James and Susan Wagner have assets with fair market values of $5,700,000 and $1,800,000, respectively. James has been diagnosed with a terminal illness and is expected to pass away within the current year 2015. James wants to minimize his estate taxes, and any appropriate planning should consider the following factors:
a. James Wagner has debts of $210,000 against the assets in his estate.
b. It is estimated that administrative and funeral expenses will be $25,000 each for James and Susan.
c. It is estimated that Susan would be able to live comfortably for the balance of her life if she had an estate of $3,000,000 at the time of her husband’s death. Susan will make charitable contributions to the extent that her estate exceeds $3,000,000 as a result of her husband’s death.
d. Assume that Susan will live for three years after the death of her husband.
e. It is anticipated that at the time of Susan’s death her estate would have appreciated by $150,000 per year for years 2015 through 2017.
f. Neither James nor Susan has made any gifts during the current year 2015.
g. The couple has two children and three grandchildren. One of the grandchildren is attending the University of Wisconsin and is expected to graduate in 2017. Annual tuition costs are $10,000 per year.
h. James has agreed to make a $200,000 charitable contribution to the Sierra Club out of his estate.
i. If any trusts are created, the income from the trust will benefit the surviving spouse, and any corpus will ultimately pass to the children.
Develop an estate plan for the Wagners that would minimize estate taxes and incorporate the above factors. The unified transfer tax rates and exclusion amounts set forth in the text should be used. Assume that annual nontaxable gifts up to $13,000 per donor will be made to all children and grandchildren to whatever extent possible.

  • CreatedApril 13, 2015
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