At his death in 2008, when the estate tax AEA was $2 mil., Lester transferred his estate, valued at $4.5 mil., as follows:

a) to a bypass trust (B trust), $2,000,000 and

b) to a QTIP trust (C trust), $2,500,000.

Both trusts were created for the benefit of his widow, who was to receive an income interest for life , and then his three living children, named as equal remainder persons. In the event that one or more of the children predeceased Lester's widow, that child's share of the trust is to go to his or her children (i.e., Lester's grandchildren)in equal shares.

During his lifetime, Lester had made no taxable gifts. In order to defer estate tax until his widow's death, Lester's executor made a QTIP election with respect to the C trust, leaving a taxable estate of$2,000,000 (i.e., theB Trust). His executor also allocated L ester's $2,000,000 GST exemption to the B trust.

Lester's widow died in 2013. Widow 's taxable estate was worth $5 mil., not including any amounts that may or may not result from elections made at Lester's death. By the date that Lester's widow died, all 3 of L estcr's children had died, each leaving one living child. On thedateof Lester's widow's death, the trusts, valued at $9 mil.(B trust $4,000,000 & C trust $5,000,000), were terminated and the property distributed in equal shares to

three grandchild r en.

When the trusts were formed at Lesters death, no GST was due because the primary beneficiary was Lesters widow. Neither was GST due when any of Lesters 3 childrendied because his widow was stillalive. But, when Lesters widow died, all interests in the trusts passed to the 3 grandchildren

If GST was going to be due, this is the event that would result in GST being due (i.e.,a taxable termination).

Bear in mind that the B trust was allocated Lesters $2,000,000 GST exemption and therefore has a zero inclusion ratio. Further recall that a 100% QTIP election was made by Lester s executor with respect to the C trust.

How much GST is due as a result of the death of Leste(s widow?

A. $2,000,000

B. None of the other answers is correct. See my Supporting Documents submission for my answer.

.C. $1,600,000

d. $ 0

E. $2,000,000