Paul and June Adams are married and live in a common law state.  Paul died in January 2021 owning the following property:

• $125,000 Boat owned fee simple.
• $3,000,000 401(k) with a basis of $300,000 and his son Jasper as the beneficiary.
• $500,000 in Apple stocks.
• $700,000 life insurance policy (#1) on his own life with a cash value of $100,000 with June as the beneficiary.
• Primary residence valued at $3,500,000 titled JTWROS with June and a mortgage remaining of $900,000.
• A condominium valued at $800,000 titled TIC with cousin Eric and a mortgage remaining of $300,000.
• A straight life annuity #1 valued at $200,000.
• A truck valued at $60,000 owned fee simple.
• $150,000 personal property owned by Paul.
• A sporting goods store valued at $400,000 owned tenancy in common with his two friends (Justin and Chase); Paul contributed $60,000 of the $200,000 purchase price.
• $600,000 whole life insurance policy (#2) on his life with a cash value of $150,000 with his mother, Phyllis, as the beneficiary.
• A survivorship annuity #2 with a comparable annuity value of $450,000.
• $1,000,000 permanent life insurance policy (#3) on June’s life with a cash value of $500,000 and her son is the beneficiary.  This is a paid up policy.

• Gifted - $300,000 to an irrevocable trust and retained no interest. The transfer was made 5 years ago and Paul paid $ 150,000 in gift taxes that year.
• Gifted - $4,000,000 life insurance policy (#4) on his own life with a cash value of $600,000.  This policy was gifted to his son one year before Paul died.  Paul paid $500,000 in gift taxes that year.
• Paul holds a general power of appointment over his mother’s estate valued at $11,500,000 which he leaves to his son Jasper.

 

Paul was killed in a car accident and received $200,000 for wrongful death and $750,000 for pain and suffering.  Paul’s credit card debt totaled $36,000, last medical expenses were $30,000, his funeral expenses were $20,000 and the administration fees for the estate were $15,000. Paul made prior taxable gifts of $2,000,000 five years prior to death and $5,000,000 one year prior to death (all Post 1976 gifts are accounted for here; gifted items above are for purposes of prior gift taxed and Section 2035 purposes only). Unless stated otherwise, Paul’s will provides a charitable gift of $1,000,000 to Texas Tech University and residuary clause leaving everything else to June. All expenses are to be paid out of her portion of the estate. For purposes of this assignment, assume the marital deduction is $7,804,000.

 

1. Breakdown of the Gross Estate

2. Deductions

3. Taxable Estate

4. Tentative Tax Due (Credits)

5. Federal Estate Tax Liability

Answer rating: 100% (QA)

1 Breakdown of the Gross Estate The gross estate of Paul Adams includes all of the property that he ... View the full answer