Remember, the clients' goals and objectives must be considered in all recommendations. Prompt: Analyze the requested documentation that the clients have provided and complete the necessary calculations in order to determine the strengths and weaknesses of the estate. In addition, analyze the clients' assets, calculate the probate estate, and make recommendations based on the clients' goals and objectives. Specifically, the following critical elements must be addressed: I. Client Analysis: In this section of the estate plan, you will analyze the requested documentation that the clients have provided and determine the strengths and weaknesses of the estate. a) Analyze the clients' documentation. In your analysis, be sure to include the following elements: i. Describe current weaknesses and strengths of the clients' estate. Support your description with relevant examples. ii. Identify the beneficiaries of all will substitutes and determine whether they meet the clients' goals. Support your determination with relevant client information. iii. Prepare the clients' net worth statement, including all forms of ownership. iv. Determine the taxable estate based on the clients' net worth statement. V. Determine the tentative estate tax by applying appropriate tax rates to the clients' taxable estate. III. Probate/Forms of Ownership: In this section of the estate plan, you will analyze the clients' assets, calculate the probate estate, and make recommendations based on the clients' goals and objectives. a) Calculate the probate estate. b) Recommend assets that could be retitled to minimize probate exposure. Support your recommendation with relevant client information. c) Describe the tax implications that your recommendation has upon the clients' estate. Below, Bob and Betty have provided a list of assets with their fair market value (FMV) and their obligations (principal only) as of January 1, 2018. Bob's Cash account $288,000 $56,000 Betty's Schedule C cash account Bob's whole life insurance policy face value (FV) of $5,000,000; cash surrender value (CSV) of $450,000 Commercial building $6,000,000 Commercial building mortgage $1,250,000 Betty's SEP IRA $250,000 Bob's 401(k) $3,200,000 ChemCo stock (ESPP) $1,100,000 Bob's vested pension benefits $788,000 Vacation home $735,000 Personal residence $1,250,000 Personal property $150,000 Betty's jewelry $75,000 Southern New Hampshire University Bob's Dali painting $300,000 $500,000 Mortgage on personal residence Automobiles Betty ($32,000; auto loan of $24,000); Bob ($75,000) The cash account in the amount of $288,000 belongs solely to Bob. The cash account in the amount of $56,000 belongs solely to Betty. This cash account is tied to her sole proprietorship. In the last year, she earned $35,000 net of expenses, and she pays for her auto loan from this account. Bob's whole life insurance policy has an FV of $5,000,000 and a CSV of $450,000. The current beneficiary is the estate. The CSV is equivalent to the interpolated terminal reserve value, and unearned premiums are zero. The commercial building has a current value of $6,000,000. The building is held within Fisher Properties, LLC, which is a single-member limited liability company. Bob is the only member of this LLC. This commercial building is encumbered by a mortgage of $1,250,000. Betty has a SEP IRA valued at $250,000 which she funds using money from her salon business. Some years she contributes, and other years she does not. She has not filled out the beneficiary designation form. Bob's 401(k) plan is valued at $3,200,000, and its current asset allocation is balanced. The current beneficiary of the plan is Elaine, Bob's former wife. ChemCo stock was purchased by Bob throughout his employment through the ESPP. The stock is currently value at $1,100,000 with a cost basis of $250,000. ChemCo does not pay dividends. There is no named beneficiary. Bob's vested benefits from ChemCo equal $788,000. He is currently taking distributions under a life-only distribution option. Bob and Betty have a vacation home on the beach valued at $735,000. This property is held JWRS. Bob and Betty's personal residence was recently appraised for $1,250,000. The property is held as tenants by the entirety and is encumbered by a mortgage of $500,000. Bob and Betty's personal property combined is worth $150,000. Betty has jewelry worth $75,000. Bob's family heirloom, a Dali painting, is worth $300,000. Betty has an automobile valued at $32,000 less an auto loan of $24,000. Bob has an automobile valued at $75,000, with no outstanding loan. Objectives and Concerns of Clients: 1. The clients have a sizable estate and would like to decrease their estate tax exposure. 2. Bob desires that, upon his death, he will be able to provide an income stream for his wife and control the disposition of assets without increasing Betty's estate tax. 3. Bob has always been charitable and would like to make sure at least 10% of his estate value is donated to his church Supplemental information: 4. The clients would like to make sure that there are minimal assets subject to probate in order to avoid publicity and creditor claims. 5. Bob is concerned about making sure there is a named guardian for Katie in case of the simultaneous death of both he and Betty when traveling. 6. Bob wants to make sure that he provides an educational fund for Katie. Southern New Hampshire University 7. Bob would like to gift the Dali painting to his sister for her upcoming birthday. 8. Bob understands that his wife is not financially astute and does not want to leave her with assets that she will need to manage. 9. Bob's desire is to leave the rental property to Chase and Candace. 10. Bob wants to make sure that there is ample liquidity to cover administrative expenses and taxes, if applicable. 11. Bob wants to make sure that any unused exemption is transferred to Betty. 12. Bob wants to make sure that all estate documents are current and any missing documents are drafted. Excerpts from Bob's Will and Testament: Introduction Clause 1, Bob Fisher, a resident of and domiciled in Tampa, Florida, being of sound mind and under no constraint, do make, publish and declare this to be my Last Will and Testament, hereby, revoking all wills and codicils by me heretofore made. Specific Bequests I, Bob Fisher, give the sum of $25,000 to my sister, Julie Bushnell. Debt/Tax Clause I direct my personal representative (Executor) and/or successor to pay out of my residuary estate all enforceable debts or claims, except any mortgages creating liens upon real estate, including the expenses of my last illness, funeral and administrative costs, and to pay all legacy, succession, transfer, inheritance, estate and other similar taxes that may become payable by reason of my death. Residuary Clause If at the time of my death, I have a child or children then living, I give all of the rest, residue and remainder of my property and estate, including the proceeds of any insurance policy or policies payable to my estate and all property over which I may have general power of appointment, unto that person or those persons who are at the time of my death serving as the Trustee or Trustees under a certain instrument of trust entitled the Bob Fisher Revocable Trust Agreement dated May 28, 1993. Excerpts from Bob Fisher Revocable Trust Agreement dated May 28, 1993: Administration of Trust by Successor Trustee In the event of my death, Julie Bushnell, acting as the trustee of this trust, shall provide for payment out of the trust principal, without seeking reimbursement or recovery from any person: a) The decedent's legally enforceable debts or claims, except any mortgages creating liens upon real estate, including the expenses of my last illness, funeral and administrative costs, and to pay all legacy, succession, transfer, inheritance, estate and other similar taxes that may become payable by reason of my death. b) As of the date of my death, the trustee shall distribute the remaining trust principal, after providing for the above payments listed in paragraph (a) above, to my children Chase and Candace in equal shares. If at the time of my death, I have a child that predeceases me, their respective share of the corpus shall pass to the child's issue. Nonqualified Assets Cash Account Cash Account Chemco Stock Total Nonqualified Assets Qualified Assets SEP IRA 401K Vested Pension Benefits Total Qualified Assets Lifestyle Assets Personal Residence (TBE) Vacation Home (JWRS) Personal Property Dali Painting Jewelry Auto Auto Total Lifestyle Assets Life Insurance Cash Value Whole Life Insurance Total Cash Value Real Estate Assets Commercial Building (LLC) Total Real Estate Assets Total Assets Liabilities Mort on Personal Residenc Mort on Comm. Building (L Auto Loan Total Net Worth ISI H H I IS H H J ISSILLL J J H H H H J HS Net Worth Statement As of January 1, 2018 ( ) ( ) Asset Cash Account Cash Account Whole Life Insurance Commercial Building SEP IRA 401 K Chemco Stk ESP Vested Pension Benefits Vacation Home Personal Residence Personal Property Jewelry Dali Painting Auto Auto Total Marital Deduction Less: 1/2 Mortgage on PR Adjusted Marital Deduction Form of Ownership H S H H S H H H Joint Joint Joint S H S H Estate Valuation Template Milestone One (Before Estate Plan) Total Gross Value Estate Probate Estate Marital Deduction Charitable Deduction Estate Tax (Before Estate Plan) Milestone One Gross Estate Less: Funeral Costs (*) Admin. Costs (based on probate estate) Debts Adjusted Gross Estate Less: Marital Deduction Charitable Deduction Taxable Estate Adjusted Taxable Gifts Estate Tax Base Tentative Estate Tax Less: Applicable Credit Amount Net Estate Tax Due Prior to Estate Plan: $90,000 plus 1.5% of the excess over $11,180,000 Subsequent to Estate Plan: Administration costs reduced to $20,000 Estate Tax (After Estate Plan) Milestone Two Gross Estate Less: Estate Tax (Before Estate Plan) Milestone One Funeral Costs (*) Admin. Costs (based on probate estate) Debts Adjusted Gross Estate Less: Marital Deduction Charitable Deduction Taxable Estate Adjusted Taxable Gifts Estate Tax Base Tentative Estate Tax Less: Applicable Credit Amount Net Estate Tax Due Prior to Estate Plan: $90,000 plus 1.5% of the excess over $11,180,000 Subsequent to Estate Plan: Administration costs reduced to $20,000 Estate Tax (After Estate Plan) Milestone Two Remember, the clients' goals and objectives must be considered in all recommendations. Prompt: Analyze the requested documentation that the clients have provided and complete the necessary calculations in order to determine the strengths and weaknesses of the estate. In addition, analyze the clients' assets, calculate the probate estate, and make recommendations based on the clients' goals and objectives. Specifically, the following critical elements must be addressed: I. Client Analysis: In this section of the estate plan, you will analyze the requested documentation that the clients have provided and determine the strengths and weaknesses of the estate. a) Analyze the clients' documentation. In your analysis, be sure to include the following elements: i. Describe current weaknesses and strengths of the clients' estate. Support your description with relevant examples. ii. Identify the beneficiaries of all will substitutes and determine whether they meet the clients' goals. Support your determination with relevant client information. iii. Prepare the clients' net worth statement, including all forms of ownership. iv. Determine the taxable estate based on the clients' net worth statement. V. Determine the tentative estate tax by applying appropriate tax rates to the clients' taxable estate. III. Probate/Forms of Ownership: In this section of the estate plan, you will analyze the clients' assets, calculate the probate estate, and make recommendations based on the clients' goals and objectives. a) Calculate the probate estate. b) Recommend assets that could be retitled to minimize probate exposure. Support your recommendation with relevant client information. c) Describe the tax implications that your recommendation has upon the clients' estate. Below, Bob and Betty have provided a list of assets with their fair market value (FMV) and their obligations (principal only) as of January 1, 2018. Bob's Cash account $288,000 $56,000 Betty's Schedule C cash account Bob's whole life insurance policy face value (FV) of $5,000,000; cash surrender value (CSV) of $450,000 Commercial building $6,000,000 Commercial building mortgage $1,250,000 Betty's SEP IRA $250,000 Bob's 401(k) $3,200,000 ChemCo stock (ESPP) $1,100,000 Bob's vested pension benefits $788,000 Vacation home $735,000 Personal residence $1,250,000 Personal property $150,000 Betty's jewelry $75,000 Southern New Hampshire University Bob's Dali painting $300,000 $500,000 Mortgage on personal residence Automobiles Betty ($32,000; auto loan of $24,000); Bob ($75,000) The cash account in the amount of $288,000 belongs solely to Bob. The cash account in the amount of $56,000 belongs solely to Betty. This cash account is tied to her sole proprietorship. In the last year, she earned $35,000 net of expenses, and she pays for her auto loan from this account. Bob's whole life insurance policy has an FV of $5,000,000 and a CSV of $450,000. The current beneficiary is the estate. The CSV is equivalent to the interpolated terminal reserve value, and unearned premiums are zero. The commercial building has a current value of $6,000,000. The building is held within Fisher Properties, LLC, which is a single-member limited liability company. Bob is the only member of this LLC. This commercial building is encumbered by a mortgage of $1,250,000. Betty has a SEP IRA valued at $250,000 which she funds using money from her salon business. Some years she contributes, and other years she does not. She has not filled out the beneficiary designation form. Bob's 401(k) plan is valued at $3,200,000, and its current asset allocation is balanced. The current beneficiary of the plan is Elaine, Bob's former wife. ChemCo stock was purchased by Bob throughout his employment through the ESPP. The stock is currently value at $1,100,000 with a cost basis of $250,000. ChemCo does not pay dividends. There is no named beneficiary. Bob's vested benefits from ChemCo equal $788,000. He is currently taking distributions under a life-only distribution option. Bob and Betty have a vacation home on the beach valued at $735,000. This property is held JWRS. Bob and Betty's personal residence was recently appraised for $1,250,000. The property is held as tenants by the entirety and is encumbered by a mortgage of $500,000. Bob and Betty's personal property combined is worth $150,000. Betty has jewelry worth $75,000. Bob's family heirloom, a Dali painting, is worth $300,000. Betty has an automobile valued at $32,000 less an auto loan of $24,000. Bob has an automobile valued at $75,000, with no outstanding loan. Objectives and Concerns of Clients: 1. The clients have a sizable estate and would like to decrease their estate tax exposure. 2. Bob desires that, upon his death, he will be able to provide an income stream for his wife and control the disposition of assets without increasing Betty's estate tax. 3. Bob has always been charitable and would like to make sure at least 10% of his estate value is donated to his church Supplemental information: 4. The clients would like to make sure that there are minimal assets subject to probate in order to avoid publicity and creditor claims. 5. Bob is concerned about making sure there is a named guardian for Katie in case of the simultaneous death of both he and Betty when traveling. 6. Bob wants to make sure that he provides an educational fund for Katie. Southern New Hampshire University 7. Bob would like to gift the Dali painting to his sister for her upcoming birthday. 8. Bob understands that his wife is not financially astute and does not want to leave her with assets that she will need to manage. 9. Bob's desire is to leave the rental property to Chase and Candace. 10. Bob wants to make sure that there is ample liquidity to cover administrative expenses and taxes, if applicable. 11. Bob wants to make sure that any unused exemption is transferred to Betty. 12. Bob wants to make sure that all estate documents are current and any missing documents are drafted. Excerpts from Bob's Will and Testament: Introduction Clause 1, Bob Fisher, a resident of and domiciled in Tampa, Florida, being of sound mind and under no constraint, do make, publish and declare this to be my Last Will and Testament, hereby, revoking all wills and codicils by me heretofore made. Specific Bequests I, Bob Fisher, give the sum of $25,000 to my sister, Julie Bushnell. Debt/Tax Clause I direct my personal representative (Executor) and/or successor to pay out of my residuary estate all enforceable debts or claims, except any mortgages creating liens upon real estate, including the expenses of my last illness, funeral and administrative costs, and to pay all legacy, succession, transfer, inheritance, estate and other similar taxes that may become payable by reason of my death. Residuary Clause If at the time of my death, I have a child or children then living, I give all of the rest, residue and remainder of my property and estate, including the proceeds of any insurance policy or policies payable to my estate and all property over which I may have general power of appointment, unto that person or those persons who are at the time of my death serving as the Trustee or Trustees under a certain instrument of trust entitled the Bob Fisher Revocable Trust Agreement dated May 28, 1993. Excerpts from Bob Fisher Revocable Trust Agreement dated May 28, 1993: Administration of Trust by Successor Trustee In the event of my death, Julie Bushnell, acting as the trustee of this trust, shall provide for payment out of the trust principal, without seeking reimbursement or recovery from any person: a) The decedent's legally enforceable debts or claims, except any mortgages creating liens upon real estate, including the expenses of my last illness, funeral and administrative costs, and to pay all legacy, succession, transfer, inheritance, estate and other similar taxes that may become payable by reason of my death. b) As of the date of my death, the trustee shall distribute the remaining trust principal, after providing for the above payments listed in paragraph (a) above, to my children Chase and Candace in equal shares. If at the time of my death, I have a child that predeceases me, their respective share of the corpus shall pass to the child's issue. Nonqualified Assets Cash Account Cash Account Chemco Stock Total Nonqualified Assets Qualified Assets SEP IRA 401K Vested Pension Benefits Total Qualified Assets Lifestyle Assets Personal Residence (TBE) Vacation Home (JWRS) Personal Property Dali Painting Jewelry Auto Auto Total Lifestyle Assets Life Insurance Cash Value Whole Life Insurance Total Cash Value Real Estate Assets Commercial Building (LLC) Total Real Estate Assets Total Assets Liabilities Mort on Personal Residenc Mort on Comm. Building (L Auto Loan Total Net Worth ISI H H I IS H H J ISSILLL J J H H H H J HS Net Worth Statement As of January 1, 2018 ( ) ( ) Asset Cash Account Cash Account Whole Life Insurance Commercial Building SEP IRA 401 K Chemco Stk ESP Vested Pension Benefits Vacation Home Personal Residence Personal Property Jewelry Dali Painting Auto Auto Total Marital Deduction Less: 1/2 Mortgage on PR Adjusted Marital Deduction Form of Ownership H S H H S H H H Joint Joint Joint S H S H Estate Valuation Template Milestone One (Before Estate Plan) Total Gross Value Estate Probate Estate Marital Deduction Charitable Deduction Estate Tax (Before Estate Plan) Milestone One Gross Estate Less: Funeral Costs (*) Admin. Costs (based on probate estate) Debts Adjusted Gross Estate Less: Marital Deduction Charitable Deduction Taxable Estate Adjusted Taxable Gifts Estate Tax Base Tentative Estate Tax Less: Applicable Credit Amount Net Estate Tax Due Prior to Estate Plan: $90,000 plus 1.5% of the excess over $11,180,000 Subsequent to Estate Plan: Administration costs reduced to $20,000 Estate Tax (After Estate Plan) Milestone Two Gross Estate Less: Estate Tax (Before Estate Plan) Milestone One Funeral Costs (*) Admin. Costs (based on probate estate) Debts Adjusted Gross Estate Less: Marital Deduction Charitable Deduction Taxable Estate Adjusted Taxable Gifts Estate Tax Base Tentative Estate Tax Less: Applicable Credit Amount Net Estate Tax Due Prior to Estate Plan: $90,000 plus 1.5% of the excess over $11,180,000 Subsequent to Estate Plan: Administration costs reduced to $20,000 Estate Tax (After Estate Plan) Milestone Two