Below is the Probate case of Phillepe and Jenna. Review the fact pattern and answer the questions
Question:
Below is the Probate case of Phillepe and Jenna. Review the fact pattern and answer the questions that follow.
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Phillipe is a co-founder of a successful bio-med start-up company and Jenna is an executive at a large pharma company. They met while on a European river cruise five years ago, fell in love and got married right away. Phillipe is 47, has been a widower for 10 years, and Jenna is 38. Jenna is currently pregnant with their first child. Marjorie, Phillepe’s 18 year old daughter from his first marriage, is heading off to college this year.
Both Phillepe and Jenna come from wealthy families and expect significant inheritance sometime in the distant future when Phillepe’s mother passes away and when Jenna’s dad passes away. Phillepe’s dad set up an irrevocable trust before he died providing Phillepe income for life and eventually passing to Phillepe’s children. The balance of the trust is $1,500,000 and he receives $60,000/year in trust income. Likewise, Jenna has a trust for her benefit set up by her grandmother that has a balance of $800,000 which she is entitled to when she turns 40 years old.
On their own, the couple has accumulated a significant amount of assets, which is noted below.
Asset | Jenna | Phillepe | Joint Tenants w/Right of Survivorship |
Family Farmland (1/3, TIC, undivided interest)(value is her interest only) | $4,000,000 | ||
Home | $800,000 | ||
Michigan Vacation Home | $1,400,000 | ||
Collections | $125,000 | $50,000 | |
Investment Portfolio A | $525,000 | ||
Investment Portfolio B | $1,450,000 | ||
Investment Portfolio C | $500,000 | ||
Rollover IRA’s (Jenna’s bene is unnamed, Phillepe’s is Marjorie) | $300,000 | $900,000 | |
Personal Property | $80,000 | $250,000 | |
Automobiles | $100,000 | ||
Anticipated Inheritance | $3,000,000 | $12,000,000 | |
They are very private people and don’t want anyone in their business. Consequently, they want to completely avoid probate and need your help to understand their situation.
1. What is Jenna’s Gross Estate TODAY?
A. $7,355,000
B. $6,555,000
C. $5,875,000
2. What is Jenna’s Probate Estate TODAY?
A. $6,555,000
B. $5,830,000
C. $5,030,000
D. $0
3. What is Phillepe’s Gross Estate TODAY?
A. $15,925,000
B. $3,925,000
C. $2,400,000
4. What is Phillepe’s Probate Estate TODAY?
A. $2,920,000
B. $3,925,000
C. $2,400,000
D. $0
5. Will either of them be subject to Illinois estate tax TODAY?
A. Yes
B. No
6. Who?
A. Jenna
B. Phillepe
C. Neither
D. Both
7. Who will have a Federally taxable estate TODAY?
A. Jenna
B. Phillepe
C. Neither
8. Why?
9. How can they avoid probate?
I. Give all of their assets to each other
II. Give all their assets to charity
III. Set up a trust and move property into it
IV. Retitle property to joint tenancy with right of survivorship
V. Ensure that their retirement accounts have named beneficiaries
A. I and III
B. I, II and III
C. III and IV
D. III, IV, V
E. All of the above
10. At what point in the future will they need to revisit their estate plan to ensure they are still avoiding probate?
