Question

Will is single and owns the following:
House, solely owned, FMV of $3,200,000
Auto, solely owned, FMV of $25,000
Stock Portfolio, solely owned, FMV $6,000,000
Bank account, JTWROS with his daughter, FMV $1.5 Million
401k vested account balance of $3.5 million, with his son being the beneficiary

If Will's Last Will had called for a $500,000 charitable contrubution to the Red Cross, how much would it have saved the estate in estate taxes?

Answer 1

Hey there !!

Let me help you with the calculation of the Net Estate on which the Estate tax will be liable.

For this we first calculate Gross Estate, Deduct certain allowabkle deductions such as Estate Expenses/ debt and other allowable charitable deductions etc from that to calculate Net Estate.

From net estate we substract the exemption limit and estate tax is then levied on residual balance of thr estate.

Refer the step by step solution below:

Assets Owned by Mr Will
	Particulars	FMV	% to be included in Gross Estate Value
	House	3,200,000	100%
	Auto	25,000	100%
	Stock Portfolio	6,000,000	100%
	Bank Account (Jointly with Daughter)	1,500,000	100%
	401k Vested Account Balance (Son is beneficiary)	3,500,000	100%
	Gross Estate	14,225,000
Less	Charitable Contribution to Red Cross	500,000
	Net Estate	13,725,000
Less	Exemption	11,180,000
	Taxable Estate	2,545,000

Note :

Since, Will is Single ie he has no spouse, 100 % of Assets will be in his name itself.

You may also note that If the Bank account/ Assets/ Other investments etc are in the individual's name only, the entire value is included; if the account is jointly held with spouse, then only 50% of the value is included and if the account is in joint names with someone other than spouse, 100% of the value is included unless it can be proven that the other account owners made contributions to the account.

I hope that the above solution is clear to you now. Do let me know in case of any concerns.

All the best !! Happy studyin