Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
7th Edition
ISBN: 9780357033609
Author: Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher: Cengage Learning
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Question
Chapter 15, Problem 8FPE
Summary Introduction
To Explain: Describing the strategy for gift distribution.
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Montgomery has decided to engage in wealth planning and has listed the value of his assets below. The life insurance has a cash surrender value of $154,000, and the proceeds are payable to Montgomery’s estate. The Walen Trust is an irrevocable trust created by Montgomery’s brother 10 years ago and contains assets currently valued at $800,000. The income from the trust is payable to Montgomery’s faithful butler, Walen, for his life, and the remainder is payable to Montgomery or his estate. Walen is currently 37 years old, and the §7520 interest rate is currently 5.4 percent. Montgomery is unmarried and plans to leave all his assets to his surviving relatives. (Refer to Exhibit 25-1, Exhibit 25-2 and Exhibit 25-4.)
Property
Value
Adjusted Basis
Auto
$ 37,000
$ 72,000
Personal effects
92,000
127,000
Checking and savings accounts
284,000
284,000
Investments
2,585,000
855,000
Residence
1,485,000
1,065,000
Life insurance proceeds
1,085,000
84,000
Real estate investments…
Doris, 55, has $100,000 in liquid assets that she would like to transfer to her nephew, Matt, 22, for his comfort and welfare. Doris would like Matt to receive the income produced by these assets annually until he is 35. At that time, she would like to give the assets to him outright.
Which one of the following is the most appropriate lifetime transfer technique for Doris to use to achieve her objectives?
A)
A gift of the assets under the provisions of the Uniform Gifts to Minors Act
B)
An Internal Revenue Code Section 2503(c) trust
C)
A 13-year reversionary trust
D)
An Internal Revenue Code Section 2503(b) trust
Your 80-year-old uncle has an estate valued at over $10 million and asked for your advice regarding how to make sure that each of his heirs receive certain assets and that estate taxes are minimized. What steps would you recommend? Be sure to address such issues as wills, trusts, gifting, and probate.
Chapter 15 Solutions
Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
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