Case Question #1- If Scott dies in 2013, predeceasing Sue (his wife), and his ex
ID: 2474251 • Letter: C
Question
Case Question #1- If Scott dies in 2013, predeceasing Sue (his wife), and his executor elected his date of death as the valuation date, indicate those assets (and their value) that would be includible in Scott's gross estate for estate tax purposes. Also, explain your reasons for the inclusion or exclusion of each asset.
He has a pension with xyz corp with a lump sum death benefit amount of $1,450,000.
XYZ corp profit-sharing death benefit amount of $1,346,000.
XYZ stock worth $1,340,000 Other common stock worht $440,000 tax-free municipal bonds worth $180,000, saving account $250,000 and houshold and tangible personal property worth $130,000.
Scott and Sue own the following as joint tenants with rights of survivorship: Residence net after mortgage- $440,000 Vacation home- $300,000 checking account-$14,000.
Scott and Dan own the following property equally as tenants in common: $4,180,000
Life insurance Scott owns on his own name: Ordinary life payable in a lump sum-$30,000, 20-payment life payable in a fixed-period option for 5 years worth $70,000, ordinary life payable in a lump sum at $200,000, and a term policy payable in a lump sum at $300,000.
Scott's Will provides a specific bequest of $10,000 to TU university. The remainder of his peoperty passing under his will is to divided as follows: an equal amount to $700,000 of his property will pass outright to Sue; the remainder will be split equally between his children Ben (age 28) and Cate (age 21), and will be held in two separate trusts. Each trust provides for income to be paid annually to the trust beneficiary with principal distributed at age 35. All the debts, funeral expenses, and administration expenses are to be paid out of the reainder of the estate passing in trust to Ben and Cate.
Explanation / Answer
Include:
The Gross Estate of the decedent consists of an accounting of everything you own or have certain interests in at the date of death. The fair market value of these items is used, not necessarily what you paid for them or what their values were when you acquired them. The total of all of these items is your "Gross Estate." The includible property may consist of cash and securities, real estate, insurance, trusts, annuities, business interests and other assets. Keep in mind that the Gross Estate will likely include non-probate as well as probate property.
Exclude:
Generally, the Gross Estate does not include property owned solely by the decedent's spouse or other individuals. Lifetime gifts that are complete (no powers or other control over the gifts are retained) are not included in the Gross Estate (but taxable gifts are used in the computation of the estate tax). Life estates given to the decedent by others in which the decedent has no further control or power at the date of death are not included.
If Scott own a 1/2 interest in a farm (or building or business) with my brother (sister, friend, other). What is included?
Depending on how your 1/2 interest is held and treated under state law, and how it was acquired, you would probably only include 1/2 of its value in your gross estate.
Computation Of Gross Estate for Estate tax purpose.
Asset
Status
Amount
Pension with xyz corp with lump sum death benefit
Include
1,450,000
XYZ corp profit sharing death benefit
Include
1,346,000
XYZ stock
Include
1,340,000
Other common stock
Include
440,000
Tax free municipal bonds
Include
180,000
Savings account
Include
250,000
Household and tangible personal property
Include
130,000
Scott and Sue own:
Residence net after mortgage
Include his share
220,000
Vocation Home
Include his share
150,000
Checking Account
Include his share
7,000
Scott and Dan Own:
Common
Include his share
2,090,000
Ordinary Life insurance
Include
30,000
Life insurance
Include
70,000
Ordinary Life insurance
Include
200,000
Term policy
300,000
Gross Estate
8,203,000
Computation Of Gross Estate for Estate tax purpose.
Asset
Status
Amount
Pension with xyz corp with lump sum death benefit
Include
1,450,000
XYZ corp profit sharing death benefit
Include
1,346,000
XYZ stock
Include
1,340,000
Other common stock
Include
440,000
Tax free municipal bonds
Include
180,000
Savings account
Include
250,000
Household and tangible personal property
Include
130,000
Scott and Sue own:
Residence net after mortgage
Include his share
220,000
Vocation Home
Include his share
150,000
Checking Account
Include his share
7,000
Scott and Dan Own:
Common
Include his share
2,090,000
Ordinary Life insurance
Include
30,000
Life insurance
Include
70,000
Ordinary Life insurance
Include
200,000
Term policy
300,000
Gross Estate
8,203,000
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