John & Susan Smith, who reside in Illinois, had wills drawn up over 20 years ago. Under
Question:
John & Susan Smith, who reside in Illinois, had wills drawn up over 20 years ago. Under the terms of their respective wills, $250,000 is to go to the XYZ Charitable Foundation upon the death of each spouse (total of $500,000), with the balance of the estate being left outright to the surviving spouse. In the event there is no surviving spouse, the wills provide that everything will be divided equally among their three children, per stirpes. John and Susan own a personal residence with a current fair market value of $1,750,000.
The value of the residence has increased in value by 10% each year. They also own CDs and bank accounts with current balances of $400,000, and various brokerage accounts currently worth $17,000,000.
All of the above property is held jointly with right of survivorship. John has a pension account in his name with a current balance of $1,500,000.
John has named Susan as the primary beneficiary of this pension, with the three children being named as contingent beneficiaries in the event Susan predeceases him.
Each spouse owns a term life insurance policy in the amount of $5,000,000.
There is no cash surrender value with respect to these policies.
The surviving spouse is the primary beneficiary of the policy with the children being named as contingent beneficiaries in the event the primary beneficiary has predeceased the insured.
Annual premiums for these two policies total $70,000.
John is a 100% owner of a small unincorporated company currently worth $5,000,000.
Two of his three children work in the business and he wishes to transfer ownership to them over time while continuing to maintain control of the company.
John and Susan Smith's anticipated taxable income this year will be $550,000.
The federal estate tax exemption for 2021 is $11,700,000.
The Illinois inheritance tax exemption is $4,000,000.
Draft a memo to John and Susan discussing the various estate and gift planning techniques available to them and how they would work given this particular fact situation.
Expert Answer:
Answers Memo To John Susan Smith From Anonymous Date xxxxxXxX Subject Estate and Gift planning techn... View the full answer
