Prepare Your Will!

| May 1, 2015

Prepare Your Will!

If you die without a valid will, the laws of your state will determine what happens to your property. That may be fine with people who have few assets, but it’s not fine for people who care what happens to their property, and it’s certainly not fine for people with dependents. In this project, you’ll consider what your current will should contain and what changes you should make to your will based on your future circumstances. Look back through this chapter and review the common features of a will. Then write your own will, based on the sample clauses and examples of a representative will given in the text. List the property that you currently have, or expect to have in the near future, and name a beneficiary for each. Be sure to name your personal representative, and charge him or her with disposing of your estate according to your wishes. If you have children or expect to have children, or if you have other dependents such as an elderly parent or a disabled sibling, be sure to name a guardian and a backup guardian for them. Also prepare a letter of last instructions to convey any personal thoughts or instructions that you feel cannot be properly included in your will. Remember, this exercise should help you think about the orderly disposition of your estate, which is the final act in implementing your personal financial plans.
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15.2 Estate Taxes on Robert Hancock’s Estate
Robert Hancock, of Charlotte, North Carolina, was 65 when he retired in 2005. Alyssa, his wife of 40 years, passed away the next year. Her will left everything to Robert. Although Alyssa’s estate was valued at $2,250,000, there was no estate tax due because of the 100 percent marital deduction. Their only child, Nathan, is married to Mary; they have four children, two in college and two in high school. In 2007, Robert made a gift of Apple stock worth $260,000 jointly to Nathan and Mary. Because of the two $13,000 annual exclusions and the unified credit, no gift taxes were due. When Robert died in 2012, his home was valued at $850,000, his vacation cabin on a lake was valued at $485,000, his investments in stocks and bonds at $1,890,000, and his pension funds at $645,000 (Nathan was named beneficiary). Robert also owned a life insurance policy that paid proceeds of $700,000 to Nathan. He left $60,000 to his church and $25,000 to his high school to start a scholarship fund in his wife’s name. The rest of the estate was left to Nathan. Funeral costs were $15,000. Debts were $90,000 and miscellaneous expenses were $25,000. Attorney and accounting fees came to $36,000.   Use Worksheet 15.2    to guide your calculations as you complete these exercises.
Critical Thinking Questions
1. Compute the value of Robert’s   probate estate
2. Compute the value of Robert’s   gross estate
3. Determine the total allowable deductions.
4. Calculate the estate tax base, taking into account the gifts given to Nathan and Mary (remember that   the annual exclusions “adjust” the taxable gifts).
5. Use Exhibit 15.7 to determine the   tentative tax on estate tax base
6. Subtract the appropriate    unified tax credit    (Exhibit 15.8) for 2012 from the   tentative tax on estate tax base to arrive at the federal estate tax due.

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