The Nichols Case Study 2021

ESTATE PLAN
Answer the following questions. Assume the facts given in the fact pattern and that the 2021 estate and gift tax rates and annual exclusion apply to all transfers in the current and previous years.

1. Which of the following transfer mechanisms would be appropriate for the transfer of Fresh Veggies to James and Elizabeth assuming Madi and Devon did not want to make an outright gift of the company to them?
1. Private Annuity.
2. SCIN.
3. Family Limited Partnership.
4. QPRT.

1 only.
3 only.
1 and 2
1, 2, 3 and 4.
2. If Devon died today, which of the following statements is true regarding the transfers made in his will?
Madi will receive Devon’s interest in the Investment Portfolio.

Elizabeth will receive the proceeds of the life insurance policy.

James will receive the yacht in place of the house boat.

Marie may potentially receive Vacation Home 1 as Lynn’s rightful heir.
3. Assuming Devon died today, calculate his gross estate.

4. Assuming Devon died today, calculate his probate estate.

5. Assuming Devon died today, calculate the marital deduction available for transfers to Madi (remember this is a net amount).

6. Ignoring the data above, Assume that Devon died today and the estate tax due was $702,591 and Keith is appointed executor. Unfortunately, Keith forgot to file an Estate Tax Return (Form 706) and pay the estate tax due until 45 days after the return’s due date. How much is the failure-to-file penalty?

7. Assume Madi and Devon wanted to establish college funds for each of the grandchildren. Which of the following statements would be true?
An irrevocable trust would be a completed gift for gift tax and estate tax purposes.
The transfers would not be subject to GSTT, regardless of to whom the money is paid, because the payments were made for education.
If Devon and Madi found out about Marie and wanted to establish a fund for her as well, then the transfer to Marie would be subject to GSTT.
An appropriate planning technique for both Elizabeth and James’ family would be to place the assets into 2 family trusts, 1 for Elizabeth’s children (with Elizabeth and Scott as joint trustees) and 1 for James’ children (with Catherine as the trustee).
8. Which of the following statements regarding the transfer to Andrew 5 years ago is correct?
Andrew is a skip person because he is more than 37 and ½ years younger than Devon, thus the transfer results in a taxable termination.
The transfer will qualify for the GSTT annual exclusion.

Assuming 2021 rates apply to this transfer, the GSTT will be 40% of $8,000,000.
The only tax consequence for this transfer will be GSTT due.