CASE - Lance & Kayla
Kayla, age 52, and Lance, age 64, have been married for 37 years and both are in fairly good health. They have the following children and grandchildren:
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CHILDREN
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AGES
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GRANDCHILDREN
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Charles
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32
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1 child
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Tammy -Twins
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30
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2 children
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Tommy -Twins
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30
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4 children
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Francisco
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27
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2 children
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Lawrence
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22
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No children
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Lance also has two children (Sebastian-age 44 and Blair-age 42) from a prior marriage to Christian. Both Sebastian and Blair have 2 children apiece (i.e. Lance has four grandchildren from this prior marriage).
Kayla and Lance own a string of five southern restaurants named "Talk of the Town", which have done quite well over the past 8 years. Lance and Tammy would like to retire from owning the restaurants, but want to hold onto some control so it can possibly provide income in their retirement. Their twins, Tammy and Tommy, are open to running the day to day operations of the business.
One of Kayla's and Lance's grandchildren was born with special needs, so they set up an irrevocable trust and funded it with $2,500,000 to support this grandchild in 2012. This was the only transfer or gift the couple made in the past. However, they would like to gift 75,000, this year (2014), to the Boy's and girl's club.
Kayla and Lance do have simple wills, sweet heart wills, leaving all their assets to each other in the event of either of their deaths. At the time of either of their deaths, they assume that funeral cost will be $20,500 administrative cost will be $35,000.
1. In the event that Lance becomes incapacitated, he wants no heroic means to take place to keep him alive, while Kayla wants the doctor to do anything possible to keep her alive.
2. They would like to provide $100,000 to support the college education of each grandchild.
3. They would like to leave each child, including the children from Lance's previous marriage, $500,000 outright.
4. They would like to provide $100,000 to support the college education of each grandchild.
5. They would like to leave each child, including the children from Lance's previous marriage, $500,000 outright.
6. The couple would like to leave $250,000 to their church which is considered a non..profit charitable organization.
7. Lance and Kayla would like to keep most of their affairs private while paying the least amount of taxes as possible.
Complete the following questions for this case:
1. Design an estate plan for Kayla and Lance. Clearly state which of your recommendations accomplishes each of their goals.
2. Calculate any gift tax and generation skipping transfer tax where applicable for 2014 (Current Year).
3. Calculate both Kayla's and Lance's estate taxes assuming that that Lance dies first and Kayla dies second.
4. Show the couple the tax savings they will receive by implementing your recommendations versus the taxes they would have paid before they hired you.
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Lance & Kayla's Balance Sheet
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Current Assets
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Current Liabilities
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Cash
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45,000
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Credit Cards
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1,500
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Money Market
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150,000
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Automobile #1
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25,000
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Total Current Assets
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195,000
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Total Current Liabilities
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26,500
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Investment Assets
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Long Term Liabilities
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401K
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1,500,000
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Mortgage on Personal Res.
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645,000
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IRA
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750,000
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Line of Credit #1
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175,000
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"Talk of the Town"
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4,500,000
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Rental Property
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1,500,000
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Trust for Jaden
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2,500,000
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Total Investment Assets
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10,750,000
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Total Long term Liability
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820,000
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Personal Use Assets
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Personal Resident
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750,000
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Total Liabilities
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846,500
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Clothing & Jewry
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125,000
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Automobile #1
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45,000
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Automobile #2
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15,000
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Total Net Worth
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11,033,500
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Total Per. Use Assets
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935,000
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Total Assets
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11,880,000
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Total Liabilities and Net Worth
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11,880,000
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