a cash income than the farm 
 property, if the grandchildren hold an important place in 
 the family plans for farm operation, if any of a number of 
 special situations is present in your family, then you must 
 take the steps to meet it. Otherwise the law provides for 
 distribution according to a set plan, a plan which, in the 
 light of special circumstances, may not be fair to those 
 concerned. This distribution often splits property hold- 
 ings to such an extent that the over-all efficiency is reduced 
 and any single heir may have difficulty uniting the parts. 
 
 Too many people think that the preparation of a will 
 
 [23] 
 
 By making a will, 
 you decide how 
 your estate is to be 
 distributed . . . 
 
 otherwise, the law 
 will do so, perhaps 
 to your heirs' 
 disadvantage 
 
With competent 
 
 legal advice, making 
 
 a will is fairly 
 
 simple 
 
 Keep your will in 
 a safe place 
 
 Never change it 
 
 without legal 
 
 advice 
 
 is an omen of impending death. This is foolish. The will, 
 like life, health, or accident insurance, is merely an expres- 
 sion of present intention to do something about the fu- 
 ture. Many people also think that the making of a will is 
 complicated. This is not true. With the assistance of an at- 
 torney, making a will can be a relatively simple affair. The 
 preparation of a will is not something which should be 
 left until later years. In fact, the family of the young 
 farmer needs protection and security to a greater degree 
 than any other. The costs of probate when there is a will 
 can be less than when there is no will, and the possibilities 
 for substantial tax savings are much greater under a care- 
 fully drawn will. The cost of drawing a will is, in all 
 instances, minor, compared with the advantages to be 
 gained. 
 
 You can help your lawyer to draw an adequate will by 
 taking certain preliminary steps. First, arrange to have a 
 conference with your attorney. Ask your attorney about 
 the costs of drawing your will and of probating an estate. 
 Bring to that conference the deeds to all real property, 
 insurance policies, and a general statement of assets and 
 liabilities. Also, be prepared to give the attorney a state- 
 ment of the income from such property. The attorney will 
 then draw a preliminary version of the will, which you 
 should take home and read carefully. When you are satis- 
 fied that the will expresses your intention, return it to 
 the attorney. He will have the final version prepared, and 
 make sure that the proper steps are taken in the signing 
 of the document. Do not attempt this last step yourself. 
 Certain legal requirements must be met to make the will 
 effective. Keep the will in a safe place where it is not likely 
 to be destroyed or tampered with. Your attorney will 
 probably retain a copy in his files. Never make changes in 
 the will without consulting an attorney. It is possible to 
 change the will, but the changes must be made in a certain 
 manner — not by erasing or crossing out portions or by 
 writing between the lines or in the margins. Whenever 
 there is an important change in the family situation, such 
 as a birth, death, or marriage, or a change in the general 
 economic situation, re-examine the will in the light of 
 such happenings. You are always free to change your will 
 or to draw a new one, but you must do it correctly. 
 
 Preserve your estate by taking the family into the business. 
 
 24] 
 
PointGrS for estate planners 
 
 It cannot be emphasized too strongly 
 that an estate plan is a very individual- 
 ized plan. What fits one family situa- 
 tion will not necessarily fit another. 
 The preceding discussion has been in 
 general terms. Consequently, the plan 
 to fit a particular person or family 
 cannot be devised solely on the basis 
 of that information. Always consult a 
 competent attorney. Good legal advice 
 is not cheap, but the advantages — both 
 in money and in feeling of security — 
 will more than outweigh the expense 
 involved. 
 
 The estate plan and the family eco- 
 nomic situation should be known to 
 the wife as well as the husband. It is 
 tragic but true that most widows know 
 nothing of the financial and business 
 affairs of their husbands. Husbands 
 should give their wives the following 
 information: 
 
 1. The location of valuable docu- 
 ments, such as deeds, leases, con- 
 
 tracts, insurance policies, wills, 
 military service papers, social se- 
 curity records, and the like. 
 
 2. The business records for the farm 
 and any outside employment or 
 business. 
 
 3. Any outstanding debts, notes, and 
 mortgages, and who holds them. 
 
 4. The banks in which savings and 
 checking accounts are kept, and 
 the location of the bank books. 
 
 5. The names of persons who act as 
 business, personal, or legal aid- 
 visors. 
 
 6. The nature of any retirement 
 plans, including social security. 
 
 The wife's knowledge of the farm 
 and family business will ease her bur- 
 dens and give her some assurance of 
 being able to cope with the many prob- 
 lems of widowhood. The handling of 
 the estate will be considerably simpler 
 if she knows something of the prob- 
 lems involved. 
 
 Family business organizations 
 
 In contrast to the individual ways of owning property 
 discussed above, there may be a joint or group operation 
 of the farm. Such an arrangement allows the pooling of 
 capital and of labor and management abilities, and gives 
 more assurance of continuity in the operation of the enter- 
 prise in the event of the death or disability of one member. 
 There may also be tax savings. Several kinds of joint busi- 
 ness operations are possible, but the partnership form 
 and the corporate form are the most widely used. Since 
 many factors must be considered, it is wise to seek compe- 
 tent legal advice before you make a choice. 
 
 Bear in mind, also, that although a business may be in 
 
 [25] 
 
 The partnership 
 and the corporate 
 form are most 
 widely used 
 
The property 
 
 involved may be 
 
 owned in several 
 
 ways 
 
 Joint operation 
 of a farm 
 
 helps prepare 
 
 younger family 
 
 members for later 
 
 responsibilities 
 
 Both income and 
 estate tax savings 
 are often effected 
 
 the form of a partnership or a corporation, the partner- 
 ship interest itself, or the corporation stocks, may be held 
 in joint tenancy, or community property, or by some other 
 form of ownership. For example, if a father, mother, and 
 son are equal partners in the farming business, the one 
 third partnership interest held by the son may be the com- 
 munity property of the son and his wife. If the father, 
 mother, and son are corporate stockholders of the incorpo- 
 rated farm, the stock certificates might be held in joint 
 tenancy as between the father and mother or between the 
 son and his wife. Thus, the preceding discussion relating 
 to community property, joint tenancy, or tenancy in com- 
 mon also applies to family business organizations. 
 
 THE FAMILY PARTNERSHIP 
 
 The family partnership is probably the most popular 
 device for the joint operation of a farm. A partnership is 
 a legal relationship; it is an association of two or more per- 
 sons who will carry on, as co-owners, a business for a profit. 
 This does not necessarily mean that the property used in 
 business must be owned by the partnership; it may be 
 leased. Usually profits and losses are shared, and all par- 
 ties participate in the management. Often there is a firm 
 name and a single set of business records. 
 
 The farming partnership is often helpful in preparing 
 younger members of the family to assume management 
 responsibilities when the father retires. It also tends to 
 promote interfamily harmony. However, if there are dis- 
 putes within the family, the success of the farming enter- 
 prise may suffer. If the partnership must be dissolved be- 
 cause of such disputes, some of the assets may have to be 
 sold, and may bring prices that are far less than the actual 
 value of those assets in the operating business. 
 
 When the sole proprietor decides to form a partnership, 
 he may be required to give up some control over the farm 
 assets. For example, if a father decides to take his son into 
 the farming business, he may make a gift of capital to the 
 son, to be contributed to the proposed partnership. In- 
 come and management of the enterprise may also be 
 shared. Because of doubts about his own financial inde- 
 pendence and security under a joint enterprise in later 
 years, a father may hesitate to enter into any such arrange- 
 ment. 
 
 From a tax standpoint, the family partnership is often 
 a good device for saving both income and estate taxes. 
 Although a husband and wife may file a joint return to 
 split their income, and the community property system 
 may divide (and thus reduce) the assets owned by one 
 spouse at his death, the family partnership allows further 
 tax savings beyond those to the husband and wife alone. 
 
 [26] 
 
If sons, daughters, and other members of the family join 
 in the partnership, by splitting the farm income among 
 them, the partners as individual taxpayers will pay lower 
 total taxes than if all the income were taxed to the parents 
 alone. The estates of the parents will also be reduced as a 
 result of giving property to their children as partners, 
 possibly to the extent of having to pay no estate or inheri- 
 tance taxes at all. 
 
 To obtain a reduction in income taxes, the formation 
 of the partnership must be handled with considerable 
 care. The partnership may not be a mere sham for the pur- 
 pose of evading taxes, but must be a genuine business 
 transaction with contributions of capital and labor by 
 each of the partners. Often children to be included in the 
 partnership do not have capital to contribute. The tax 
 laws, however, allow a person to make gifts of money or 
 property to his children to contribute to the partnership, 
 provided the formation of the partnership is for a valid 
 business purpose. Gifts of rather substantial amounts may 
 be made, by the parents, free of any federal or state taxes 
 by reason of the gift tax exemptions and exclusions. Even 
 if a gift tax were payable, the cost would not be so great 
 as to outweigh the potential savings in estate and inheri- 
 tance taxes which would result from the reduction of the 
 parents' estates. (See the discussion on page 17.) 
 
 The children may be given either an undivided interest 
 in a partnership or they may receive directly gifts of 
 money and property which they then contribute to the 
 partnership as capital. Although the family partnership 
 might be formed without a capital contribution by the 
 children and still comply with the federal tax laws — 
 merely by having the children contribute their labors — 
 this would not serve to reduce the estates of the parents. 
 The trust device can be combined with a family partner- 
 ship by having the parents contribute money and property 
 to a trust for the children which would then act as a part- 
 nership. This is particularly useful when children are 
 minors. 
 
 Of course, the parents could retain management and 
 control of the partnership property by the terms of the 
 partnership agreement. To provide for the parents upon 
 their retirement, the partnership agreement could state 
 that, after allowance for services rendered by the active 
 (nonretired) partners, the balance of the partnership prof- 
 its is to be distributed according to the share of the total 
 value of the partnership held by each partner. For ex- 
 ample, suppose that in a partnership consisting of the par- 
 ents and two sons, the parents contribute 60 per cent of 
 the total partnership assets and the sons each contribute 
 20 per cent. When the parents retire, reasonable salaries 
 
 Children may 
 receive tax-free gifts 
 to contribute to the 
 partnership 
 
 Provision can be 
 made for the 
 parents' retirement 
 
 [27 
 
A partnership 
 
 should be carefully 
 
 planned to insure 
 
 its continuation 
 
 The surviving 
 
 partners may be 
 
 protected by a buy 
 
 and sell agreement 
 
 Or, a partner might 
 
 appoint an executor 
 
 or a trustee 
 
 may first be paid to the sons active in the partnership; 60 
 per cent of the remaining profits may be distributed to the 
 parents, and 40 per cent to the sons. In addition to pro- 
 viding for retirement, this provision would prevent the 
 loss of income which ordinarily accompanies the giving 
 away of property. The portion of the income distributed 
 to the retired partners (the parents) must be fairly close to 
 the amount of their capital left in the business. It cannot 
 be disproportionate to the capital interest and thereby an 
 evasion of income taxes. 
 
 The carefully drawn partnership agreement will pro- 
 vide for the contingencies of death or disability of a part- 
 ner and continuation of the business by others without 
 dissolution or liquidation of the partnership. Unless some 
 such provision is made, partnership will end, by law, at 
 the death of one of the partners. Continued operation of 
 the farm can prevent a forced sale of the farm assets. 
 
 Through a "buy and sell agreement," an arrangement 
 can be made, before death, whereby the surviving part- 
 ners may acquire the interest of the deceased partner. 
 Under this arrangement, each partner agrees to sell his 
 interest to the surviving partners at a given price. A pur- 
 chase price can be determined by the original agreement 
 or by a later appraisal of the assets. 
 
 If a buy and sell agreement is made, some additional 
 thought must be given to financing the purchase of a de- 
 ceased partner's interest. To provide the necessary funds, 
 insurance is often purchased on the lives of the partners, 
 with the insurance proceeds payable to the surviving 
 partners. Instead of buying insurance, either the partner- 
 ship or the partners can set aside cash for this contingency. 
 The buy and sell agreement might also allow payment of 
 the purchase price in installments out of profits from the 
 business. 
 
 As a second possibility, the deceased partner's estate 
 could continue to participate in the operation of the farm 
 business, with the deceased partner's executor, trustee, or 
 some relative, as the new partner. Difficulties in maintain- 
 ing such an agreement can arise, especially if the executor 
 or trustee is not on good terms with the surviving partners. 
 It may be better merely to keep all the deceased partner's 
 interest in the business and to pay a share of the profits 
 to his beneficiary. 
 
 Written partnership agreements prevent questions 
 among the partners relating to allocation of gain or loss, 
 retirement, and other matters of special importance. They 
 may also provide easier proof, to the taxing authorities, of 
 the genuineness of the family partnership. 
 
 [28] 
 
THE CORPORATE FARM 
 
 The incorporated farm is another possible method of 
 joint operation. This device makes possible the amassing 
 of capital under centralized management for more effec- 
 tive production and marketing of farm products. A corpo- 
 ration is a legal unit for carrying on a business. It is an 
 entity or legal "person" separate from the legal capacity 
 of the corporation shareholders. Thus, for example, the 
 Jones Corporation is an entirely different legal unit from 
 Mr. Jones even though he organized the corporation to 
 conduct his farm, manages it, and owns all or practically 
 all of its shares. The desirability of incorporating a farm 
 is largely a matter for the individual farmer to decide 
 after seeking the help of a competent lawyer. 
 
 The advantages of the corporate device may be com- 
 pared with those of the partnership. For example, liability 
 of the shareholders of the corporation is limited to the 
 extent of their capital invested, as compared with unlim- 
 ited personal liability of partners. Continuity of existence 
 is generally unaffected by the death, disability, or bank- 
 ruptcy of a member, as compared with the normal dissolu- 
 tion of a partnership when the partner is no longer able 
 to carry on the business. Management by the officers and 
 directors of the corporation is centralized, as compared 
 with the power of any partner to act for the partnership 
 within the scope of the business. The corporation has 
 capacity to act as a legal unit separate from the individual 
 shareholders, whereas no such separation exists between 
 the partnership and the partners. These, however, are only 
 a few of the factors to be considered. 
 
 The costs of forming a corporation include those for 
 preparing articles of incorporation, filing, recording, stock 
 issuance, and others. They are, in general, greater than 
 those for a partnership. Furthermore, proper maintenance 
 of the corporate form involves an amount of paper work 
 which a small family enterprise may find burdensome. 
 
 The corporate form of ownership, from the tax stand- 
 point, is not recommended for the farm with less than an 
 annual net income of about $30,000. This is because of 
 the double tax. Corporations are taxed on their net earn- 
 ing whether distributed or not. If the earnings are dis- 
 tributed, the shareholders will generally be taxed on the 
 distributions (dividends). If the earnings of the corpora- 
 tion are unreasonably withheld from distribution, penalty 
 taxes may be imposed. Compare the taxation of the cor- 
 poration with that of the partnership. Partnerships do 
 not, as such, pay federal income taxes. Partners are indi- 
 vidually taxed on the earnings distributed or distributable 
 by the partnership; thus, there is no double tax. 
 
 Before 
 
 incorporating your 
 farm, get competent 
 legal advice 
 
 In general, a 
 corporation can be 
 more costly than 
 a partnership 
 
 Incorporation is 
 usually advisable 
 only for large- 
 income farms — 
 $30,000 or over 
 
 29 
 
Some tax savings 
 
 may result from 
 
 incorporation 
 
 Corporate owner- 
 ship of land limits 
 irrigation water to 
 160 icres 
 
 It also is possible to obtain the legal and practical ad- 
 vantages of a corporation for a farming operation while 
 continuing to be taxed in much the same manner as a 
 partnership. An election may be made under subchapter 
 S of the Internal Revenue Code to have the income, 
 with certain technical limitations, taxed directly to the 
 shareholders, which would avoid the double tax that 
 otherwise arises when dividends are declared. There are 
 no provisions in the California tax law comparable to 
 those of subchapter S on the Federal side and a corpora- 
 tion formed and taxed under subchapter S will be taxed 
 as a normal corporation for state tax purposes under 
 California's Bank and Corporation Tax Law. 
 
 Where the farm income is high and a large part is used 
 for reinvesting in the farm, a corporation is advisable. A 
 corporation may pay reasonable salaries to its shareholders 
 for services rendered, and all surplus earnings need not 
 be distributed to the shareholders and taxed to them in 
 dividends. A reasonable amount of earnings may be ac- 
 cumulated for business needs. Because of the legal separa- 
 tion of the corporation and the shareholder, there may be 
 a splitting of income which can result in tax savings. For 
 example, a corporation may rent land from a shareholder 
 and deduct the rent as an ordinary business expense, thus 
 shifting a part of the corporation income to the share- 
 holder owning the land while, at the same time, reducing 
 the taxable income of the corporation. 
 
 Care should be taken that ownership of the farm land 
 is not placed in the corporation if the land is irrigated 
 with Federal water. Otherwise land owned by a husband 
 and wife not exceeding 320 acres and entitled to receive 
 Federal water will, if placed in corporate ownership, be 
 only entitled to receive water for 160 acres. 
 
 30 
 
The choice is yours 
 
 Unfortunate estate problems and delays in probate which 
 might have been avoided had the decedent consulted an 
 attorney are set forth in the actual case stories which fol- 
 low. The fortunate situations which followed from careful 
 estate planning with the aid of a competent attorney are 
 also described. 
 
 I. THE MUTILATED WILL 
 
 Otto had come to this country from Switz- 
 erland as a young man. He married, but 
 never had children. After his wife's death, 
 he consulted an attorney about making a 
 will. In the will he expressly disinherited 
 his brothers and sisters who were still in 
 Switzerland whom he had not seen for 
 several years, and with whom he had not 
 been friendly since he suspected them of 
 being Nazi sympathizers in World War II. 
 Under his will he left his entire estate to a 
 number of his friends and neighbors and 
 some favorite charities. 
 
 As Otto grew older he became senile and 
 apparently spent long evenings thinking 
 about what would happen to his estate 
 upon his death, and imagining hostilities 
 
 between himself and the beneficiaries 
 named in his will. The result was that he 
 made many handwritten changes on his 
 will with scratched-out names, comments 
 concerning the scratched-out names, il- 
 legible names written in, and other inter- 
 lineations until the entire will was muti- 
 lated beyond legibility. 
 
 The result, of course, was that upon his 
 death his will could not be admitted to 
 probate and his estate went to his brothers 
 and sisters in Switzerland — the very people 
 to whom he wanted to leave nothing. 
 
 The will should have been left with his 
 attorney for safekeeping, so that Otto's 
 desired changes could have been made 
 in a proper manner. 
 
 [31 
 
II. THE OUT-OF-DATE WILL 
 
 Robert and Elizabeth owned a fair-sized 
 ranch upon which they conducted a suc- 
 cessful farming and livestock operation. 
 They had two teenage daughters at the 
 time they consulted their attorney for the 
 making of a will. They each executed 
 trust wills with the other as beneficiary for 
 life and the remainder over to the daugh- 
 ters until they attained age twenty-five. 
 
 A number of years later after the daugh- 
 ters had finished college and married, 
 John and Elizabeth sold the ranch, made 
 extensive investments in securities, and 
 spent a great deal of time in traveling. 
 They also built a beautiful new home in 
 town. On several occasions the attorney 
 urged Robert and Elizabeth to call at his 
 office and discuss possible changes in the 
 wills, because of the changes in their prop- 
 erty holdings and in the family situation. 
 No changes were made, and Robert died 
 eighteen years after the making of the orig- 
 inal wills. 
 
 As the residence was now subject to the 
 trust under the old will, and because Eliza- 
 beth felt that for sentimental reasons she 
 would like to have sole ownership of it, 
 she had to use some of her cash to purchase 
 the bank trustee's interest in the residence. 
 
 Since the securities had greatly increased 
 in value, some of them could easily have 
 gone to the daughters directly under 
 Robert's will, rather than through the 
 trustee. This could have reduced future 
 trustee's and attorney's fees, which will 
 now continue for the remainder of Eliza- 
 beth's life. The daughters could have used 
 their father's inheritance at this time while 
 their families are growing, and particul- 
 arly, could use it in a few years when their 
 children will be ready for college. While 
 the daughters are forced to defer enjoy- 
 ment of their inheritance until Elizabeth's 
 death, Elizabeth has been provided with 
 more income and property than she needs 
 and thus is forced to pay more Federal 
 and State income taxes than should be 
 necessary. 
 
 Many of the difficulties could have been 
 obviated and Elizabeth's future, as well as 
 the future of the daughters and their fam- 
 ilies, could have been simplified if Richard 
 and Elizabeth had made changes in their 
 old wills, which were most proper for 
 them at the time they were made, but 
 which should have been changed because 
 of altered circumstances. 
 
 III. THE THREE-WAY JOINT TENANCY 
 
 Ralph and Margaret, brother and sister, 
 inherited farm land from their parents 
 many years ago. Thereafter, Ralph mar- 
 ried Esther and they raised a family. Mar- 
 garet continued to live with them, she be- 
 ing employed as a school teacher. Ralph 
 and Margaret, with some of the money 
 they inherited from their parents, some of 
 Margaret's earnings, and some of the in- 
 come from the farm, purchased additional 
 land, taking title in Ralph and Margaret's 
 names as joint tenants. Ralph also pur- 
 chased some adjacent land with farm in- 
 come and took title in himself and Esther 
 as joint tenants. Some rental properties in 
 town were purchased with farm income 
 and title vested in Ralph's name. 
 
 Believing that matters would be sim- 
 plified in the event of the death of any one 
 of them, they put all of their real property, 
 bank accounts and securities in joint ten- 
 ancy between Ralph, Margaret and Esther. 
 They correctly understood that each of 
 them held an equal one-third interest in 
 all of the property, but mistakenly believed 
 that if anything happened to Ralph or 
 Esther, his or her share would go to the 
 survivor of them and that Margaret would 
 continue to have a one-third interest in the 
 property. 
 
 Ralph died and to the consternation of 
 Margaret and Esther, they learned that 
 they each now owned a one-half interest 
 in the property, that inheritance taxes had 
 
 [32] 
 
to be paid by Margaret and Esther, and 
 that delinquent gift taxes were also due 
 and payable, including penalties and in- 
 terest. Further expense was incurred since 
 Margaret and Esther are now in advanced 
 years and desire to bring Ralph Jr. into 
 
 the ranch operations through gifts and 
 partnership arrangements. 
 
 Much of the trouble and expense could 
 have been avoided if these people had 
 availed themselves of competent legal ad- 
 vice rather than setting up the unfortunate 
 joint tenancy between the three of them. 
 
 IV. THE BACHELOR BROTHERS WHO DID 
 NOT BELIEVE IN WILLS 
 
 Arthur and Richard were bachelors. They 
 were the survivors of a family of seven chil- 
 dren. One sister had died in childhood. 
 Three other sisters and a brother had 
 died leaving ten adult nephews and nieces 
 surviving. Arthur and Richard continued 
 to farm the old family-ranch property 
 after their parents and brothers and sisters 
 had all died, but they paid a proportionate 
 share of the income each year to their 
 nephews and nieces. 
 
 Unfortunately, neither Richard nor 
 Arthur believed in wills. Richard died and 
 then when Arthur died a few months later, 
 the difficulties began. Some of the nephews 
 and nieces purchased the whole or partial 
 interests of other nephews and nieces in 
 the ranch property, and in one or the 
 other or both of Richard's and Arthur's 
 estates. 
 
 Distribution in the two estates was most 
 difficult. The nephews and nieces had vari- 
 ous undivided interests (sometimes a 
 1 /i24th interest) in certain lands and other 
 fractional interests in other parcels, and 
 there was the additional problem of at- 
 tempting to manage the property after 
 distribution with the different nephews 
 and nieces having varying ideas as to how 
 the property should be managed. 
 
 If Richard and Arthur had consulted an 
 attorney during their lifetimes, they could 
 undoubtedly have worked out an opera- 
 tional plan with their nephews and nieces 
 and could have controlled the disposition 
 of the property through their wills. This 
 would have simplified matters and im- 
 measurably reduced the costs incurred in 
 the administration of their estates. 
 
 V. THE PHILANTHROPIC BACHELOR 
 
 Leslie, who had no relatives other than 
 distant cousins, was a bachelor who lived 
 for many years with his elderly mother. A 
 few years after her death he learned that 
 he had a fatal illness. Having no other re- 
 latives, he consulted an attorney friend 
 with the idea of devoting his considerable 
 estate to the establishment of a laboratory 
 through which soil problems he had en- 
 countered in his farming operations could 
 be investigated and remedied. The attor- 
 ney explained that the preparation of a 
 will involving a gift to charity requires 
 special technical knowledge and careful 
 handling. A will and other documents 
 
 were drafted to carry out Leslie's wishes. 
 
 Through a bank as trustee, and with the 
 cooperation of the University of California 
 at Davis, a soils laboratory was established 
 upon Leslie's death and many worthwhile 
 research activities resulted. This valuable 
 work has led to improvement of soil con- 
 ditions and farming practices in the county 
 where Leslie lived and — through farm 
 advisors and the extension services — in 
 other areas of the state as well. 
 
 Without such a will, Leslie's estate would 
 have gone to some distant relatives whom 
 he hardly knew. 
 
 [33] 
 
VI. THE INTEGRATED ESTATE AND FARM- 
 OPERATION PLAN 
 
 John and Dorothy R. increased their farm 
 holdings and ranch operations over the 
 years. When their three sons returned 
 home after World War II the sons pur- 
 chased additional farm lands with some of 
 their own savings, and with contributions 
 from their parents. Title to the lands thus 
 purchased was vested sometimes in John's 
 name alone, sometimes jointly with one 
 or more of the boys, and sometimes in the 
 names of one or more of the boys. The 
 farming operations were all conducted 
 under an informal oral partnership ar- 
 rangement using the name "John R. and 
 Sons." 
 
 The operations became more extensive, 
 and realizing that there should be more 
 organization to the larger enterprise they 
 consulted their attorney, who in turn con- 
 ferred with their life-insurance represent- 
 ative and accountant. 
 
 This resulted in the formulation of trust 
 wills for John and his wife which made 
 adequate provision for the survivor of 
 them for the remainder of his or her life, 
 protected the business interests of the boys, 
 and also provided for a married daugh- 
 ter. Wills were also made for each of the 
 boys to accommodate their particular fam- 
 ily situations. Two close-held corporations 
 and a family partnership were created 
 whereby farming operations were con- 
 ducted under one corporation, the live- 
 stock operations under another, and the 
 ownership of certain machinery and equip- 
 ment was held under a partnership. 
 
 The result has been efficient farm opera- 
 tion, with income tax benefits to John and 
 the three boys. Upon John's recent death 
 there was a smooth transition for the bene- 
 fit of the entire family without any forced 
 sale of assets in order to pay taxes or ex- 
 penses of administration. 
 
 [34 
 
Acknowledgments 
 
 A number of people and organizations have contributed 
 to the planning, preparation and publication of this cir- 
 cular. The first circular, printed in 1957, was one of the 
 most popular circulars produced by the Division of Agri- 
 cultural Sciences of the University of California. It was a 
 joint project involving the cooperation of the California 
 Farm Bureau Federation, the University of California's 
 School of Law, and the Agricultural Extension Service. 
 
 Special thanks are due to Charles A. Rummel, General 
 Counsel, California Farm Bureau Federation and Cal- 
 Farm Life Insurance Company, Berkeley, for coordinat- 
 ing and bringing together attorneys with practical experi- 
 ence in farm estate planning in California. 
 
 Particular thanks are due to J. Clayton Orr, Lawrence S. 
 Simon, and Victor D. Rosen of Oakland, Howard Thomas 
 and Philip H. Wile of Fresno, George A. Tebbe, Jr. and 
 J. P. Correia of Yreka, Harry M. Halstead of Los Angeles, 
 Charles H. Frost, Jr. of Willows, and Haskell Titchell of 
 San Francisco, who generously contributed to the second 
 revision. 
 
 Special thanks are due to Edward C. Halbach, Jr., Dean 
 of the University of California School of Law, who has 
 reviewed the second revision. 
 
 Thanks are also due to Mrs. Robert Burr of the Farm 
 Bureau Women, who had much to do with the conception 
 of the project through her work in emphasizing the im- 
 portance of estate planning to the Farm Bureau Women 
 in California. 
 
 Co-operative Extension work in Agriculture and Home Economies, College of Agriculture, University of California, and United States Department of Agriculture 
 co-operating. Distributed in furtherance of the Acts of Congress of May 8, and June 30, 1914. George B. Alcorn, Director, California Agricultural Extension Service. 
 
 20m-5,'68(H7858s)VL 
 
 [35