Robert and Lisa Franklin Case Personal and Financial Objectives: 1.) Robert plans to retire now and begin his retirement by traveling around the world with Lisa. 2.) Robert plans to sell his share of the securities business. He wants to sell half of his share of the business to his key employee, Mark Newhart. He wants to sell the other half to his daughter, Elise, who is the senior broker at the firm. 3.) After traveling around the world, Robert plans to return to the business as a self-employed consultant on a fee basis, beginning this year. 4.) Robert Jr. will be starting at a private university in the fall of 2. 5.) Robert's grandchild, Greg, Pam's youngest child, was born with a serious physical disability. Robert plans to give Greg $2.5 million through a trust for his care and benefit. Economic Information The couple expects inflation to average 4% annually. The expected stock market returns are 10% annually, as measured by the S&P 500 Index, with a standard deviation of 15% - Tuition is currently $30,000 per year at the private university. The expected education inflation rate is 5%. The 30-day T-bill is yielding 3.5%. The 30-year Treasury bond is yielding 7.5%. Current mortgage rates are 7.5% for 15 years and 8% for 30 years. In addition, closing costs (3% of the mortgage) will be paid at closing and not financed. Insurance Information Life Insurance Neither spouse has life insurance. Health Insurance Robert's business provide health coverage for both Lisa and himself during employment and during retirement Major medical with an 80/20 coinsurance clause. $250 deductible per person. $2,000 family stop-loss provision. Disability Insurance Neither Robert nor Lisa has disability insurance. Umbrella Liability Policy They have $5 million of coverage, Automobile Insurance They have liability coverage, $250,000/S500,000/$100,000. They also carry They have liability coverage, S250,000/S500,000/S100,000. They also carry comprehensive and collision on their autos. Homeowners Insurance They have HO-3 policies on their primary residence and vacation homes. The vacation homes are located on the US Gulf coast and in the mountains Dwelling Coinsurance requirement Deductible - all other covered losses Deductible - hurricane Residence Gulf Coast Home $975,000 $700,000 80% 80% $250 $250 wa $10.500 Mountain Home $600,000 80% S250 n/a Insurance Premium Car insurance: $6,000 per year for all three of Robert and Lisa's automobiles. Homeowners insurance: $8,500 per year (includes all homes). Boat insurance: $1,200 per year (covered under the umbrella policy). Umbrella policy: 51.000 per year. Investment Information The Franklins have a required rate of retum of 8% The couple can tolerate medium to high amounts of risk but have little need to take excessive risks because of their net worth. Robert's 401(k) plan investments are secure in a well-diversified but relatively volatile group of small-cap value stocks. The 401(k) is still in the Smith Brothers Retirement Plan Robert has a single premium deferred annuity that was purchase on July 1, 1981, for $60,000 and is current worth $233,047. The expected return over the next year and the 15 years of fixed term of the annuity is 6%. The start date of the monthly annuity is January 1, 2016, when the expected fair market value will be $247,030. Robert plans to sell 4,468 shares of Dollar Mart stock to his daughter, Vicki, who is rs/williamsa/Desktop/Hober Wrect Robert plans to sell 4.468 shares of Dollar Mart stock to his daughter, Vicki, who is employed by Dollar Mart. Robert anticipates the stock will greatly appreciate in the upcoming years. The stock was purchase in 2008 for $26.66 per share and is currently trading for $11.25 per share. Income Tax Information Robert and Lisa are currently in the highest foderal income tax bracket, 37%. They also pay state taxes of 5% For personal income tax reporting, Robert has a $700,000 salary. They do not reside in a community property state. Retirement Information - The 401(k) plan has a balance of $600,000 consisting of a portfolio of small-cap value stocks. The portfolio is projected to average a return of 16% over the next 20 years with a standard deviation of 8% Robert's anticipated Social Security retirement benefit is $24.000 per year this year and will increase at the expected consumer price index (CPI) of 4% 1 Robert has a profit-sharing type of Keogh plan. His company contributos $12,000 per year to the profit sharing plan. The contributions to this plan have been made out of the company's profits. The balance in his account is a result of annual contributions of $12,000, with a 7% approximate average retum Robert und Lina will continue to collect $200,000 per year in rental proceeds from Commercial Property A Robert will receive $50,000 per year from the charitable remainder annuity trust (CRAT) that owns Commercial Property B for Robert's lifetime. Gifts, Estates, Trusts and will Information Gifts flimminkinonditimit Gifts, Estates, Trusts and Will Information Gifts The following are the Franklins' only lifetime gifts. - For the past several years, Robert has given cash gifts to each of his give children. Each gift has been equal to the annual exclusion amount for the year of the gift, so no taxable gifts have resulted - Robert is planning to transfer $1 million of property to a grantor retained annuity trust (GRAT) this year. Robert hopes to save on gift and estate taxes by transferring this portion of his interest into a trust while retaining the right to a fixed ordinary annuity of $298,059 for a term of 10 years. The Franklins' give children will be the remainder beneficiaries of the GRAT. Upon the death of a remainderman, the interest will pass to the remainderman's descendants. If a remainderman dies without heirs, then the remainderman's interest will pass to the other children pro rata. Based on recent Section 7520 rates, Robert expects the taxable gift resulting from the transfer will be $1 million. Lisa has made no taxable gifts during her lifetime nor have any gifts been split Last year, Robert established a 5% CRAT by donating a piece of real estate (an apartment building, Commercial Property B) inherited from his grandfather. The initial valuation of the trust was $1 million with the initial income in the first year projected to be $50,000 beginning this year. Robert is the income beneficiary, and the charitable remainder beneficiary is the Chicago Art Institute Robert plans to donate $2.5 million to an irrevocable trust for his grandchild, Grog, the youngest child of Pam. Estates The Franklin's last illness and funeral expenses combined with estate administration expenses are estimated at $450,00 cach. Robert and Lisa have simple wills. They have left all probate nssets to each other. Each will also include a six-month survivorship cluse. Debts and taxes are to be paid from the residue of the estate WILL Excerpts from Robert Franklin's Last Will and Testament 1. ROBERT FRANKLIN SR., being of sound mind and wishing to make proper disposition of my property in the event of my death, do declare this to be my Last Will and Testament. I revoke all of my prior wills and codicils, 1.1 I have been married but once, and only to Lisa Franklin with whom I am presently living, 1.2 Out of my marriage to Lisa Franklin, five children were bom namely Pam Franklin, Elise Franklin, Jackie Franklin, Vicki Franklin and Robert Franklin Ir. 1.3 I have adopted no one nor has anyone adopted me. 3.1 I give my entire estate to Lisa Franklin, my wife. In the event that Lisa Franklin predeoenses me or fails to survive me for more than six months from the date of my death, I give my entire estate to my children in equal shures. 3.3 In the event that any of the named heirs should predecease me, die within six months from the date of my death, disclaim or otherwise fail to accept any property bequenth to him and suid legatee has no descendants, his share of all of my property of which I die possessed shall be given to the surviving named logateos. 5.1 I name Lisa Franklin to serve as my executrix of my succession, with full seisin and without bond 5.2 I direct that the expenses of my last illness, funeral, and the administrations of my estate shall be paid by my executrix as soon as practicable after my death. 5.3 all inheritance, estate succession, transfer and other taxes payable by torson of my death shall be apportioned in acordance with the law. Statement of Income and Expenses TOTALS $700,000.00 CASH INFLOWS Salaries Robert's Salary Passive Income Rental Income Total Salaries $700,000.00 $200,000.00 Total Passive $200,000.00 Investment Income Interest Income Dividend Income $1,000.00 $6,500.00 Total Investment $7,500.00 TOTAL CASH INFLOWS $907,500.00 CASH OUTFLOWS Ordinary Living Expenses Credit Car Payments Entertainment Food Clothes Udlities Charity $2,400.00 $50,000.00 $14,400,00 $30,000.00 $24,000.00 $90,000.00 Total Ordinary Living Expenses $210,800.00 Debt Payments Primary Residence Vacation Home Vacation Home 2 1 $37,030.00 $45,181.00 579,308,00 Total Debt Payments $161.519.00 Insurance Premium Homeowners Auto Hout $8,500.00 $6,000.00 $1,200.00 $1,000.00 Umbrelli Total Insurance Premium 516,700.00 Tires Property Tax Income Tax 584,000.00 $408,375.00 Total Tate TOTAL CASH OUTHOWS NET DISCRETIONARY CASH FLOW 5492,375.00 5881,394.00 $26,106,00 Statement of Financial Position LIABILITIES AND NET WORTH ASSETS S w word S.. 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SI th S411,4T & NEW TA Information Regarding Assets and Liabilities Franklin Securities - Robert is a 50% Partner The fair market value of Robert's interest is $5 million The current adjusted taxable basis is $1 million, Details of the transfer of the business (sale) are as follows: 50% a 10 year installment sale to Mark Newhart for a down payment of 20% on January 1" this year and monthly payments beginning February 1" this year at 10% interest 50% - self-cancelling installment note (SCIN) or private annuity to Elise, Primary Residence Purchased 2003 Jointly owner - Joint Tenants with Rights of Survivorship Market value $1.3 million Original purchase price $300,000 Current mortgage at 12% interest: payment of $3,085.84, (30 year) per month Vacation Home-Gull Coast Jointly owned; purchased in 2016 Market value $800,000 Original purchase price $400,000 Current mortgage at 7.75%, payment of S3,765.10, (15 your) per month sers/williamsa/Desktop/Robert%20and%20Lisa%20Franklin%20C Vacation Home Woman Jointly owned; purchased in 2018 Market value $700,000 Original purchase price $700,000 Current mortgage at 7.8%; payment of $6,608.99. (15 year) per month Commercial Property Original site of the business Fair market value $1.5 million Adjusted basis $200,000 Single Premium Deferred Annuity Robert purchased this annuity on July 1, 1981 for $60,000. The current fair market value is $233,047 An earnings rate of 6% compounded annually is expected in the near term. Annuity start date is January 1, 2016, at which time the fair market value is projected to be $247,030 and will consist of 190 monthly payments (15 years). If Robert dies before the annuity start date, Lisa is named beneficiary (100% joint and survivor annuity) Summary of Indebtedness Asset Interest 1 Mortgage Term Payment Amount Years 4/1/98 $300,000 30 Monthly Remaining Remaining Payments Payments Balance $3,085,85 183 $258,629.70 12% 1/1/11 Primary Residence Vacation Home GC Vacation Home M $400,000 15 7.75% $3,765.10 156 $369,427.86 7/1/13 $700,000 15 7.80% $6,608.99174 $687,443.56 Detailed Investment Portfolios Robert's Portfolio Description Sears Dollar Mart Canon, Inc RC Inc. WW Grainger City Electronics Total Acquired BOS 1/08 2/10 9/10 10/13 9/13 Shares 16,325 4,468 22,249 3,742 4,257 10,561 Adjusted Basis 5201,633 $119,117 $400,188 $67,181 $221,435 S304,062 Beta 0.9 1.2 1.4 1.5 1.2 1.2 Current FMV $830,214 $50,265 $2,230,462 $222,600 $311,293 $355,166 $4,000,000 . The RC, Inc, stock is Section 1244 Small Business Stock Lisa's Portfolio Description Beta Current FMV Acquired Adjusted Basis $30,504 1/05 2,542 0.6 $50,209 2/10 1,500 $120,000 0.5 $167.250 Tenet Health Care Bay Bank, Inc Microsoft Zenith Total 9/10 10/11 589 22,190 $53,010 $177,520 0,7 0.8 566,189 $216,352 $500,000 Questions 1. Assume Lisa dios this year a. What is the value of Lisa's grossestate? b. What amount qualifies for the marital deduction in Lisa's estate assuming Robert survives for 6 months following her death? Microsoft Zenith Total 9/10 10/11 589 22,190 $53,010 $177,520 0.7 0.8 $66,189 $216,352 $500,000 Questions 1. Assume Lisa dies this year. a. What is the value of Lisa's gross estate? b. What amount qualifies for the marital deduction in Lisa's estate assuming Robert survives for 6 months following her death? 2. Which of the following transfers will not result in a taxable gift from Robert in this year, assuming he makes no other gifts? a. Robert pays each grandchild's private school tuition, $6,000 each. b. Robert pays City Hospital for the hospital bill of a friend, $15,000. c. Robert pays a university for a distant cousin's law school tuition, $16,000. d. Robert pays the tuition for Robert Jr. directly to a private university, $30,000. 3. What is the impact of the survivorship clause in Robert's will? 4. Robert and Lisa are considering the purchase of a joint and survivorship (second-to-die) life insurance policy for the purpose of wealth replacement for the assets that were transferred to the CRAT and to help to create estate liquidity, Discuss the most appropriate way to own the joint and survivorship life insurance. 5. What estate planning recommendations would you make to the Franklins? 6. Explain the benefits of the grantor retained annuity trust (GRAT) Robert is planning to create 7. What are the advantages of using a charitable remainder trust (CRAT)? 8. Discuss SCINs and how its use would affect Robert Franklin and his daughter Elise in the sale of half of his share of Franklin Securities to her instead of in an installment sale. 9. If the Franklin set up an irrevocable trust for the rest of their grandchildren, what kind of tax will the grandchildren pay on the income distributed to them from this trust? Robert and Lisa Franklin Case Personal and Financial Objectives: 1.) Robert plans to retire now and begin his retirement by traveling around the world with Lisa. 2.) Robert plans to sell his share of the securities business. He wants to sell half of his share of the business to his key employee, Mark Newhart. He wants to sell the other half to his daughter, Elise, who is the senior broker at the firm. 3.) After traveling around the world, Robert plans to return to the business as a self-employed consultant on a fee basis, beginning this year. 4.) Robert Jr. will be starting at a private university in the fall of 2. 5.) Robert's grandchild, Greg, Pam's youngest child, was born with a serious physical disability. Robert plans to give Greg $2.5 million through a trust for his care and benefit. Economic Information The couple expects inflation to average 4% annually. The expected stock market returns are 10% annually, as measured by the S&P 500 Index, with a standard deviation of 15% - Tuition is currently $30,000 per year at the private university. The expected education inflation rate is 5%. The 30-day T-bill is yielding 3.5%. The 30-year Treasury bond is yielding 7.5%. Current mortgage rates are 7.5% for 15 years and 8% for 30 years. In addition, closing costs (3% of the mortgage) will be paid at closing and not financed. Insurance Information Life Insurance Neither spouse has life insurance. Health Insurance Robert's business provide health coverage for both Lisa and himself during employment and during retirement Major medical with an 80/20 coinsurance clause. $250 deductible per person. $2,000 family stop-loss provision. Disability Insurance Neither Robert nor Lisa has disability insurance. Umbrella Liability Policy They have $5 million of coverage, Automobile Insurance They have liability coverage, $250,000/S500,000/$100,000. They also carry They have liability coverage, S250,000/S500,000/S100,000. They also carry comprehensive and collision on their autos. Homeowners Insurance They have HO-3 policies on their primary residence and vacation homes. The vacation homes are located on the US Gulf coast and in the mountains Dwelling Coinsurance requirement Deductible - all other covered losses Deductible - hurricane Residence Gulf Coast Home $975,000 $700,000 80% 80% $250 $250 wa $10.500 Mountain Home $600,000 80% S250 n/a Insurance Premium Car insurance: $6,000 per year for all three of Robert and Lisa's automobiles. Homeowners insurance: $8,500 per year (includes all homes). Boat insurance: $1,200 per year (covered under the umbrella policy). Umbrella policy: 51.000 per year. Investment Information The Franklins have a required rate of retum of 8% The couple can tolerate medium to high amounts of risk but have little need to take excessive risks because of their net worth. Robert's 401(k) plan investments are secure in a well-diversified but relatively volatile group of small-cap value stocks. The 401(k) is still in the Smith Brothers Retirement Plan Robert has a single premium deferred annuity that was purchase on July 1, 1981, for $60,000 and is current worth $233,047. The expected return over the next year and the 15 years of fixed term of the annuity is 6%. The start date of the monthly annuity is January 1, 2016, when the expected fair market value will be $247,030. Robert plans to sell 4,468 shares of Dollar Mart stock to his daughter, Vicki, who is rs/williamsa/Desktop/Hober Wrect Robert plans to sell 4.468 shares of Dollar Mart stock to his daughter, Vicki, who is employed by Dollar Mart. Robert anticipates the stock will greatly appreciate in the upcoming years. The stock was purchase in 2008 for $26.66 per share and is currently trading for $11.25 per share. Income Tax Information Robert and Lisa are currently in the highest foderal income tax bracket, 37%. They also pay state taxes of 5% For personal income tax reporting, Robert has a $700,000 salary. They do not reside in a community property state. Retirement Information - The 401(k) plan has a balance of $600,000 consisting of a portfolio of small-cap value stocks. The portfolio is projected to average a return of 16% over the next 20 years with a standard deviation of 8% Robert's anticipated Social Security retirement benefit is $24.000 per year this year and will increase at the expected consumer price index (CPI) of 4% 1 Robert has a profit-sharing type of Keogh plan. His company contributos $12,000 per year to the profit sharing plan. The contributions to this plan have been made out of the company's profits. The balance in his account is a result of annual contributions of $12,000, with a 7% approximate average retum Robert und Lina will continue to collect $200,000 per year in rental proceeds from Commercial Property A Robert will receive $50,000 per year from the charitable remainder annuity trust (CRAT) that owns Commercial Property B for Robert's lifetime. Gifts, Estates, Trusts and will Information Gifts flimminkinonditimit Gifts, Estates, Trusts and Will Information Gifts The following are the Franklins' only lifetime gifts. - For the past several years, Robert has given cash gifts to each of his give children. Each gift has been equal to the annual exclusion amount for the year of the gift, so no taxable gifts have resulted - Robert is planning to transfer $1 million of property to a grantor retained annuity trust (GRAT) this year. Robert hopes to save on gift and estate taxes by transferring this portion of his interest into a trust while retaining the right to a fixed ordinary annuity of $298,059 for a term of 10 years. The Franklins' give children will be the remainder beneficiaries of the GRAT. Upon the death of a remainderman, the interest will pass to the remainderman's descendants. If a remainderman dies without heirs, then the remainderman's interest will pass to the other children pro rata. Based on recent Section 7520 rates, Robert expects the taxable gift resulting from the transfer will be $1 million. Lisa has made no taxable gifts during her lifetime nor have any gifts been split Last year, Robert established a 5% CRAT by donating a piece of real estate (an apartment building, Commercial Property B) inherited from his grandfather. The initial valuation of the trust was $1 million with the initial income in the first year projected to be $50,000 beginning this year. Robert is the income beneficiary, and the charitable remainder beneficiary is the Chicago Art Institute Robert plans to donate $2.5 million to an irrevocable trust for his grandchild, Grog, the youngest child of Pam. Estates The Franklin's last illness and funeral expenses combined with estate administration expenses are estimated at $450,00 cach. Robert and Lisa have simple wills. They have left all probate nssets to each other. Each will also include a six-month survivorship cluse. Debts and taxes are to be paid from the residue of the estate WILL Excerpts from Robert Franklin's Last Will and Testament 1. ROBERT FRANKLIN SR., being of sound mind and wishing to make proper disposition of my property in the event of my death, do declare this to be my Last Will and Testament. I revoke all of my prior wills and codicils, 1.1 I have been married but once, and only to Lisa Franklin with whom I am presently living, 1.2 Out of my marriage to Lisa Franklin, five children were bom namely Pam Franklin, Elise Franklin, Jackie Franklin, Vicki Franklin and Robert Franklin Ir. 1.3 I have adopted no one nor has anyone adopted me. 3.1 I give my entire estate to Lisa Franklin, my wife. In the event that Lisa Franklin predeoenses me or fails to survive me for more than six months from the date of my death, I give my entire estate to my children in equal shures. 3.3 In the event that any of the named heirs should predecease me, die within six months from the date of my death, disclaim or otherwise fail to accept any property bequenth to him and suid legatee has no descendants, his share of all of my property of which I die possessed shall be given to the surviving named logateos. 5.1 I name Lisa Franklin to serve as my executrix of my succession, with full seisin and without bond 5.2 I direct that the expenses of my last illness, funeral, and the administrations of my estate shall be paid by my executrix as soon as practicable after my death. 5.3 all inheritance, estate succession, transfer and other taxes payable by torson of my death shall be apportioned in acordance with the law. Statement of Income and Expenses TOTALS $700,000.00 CASH INFLOWS Salaries Robert's Salary Passive Income Rental Income Total Salaries $700,000.00 $200,000.00 Total Passive $200,000.00 Investment Income Interest Income Dividend Income $1,000.00 $6,500.00 Total Investment $7,500.00 TOTAL CASH INFLOWS $907,500.00 CASH OUTFLOWS Ordinary Living Expenses Credit Car Payments Entertainment Food Clothes Udlities Charity $2,400.00 $50,000.00 $14,400,00 $30,000.00 $24,000.00 $90,000.00 Total Ordinary Living Expenses $210,800.00 Debt Payments Primary Residence Vacation Home Vacation Home 2 1 $37,030.00 $45,181.00 579,308,00 Total Debt Payments $161.519.00 Insurance Premium Homeowners Auto Hout $8,500.00 $6,000.00 $1,200.00 $1,000.00 Umbrelli Total Insurance Premium 516,700.00 Tires Property Tax Income Tax 584,000.00 $408,375.00 Total Tate TOTAL CASH OUTHOWS NET DISCRETIONARY CASH FLOW 5492,375.00 5881,394.00 $26,106,00 Statement of Financial Position LIABILITIES AND NET WORTH ASSETS S w word S.. Tool A 19.00 00 ITS w Lupo HD Kar IT-WA AYO COM 14 tengt - JT JTM TH IT ITV Outro ITVM SLO 30 DO HA w w Tel. S. H. SI th S411,4T & NEW TA Information Regarding Assets and Liabilities Franklin Securities - Robert is a 50% Partner The fair market value of Robert's interest is $5 million The current adjusted taxable basis is $1 million, Details of the transfer of the business (sale) are as follows: 50% a 10 year installment sale to Mark Newhart for a down payment of 20% on January 1" this year and monthly payments beginning February 1" this year at 10% interest 50% - self-cancelling installment note (SCIN) or private annuity to Elise, Primary Residence Purchased 2003 Jointly owner - Joint Tenants with Rights of Survivorship Market value $1.3 million Original purchase price $300,000 Current mortgage at 12% interest: payment of $3,085.84, (30 year) per month Vacation Home-Gull Coast Jointly owned; purchased in 2016 Market value $800,000 Original purchase price $400,000 Current mortgage at 7.75%, payment of S3,765.10, (15 your) per month sers/williamsa/Desktop/Robert%20and%20Lisa%20Franklin%20C Vacation Home Woman Jointly owned; purchased in 2018 Market value $700,000 Original purchase price $700,000 Current mortgage at 7.8%; payment of $6,608.99. (15 year) per month Commercial Property Original site of the business Fair market value $1.5 million Adjusted basis $200,000 Single Premium Deferred Annuity Robert purchased this annuity on July 1, 1981 for $60,000. The current fair market value is $233,047 An earnings rate of 6% compounded annually is expected in the near term. Annuity start date is January 1, 2016, at which time the fair market value is projected to be $247,030 and will consist of 190 monthly payments (15 years). If Robert dies before the annuity start date, Lisa is named beneficiary (100% joint and survivor annuity) Summary of Indebtedness Asset Interest 1 Mortgage Term Payment Amount Years 4/1/98 $300,000 30 Monthly Remaining Remaining Payments Payments Balance $3,085,85 183 $258,629.70 12% 1/1/11 Primary Residence Vacation Home GC Vacation Home M $400,000 15 7.75% $3,765.10 156 $369,427.86 7/1/13 $700,000 15 7.80% $6,608.99174 $687,443.56 Detailed Investment Portfolios Robert's Portfolio Description Sears Dollar Mart Canon, Inc RC Inc. WW Grainger City Electronics Total Acquired BOS 1/08 2/10 9/10 10/13 9/13 Shares 16,325 4,468 22,249 3,742 4,257 10,561 Adjusted Basis 5201,633 $119,117 $400,188 $67,181 $221,435 S304,062 Beta 0.9 1.2 1.4 1.5 1.2 1.2 Current FMV $830,214 $50,265 $2,230,462 $222,600 $311,293 $355,166 $4,000,000 . The RC, Inc, stock is Section 1244 Small Business Stock Lisa's Portfolio Description Beta Current FMV Acquired Adjusted Basis $30,504 1/05 2,542 0.6 $50,209 2/10 1,500 $120,000 0.5 $167.250 Tenet Health Care Bay Bank, Inc Microsoft Zenith Total 9/10 10/11 589 22,190 $53,010 $177,520 0,7 0.8 566,189 $216,352 $500,000 Questions 1. Assume Lisa dios this year a. What is the value of Lisa's grossestate? b. What amount qualifies for the marital deduction in Lisa's estate assuming Robert survives for 6 months following her death? Microsoft Zenith Total 9/10 10/11 589 22,190 $53,010 $177,520 0.7 0.8 $66,189 $216,352 $500,000 Questions 1. Assume Lisa dies this year. a. What is the value of Lisa's gross estate? b. What amount qualifies for the marital deduction in Lisa's estate assuming Robert survives for 6 months following her death? 2. Which of the following transfers will not result in a taxable gift from Robert in this year, assuming he makes no other gifts? a. Robert pays each grandchild's private school tuition, $6,000 each. b. Robert pays City Hospital for the hospital bill of a friend, $15,000. c. Robert pays a university for a distant cousin's law school tuition, $16,000. d. Robert pays the tuition for Robert Jr. directly to a private university, $30,000. 3. What is the impact of the survivorship clause in Robert's will? 4. Robert and Lisa are considering the purchase of a joint and survivorship (second-to-die) life insurance policy for the purpose of wealth replacement for the assets that were transferred to the CRAT and to help to create estate liquidity, Discuss the most appropriate way to own the joint and survivorship life insurance. 5. What estate planning recommendations would you make to the Franklins? 6. Explain the benefits of the grantor retained annuity trust (GRAT) Robert is planning to create 7. What are the advantages of using a charitable remainder trust (CRAT)? 8. Discuss SCINs and how its use would affect Robert Franklin and his daughter Elise in the sale of half of his share of Franklin Securities to her instead of in an installment sale. 9. If the Franklin set up an irrevocable trust for the rest of their grandchildren, what kind of tax will the grandchildren pay on the income distributed to them from this trust