Question

Before her death in early 2016, Katie made the following transfers:

• In 2008, purchased stock in Green Corporation for $200,000, listing title as follows: "Katie, payable on proof of death to my son Travis." Travis survives Katie, and the stock is worth $300,000 when Katie dies.
  
• In 2014, purchased an insurance policy on her life for $200,000, listing Paul, another of Katie's sons, as the designated beneficiary. The policy has a maturity value of $1,000,000 and was immediately transferred to Paul as a gift.
  
• In 2014, made a gift of land (basis of $300,000; fair market value of $1,300,000) to Adriana, Katie's only daughter. As a result of the transfer, Katie paid a gift tax of $150,000. The value of the land is still $1,300,000 at Katie's death.
  
• In 2014, established a savings account with Noah, her grandfather. Title to the account was listed as "Katie and Noah, joint tenants with right of survivorship." Of the $200,000 deposited in the account, Katie furnished $20,000 and Noah contributed the balance. At Katie's death, the balance was $206,000.

Katie's gross estate is valued at $ ?

posted 2 times still wrong

Answer 1

$1656000 = ($300,000 + $1,000,000 + $150,000 + $206000).

The stock in Green Corporation is included based on the assumption that Katie did not change the ownership designation. On her death, therefore, the transfer becomes complete and the stock passes to Travis. By virtue of 2035 and the 3-year rule, both the insurance proceeds ($1 million) and the gift tax ($150,000) are included in the gross estate.

Note, however, that the gift of land is not included. This answer presumes that Noah survived Katie. Thus, none of the savings account is included in Katie’s probate estate and 10% [$20,000 (Katie’s contribution) ÷ $200,000 (total deposited)] of $206,000 is included in her gross estate.