Donny Decedent died January 1st of this year. You have been engaged to prepare the Form 706 for the executor. Based on the following facts, determine (1) who receives the property at death, (2) how and when they get the property by what method of transfer, and (3) the items or property interests includible in Donny's gross estate for federal estate tax purposes. Donny's will leave all of his estate to his wife Donna.
Donny's employer distributed $25,000 to his executor for unused vacation and sick leave time.
Donny owned a home titled as tenancy by the entireties with Donna valued at $400,000 at the time of his death. Donna paid the entire purchase $350,000 purchase price for the home two years before and she put Donny's name on the deed.
Donny transferred $7,500,000 to a living revocable trust two years before his death. The trust terms permit Donny to distribute the money to himself or his children as he selects as long as he is alive. The trust also provides: "at the time of my death, transfer to my children, Dawn and David, in equal shares the maximum applicable exclusion amount available at the time of my death. . . .and transfer the remaining trust estate to the person who is my wife at the time of my death, and if I am not then married, distribute such share to Widener University." Assume the maximum applicable exclusion amount is $5,250,000.
Donny transferred a $5,000,000 (value in 2008) vacation home (personal residence) to an irrevocable trust five years ago. The trust provided Donny with the right to live in the home for 10 years for 10 years. Assume the trust has five years until termination at his death. At the termination of the trust, his children are the remainder beneficiaries. At the time of his death, the principal of the trust is $4,000,000.
Donny's employer has a nonqualified deferred compensation plan. The plan provides a benefit of $100,000 per year for ten years at the time of his retirement. Assume Donny retired two years ago and has received two years of payments. On his employer's forms, he designated his wife as beneficiary of the remaining payments.
Donny has an interest in a trust created by his father in his father's will. The trust is valued at $800,000 at the time of Donny's death. The trust provided Donny with all income while he was alive. In addition, he could invade principal for any reason while he is alive. At the time of his death, Donny has the ability to appoint the principal to his lineal descendants as he chooses through specific reference to the power in his last will. If no reference is made to the power in Donny's will, the property passes to his children in equal shares. Donny failed to exercise the power in his will.
Donny created an irrevocable trust two years ago. The trust provides for income for life to Donna with the remainder at her death to their two children, or their estates, in equal shares at her death. Donny places $20,000 each year in the trust and the trustee applies for, owns, and is the designated beneficiary of a $1,000,000 life insurance policy on Donny's life.
Donny has a life income interest in a trust created for him five years ago by Donna with the principal worth $400,000 at the time of his death. The trust provides him with all income with the remainder at his death distributed to their two children. Donny has no rights or powers with respect to principal. Donna filed a gift tax return when creating the trust and elected to take the QTIP election for the gift tax marital deduction for the property transferred to the trust for Donny's benefit.