Roger Kramer’s wife Sarah passed away five years ago, and she made Roger promise to continue to provide care for Sarah’s sister Margaret Smith and let her live in their residence for a period of time. Roger and Sarah had no children, and Margaret Smith was like a daughter to them. Roger passed away, and his will contained the following provisions:
a. $200,000 of estate principal should be donated to the Sierra Club and the balance, less appropriate expenses, should be placed in the Margaret Smith trust.
b. The Margaret Smith trust calls for 80% of periodic net income to be paid out to Margaret Smith with the balance to be considered trust corpus.
c. The trust is to be terminated two years after Roger’s death at which time 60% of the corpus will be given to Margaret Smith and the balance to the Milwaukee Foundation to be placed in a fund to support environmental issues dealing with alternative energy sources.
The following events occurred within one year of Roger’s death:
1. In addition to the personal residence (valued at $350,000), the inventory at fair value of Roger’s estate consisted of $230,000 cash, securities worth $210,000, personal effects worth $12,000, and a sailboat worth $8,000.
2. Mortgage payments on the residence were paid in the amount of $24,000, of which $8,000 was interest ($2,000 of which had accrued as of Roger’s date of death).
3. Funeral and attorney fees to administer the estate were $27,000. Medical expenses incurred up to Roger’s death were $21,000. Income taxes of $13,000 were due on Roger’s final personal tax return.
4. Securities existing at the date of death with a cost of $130,000 and a market value of $178,000 were subsequently sold for $164,000. The proceeds upon sale were reinvested into bonds. Interest of $4,000 was received on the bonds.
5. A delinquency notice was received indicating that real estate taxes on the residence from last year remained unpaid in the amount of $12,000 plus interest and penalties of $2,000.
6. Dividends on the securities were received in the amount of $27,000, of which $7,000 were declared as of Roger’s death.
7. Utilities and normal repairs and maintenance on the residence were $7,200, of which $1,200 had remained unpaid as of the date of death.
8. Out of estate assets, $15,000 was spent to replace the roof on the residence and $3,000 was paid for lawn care.
9. A bill was received from the Yacht Club indicating that Roger had unpaid dues and charges of $1,400. Margaret decided to continue membership in the club and paid additional dues and charges of $2,800.
Assuming that the trustee of the trust has approved all of the above, prepare a schedule to determine the principal and income balances after periodic distributions have been made to Margaret.

  • CreatedApril 13, 2015
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