Question
Use the following scenario to answer questions 1 and 2. Lois, an elderly, single woman, recently came to you, an estate planning professional, to discuss
Use the following scenario to answer questions 1 and 2. Lois, an elderly, single woman, recently came to you, an estate planning professional, to discuss her estate plan. After a lengthy discussion, you determine that Lois completed several transactions last year that may be subject to the gift tax. The transactions you uncovered include:
a. Lois had a bank account in the amount of $15,000 that was owned fee simple. She wanted to make sure her son, Clark, could access the money just in case so she changed the ownership of the account to JTWROS in her and Clarks name equally. Clark has not made any withdrawals.
b. Feeling guilty about retitling her checking account JTWROS with her son, Lois decided to change the titling of her 1967 split-window Corvette as JTWROS with her daughter, Teri. Lois purchased the car for $15,000 and the fair market value of the property on the date of retitling was $30,000. Due to the high demand for this particular Vette the value of the car, today is $40,000.
c. Lois received a beneficiary designation form in the mail for her $1,000,000 life insurance policy. The policy never had a beneficiary, so she designated her son, Clark, and daughter, Teri, as joint beneficiaries. Loiss basis in the policy is $200,000.
d. Lois has two stock portfolio accounts with a local brokerage firm valued at $200,000. Upon her advisors suggestion, she retitled the account as a Transfer on Death account to save taxes. Upon her death, the assets will transfer equally to her son, Clark, and her daughter, Teri.
e. Loiss daughter Teri has always been a little poor with budgeting her money. So, it was no surprise to Lois that Teri could not afford her daughter Laynees braces. Feeling sorry for Laynee, Lois gave Teri $50,000 for the braces. Lois later found out that the braces only cost $15,000 and Teri spent the remaining money on elective cosmetic surgery.
f. Lois was beginning to become very concerned because her son, Clark, had never married. She was so happy he finally got married, she gave Clark $40,000 so the couple could take a two-month trip to Australia.
When you inform her that you are concerned about some of these transactions and that she may need to file a gift tax return she states, you obviously must not be a very good planner because none of my other planners ever told me that, besides it would be ridiculous for me to pay tax on things I want to give to my family that I purchased with my hard-earned money that was already taxed. After more discussion, Lois confesses to you that you are highly recommended and frankly, she has already used almost every planner in town and since they have all declined to represent her, she is confident that you will do the right things.
1. Calculate Loiss taxable gifts for the current year
2. Calculate the value of Loiss total qualified transfers for the current year.
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