Meg owns and operates a plastic manufacturing company, and Maynard is a teacher. Maynard and Meg’s principal is stock in the family business (Meg owns eighty percent of the stock and Maynard owns the other twenty percent); the business was recently appraised at $3.2 million. They have about $1 million in other assets, all jointly held. Meg has four children from a previous marriage: Tom (age 26, a lawyer), Martha (age 24, a manager in the family business), and twins Hal and Al, college students, age 20. Both Martha and Hal have indicated an interest in remaining with the family business.Neither Maynard no Meg has made any lifetime transfers. They desire for their children to inherit all their properties eventually. Since Meg is ten years older than Maynard, she would like to insure that he has enough income to live on should he survive her, and she also would like to ensure that her children receive the entire estate after he dies. They would also eventually like to leave a gift of $500,000 to State University to fund a scholarship program.Assume as a CPA and tax planner you have been asked by Meg and Maynard to establish a family financial plan that would accomplish their wishes. List the basic steps that you would suggest they take in order to accomplish their wishes. In other words what type of plan would you suggest?

Question
Asked Feb 7, 2019

Meg owns and operates a plastic manufacturing company, and Maynard is a teacher. Maynard and Meg’s principal is stock in the family business (Meg owns eighty percent of the stock and Maynard owns the other twenty percent); the business was recently appraised at $3.2 million. They have about $1 million in other assets, all jointly held. Meg has four children from a previous marriage: Tom (age 26, a lawyer), Martha (age 24, a manager in the family business), and twins Hal and Al, college students, age 20. Both Martha and Hal have indicated an interest in remaining with the family business.

Neither Maynard no Meg has made any lifetime transfers. They desire for their children to inherit all their properties eventually. Since Meg is ten years older than Maynard, she would like to insure that he has enough income to live on should he survive her, and she also would like to ensure that her children receive the entire estate after he dies. They would also eventually like to leave a gift of $500,000 to State University to fund a scholarship program.

Assume as a CPA and tax planner you have been asked by Meg and Maynard to establish a family financial plan that would accomplish their wishes. List the basic steps that you would suggest they take in order to accomplish their wishes. In other words what type of plan would you suggest?

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Expert Answer

Step 1

List the basic steps that can be suggested to Meg and Maynard to accomplish their wishes by Tax Planner as shown below:

Estate Planning:

  • Provide for the special needs of family members.
  • Ensure the continued operation of a family business.
  • Provide for an orderly transfer of your property in accordance with your wishes.
  • Minimize the tax on your state and minimize the inheritance for your beneficiaries.
Step 2

Investment Planning:

They should invest their profits in such a way, so that their children get a fixed rate of interest after some particular period of time. For that reason, they do not suffer in any condition.

Tax Planning...

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