1. Andrea made the following gifts this year:
- $400,000 to her daughter
- $200,000 to her son
- $50,000 to her grandson
- $20,000 to City University.
Assume the tax rates for 2013 are in effect. Compute Andrea's taxable gifts. Show your work.
2. Andrea's husband, Martin, has agreed to split the gifts (above). Compute the taxable gifts. Show your work.
3. Ten years ago, Brad and his wife, Angie, purchased 100 shares of GM stock for $15,000, holding it as JTWROS. Brad paid for the stock entirely from his savings account. Brad died last year when the stock was worth $150,000. How much will be included in Brad's estate? Show your work.
4. Ten years ago, Wilbur purchased 100 shares of AmericanAir stock for $20,000, titling it JTWROS with his brother, Orville. Wilbur paid $12,000 for the stock and Orville paid $8,000. Orville died last year when the stock was worth $100,000. How much will be included in Orville's estate? Show your work.
5. Althea, Barbara, and Cathy are cousins. They decided to form an investment club. Each contributed $7,500 and the club purchased NetFlix stock. Barbara died last year. At the time of her death, the stock had doubled in value. How much will be included in her estate? Show your work.
6. Ten years ago, Pauline created an irrevocable trust and funded it with $1,500,000. Pauline died last year. Assuming she made no other taxable gifts, how much is in her gross estate? Show your work.
7. Two years ago, Michael created an irrevocable trust and transferred in his life insurance policy that had a death benefit of $3,500,000. The trust was named the owner and beneficiary. Michael died last year. Assuming he made no other taxable gifts, how much is in his gross estate? Show your work.
8-10. Patricia and Kyle are a married couple who have come to you for financial and estate planning. Their primary goal is to minimize estate and gift taxes. Their children are married and doing well so their main concern is to maintain their lifestyle regardless of which of them passes first. They love their Uncle Sam but would like to disinherit him if at all possible.
Patricia and Kyle own the following assets together: (You may assume that they do not live in a community property state.)
- Checking Account $110,000
- Savings Account $100,000
- Municipal Bonds $2,000,000
- Primary Residence $5,000,000
- Vacation Home $4,500,000
Kyle owns the following assets in his own name:
- IRA Account $1,700,000
- Mutual Fund Accounts $1,200,000
- 401(k) Account $1,500,000
- Little Red Corvette $100,000
Patricia owns the following assets in her own name:
- Credit Union Account $750,000
- Stock Account $1,750,000
- 403(b) Account $1,500,000
- Lexus $120,000
Patricia and Kyle have a personal loan account (Joint) with a balance of $100,000. They estimate that funeral expenses would run approximately $25,000 (each). They have a mortgage on their residence in the amount of $2,000,000.
Five years ago, Kyle purchased a VUL policy with a Death Benefit of $5,000,000. Two years ago, Patricia purchased a UL policy with a Death Benefit of $2,500,000. Each named their spouse as the primary beneficiary.
8. What is the value of Kyle's gross estate? In his adjusted gross estate? Show how you have treated each asset and what you have included in his estate.
9. What is the value of Patricia's gross estate? In her adjusted gross estate? Show how you have treated each asset and what you have included in his estate.
10. In view of their combined estate values, and knowing that one of their planning objectives is the reduction of estate taxes, what are some estate planning techniques you might recommend to the Kyle and Patricia? Provide at least 2 detailed recommendations. Each is worth up to 10 points. You may offer 3 additional (but different) recommendations for 10 points each, if you wish. The maximum points for this question are 50.