Using 2016 Suppose Vince dies this year with a gross estate of $15 million and n

Question

Using 2016

Suppose Vince dies this year with a gross estate of $15 million and no adjusted prior gifts. Calculate the amount of estate tax due (if any) under the following alternative conditions. (Refer to Exhibit 25-1 and Exhibit 25-2.)

a. Vince leaves his entire estate to his spouse, Millie.

b. Vince leaves $10 million to Millie and the remainder to charity.

c. Vince leaves $10 million to Millie and the remainder to his son, Paul.

d. Vince leaves $10 million to Millie and the remainder to a trust whose trustee is required to pay income to Millie for her life and the remainder to Paul.

Explanation / Answer

a.) * If all the property in Vince’s estate qualifies for the marital deduction, then there would be no taxable estate and there would be no estate tax due upon Vince’s death. If Millie dies with a taxable estate of $15 million, she would owe an estate tax of$3.458 million {($15 million - $5.12 million exemption equivalent) x .35}.This solution ignores the potential for a deceased spouse unused exclusion amount(DSUEA) as well as a credit on proximate deaths should Millie die within 10 years of Vince’s death. Of course, the value of the property would likely change over time and Millie’s consumption would decrease the property over the interim between the deaths of Vince and Mille.

b) * Once again, if the property left to Millie qualifies for the marital deduction and if the property bequeathed to charity qualifies for the charitable deduction, then there would be no taxable estate and there would be no estate tax due upon Vince’s death.

c)     assuming that the property left to Millie qualifies for the marital deductions, the calculations of the estate tax would proceeds as follows:

           gross estate                                                   $15,000,000

           marital deductions                                       $10,000,000

         taxable estate and cumulative transfers      $5,000,000

              tax on cumulative transfers            $2,130,800

                   unified credit (2016)                $1,455,800

              estimated estate tax due                $675,000

d) Vince leaves $10 million to Millie and the remainder to a trust whose trustee is required to pay income to Millie for her life and the remainder to Paul

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