RANDCHILDREN Mel made the following gifts to his grandchildren during 2017 Seeing how Mel's mom outlived her assets, Mel is afraid his grandchildren may have the same fate. To assist them with their retirement income, Mel decided to establish a trust for the grandchildren. The trust is an irrevocable trust and he funded it in the current year with $400,000 The trust will accumulate income until each grandchild reaches age 50. When a grandchild reaches age 50, helshe will begin receiving an annuity for their life. When all of the grandchildren die, if there is any remaining assets then the trustee may distribute those assets to a charitable organization of his choosing Mel sent a check in the amount of S6,000 directly to Kali's private school to pay her tuition. Mel also gave both Cody and Riley $6,000 each. Assume Mel paid gift tax of $1,362,518 in 2016 for taxable gifts in the amount of $8,836,295 made in 2015. These were his first taxable gifts. ME STATEME SITION (AFTER GI ASSETS Cash & Cash Equivalents Cash LIABILITIES AND NET WORTH Primary Residence Total Current Liabilities $200,000 $120,000Auto 1 $210,000 Invested Assets The Bungalow Investment Portfolio $1,500,000 $800,000 Total Investments $2,800,000 Use Assets Residence Net Worth 290 $400,000 $100,000 $20,000 acation Pro Boat Total Personal Use Total Assets Total Liabilities and Net Financial Statements: 1. 2. 3. Assets are stated at fair market value (rounded to even dollars) Liabilities are stated at principal only (rounded to even dollars). The Bungalow was valued last week for insurance purposes. The valuation includes $100,000 for the land and $1,400,000 for the business. The qualified plan has Robyn listed as the designated beneficiary. The Investment Portfolio is a Transfer on Death (TOD) account with Kati and Karli as the listed beneficiaries. The adjusted basis of the personal residence is $200,000 Mel received the vacation property as a gift from his grandfather, Grover. Grover purchased the vacation property for $10,000 and the FMV of the property at the date of transfer was $30,000. The FMV when Grover died was $60,000. The annual exclusion did not apply to the transfer and the gift tax paid was $14,700 The boat is owned joint tenancy with rights of survivorship with Robyn. They each contributed 50% of the purchase price. The Statement of Financial Position only reflects Mel's interest. Mel's state does not have any statutes that invalidate bequests or beneficiary designations to prior spouses This statement is prepared after all the gifts were made, including the one to Oksana, and the gift tax has been paid for the 2015 gifts. 4. 5. 6. 7. 8. 9. STA Answer the following questions. (Numbers are rounded for convenience.) 1. Mel and Oksana decide to make an estate plan. What are the appropriate steps to create an estate plan? What practitioners should be included in the estate planning discussions and what are the roles of each practitioner? (Value 6 points) 2. Assuming Mel died February 1, 2018, calculate his gross estate. For full credit, identify each asset and its value. (Value 5 points) 3. Assuming Mel died February 1, 2018, calculate his probate estate. For full credit, identify each asset and its value. (Value -5 points) 4. Assuming Mel died February 1, 2018, calculate the Marital Deduction available for estate transfers to Oksana. (Value 5 points) 5. Assume Mel died February 1, 2018. For this question only, assume that the estate tax liability due is $266,881, and Kati is appointed executor. Unfortunately, Kati forgot to file an Estate Tax Retum (Form 706) and pay the estate tax due until 68 days after the return's due date. How much is the total penalty for failure-to-file and failure-to-pay? (Note this is not the actual estate tax liability due.) (Value 5 points) 6. What is the amount of Mel's total taxable gifts for 2017 (less the annual exclusion and qualified transfers)? (Value - 5 points) 7. Calculate Mel's gift tax due for 2017. Show your work. Even if the tax due is zero, show your calculation to earn full credit. (Value 5 points) Use the following scenario to answer questions 8 through 12. Assume, for Questions 6 through 10 only, that Mel and Oksana were maried today. They went straight to Mel's lawyer's office to execute new wills. On the way home from executing a valid will leaving all assets to Oksana, Mel and Oksana were in a serious car accident. Mel was comatose for several days before dying. His unpaid medical expenses were $150,000. The day after Mel died; Oksana gave Mel's children and grandchildren each $22,000 then left for France to stay with her mother. Which of the following postmortem elections would be available to Mel's executor? Yes, this election would be available. No, this election would not be available a. b. A QTIP election for the assets transferred to Oksana A deduction on Mel's final income tax return for the unpaid medical ex A split-gift election for gifts Oksana made to the Mel's children the day after Mel's death 10. I use valuation for the Bungalow 12. Married Filing Jointly filing status for the current year (Value 1 point each for questions 7-11) 13. Mel is considering transferring his life insurance policy to an ILIT. What benefits could Mel gain by implementing an ILIT? What risks does Mel face using an ILIT? (Value 5 points) 14. What trust options (besides an ILIT) would you recommend as part of Mel and Oksana's overall estate plan? Why? (At least 3 trust options must be discussed for full credit.) RANDCHILDREN Mel made the following gifts to his grandchildren during 2017 Seeing how Mel's mom outlived her assets, Mel is afraid his grandchildren may have the same fate. To assist them with their retirement income, Mel decided to establish a trust for the grandchildren. The trust is an irrevocable trust and he funded it in the current year with $400,000 The trust will accumulate income until each grandchild reaches age 50. When a grandchild reaches age 50, helshe will begin receiving an annuity for their life. When all of the grandchildren die, if there is any remaining assets then the trustee may distribute those assets to a charitable organization of his choosing Mel sent a check in the amount of S6,000 directly to Kali's private school to pay her tuition. Mel also gave both Cody and Riley $6,000 each. Assume Mel paid gift tax of $1,362,518 in 2016 for taxable gifts in the amount of $8,836,295 made in 2015. These were his first taxable gifts. ME STATEME SITION (AFTER GI ASSETS Cash & Cash Equivalents Cash LIABILITIES AND NET WORTH Primary Residence Total Current Liabilities $200,000 $120,000Auto 1 $210,000 Invested Assets The Bungalow Investment Portfolio $1,500,000 $800,000 Total Investments $2,800,000 Use Assets Residence Net Worth 290 $400,000 $100,000 $20,000 acation Pro Boat Total Personal Use Total Assets Total Liabilities and Net Financial Statements: 1. 2. 3. Assets are stated at fair market value (rounded to even dollars) Liabilities are stated at principal only (rounded to even dollars). The Bungalow was valued last week for insurance purposes. The valuation includes $100,000 for the land and $1,400,000 for the business. The qualified plan has Robyn listed as the designated beneficiary. The Investment Portfolio is a Transfer on Death (TOD) account with Kati and Karli as the listed beneficiaries. The adjusted basis of the personal residence is $200,000 Mel received the vacation property as a gift from his grandfather, Grover. Grover purchased the vacation property for $10,000 and the FMV of the property at the date of transfer was $30,000. The FMV when Grover died was $60,000. The annual exclusion did not apply to the transfer and the gift tax paid was $14,700 The boat is owned joint tenancy with rights of survivorship with Robyn. They each contributed 50% of the purchase price. The Statement of Financial Position only reflects Mel's interest. Mel's state does not have any statutes that invalidate bequests or beneficiary designations to prior spouses This statement is prepared after all the gifts were made, including the one to Oksana, and the gift tax has been paid for the 2015 gifts. 4. 5. 6. 7. 8. 9. STA Answer the following questions. (Numbers are rounded for convenience.) 1. Mel and Oksana decide to make an estate plan. What are the appropriate steps to create an estate plan? What practitioners should be included in the estate planning discussions and what are the roles of each practitioner? (Value 6 points) 2. Assuming Mel died February 1, 2018, calculate his gross estate. For full credit, identify each asset and its value. (Value 5 points) 3. Assuming Mel died February 1, 2018, calculate his probate estate. For full credit, identify each asset and its value. (Value -5 points) 4. Assuming Mel died February 1, 2018, calculate the Marital Deduction available for estate transfers to Oksana. (Value 5 points) 5. Assume Mel died February 1, 2018. For this question only, assume that the estate tax liability due is $266,881, and Kati is appointed executor. Unfortunately, Kati forgot to file an Estate Tax Retum (Form 706) and pay the estate tax due until 68 days after the return's due date. How much is the total penalty for failure-to-file and failure-to-pay? (Note this is not the actual estate tax liability due.) (Value 5 points) 6. What is the amount of Mel's total taxable gifts for 2017 (less the annual exclusion and qualified transfers)? (Value - 5 points) 7. Calculate Mel's gift tax due for 2017. Show your work. Even if the tax due is zero, show your calculation to earn full credit. (Value 5 points) Use the following scenario to answer questions 8 through 12. Assume, for Questions 6 through 10 only, that Mel and Oksana were maried today. They went straight to Mel's lawyer's office to execute new wills. On the way home from executing a valid will leaving all assets to Oksana, Mel and Oksana were in a serious car accident. Mel was comatose for several days before dying. His unpaid medical expenses were $150,000. The day after Mel died; Oksana gave Mel's children and grandchildren each $22,000 then left for France to stay with her mother. Which of the following postmortem elections would be available to Mel's executor? Yes, this election would be available. No, this election would not be available a. b. A QTIP election for the assets transferred to Oksana A deduction on Mel's final income tax return for the unpaid medical ex A split-gift election for gifts Oksana made to the Mel's children the day after Mel's death 10. I use valuation for the Bungalow 12. Married Filing Jointly filing status for the current year (Value 1 point each for questions 7-11) 13. Mel is considering transferring his life insurance policy to an ILIT. What benefits could Mel gain by implementing an ILIT? What risks does Mel face using an ILIT? (Value 5 points) 14. What trust options (besides an ILIT) would you recommend as part of Mel and Oksana's overall estate plan? Why? (At least 3 trust options must be discussed for full credit.)