Ch20 - CHAPTER 20 UNDERSTANDING THE ISSUES 1. Several of...

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 de- sires and wishes of the decedent, maximize the value of the estate’s net assets, minimize the taxes that may be assessed against the assets and in- come 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 expectancy. However, a wealthy couple may have plenty of as- sets and the unified credit should be taken advant- age of. The credit will allow the first to die to transfer assets out of the estate with no resulting estate tax. Furthermore, the surviving spouse will also be able to claim a unified credit. If all of the deceased 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 in- come. Second, the income of an estate is subject to tax. These taxes are either imposed on the estate or the recipient of the income. The sum of intended legacies may be larger than the available assets of an estate. In those in- stances, a procedure referred to as abatement is ap- plied. This procedure requires that legacies be satis- fied to whatever extent possible, beginning with the highest priority level of legacies. If demonstrative legacy cannot be satisfied, the unsatisfied amount is considered a general legacy. If there are inadequate resources to satisfy general legacies, available re- sources are allocated proportionately among the identified parties. 20-1
Background image of page 1

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

View Full DocumentRight Arrow Icon
EXERCISES 1. (a) Cash—Principal. ...................................................................... 60,000 Stock of Trains Incorporated. ................................................... 40,000 Zip Railroad 10% Bonds. .......................................................... 120,000 Accrued Interest on Zip Bonds. ................................................ 2,000 Personal and Household Effects. ............................................. 30,000 Estate Principal. ................................................................. 252,000 To record estate inventory filed with probate court. (b) Funeral and Administrative Expenses. ..................................... 2,800 Cash—Principal. ................................................................. 2,800 To record payment of funeral expenses. (c)
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 04/07/2008 for the course ACCT. 3533 taught by Professor Jahanian during the Spring '08 term at Temple.

Page1 / 25

Ch20 - CHAPTER 20 UNDERSTANDING THE ISSUES 1. Several of...

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