Jimmy and Rebecca have been married for 35 years. Jimmy had a net worth of $8,000,000 when he died in 2016. Which of the following scenarios would incur the lowest overall (at Jimmy’s death and Rebecca’s death) estate taxes assuming the property transfers at equal value at the death of both individuals and utilizing 2016 estate tax rates? Assume that portability is not elected. Show your calculations for each scenario.
a. Jimmy’s will directs that all of his property is transferred to Rebecca.
b. In his will, Jimmy funds a trust with $5,450,000 for the benefit of his two children. Rebecca will receive an annual income distribution from the trust. All other assets will transfer to Rebecca.
c. At Jimmy’s death, specific bequests totaling $550,000 are transferred per the direction of the will to individuals other than Rebecca. The remainder of the assets are transferred to a trust with the income payable to Rebecca for her life and the remainder interest payable to the children at Rebecca’s death. Jimmy’s executor elected to treat this as a QTIP trust.
d. Jimmy’s will directs the transfer of $1,000,000 to his two children and the remainder of his assets to his wife, Rebecca.