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Hank is a single individual who possesses a life insurance policy worth $300,000 that will pay his two children a total of $800,000 upon his death. This year Hank transferred the policy and all incidents of ownership to an irrevocable trust that pays income annually to his two children for 15 years and then distributes the corpus to the children in equal shares.

a. Calculate the amount of gift tax due (if any) on the gift. Assume that Hank has made only one prior taxable gift of $5 million in 2011.

b. Calculate the amount of cumulative taxable transfers for estate tax purposes if Hank dies this year but after the date of the gift. At the time of his death, Hank's probate estate is $10 million and it is to be divided in equal shares between his two children.

EXHIBIT 25-1 Unified Transfer Tax Rates* Not Over Tentative Tax Plus of Amount Over Tax Base Equal to or Over $ 0 $10,000 S 0 18% $ 0 10,000 20,000 1,800 20 10,000 20,000 40,000 3,800 22 20,000 40,000 60,000 8,200 24 26 60,000 40,000 60,000 80,000 100,000 80,000 100,000 150,000 13,000 18,200 23,800 28 80,000 30 100,000 150,000 250,000 38,800 32 150,000 250,000 500,000 70.800 34 250,000 500,000 750,000 155,800 37 500.000 750,000 1,000,000 248,300 39 750,000 1,000,000 345,800 40 1,000,000 *The applicable credit and exemption is zero for estates that opted out of the estate tax in 2010. EXHIBIT 25-2 The Exemption Equivalent Year of Transfer Gift Tax Estate Tax 1986 $500,000 $500,000 1987-1997 600,000 600,000 1998 625,000 650,000 675,000 625,000 650,000 1999 2000-2001 675,000 2002-2003 1,000,000 1,000,000 2004-2005 1,000,000 1,500,000 2006-2008 2,000,000 1,000,000 1,000,000 2009-2010* 3,500,000 2011 5,000,000 5,000,000 2012 5,120,000 5,120,000 2013 5,250,000 5,250,000 2014 5,340,000 5,340,000 5,430,000 2015 5,430,000 2016 5,450,000 5,490,000 2017 5,450,000 5,490,000 11,180,000 2018 11,180,000 2019 11,400,000 11,400,000 *The applicable credit and exemption is zero for taxpayers who opt out of the estate tax in 2010