Donna Died on June 1 of the Current Year

question 104

Essay

Donna died on June 1 of the current year. The executor considers the following information when preparing her estate tax return:
• In 1997, Donna transfers title to her personal residence to her son. The residence is worth $60,000 on the transfer date. Donna continued to live alone in the residence until her death. She did not pay any rent. At her death, the residence is worth $100,000.
• In 1998, Donna created an irrevocable trust and funded it with $300,000 of assets. Donna names a bank as trustee. According to the trust agreement, all the trust income is to be paid out annually for 25 years. The trustee, however, is to decide how much income to pay each year to Donna's son and daughter. Upon termination of the trust, the assets are to be distributed equally among her two children or their estates. The trust's assets are worth $320,000 when Donna dies.
• In 1998, Donna created a revocable trust with a bank named as trustee. She named her grandchild Joe as the beneficiary for life. Upon Joe's death, the property is to be distributed equally among Joe's descendants. The trust assets are worth $300,000 when Donna dies. How much would be included in Donna's gross estate?

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Definitions:

M1

Refers to a category of the money supply that includes all physical money, such as coins and currency, as well as demand deposits, checking accounts, and negotiable order of withdrawal (NOW) accounts.

Passbook Savings Account

A type of savings account where transactions are recorded in a physical booklet, allowing depositors to track account activity manually.

Checking Accounts

Banking accounts that allow depositors to write checks and use electronic debit to access funds for transactions and withdrawals.

Traveler's Checks

A type of check especially designed for travelers to use as a form of payment, which offers the security against loss or theft by requiring signatures for cashing.