1. You have two new clients, Mark and Mary Smith. The Smiths have done minimal estate planning in the past, but have decided to meet with you to discuss their future.

The basic information for Mark and Mary is as follows:

Mark is an orthopedic surgeon. He is finally out of residency, fellowships, etc.,

and will join ABC Orthopedics in San Antonio starting January 1, 2021. His

annual salary will be $600,000 per year. He has medical school debt of $250,000.

His date of birth is January 19, 1979.

Mary is an attorney. She is a junior partner at a large national firm where she

specializes in litigation. She has no student loans. Her annual salary is $250,000.

She expects to get a bonus/profit-share in December 2021 of $100,000. Her date

of birth is August 27, 1979.

Mark and Mary were married March 8, 2005. They have the following three children:

1. Catherine Smith, born September 25, 2014. Catherine was born with Down Syndrome

and will need special care during her lifetime.

2. Christina Smith, born January 14, 2020.

3. Christopher Smith, born January 14, 2020.

Mark and Mary have the following assets:

• House they purchased in 2011 Fair market value of $1,250,000; the current mortgage is

$300,000

• Checking account held as joint tenants, funded with monies earned during marriage

$100,000

• Savings accounts held as joint tenants, funded with monies earned during marriage-

$225,000

• Brokerage account held as joint tenants, funded with monies earned during marriage -

$450,000

• A 2018 Mercedes purchased with monies earned during marriage - $29,000
• A 2005 Suburban Mary owned prior to their marriage - $25,000
• 401K through Marys work with a current value of $300,000. Mark is named as the

beneficiary

• A horse trailer that they purchased during their marriage - $20,000
• Personal belongings - $80,000

In addition to the debt listed above, they have credit card debt of $50,000.

They currently have the following life insurance policies:

• A 20-year term policy on Marks life for $500,000.
• A whole life policy on Marks life for $1,000,000.
• A 20-year term policy on Marys life for $500,000.

Mark and Mary currently have handwritten wills (that they wrote before they went on vacation before the twins were born) that read as follows:

November 1, 2019

I, Mark Smith, give my estate to my wife, Mary. Mary will be my

executor. If Mary and I die at the same time then my brother, Bob,

will take care of my kids.

Mark Smith

November 1, 2019

I, Mary Smith, give my estate to my husband, Mark. Mark will be my

executor. If Mark and I die at the same time then my cousin, Carla,

will take care of my kids.

Mary Smith

They do not have any other estate planning documents in place. They do want to make sure if something happens to both of them that the kids are cared for. Mark and Mary have charitable inclinations as well. They want to give 10% of their salary and would like to leave a gift to their church on their deaths. They also would like to consider providing other charitable support to an organization providing research for Downs Syndrome. They are willing to consider making such contribution during their life or at their deaths.

Marys parents are Paul and Patricia. Several years ago, her only sibling, her brother John, died in a plane crash. He was not married, but had one child, a son named Sam. Therefore, Mary and Sam will be the primary beneficiaries of Paul and Patricias estate, although they might want to leave some to Mark and Marys children.

Paul and Patricia own the following assets:

• Ranch (on which their residence is located) - $15,000,000
• Bank accounts (including checking and savings) - $100,000
• Retirement accounts (combined) - $700,000
• Personal belongings - $10,000
• Farm and ranch equipment - $100,000

Mary is concerned what will happen at her parents deaths. Her biggest concern is that she does not want to have to sell the ranch to pay estate taxes, as it has been in the family several generations. Her parents are both 65 and are in good health.

She also wants to help her parents figure out the best way to structure giving away their estate (either during their lives or at their deaths).

Marks grandmother also recently passed away. Her will left a specific bequest to Mark in the amount of $10,000. There were also specific bequests to each of the three children of $5,000 each. Marks uncle, Joe, is named as the executor in the will, but Mark isnt sure what has been done to probate it.

1. Calculate the value of each of Marks and Marys respective estates. Identify what

property is separate property and what is community property.

2. Would you suggest that Mark and Mary purchase any additional life insurance? Why or why not and if so, what kind and why?

3. It is clear Mark and Mary need to update their Wills. Should they include any tax

planning provisions in their Wills?

4. How do you suggest Mark and Mary address their charitable wishes? Should they set up a trust? Why or why not and if so, what kind?