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Estate Planning Memo

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					MEMO 2 a. You have asked us to calculate the Regert’s estate tax liability should Dalia and Ben die without any adjustments to their estate plan. I will discuss the scenario where Dalia predeceases Ben only. If Dalia were to die today included in her estate (gross estate) would be the following: $2,000,000 -$750,000 -$600,000 -$2,100,000 -$1,000,000 -$250,000 -$225,000 -$50,000 -from GPA trust established by Howard her share of the house her share of publicly traded stocks her share of residential and commercial real estate her share of undeveloped real estate her share of artwork and antiques her share of cars and other assets her share of cash

$6,975,000 is the total of her gross estate; Next we take deductions. <$200,000> -- deduction for her share of the mortgage <$4,775,000> -- marital deduction for portion going to husband $2,000,000 – The Taxable Estate; Now we apply the rates to find the tax on $2,000,000. $780,800 is the tax on $2,000,000; Next we apply the Unified Credit <$780,800> $0 – Is Dalia’s Tax Liability Assuming Ben dies soon after Dalia (with the assets not changing in value) we have the following included in Ben’s gross estate: $4,775,000 -$500,000 -$600,000 -$750,000 -$600,000 -$2,100,000 -$1,000,000 -$250,000 -$225,000 -$50,000 -amount received from Dalia the value of his separate property stocks the value of his separate property pension account his share of the house his share of publicly traded stocks his share of residential and commercial real estate his share of undeveloped real estate his share of artwork and antiques his share of cars and other assets his share of cash

$10,850,000 – is the total of his gross estate; Next we take deductions

<$200,000> -- deduction for his share of the mortgage $10,650,000 – Is the Taxable Estate; Now we apply the rates keeping in mind that the maximum rate in 2006 is 46%. The tax on the first $2,000,000 is $780,800 and anything above that will be taxed at 46%. Thus, 46% of $8,650,000 is $3,979,000. So we add $780,800 and $3,979,000 to get $4,759,800. $4,759,800 is the tax on $10,850,000; Next we apply the Unified Credit <$780,800> $3,979,000 -- is Ben’s Tax Liability b. Under the revised estate plan if Dalia were to die first the tax situation will look very similar, in fact, almost identical, because Dalia was already utilizing her full unified credit. So therefore, at her death her tax liability will be 0. When Ben dies his tax liability will be exactly the same as well: $3,979,000. Should Ben die first, the estate tax liability of Ben will be as follows: His gross estate will consist of: $500,000 -$600,000 -$750,000 -$600,000 -$2,100,000 -$1,000,000 -$250,000 -$225,000 -$50,000 -the value of his separate property stocks the value of his separate property pension account his share of the house his share of publicly traded stocks his share of residential and commercial real estate his share of undeveloped real estate his share of artwork and antiques his share of cars and other assets his share of cash

$6,075,000 is the total of his gross estate; Next we take deductions <$200,000> -- deduction for his share of the mortgage <$3,875,000> -- marital deduction for portion going to Dalia outright $2,000,000 – Is the taxable estate; Now we apply the rates to find the tax on $2,000,000. $780,800 is the tax on $2,000,000; Next we apply the Unified Credit <$780,800> $0 – Is Ben’s Tax Liability

When Dalia subsequently dies her gross estate will consist of:

$3,875,000 – $2,000,000 -$750,000 -$600,000 -$2,100,000 -$1,000,000 -$250,000 -$225,000 -$50,000 --

amount received from Ben from GPA trust established by Howard her share of the house her share of publicly traded stocks her share of residential and commercial real estate her share of undeveloped real estate her share of artwork and antiques her share of cars and other assets her share of cash

$10,850,000 – is the total of her gross estate; Next we take deductions <$200,000> -- deduction for her share of the mortgage $10,650,000 – Is the Taxable Estate; Now we apply the rates keeping in mind that the maximum rate in 2006 is 46%. The tax on the first $2,000,000 is $780,800 and anything above that will be taxed at 46%. Thus, 46% of $8,650,000 is $3,979,000. So we add $780,800 and $3,979,000 to get $4,759,800. $4,759,800 is the tax on $10,850,000; Next we apply the Unified Credit <$780,800> $3,979,000 -- is Dalia’s Tax Liability


				
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posted:10/23/2007
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