Question

Suppose Vince dies this year with a gross estate of $25 million and no adjusted prior gifts. Assume the estate qualifies for the martial deduction. Calculate the amount of estate tax due (if any) under the following alternative conditions. Required: Vince leaves his entire estate to his spouse, Millie. Vince leaves $10 million to Millie and the remainder to charity. Vince leaves $10 million to Millie and the remainder to his son, Paul. Vince leaves $10 million to Millie and the remainder to a trust whose trustee is required to pay income to Millie for her life and the remainder to Paul

Answer 1

a. If all the property in Vince’s estate qualifies for the marital deduction, then there would be no taxable estate and there would be no estate tax due upon Vince’s death.

Note: If Millie dies with a taxable estate of $25 million, she would owe an estate tax.

b.Once again, if the property left to Millie qualifies for the marital deduction and if the property bequeathed to charity qualifies for the charitable deduction, then there would be no taxable estate and there would be no estate tax due upon Vince’s death.

c.Assuming that the property left to Millie qualifies for the marital deduction.

Then, the calculation of the estate tax:

Gross estate.    $ 25,000,000

Marital deduction. $ 10,000,000

Taxable estate and cumulative transfers. $ 15,000,000

Tax on cumulative transfers

[ $14,000,000 *40% +  $345,800] $ 5,945,800

Unified credit. $ (4,417,800)

Estimated estate tax due. $ 1,528,000

d. The solution is identical to (3) above because the amount left in trust is a terminable interest that would not qualify for a marital deduction.