Oscar (age 70) and Maggie (age 60) are married and jointly own a personal residence valued at $800,000. Oscar also owns stocks valued at $700,000; an art collection valued at $400,000; a retirement account valued at $900,000 (contributions were entirely from pretax income); $80,000 in cash; and $100,000 in other miscellaneous assets. Oscar’s will specifies that when he dies his half of the personal residence will go to Maggie but that all his other assets will pass to his four children because Maggie has sufficient income from a trust fund she inherited from her grandfather. Oscar has made no previous taxable gifts.

a. Oscar wants to know what his estate tax liability would be if he died in 2007.

b. Each of Oscar’s four children have three children (total of 12 grandchildren).

If Oscar wants to begin transferring assets to his children and grandchildren, how much can he remove in value from his estate over the next five years through gift splitting and making annual transfers equal to the gift exclusion?

AppendixLO1