Question

Assuming you have a defined benefit plan what would your projected annual benefit be if it was: 1.75%/per year of service, based on the average of your last three years of compensation (expected to be $74,000, $77,000 and $76,000) and you will have 25 years of service. Assume you are advising a family member/friend who's is an only child and their remaining parent passed away. Assuming there is a $5,000,000 estate, calculate the estate taxes payable to the federal government.

Answer 1

a.)

1.75% per year * 25 Years of Service * Average of (74,000 & 77,000 & 76,000)

Defined Benefit Plan = 1.75%*25*75,667 = 43.75% * 75,667 = $33,104

b.)

Assumng Parents died after Dec 31, 2009. And the $5 Million Estate is the net taxable value of estate after all deductions (viz. Mortgage, Debt etc) and all additions ( Taxable Gifts and such). The table for the taxation is easily available online.

Estate Taxes Payable to Federal Government = $345,000 upto $1 Million and any excess @40%

==> = $345,000 + (40% * 4,000,000) = $345,000 + $1,600,000

==> = $1,945,000

Good luck