Case 11 The Dion Case AN ESTATE PLANNING MINI-CASE MarcelandClioDionare talo'ngstepstobeginevaluatingtheiratateplamiing situation. Marcel is 60 years old. Clio is 56 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 thatif 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 V1.20 summarizes their asset, liability, and estate expense situation. TableVl.20 Asset, Liability, and Expense Situation for the Dion Family Assets Value Ownership Checkinuacoount -EE_ Swim account m Money market account m Other monetarv assets mm EB" bonds m Mutual funds (basis less than fair market value) m Other investment assets $250,000 m Primary residence Other housing assets [vacation home} m Vehicles $86,000 JTWROS Personal property JTWROS Retirement assets ie.g., 4mm and IRA) Retirement assets ie.g., 401(k) and IRA) \" Life insurance {variable universal life)\" Life insurance [universal life) $250,000 Clio \"abilities Value Ownership Mortgage on vacation home $112,000 Joint Debts Expenses Costs Funeral and nal expenses assumed the same for both $25,000 'Clio is the beneciary of Marcel's policy, and Marcel is the beneciaryof Clio's policy. 1. Identify the statement(s) below that correctly diaracterizs) 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 notbe included in the decedent's gross estate. 111. Property that passes by operation of law cannot qualify for the marital deduction. IV. The titling onthe instrument determine whoshallreceive theproperty. a. I only b. I, H, and III only c. I and IV only d. I, II, and IV only e. 11 and ]I[ only 2. As Marcel and GiothinkabOutievalue oftheiradjustedgmssestate,they areunsurewhich 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. :1. Property inherited from others. 3. Currently, the Dions own their personal residence asJ'I'WROS. Ifinstead theyowned theproperty as a tenancy by the entirety, how could this form of ownership be terminated? H Death, whereby the survivor takes the property. 1]. Mutual agreement. HI. 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. 21. IV only b. I and III only c. II and IV only d. I. II, and 111 only e. L 11, HI, and IV 4. One of Marcel's primary nancial planning goals includes making lifetime gifts to his children. Hewouldliketo dottsmhelphischdrmandboreducelspotenalostatelaxabjty hemoves forward withhisplantommdmizethevalueofthestl'ategy,heshouldmakegiftsof property that I. areexpectedtodepreciateinthefutme. II. areexpectedtoappreciateinthefuture. III. have already depreciated sigrcantly. a. I only I). II only c. III only :1. I and III only e. I, II, and III 5. What is the value of Marcel's adjusted gross estate ifhe were to pass away today and before Clio? a. \"1475300 b. $3,225,000 0 $3,851,000 :1. $3,975,000 6. There are several weaknesses associated with the Dions' current estate plan. Which of the following are the signicant weaknesses within their plan? 1. Failure to utilize the marital deduction. II. Failure to maximize the unied credit. III. Failure to utilize charitable gift strategies to reduce the taxable estate. IV. Failure to avoid probate. a. Iandlonly b. HandIVonly c. I,H,andIHonly d. 1],I]1,andIVonly e. I,]],II[,anclIV 7. In View of combined estate values for Marcel and Clio, and knowing that one of their planning objectives is the reduction of estate taxes, which of the following estate planning techniques might be appropriate? I. Placing the life insurance policies in an irrevocable trust. 11. Establishing a revocable living trust and funding it by using the unlimited marital deduction and the full unied credit. III. Making use of the gift tax annual exclusion. IV. Establishing a quaJied terminable interest property (QTEP) trust to pass property to their children. a. HandlIlonly b. IandIIIonly c. Hanleonly d. II,III,andIVonly e. I,II,III,andIV 8. Calculate Clio's taxable estate assuming that Marcel passes away rst, followed closely by Clio's death. a. $6,029,000 13. $6,484r000 c. $7,860,000 d. $7,736,000 9. $7,984,000