Case 11

The Dion Case

AN ESTATE PLANNING MINI-CASE

Marcel and Clio Dion are taking steps to begin evaluating their estate planning situation. Marcel is 60 years old. Clio is 53 years old. They have two children, ages 13 and 18. Marcel is a successful executive with a Fortune 500 company, and Clio has achieved success as a cosmetics home sales trainer.

Currently, their wills state that if either Marcel or Clio were to pass away, the surviving spouse would inherit everything. Both Marcel and Clio value their privacy, but they have not established a trust at this time. They have an interest in providing charitable support to their church, but they have not made any sizable contributions. Table VI.20 summarizes their asset, liability, and estate expense situation.

Case Questions

1. Identify the statement(s) below that correctly characterize(s) property interests held by Marcel that, at death, pass by operation of law.

I. If the property passes according to the operation of law, the property avoids probate.

II. If the property passes according to the operation of law, it will not be included in the decedents gross estate.

III. Property that passes by operation of law cannot qualify for the marital deduction.

IV. The titling on the instrument determines who shall receive the property.

a. I only

b. I, II, and III only

c. I and IV only

d. I, II, and IV only

e. II and III only

2. As Marcel and Clio think about the value of their adjusted gross estate, they are unsure which assets and expenses might be deductible. Which of the following is a deduction from the gross estate used to calculate the adjusted gross estate?

a. Costs associated with maintaining estate assets.

b. Nontaxable gifts made within three years.

c. Federal estate tax marital deduction.

d. Property inherited from others.

3. Currently, the Dions own their personal residence as JTWROS. If instead they owned the property as a tenancy by the entirety, how could this form of ownership be terminated?

I. Death, whereby the survivor takes the property.

II. Mutual agreement.

III. Divorce, which converts the estate into a tenancy in common or a joint tenancy.

IV. Severance, whereby one spouse transfers his or her interest to a third party without the consent of the other spouse.

a. IV only

b. I and III only

c. II and IV only

d. I, II, and III only

e. I, II, III, and IV

4. One of Marcels primary financial planning goals includes making lifetime gifts to his children. He would like to do this to help his children and to reduce his potential estate tax liability. If he moves forward with his plan to maximize the value of the strategy, he should make gifts of property that

I. are expected to depreciate in the future.

II. are expected to appreciate in the future.

III. have already depreciated significantly.

a. I only

b. II only

c. III only

d. I and III only

e. I, II, and III

5. What is the value of Marcels adjusted gross estate if he were to pass away today and before Clio?

a. $2,475,000

b. $3,225,000

c. $3,851,000

d. $3,975,000