Montgomery has decided to engage in wealth planning and has listed the value of his assets below. The life insurance has a cash surrender value of $166,000, and the proceeds are payable to Montgomery's estate. The Walen Trust is an irrevocable trust created by Montgomery's brother 10 years ago and contains assets currently valued at $800,000. The income from the trust is payable to Montgomery's faithful butler, Walen, for his life, and the remainder is payable to Montgomery or his estate. Walen is currently 37 years old, and the $7520 interest rate is currently 5.4 percent. Montgomery is unmarried and plans to leave all his assets to his surviving relatives. (Refer to Exhibit 25-1, Exhibit 25-2_and Exhibit 25-4.) Property Auto Personal effects Checking and savings accounts Investments Residence Life insurance proceeds Real estate investments Walen Trust Value $ 43,000 98,000 296,000 2,615,000 1,515,000 1,115,000 10, 240,000 800,000 Adjusted Basis $ 78,000 133,000 296,000 885,000 1,095,000 96,000 2,915,000 80,000 Required: a. Calculate the amount of the estate tax due (if any), assuming Montgomery dies this year and has never made any taxable gifts. b. Calculate the amount of the estate tax due (if any), assuming Montgomery dies this year and made one taxable gift in 2006. The taxable gift was $1 million, and Montgomery used his 2006 applicable credit to avoid paying any gift tax. c. Calculate the amount of the estate tax due (if any), assuming Montgomery dies this year and made one taxable gift in 2006. The taxable gift was $5 million, and Montgomery used his $1 million 2006 applicable credit to reduce the gift tax in 2006. Montgomery plans to bequeath his investments to charity and leave his remaining assets to his surviving relatives. EXHIBIT 25-4 Discount Factors for Estimating the Value of Remainders Regulation 20.2031-7(d)(7) Table S.-Based on Life Table 2000CM Single Life Remainder Factors Applicable After May 1, 2009 [Interest rate] 4.6% 4.8% 5.0% 5.2% 5.4% 5.6% 4.2% 4.4% 5.8% 6.0% .06083 .05483 .04959 .04501 .04101 .03749 .03441 .03170 .02931 .02721 Age 0 Age 1 .05668 .05049 .04507 .04034 .03618 .03254 .02934 .02652 .02403 .02183 Age 2 .05858 .05222 .04665 .04178 .03750 .03373 .03042 .02750 .02492 .02264 Age 3 .06072 .05420 .04848 .04346 .03904 .03516 .03173 .02871 .02603 .02366 Age 4 .06303 .05634 .05046 .04530 .04075 .03674 .03319 .03006 .02729 .02483 Age 5 .06547 .05861 .05258 .04726 .04258 .03844 .03478 .03153 .02866 .02610 Age 6 .06805 .06102 .05482 .04935 .04453 .04026 .03647 .03312 .03014 .02749 Age 35 .19692 .18423 .17253 .16174 .15178 .14258 .13408 .12621 .11892 .11217 .20407 .19119 .17931 .16833 .15818 .14879 .14009 .13204 .12457 .11764 .21144 .19838 .18631 .17515 .16481 .15523 .14635 .13811 .13046 .12335 .21904 .20582 .19357 .18222 .17170 .16193 .15287 .14444 .13661 .12932 Age 36 Age 37 Age 38 Age 86 Age 87 Age 88 Age 89 .79825 .79044 .78278 .77524 .76783 .76055 .75340 .74636 .73944 .73264 .80921 .80176 79443 .78722 78014 .77316 .76630 .75956 75292 .74638 .81978 .81268 .80569 .79880 .79203 .78536 .77880 .77234 .76598 .75971 .82994 .82317 .81651 .80995 .80349 .79712 .79085 .78467 .77859 .77259 Source: Reg. $ 20.2031-7(d)(7) Table S
