Question

Case Study #4

Data:

Anne Smith had a $5,500,000 net worth at the time of her death in December 2018. In addition,

she had a $250,000 whole life policy with a $40,000 of accumulated cash value; her niece was

designated as the beneficiary. She also had a $150,000 pension plan death benefit.

Calculations:

1. What was the value of Anne’s gross estate?

2. How much of her estate is taxable?

3. How much estate tax will need to be paid?

4. How much of her estate must pass through probate?

Answer 1

1. Gross estate = $5,500,000+$250,000+$150,000 = $5,900,000

2. For 2018, the estate tax basic exclusion amount was $11,180,000 (Figure taken from IRS site). As the value of Anne Smith gross estate is less than the 2018 estate tax basic exclusion amount none of her estate is taxable.

3. Nil as none of Anne Smith estate is taxable.

4. $5,650,000 ($5,500,000+$150,000) of her estate must pass through probate as these estate assets had no name attached. In case of whole life policy there is no need of probate because her neice was designated as the beneficiary.