23_Fischer10e_SM_Ch20_final

23_Fischer10e_SM_Ch20_final - CHAPTER 20 UNDERSTANDING THE...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
CHAPTER 20 UNDERSTANDING THE ISSUES 1. Several of the important goals of estate plan- ning are to identify and clearly communicate the desires and wishes of the decedent, max- imize the value of the estate’s net assets, min- imize the taxes that may be assessed against the assets and income of the estate, achieve the necessary liquidity of the estate’s assets so that desired conveyances and distributions may be received, and provide a proper and timely accounting of the activities of the estate and its fiduciary. 2. The marital exclusion is an effective strategy if one assumes that the surviving spouse will use up estate assets during their remaining life ex- pectancy. However, a wealthy couple may have plenty of assets and should take advantage of the unified credit. The credit will allow the first to die to transfer assets out of the estate with no resulting estate tax. Furthermore, the surviv- ing spouse will also be able to claim a unified credit. If all of the deceased’s assets were transferred to the surviving spouse, the estate of the surviving spouse would likely become even larger and possibly place those assets into a higher estate tax bracket. 3. It is important to separately account for the in- come and principal of an estate for several reasons. First, the decedent may have created a will that has special provisions relating to both principal and income. Second, the income of an estate is subject to tax. These taxes are either imposed on the estate or the recipient of the in- come. The sum of intended legacies may be larger than the available assets of an estate. In those instances, a procedure referred to as abate- ment is applied. This procedure requires that legacies be satisfied to whatever extent pos- sible, beginning with the highest priority level of legacies. If demonstrative legacy cannot be sat- isfied, the unsatisfied amount is considered a general legacy. If there are inadequate re- sources to satisfy general legacies, available resources are allocated proportionately among the identified parties. 31
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Ch. 20—Exercises EXERCISES EXERCISE 20-1 Scenario A Scenario B General legacies as set forth in will: Amount due The Nature Conservancy. ..................... $ 50,000 $ 50,000 Equal amounts due three grandchildren. .................. 150,000 150,000 Unsatisfied demonstrative legacies that constitute a general legacy: Amount not satisfied by insurance proceeds. ........... 20,000 20,000 Total needed to satisfy general legacies. .............................. $220,000 $ 220,000 Available cash to satisfy general legacies: Cash at date of death. ............................................... $ 40,000 $ 15,000 Sale of Kachina collection. ......................................... 45,000 Insurance proceeds (policy number 48002). ............. 40,000 40,000 Sale of residence. ...................................................... 220,000 Total. ..........................................................................
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/05/2010 for the course ACC 476 taught by Professor Hildy during the Spring '07 term at Lane.

Page1 / 21

23_Fischer10e_SM_Ch20_final - CHAPTER 20 UNDERSTANDING THE...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online