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Estate PlanningEstate Planning

by | Jun 18, 2022 | Questions & Answers

EXTRA CREDIT PROJECT
THE PROBATE AND TAXABLE ESTATE
Project. Prepare a ?test? question and a separate answer analysis which illustrates the concepts of the probate
estate, calculation of statutory fees, the taxable estate, calculation of the estate tax and basis. Your test
question (vignette) should be a fictional tale about an unmarried individual ? who she/he was, what he/she
owned, who he/she was survived by and how his/her estate is to be administered.
Substantive Topics ? Fact Pattern. In the fact pattern (the story) you should introduce facts that establish the
following:
1. 6 separate assets should be described in total, as follows:
a. You must include four of the following (your choice which two):
i. A Jointly titled piece of real property, titled in joint tenancy (with mortgage);
ii. A high-value piece of personal property;
iii. An asset with a low basis, and which basis was significantly higher or significantly
lower at date of death
iv. An account that passes via beneficiary designation;
v. An asset that must be included as a result of the decedent making an incomplete gift
vi. An asset that may or may not be included as a result of a power of appointment
b. You must also include any two of the following (your choice which two, which can overlap
with a. above):
i. Life insurance
ii. A jointly titled piece of real property, not titled in joint tenancy
iii. A QTIP Trust
iv. One wild card asset of your choosing that is different from any of the above
2. On the Probate side, at least 2 assets must be subject to probate.
3. On the taxable estate side:
a. The gross estate must exceed $8,000,000
b. The tentative taxable estate must exceed $6,250,000
c. There should be details establishing the following deductions (including the above):
i. At least 3 types of administrative deductions
ii. At least 2 debts
iii. At least 1 charitable deduction
4. Prepare the questions following your story which require the test-taker to:
a. Determine the probate estate and statutory fees
b. Determine the taxable estate and calculate the estate tax
c. Determine the basis of the assets you include as a result of the following upon receipt by the
beneficiary
Answer and Analysis. On a separate sheet attached to your fact pattern, you should prepare a FULL typed
analysis including all of the following:
1. A table mapping each of the assets and detailing which assets are subject to probate and which are
not
2. A step-by-step calculation of statutory probate fees, down to the total probate fees payable by the
probate estate and who will receive them
3. A table mapping each of the assets and detailing which assets are included in the taxable estate and
which are not
4. A step-by-step calculation of the estate tax. Note ? the decedent?s estate must pay some estate tax.
5. A table detailing the beneficiary?s new basis of each asset
Parameters. Your vignette (fact pattern) must be typed in Calibri 12 point font, with 1 inch margins, and may
not exceed one page. Your analysis should be separate from your fact pattern, typed in Calibri 12 point font,
with 1 inch margins, and may not exceed two pages. Your pages must be stapled with the fact pattern on top,
followed by the analysis. Emailed summaries will not be accepted unless previous arrangements are made.
Grading. Your grade will be based upon the following:
1. Parameters ? How well you followed the parameters as to format and structure (please, run
spell-check and proofread).
2. Substance ? How well you covered the required topics, including accuracy and clarity.
3. Readability for Audience ? How well you conveyed the principal concepts in easy terms.
Recommendation. I highly recommend that you present a draft of your problem to a classmate to work
through. This will provide you with feedback and help you find any problems with your facts and/or analysis.
Maximum Points. The maximum points available for this project are 15 points.
DUE BY 7PM ON TUESDAY, NOVEMBER 29. If you turn in your extra credit late, a point will be
deducted for each minute after 7pm.

GROSS?ESTATE?PROBLEM?
Vivien?Harmon?and?Ben?Harmon?are?a?married?couple?residing?in?California.?Vivien?and?Ben?have?
one?child,?Violet?Harmon?(16).?Sadly,?in?2016,?Vivien?dies?after?giving?birth?to?their?youngest?child,?
Ghostie?Harmon.?At?the?time?of?Vivien?s?death,?the?Harmons?own?their?home?(titled?in?their?names?
as? ?community? property?)?with?a? fair?market?value? of? $4,850,000,?and?a? current?mortgage? of?
$425,000.?The?Harmons?purchased?the?home?2?years?earlier?for?$3,300,000.?The?Harmons?also?have?
a?lake?home?in?Big?Bear?titled?as??joint?tenants??valued?at?$2,300,000?(no?mortgage),?which?they?
purchased?10?years?ago?for?$2,500,000.??
There?are?two?bank?accounts?equaling?$880,000,?titled?in?both?of?their?names?as??joint?tenants.??
There?is?a?brokerage?account?equaling?$1,120,000,?which?was?Vivien?s?inheritance?from?her?father.?
There? are? two? life? insurance? policies? on? Vivien?s? life:? one? with? a? death? benefit? of? $2,200,000?
(payable? to? Ben);?and?another?with?a? death? benefit? of? $250,000?(payable? to? Vivien?s?mother,?
Constance).?There?is?one?life?insurance?policy?on?Ben?s?life?with?a?death?benefit?of?$3,000,000?
(payable?to?Vivien).?Finally,?Vivien?has?stock?held?in?her?name?in?American?Horror?Tale,?Inc.,?which?is?
valued?at?$1,100,000.?
Vivien?had?a?Will?stating?that?everything?goes?to?Ben.?Unless?otherwise?stated,?assume?all?assets?
were?acquired?during?marriage?through?Vivien?s?and?Ben?s?employment?during?marriage.?
Calculate?the?probatable?estate,?total?statutory?probate?fees,?and?value?of?gross?estate.?
Part?II:?Ben?dies?10?months?after?Vivien?(he?accidently?hangs?himself?while?changing?a?light?bulb?on?
a?chandelier???or?was?it?ghosts?that?pushed?him?).?Ben?had?a?Will?stating?that?everything?goes?to?
Vivien?(which?he?never?got?around?to?updating).?Fortunately,?Ben?changed?the?beneficiary?of?his?life?
insurance?policy?to?the?children.?Assume?all?assets?are?the?same?value?as?they?were?at?Vivien?s?
death.?Do?not?take?into?account?any?administration?expenses?paid?as?a?result?of?Vivien?s?death.?
Calculate?the?probatable?estate,?total?statutory?probate?fees,?and?Ben’s?gross?estate.?

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Upon?Vivien’s?Death
Asset Value Title/Ch % V’s?Value Probate?Value Gross?ETax?Value Bene
Home 4,850,000 CP 50% 2,425,000 2,425,000 2,425,000 Ben
Lake?house 2,300,000 JT 50% 1,150,000 0 1,150,000 Ben
Bank?Accounts 880,000 JT 50% 440,000 0 440,000 Ben
Brokerage?acct 1,120,000 SP 100% 1,120,000 1,120,000 1,120,000 Ben
Life?insurance?-?V1 2,200,000 CP 50% 1,100,000 0 1,100,000 Ben
Life?insurance?-?V2 250,000 CP 50% 125,000 0 125,000 Constance
Life?insurance?-?B 3,000,000 CP 50% 0 0 0 Viv
Stock 1,100,000 CP 50% 550,000 550,000 550,000 Ben
Totals 15,700,000 6,910,000 4,095,000 6,910,000
0 100,000 0.04 4,000
100,000 200,000 0.03 3,000
200,000 1,000,000 0.02 16,000
1,000,000 4,095,000 0.01 30,950
53,950
x2
107,900
6,910,000
212,500
107,900
6,589,600
0
1,139,600
5,450,000
0
5,450,000
2,125,800
0
2,125,800
0
0
Gross?Estate




Estate?tax?payable
Taxable?Estate
Lifetime?taxable?gifts
Tentative?tax?base
***************
Tentative?tax
Total?Probate?fees:
L10-12:?Gross?Estate/Probate?Fees?Analysis
100,000
100,000
800,000
3,095,000

Adj?Gross?Estate


Upon?Ben’s?Death
Asset Value Title/Ch % B’s?Value Probate?Value Estate?Tax?Value
Home 4,850,000 Sole 100% 4,850,000 4,850,000 4,850,000
Lake?house 2,300,000 Sole 100% 2,300,000 2,300,000 2,300,000
Bank?Accounts 880,000 Sole 100% 880,000 880,000 880,000
Brokerage?acct 1,120,000 Sole 100% 1,120,000 1,120,000 1,120,000
Proceeds?from?V1?LI 2,200,000 Sole 100% 2,200,000 2,200,000 2,200,000
Proceeds?from?V2?LI 250,000 Sole 50% 125,000 125,000 125,000
Life?insurance?-?B 3,000,000 Sole 100% 3,000,000 0 3,000,000
Stock 1,100,000 Sole 100% 1,100,000 1,100,000 1,100,000
Totals 15,700,000 15,575,000 12,575,000 15,575,000
0 100,000 0.04 4,000
100,000 200,000 0.03 3,000
200,000 1,000,000 0.02 16,000
1,000,000 10,000,000 0.01 90,000
10,000,000 12,575,000 0.005 12,875
125,875
x2
251,750
15,575,000
425,000
251,750
14,898,250
0
0
14,898,250
0
14,898,250
5,990,100
0
2,125,800
0
3,864,300


Estate?tax?payable
Lifetime?taxable?gifts
Tentative?tax?base
***************
Tentative?tax


Adj?Gross?Estate


Taxable?Estate
Gross?Estate

12,575,000
100,000
100,000
800,000
9,000,000
2,575,000

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