Question

1. Henry owns 100 percent of the stock in Family Business, Inc.

a. Henry gives 40 percent of the stock outright to his spouse, Wanda. Henry also creates a trust for Wanda’s benefit that qualifies for the marital deduction as Qualified Terminable Interest Property, and he transfers 40 percent of the stock to it. Henry also gives 5 percent of the stock to each of his four children. How will the gifts be valued?

b. Instead, Henry dies owning all the stock. He bequeaths the property as designated in problem 1.a. How will the stock be valued for purpose of his estate?

c. Same as 1.b., then Wanda dies. How will the stock be valued in her estate? Would it make any difference if Henry had left the stock to a trust that qualified for the marital deduction by giving Wanda a testamentary general power of appointment?

d. Same as 1.b., except that Henry gave 60 percent of the stock to Wanda outright and gave each of his children 10 percent. How will the stock be valued for purposes for Henry’s estate? How should it be valued for purposes of the marital deduction?

Answer 1

1

a)     A qualified terminable interest property trust allows a spouse to give a life estate in property to his or her spouse without incurring the federal gift tax. Thus wanda not be taxed on the receipt of a gift from her husband Henry.

Henry also gives 5 percent of the stock to each of his four children because Parents can gift any amount of money out of their taxable income to their children without any tax implication on the children.. However, he will be liable to pay tax on any income derived from it.

b)

1.a)   If the decedent owns stock when he dies, the stock is included in his estate . if their is no beneficiaries and then estate is considered “intestate.” The intestate process is a state-approved distribution plan for estate property. The property is generally distributed among the surviving relatives of the decedent. Most times the surviving spouse, parents, and children of the decedent get the property. So henry estate will get in the hand of his wife and childrens

C) If henry and wanda dies then then the all estate will transfer to their childrens. A person writing a will or trust can give his or her beneficiaries a power of appointment, which enables them to direct where their share of the estate or trust goes at their death. A power of appointment provides flexibility for transferring property to children and grandchildren.

d) if all the estate of henry is transferred to his wife and children then their will be no tax for the estate