Several years ago, Bonita started a clothing boutique which she structured as a wholly owned corporation. The business took off after her clothes were touted by a popular actress on national TV. Concerned about the size of her potential gross estate at that point, Bonita established two trusts, one for the benefit of her niece and another for the benefit of her nephew, and she funded each trust with a 20 percent interest in the clothing corporation. Bonita designated herself to serve as trustee together with her brother. 

a. What are the potential estate tax consequences to Bonita’s estate upon her death? 

b. Would your answer change if Bonita’s business were structured as an LLC? 

c. When advised of the answer in (a), Bonita immediately resigns as trustee. Will her resignation be sufficient to avoid adverse estate tax consequences?

Answer rating: 100% (QA)

a In case of Bonita dies even then the tax will be paid to the government by the benefici... View the full answer