MINDTAP FINANCE FOR BILLINGSLEY/GITMAN/
14th Edition
ISBN: 9781305636651
Author: Joehnk
Publisher: IACCENGAGE
expand_more
expand_more
format_list_bulleted
Question
Chapter 15, Problem 6FPE
Summary Introduction
To discuss: The way trusts uses as a part of estate planning and suggest some of ideas to consider them in preparing will.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Your 80-year-old uncle has an estate valued at over $10 million and asked for your advice regarding how to make sure that each of his heirs receive certain assets and that estate taxes are minimized. What steps would you recommend? Be sure to address such issues as wills, trusts, gifting, and probate.
Montgomery has decided to engage in wealth planning and has listed the value of his assets below. The life insurance has a cash surrender value of $154,000, and the proceeds are payable to Montgomery’s estate. The Walen Trust is an irrevocable trust created by Montgomery’s brother 10 years ago and contains assets currently valued at $800,000. The income from the trust is payable to Montgomery’s faithful butler, Walen, for his life, and the remainder is payable to Montgomery or his estate. Walen is currently 37 years old, and the §7520 interest rate is currently 5.4 percent. Montgomery is unmarried and plans to leave all his assets to his surviving relatives. (Refer to Exhibit 25-1, Exhibit 25-2 and Exhibit 25-4.)
Property
Value
Adjusted Basis
Auto
$ 37,000
$ 72,000
Personal effects
92,000
127,000
Checking and savings accounts
284,000
284,000
Investments
2,585,000
855,000
Residence
1,485,000
1,065,000
Life insurance proceeds
1,085,000
84,000
Real estate investments…
In 2008 Anne and Jim established a living trust. Anne and Jim have 2 children Olivia and Patrick (ages 19 and 21) from the current marriage and Anne has a child Elliott (age 33) from a prior marriage. Their main concern was to protect the assets for their children. The trust provided for Survivor, Bypass and QTIP trusts upon the first spouse’s death.
When Jim died in 2011 the couple held the following property in their trust:
Jim’s SP $2,600,000
CP $20,000,000
Anne’s SP $2,400,000
A. What is the amount in Anne’s taxable estate if she dies in 2021. The following are values of the various trusts in 2021:
Survivor trust $15,000,000
Bypass trust is $9,000,000
QTIP is $10,000,000?
What assets are included in Jim’s estate? Is there any estate tax payable? Or could you apply marital deduction? C. Show allocation of assets into Survivor’s trust, Bypass trust and QTIP trust.
Chapter 15 Solutions
MINDTAP FINANCE FOR BILLINGSLEY/GITMAN/
Knowledge Booster
Similar questions
- Bob and Vikki are a married couple with $250,000 in assets. $100,000 of their assets were inherited by Vikki during the marriage when her uncle died. They live in Nevada, which is a community-property state. How much of their assets is considered to be community property?arrow_forwardYour client is terminally ill. Her potential gross estate, valued at $12.9 million, includes the following assets: A life insurance policy on her life, with a death benefit of $500,000; her deceased husband is the named beneficiary A general power of appointment (valued at $500,000) over the assets of a trust established by her husband; her children are the designated remaindermen of the trust A $500,000 retained life estate in the family residence Your client also expects to receive a $500,000 bequest within the next four months from her deceased sister's estate; the client's children are the contingent beneficiaries of the bequest. Your client would like to transfer a portion of her estate to her two children while she is alive to reduce her potential estate tax liability to the greatest extent possible. Which one of the following exclusion techniques would be the most appropriate to reduce the value of your client's potential gross estate? A)disclaim the inheritance before…arrow_forwardRequired Information [The following information applies to the questions displayed below.] Tom Hruise was an entertainment executive who had a fatal accident on a film set. Tom's will directed his executor to distribute his cash and stock to his spouse, Kaffie, and the real estate to a church. The First Church of Methodology. The remainder of Tom's assets were to be placed in trust for three children. Tom's estate consisted of the following: Assets: Personal assets Cash and stock Intangible assets (film rights) Real estate Liabilities: Mortgage Other liabilities Gross estate Marital Deduction Charitable Deduction Debts Taxable Estate Adjusted taxable gifts Cumulative taxable transfers Tax on cumulative transfers Less taxes paid on prior gifts Tentative estate tax a. Tom made a taxable gift of $6.40 million in 2011. Compute the estate tax for Tom's estate. (Refer to Exhibit 25-1 and Exhibit 25-2.) Note: Enter your answers in dollars, not millions of dollars. Answer is not complete. $…arrow_forward
- 3) Bob and Kelly are business partners at the firm of Dewey Cheatham and Howe. They purchased a fishing cabin together on the St. Lawrence river. Each contributed $150,000 . Toward the price of $300,000 After they owned the property for ten years Bob passed away . The cabin was valued at 500,000 on the date of bobs death . What is included in Bob's estate? What if they are father and daughter and Bob makes 3x the money that Kelly makes ?arrow_forwardThe Jeffersons want to establish a trust to provide for their children in case of their premature deaths. Which of the following is most appropriate for the Jeffersons' overall situation and objectives (objectives are Capital accumulation is a primary concern in this stage of their lives. The protection of principal, income production, and reduction of taxes are of minor importance)? They have a net worth of $725,000 Provide a rationale for your answer. Choose one of the following an irrevocable life insurance trust granting Crummey powers to the children a grantor retained income trust (GRIT) with their children, Ashanti and Blake named as beneficiaries a revocable living trust naming a third party as successor trustee, with Avery and Jaylen as the primary beneficiaries while living and the children listed as remainder beneficiaries an irrevocable living trust naming the children as beneficiaries and Jaylen and Avery as the trusteesarrow_forwardLarry has expanded his business. When he met with his accountant at theend of the year, he learned that his total assets are in excess of $1 million.His accountant asked Larry if he had a will, and Larry said he had been toobusy to develop one. His accountant strongly recommended that Larrycontact an estate planning attorney.a. What advice do you think the estate planner will give Larry with respect toestablishing a will?b. What do you advise?arrow_forward
- Bob died in 2020. He left an estate worth $20,000,000, a surviving spouse, and a two trust will which creates a marital trust and a credit shelter trust, how much property should go into each trust to minimize the estate taxes at Bob's death and at the death of the surviving spouse? $10,000,000 into each trust. $20,000,000 into the marital trust and nothing into the credit shelter trust. Approximately $11,500,000 into the marital trust and approximately $4,500,000 into the credit shelter trust. Approximately $11,500,000 into the credit shelter trust and the balance of the estate into the marital trust.arrow_forwardRaymond and Susan are married and 55 years old. They sell their personal residence for $850,000 cash. They purchased the house fifteen years ago for $200,000. What is the amount of gain that Raymond and Susan should recognize on the sale?arrow_forwardNatalie Bryan, a single adult who lives at 425 Flathead Way, Kalispell, Montana 59901, has three adult children (Daniel Bryan, Amanda Green, and Samantha Cruz). During the year, Natalie makes the following gifts to the children: To Daniel. Office building, I Helena acquired in 2011 at a cost of $900,000, current value $1,900,000. To Amanda. Rental cabins in Whitefish inherited in 2009 (value $1,000,000) from her father, current value $1,800,000. To Samantha. Vacation lodge on Flathead Lake acquired in 2015 at a cost of $800,000, current value $1,900,000. Requirements: Prepare 2022 gift tax return (Form 709) for Natalie (Social Security number 112-45-6787) to compute the total taxable gifts (line 3) for her; stop with line 3 of page 1, but complete page 2 and 3 of the return. Natalie made no taxable gifts in prior years.arrow_forward
- Marie Hardy's will has the following provisions: "I leave the cash balance deposited in the First National Bank (up to a total of $50,000) to Jack Abrams. leave $18,000 cash to Suzanne Benton. I leave 1,000 shares of Coca-Cola Company stock to Cindy Cheng. I leave my house to Dennis Davis. I leave all of my other assets and properties to Wilbur N. Ed." a. Assume that the estate has the following assets: $41,000 cash in the First National Bank, $16,000 cash in the New Hampshire Savings and Loan, 800 shares of Coca-Cola stock, 1,100 shares of Xerox stock, a house, and other property valued at $13,000. What distributions will be made from this estate? b. Assume that the estate has the following assets: $55,000 cash in the First National Bank, $6,000 cash in the New Hampshire Savings and Loan, 1,200 shares of Coca-Cola stock, 600 shares of Xerox stock, and other property valued at $22,000. What distributions will be made from this estate? (Make estate distributions in the order mentioned…arrow_forwardDuring her lifetime, Elaine made several property transfers, including the following: a) The $11,0000 in cash for each of her nieces and nephews that she placed in a revocable trust last year for their benefit b) The $10,000 she paid four years ago to Dr. Meyers to pay off her father's medical bill c) The $28,000 remainder interest given to her daughter, Elsie, two years ago in a irrevocable Grantor Retained Income Trust that Elaine established and funded d) The $10,000 she paid to State University for Elsie's books, and room and board six years ago e) The $29,000 in cash she gave six years ago to her husband Rolf Assume that each of these transfers constitutes Elaine's only transfer to each transferee during the year in which the transfer was made. As her Financial adviser, which of the following transfers would you tell her are fully or partially includible in her total gifts for the purpose of calculating her federal gift tax liability? Explain your response.arrow_forwardSiblings William and Harry own a castle as Joint Tenants with Rights of Survivorship. William contributed $200,000 and Harry contributed $10,000 many years ago to purchase the farm land. The farm is currently valued at $2,000,000. : What are William and Harry’s ownership interests in the farm land? : If Harry died today, what amount of the value of the farm land would be included in his gross estate?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
PFIN (with PFIN Online, 1 term (6 months) Printed...FinanceISBN:9781337117005Author:Randall Billingsley, Lawrence J. Gitman, Michael D. JoehnkPublisher:Cengage Learning
Pfin (with Mindtap, 1 Term Printed Access Card) (...FinanceISBN:9780357033609Author:Randall Billingsley, Lawrence J. Gitman, Michael D. JoehnkPublisher:Cengage Learning
PFIN (with PFIN Online, 1 term (6 months) Printed...
Finance
ISBN:9781337117005
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Cengage Learning
Pfin (with Mindtap, 1 Term Printed Access Card) (...
Finance
ISBN:9780357033609
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Cengage Learning