Question

May, age 84, died Sept. 19, 2019. At the time of her death, she owned, completely or partially, the following assets:

1. Her late husband, John, had established a trust with being an income beneficiary and their two children receiving a remainder interests. The executor of John’s estate made the QTIP election. At the time of her death, the value of the trust was $7.5 million.

2. May owned three insurance policies – one on her life and one on the life of each child. Each policy has a maturity value of $1,000,000; all name May or her estate as the beneficiary. As of Sept. 19, the policies on each child have a cash surrender value of $200,000.

3. A tract of undeveloped land that was inherited from her father (Cost=$200,000; FMV=$600,000 at his death) that was held as tenants in common with her two children. The land was worth $1,250,000 at the time of her death.

4. A tract of undeveloped land was purchased by May in 2002 for $300,000.   As of Sept. 19, the land is worth $2.3 million and has a $500,000 mortgage.

5. A family vacation lodge in Union, SC, was held as joint tenants with the right of survivorship in the names of May and each child. The property was purchased in 2002 for $350,000; $150,000 of which was provided by May and $100,000 from each child. On Sept. 19, the lodge was worth $1.4 million.

6. Rental beach cottages in Destin, FL, were inherited from John and worth $1.2 million.

7. May owns her residence, which is valued at $2.8 million.

8. May had been injured in a car accident on July 28, 2018. The accident was caused by the delivery truck of a national soft drink bottling company. Not only was the truck in disrepair, but the driver was charged with DUI. To avoid the adverse publicity of a lawsuit involving obvious gross negligence, the corporate office offered to settle any claims. The estate received $700,000 in cash plus payment of all medical expenses. Of the medical expenses, the doctors and hospitals were paid directly by the bottling company.

9. May had made prior taxable gifts of $600,000 to each child.

10. In addition to the above, May had the following:

Checking account cash                                                                            $    18,000

State of Minnesota bonds                                                                          205,000

Personal and household effects                                                                 160,000

Traditional IRA with T. R. Price                                                                       100,000

Federal income tax refund receivable                                                            4,000

Credit card and household bills                                                                   21,000

Funeral expenses                                                                                          9,000

Attorney’s fees                                                                                             24,000

Accounting fees                                                                                           10,000

Appraisal fees and court costs                                                                       6,000

Unpaid pledge to Catholic Charities

(paid by the estate during its administration)                                            400,000

Charitable contribution to the American Red Cross                                   250,000

Charitable contribution to the American Cancer Society                          250,000

As the executor of the estate, one of your responsibilities is to file Form 706 for the estate. Therefore, you will need to determine the amount of her gross estate, appropriate deductions, taxable estate, and the net estate tax liability.