1. Should Lee and Marta be concerned about probate? Why or why not?
2. What should Lee and Marta include in a letter of last instructions?
3. Help the Howards understand the differences between revocable and irrevocable living trusts by listing the advantages and disadvantages of both.
4. How might the Howards use trusts to benefit their grandchildren? How might these strategies affect their estate taxes?
5. What options does Lee have for gifting his whole life insurance policy, either to an individual or to a charity? What are the consequences for his estate tax planning?
6. Would you recommend that Lee and Marta write their own will, or should they hire an attorney? Explain your answer.
7. Once they have a completed and signed will, where should they keep it? Where should they definitely not keep the will?
8. Assume that Lee and Marta (a) own all assets jointly, except for the life insurance policy that Lee owns, and (b) decide not to gift or establish trusts. If Lee were to die in 2014 and leave his assets to Marta through a marital transfer, how much of the estate would be subject to taxes if Marta dies later in 2014 (assuming the estate growth is offset by all expenses incurred in 2014)?
9. If after Lee's death Marta decided to (a) give her son the $100,000, (b) establish two $1,000,000 irrevocable trusts for the grandchildren, and (c) give another $500,000 to charity, how much of the estate would be subject to taxes if Marta were to die later in 2014 (assuming the estate growth is offset by all expenses incurred in 2014)?
10. Given the ages of the Howards, should they consider naming their son in a durable power of attorney document? What are the advantages and disadvantages of this?
Lee and Marta Howard are in their early 70s. Recently, they have grown concerned about pro-bate and estate taxes. They calculated that this year they will have a combined net worth of $6,100,000. In addition, Lee owns a $500,000 whole life insurance policy on his life. Marta is the beneficiary. They are also considering giving their recently divorced son $100,000 to start a financial counseling practice. He is their only child, but he has two children of his own. One, age 25, is disabled, lives in a group home, and receives Medicaid. The other is a freshman in college. Although a bit ashamed to admit as much, the Howards do not have a will and have made no plans for their estate. Their overriding fear is that they will outlive their money.