Flora and Nicholas Zamboni have come to you with questions about estate planning. They are in their mid-50’s, in good health, and are raising two children, Venus, age 12, and Giovanni, age 24. Venus is a child of the marriage, and Giovanni is Nicholas’s son from a previous marriage. Flora is an administrator with the public-school system and has been working there for 10 years. She is participating in the state’s retirement system. Nicholas is an entrepreneur and is the sole owner of a successful pizza restaurant, Nick’s Pizza Den, which currently has 12 full- and part-time employees. Nicholas’s son Giovanni also works in the business part-time. Nicholas wants to start sharing ownership with Giovanni but wants to maintain full control until Giovanni has more experience and has proven himself capable of running the business. Nicholas also owns the building where his business is located, and rents space out to his business and two other small businesses. Flora and Nicholas have brought in their account statements and information as you requested, and you have taken the following notes on what was provided:

Latest estimated value of Nick’s Pizza Den: $3,500,000

Commercial building owned by Nicholas: $1,800,000 FMV (outstanding mortgage principal balance is $440,000 and the adjusted basis, after depreciation, is currently $900,000).

Earned income last year was $52,000 for Flora and $175,000 for Nicholas, Nicholas also received $168,000 in rental income from leasing space in the commercial building he owns.

Flora and Nicholas work with a CPA and are comfortable with their finances and cash flow.

Other assets –
• Flora IRA - $365,000, Nicholas is the beneficiary
• Nicholas IRA - $650,000, Flora is the beneficiary
• Nicholas SIMPLE IRA - $735,000, Flora is the beneficiary
• Joint stock account - $1,350,000 invested primarily in index funds and ETFs
• Personal residence (owned as tenants by the entirety) - $650,000 FMV (outstanding mortgage principal balance is $295,000)
• Autos and personal property - $90,000

Life insurance –
• Nicholas owns a whole life policy on his own life with Flora as the beneficiary – the death benefit is $1,000,000 and the current cash value is $220,000
• Nicholas owns a whole life policy on Flora, and he is the beneficiary – the death benefit is $500,000 and the current cash value is $55,000

Other liabilities (other than mortgages) –
• $25,000 remaining on an auto loan
• $13,000 in credit card debt

Flora and Nicholas have never done any estate planning or prepared any documents, but the recent premature death of a close friend alarmed them both. They have asked you to provide conduct a thorough review of their situation and advise them of what they should do immediately regarding estate planning and advise them of any other factors they should be considering for the future. Questions include:
• Should they be concerned about estate taxes?
• How would it be best to start saving for Venus for college?
• How can they start gifting to Giovanni without giving him complete and immediate control?
• What would happen with Giovanni’s business if he were to die suddenly?
• Are they any blind spots that they are not aware of but should be addressed regarding estate planning?

Answer rating: 100% (QA)

Flora and Nicholas Zamboni are in excellent financial condition according to the statistics given to me I have considered various aspects and have con... View the full answer