Question

Estate Finance Family Tax Plan Question

Mr. Brady comes to you to review his estate plan. Under Mr. Brady's current will, Mr. Brady leaves the entirety of his estate to the Michael P. Brady trust with Tenleytown Trust Company as trustee. Under the terms of the trust, the trust pays all income to his three sons, Greg, Peter and Bobby for 20 years. The trustee may at its discretion distribute principal to provide for the health, education, maintenance and support of the income beneficiaries. At the end of the expiration of 20 years, the trust terminates and the remainder is distributed as follows:

• 20% to each of Greg, Peter and Bobby and
• 40% to the United Way, a tax-exempt charitable organization under 501(c)(3).
• Mr. Brady currently has approximately $50 million of assets.

Based on the information above, please answer the following questions:

• Would you advise Mr. Brady to revise his estate plan? If so how?
• As his testamentary trust is currently drafted, will Mr. Brady's estate receive any charitable deduction?
• What questions might you ask Mr. Brady in deciding whether or how to revise his estate plan?

Answer 1

Part a) Revision of Estate Plan is recommended whch can be achieved in following ways -

i) Life Insurance is required to be taken which can help ensure heirs of Mr Brady aren't negatively impacted by their inheritance or to pay the funeral expenses or final taxes

ii) Power of Attorney for Property which allows a trusted family member or friend to make financial decisions for you should you become incapacitated, bu only while you are alive.

iii) Living Will

iv) Trustee should not be at discretion to pay principal for health , education, maintenance and support of beneficiaries hence it should be made legally bound to do the same.

v) Term of 20 yrs can be restated to till all three children turn 20 yrs of age and share of distribution can also be altered if required.

Part b) 26 U.S.C 170, provides a deduction for federal Income Tax purposes, for donors who make contributions to most types of 501(c)(3) organizations. Othr unique provisions tend to vary by state, many states allow to be exempt from sales tax on purchases, as well as exempt from property taxes.

Part c) Questions to be asked --- to whom Mr Brady can choose for Power of attorney, When does Mr Brady children turn 18, ehat are they doing currently, how Property taxes will be taken off currently, Any insurance plan taken or not