Q1. For each of the following situation, select the response that best describes the treatment of the property as far as inclusion in Decedent's probate estate and/or gross estate.
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At his death, Decedent owned with his Daughter a vacation home that was titled joint with right of survivorship. Eight years before his death, Decedent had added Daughters name to title. Daughter did not give any consideration in exchange for her half of the vacation home.
At his death, Decedent owned with his Daughter a vacation home that was titled joint with right of survivorship. Eight years before his death, Decedent had added Daughters name to title in exchange for the payment by Daughter of an amount equal to 50% of the value of the vacation home at that time.
At his death, Decedent owned with his Daughter a vacation home that was titled joint with right of survivorship. Daughter had originally purchased the vacation home. Eight years before his death, Daughter had added Decedent's name to title. Decedent did not give any consideration to Daughter in exchange for his half of the vacation home.
At the time of his death, Decedent owned a life insurance policy that insured his life. His Daughter was named as the beneficiary of the policy.
A life insurance policy insuring Decedent's life was in force at the time of his death. The policy was owned by his Daughter at the time of Decedent's death. Decedent had originally owned the policy, but transferred it to daughter 30 months ago as a gift (i.e., no consideration received).
A life insurance policy insuring Decedent's life was in force at the time of his death. The policy was owned by his Daughter at the time of Decedent's death. Decedent had originally owned the policy, but transferred it to daughter 54 months ago as a gift (i.e., no consideration received).
A life insurance policy insuring Decedent's life was in force at the time of his death. The policy was owned by his irrevocable life insurance trust (ILIT). Decedent never owned the policy. Rather, the trustee of the ILIT purchased the policy with funds provided to the trust by Decedent. The policy was purchased by the trustee 30 months before Decedent died.
When he died, Decedent owned several certificates of deposit (CDs). The title of each CD included a "payable-on-death" beneficiary.
At the time of his death, all of Decedent's property was held in a revocable living trust. Until his death, Decedent was the trustee of his living trust. Upon his death, a successor trustee was named and the trust automatically became an irrevocable trust.
At his death, Decedent owned a Roth IRA that named his Daughter as beneficiary in the event of death.
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A. The property is not included in Decedent's probate estate, but 50% of the date-of-death value is included in Decedent's gross estate.
B. The property is included in both Decedent's probate estate and in his gross estate.
C. The property is included in Decedent's probate estate, but not in his gross estate.
D. Decedent does not have a probate or gross estate, because his property is left to an immediate family member.
E. The property is not included in Decedent's probate estate, but the full date-of-death value is included in Decedent's gross estate.
F. None of the other answers is correct.
G. The property is not included in either Decedent's probate estate or his gross estate.
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Q2. At her death in 2015, Sarah had a taxable estate that was worth $7,430,000. For each of the following situations, compute the estate tax that is due at Sarah's death.
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At her death in 2015, Sarah was single (never married). Sarah had made no taxable gifts during her lifetime.
At her death in 2015, Sarah was single (never married). In 2011, Sarah had made a taxable gift valued at $2,250,000.
At her death in 2015, Sarah was single (never married). In 2009, Sarah had made a taxable gift valued at $2,250,000.
At her death in 2015, Sarah was single (widowed). Sarah's husband had died in 2011 with a taxable estate of $2,250,000. Because Husband's taxable estate was less than his applicable exclusion amount (AEA) in 2011, no estate tax was filed. Sarah had made no taxable gifts during her lifetime.
At her death in 2015, Sarah was single (widowed). Sarah's husband had died in 2011 with a taxable estate of $2,250,000. Although Husband's taxable estate was less than his applicable exclusion amount (AEA) in 2011, an estate tax was filed for the sole purpose of electing portability with respect to his unused AEA. Sarah had made no taxable gifts during her lifetime.
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A. Sarah's estate tax is $800,000.
B. Sarah's estate tax is $0.
C. Sarah's estate tax is $2,655,800.
D. Sarah's estate tax is $700,000.
E. None of the other answers is correct.
F. Sarah's estate tax is $1,050,000.
G. Sarah's estate tax is $1,487,500.
H. Sarah's estate tax is $1,200,000.
I. Sarah's estate tax is $1,700,000.
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Q3. Lester died right now, he would have a gross estate wort $8 mil. Lester wants to assure that his taxable estate bears no estate tax. Further, he wants to provide for his wife's support needs for as long as she lives. However, Lester is reluctant to simply bequeath his entire estate to his wife, because he has children from a prior marriage to whom he wants his estate eventually to go. With this in mind, Lester wishes to have his entire estate to be transferred to a "QTIP Trust" when he dies, with his executor making a QTIP election such that there will be no estate tax on Lester's estate. Select the best answer to each of the following questions.
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In previous years (pre-2011), Lester made taxable gifts that totaled $820,000. If Lester died in 2015, in what amount should Lester's executor "make the QTIP election"?
Refer to the question above. Assuming the value of the trust property increases to $12 mil. by the time Lester's wife dies, how much of the trust's $12,000,000 value will be included in Lester's wife's gross estate?
In previous years (pre-2011), Lester made taxable gifts that totaled $1,250,000. If Lester died in 2015, in what amount should Lester's executor "make the QTIP election"?
Refer to the question above. Assuming the value of the trust property increases to $12 mil. by the time Lester's wife dies, how much of the trust's $12,000,000 value will be included in Lester's wife's gross estate?
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A. The QTIP election should be made in the amount of $2,570,000, leaving a taxable estate of $5,430,000.
B. Nothing will be included.
C. The QTIP election should be made in the amount of $3,570,000, leaving a taxable estate of $4,430,000.
D. The QTIP election should be made in the amount of $3,390,000, leaving a taxable estate of $4,610,000.
E. The QTIP election should be made in the amount of $8,000,000, leaving a taxable estate of zero.
F. $12,000,000 will be included.
G. None of the other answers is correct.
H. $5,085,000 will be included.
I. No QTIP election should be made by Lester's executor.
J. $5,355,000 will be included.
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Q3. Referring to Lester's QTIP Trust above, can Lester's wife be allowed any access to the property of the trust (i.e., powers of appointment)? That is, can the beneficiary of a QTIP Trust be allowed to "invade corpus"?
A. None of the other answers is correct.
B. Yes, a power of appointment is OK, as long as it is not a general power of appointment.
C. Yes, any power of appointment is OK, including a general power of appointment.
D. No, any power of appointment will result in the benefits of any QTIP planning being lost.
Q4. For each of the following 2015 taxable estate amounts, determine the tentative estate tax. Note, tentative estate tax is the estate tax before applying any credits-just compute the tax on the taxable estate. I want you to practice using the tax table.
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$3,500,000
$5,430,000
$1, 000, 000
$10,000,000
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A. None of the other answers is correct
B. $3,945,800
C. $1,345,800
D. $345,800
E. $2,117,800
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Q5. Lonnie died in 2015 with a taxable estate of $6,430,000. This figure does not include any value, if applicable; associated with a $5,000,000 life insurance policy Lonnie had given away in a previous year. Two and a half years ago, Lonnie gave his $5,000,000 life insurance policy (on his life) to his favorite nephew. The policy was a term policy; therefore, at the time of the gift, there was no value associated with the policy. Each year, when the premium was due on the policy, Lonnie gave his nephew cash to pay the premium. In no year was the premium (and, therefore, the cash gift) greater than $14,000, the annual gift tax exclusion. Under the circumstances described, there are no gift tax implications related to the gift of the insurance policy. Lonnie's nephew received a check in the amount of $5,000,000 from the insurance company. What is the estate tax due with respect to Lonnie's death?
A. $2,400,000
B. $400,000
C. $4,517,800
D. None of the other answers is correct
E. $2,517,800
Q6. Lonnie died in 2015 with a taxable estate of $6,430,000. This figure does not include any value, if applicable; associated with a $5,000,000 life insurance policy Lonnie had given away in a previous year. Five years ago, Lonnie gave his $5,000,000 life insurance policy (on his life) to his favorite nephew. The policy was a term policy; therefore, at the time of the gift, there was no value associated with the policy. Each year, when the premium was due on the policy, Lonnie gave his nephew cash to pay the premium. In no year was the premium (and, therefore, the cash gift) greater than the annual gift tax exclusion. Under the circumstances described, there are no gift tax implications related to the gift of the insurance policy. Lonnie's nephew received a check in the amount of $5,000,000 from the insurance company. What is the estate tax due with respect to Lonnie's death?
A. $400,000
B. $2,400,000
C. $4,517,800
D. $2,517,800
E. None of the other answers is correct
Q7. Early in 2015, Mythos was diagnosed with a very fast-acting terminal illness. At the time of his diagnosis, his gross estate was valued at $10,430,000. Wanting to do some deathbed tax planning, he made gifts that totaled $8,570,000 (taxable gifts, reduced by 10 annual exclusions, was $8,430,000), resulting in a gift tax liability of $1,200,000. This large deathbed gift left Mythos with an estate valued at $1,860,000 at his death. What is Mythos' gross estate?
A. $1,860,000
B. $0
C. $10,430,000
D. $3,060,000
E. None of the other answers is correct
Q8. John died in 2015 with a taxable estate worth $6.5 mil. In computing his estate tax liability, John's executor (his brother) computed the tax as follows:
- Taxable estate $6,500,000
- Less, exemption amount 5.000, 000
- Tax base $1,500,000
- Tax on $1,500,000 $ 555,800
If $555,800 is not the correct estate tax, what is John's estate tax liability for 2015?
A. $428,000 is John's correct estate tax for 2015.
B. $374,500 is John's correct estate tax for 2015.
C. None of the other answers is correct.
D. $2,545,800 is John's correct estate tax for 2015.
E. $555,800 is John's correct estate tax for 2015.