Q1: In each of the following independent situations, determine how much should be included in Burton's gross estate less than 2042 as to the various life insurance policies involved. Assume that none of the policies are community property.
a. At the time of his death, Burton owned a paid up policy on the life of Suzana, with Penny as the designated beneficiary. The policy had a replacement cost of $80,000 and a maturity value of $300,000.
b. Nancy owns a policy on the life of Burton ($300,000 maturity value) with Burton's estate as the designated beneficiary. Upon Burton's death, the insurance company pays $300,000 to his estate.
c. Four years before his death, Burton transferred a policy on his life ($300,000 maturity value) to Ann as a gift. Burton retained the power to change beneficiaries. At the time of the transfer, the designated beneficiary was Ann. Because Burton had never exercised his right to change beneficiaries, the insurance company pays Ann $300,000 upon Burton's death.
Q2: At the time of his death in the current year, Jerome owned the following real estate:
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Tract A
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$1,000,000
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Mortgage on Tract A
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(200,000)
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Tract B
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700,000
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Mortgage on Tract B
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(100,000)
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Under Jerome's will, both tract of land pass to Janice (Jerome's surviving spouse). However, Jerome's will directs the executor to pay off the mortgage on tract B from the remainder interest passing to the children.
a. How much marital deduction will Jerome's estate be allowed?
b. What is the deduction for indebtedness under 2053?
Q3: In 2000, Brad places in trust $500,000 worth of securities. Under the terms of the trust instruments, Wanda (Brad's wife) is granted a life estate, and on Wanda's death, the remainder interest passes to Brad and Wanda's children (as Wanda determines in her will). Upon Wanda's 8 years later, the trust assets are valued at $2 million.
a. How much, if any, marital deduction will be allowed on the gift made in 2000?
b. How much, if any, of the trust will be included in Wanda's gross estate upon her death?
Q4: Assume the same facts as in question 5, except that Brad made the QTIP election when the trust was created. Further assume that Wanda has no choice as to which of her children will receive the remainder interest upon her death.
a. How much, if any, marital deduction will be allowed on the gift made in 2000?
b. How much, if any, of the trust will be subject to the Federal estate tax upon Wanda's later death?