Assets Liabilities and Net Worth

Cash/checking accounts (JT) $5,000 Mortgage note balance (JT)$157,119

Life insurance cash value¹ $2,393 Automobile loan (JT) $20,000

Ascend, Inc. common stock (JT)² $10,000

Mutual fund (JT)³ $16,000 Total liabilities $177,119

Collectibles (JT)⁴ $13,500

Pension Plan⁵ $10,800

IRA⁶ $5,430

Residence (JT)⁷ $200,000

Automobiles (JT) $28,800

Personal Property (JT) $65,000 Net Worth $179,804

Total Assets $356,923 Liabilities and Net Worth $356,923

Life Insurance

Ryan is insured through his firms employee group term life insurance policy; the current face value is $90,000; the primary beneficiary is Nancy, and the children are contingent beneficiaries.

Nancy is insured through her companys group term life insurance policy; the current face value is $120,000; Nancy also owns an individual variable universal life policy with a face value of $75,000. Ryan is the primary beneficiary on both policies, and the children are contingent beneficiaries.

They both feel they need additional life insurance. Nancy feels she needs an additional $275,000, and Ryan feels he needs an additional $400,000.

They want life insurance to pay off the existing mortgage at the death of the first spouse (first-to-die-mortgage term). Assume this coverage is also put into effect to answer the following questions in addition to the individual $275,000 and $400,000 of life insurance policies shown above.

¹ Policy is invested in US Large Cap variable account.

² Stock was purchased on tip for $1,000.

³ Mutual fund is invested in Global Mutual Fund; all dividends and capital gains are reinvested.

⁴ The collectibles are an inherited stamp and coin collection with some quality stamps.

⁵ Pensions plan is invested in GICs; Ryan is the primary beneficiary, and the children are the contingent beneficiaries.

⁶ His IRA is self-directed; Nancy is the primary beneficiary, and the children are the contingent beneficiaries.

⁷ Replacement cost is $150,000.

⁸ Mortgage is a 30-year fixed at 5.75% (3 years old).

1. If Ryan dies first, using all the facts and assumptions presented in the case narrative, what will be Ryans gross estate?

A. $264,580

B. $428,300

C. $664,580

D. $821,699

E. $828,300

2. If Ryan dies with a taxable estate of $756,000 and no taxable gift, what is Ryans estate tax due in 2009?