Question

In each of the following situations explain whether the property or property interest, which is held as of the date of my death, will be included in my gross estate and, if so, what amount:

A: In 2011 my father transferred $400,000 to a trust and appointed me trustee. My powers include the right to decide how much will be distributed to the two beneficiaries, my mother and my sister. Trust assets are now $500,000.

B: In 2011, my father transferred $400,000 to a trust and appointed me trustee. My powers include the right to decide how much will be distributed to the two beneficiaries, my sister and me. Trust assets are now $500,000.

C: In 2018, I die and my estate receives $500,000 as proceeds of a life insurance policy on my life.

Answer 1

General rule :

Only that much amount, which a person owns and controls will be included in his Gross Estate for the purpose of Federal

Situation	Whether Included in Gross Estate?	Amount	Reason for Inclusion
A.	Not to be included	-	Since you are not the beneficiary of the trust, you do not own any amount from $ 500,000. Only your mother and sister will be entited to the trust assets and hence nothing would be included in your Gross state.
B.	Included (Partial)	$ 250,000	In this situation, you and your sister are the beneficiaries of the trust assets. Therefore, as per the Federal Estate Tax Laws, 50% is assumed to be included in your Gross Estate.
C.	Included (Full)	$ 500,000	As per the Fedral Estate Tax Laws, proceeds of Life Insurance policy of the deceased would be fully included in his Gross Estate.

Total value to be included in your Gross Estate = $ 750,000