Determine method of money transfer, Taxation

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Ted Testator died January 1st of this year.  Ted was married to Teri at the time of his death, but has two children, Timothy and Tabitha, from a prior marriage. You have been hired to do tax preparation for the executor.  Based on the following facts, determine (1) who receives the property at death (REMEMBER THAT A TRANSFER COULD HAVE SEPARATE PORTIONS) (2) the method of transfer (e.g., probate, trust, contract, etc.) and (3) the items includible in Ted's gross estate for federal estate tax purposes.  Ted's will left all of his estate to his wife Teri.

  • Ted's executor received $50,000 in dividends from stock. The dividends were declared before his death but were distributed to shareholders after his death.
  • Ted owned a home titled as tenancy by the entireties with Teri valued at 600,000 at the time of his death. Teri paid the entire purchase $750,000 purchase price for the home six years before.
  • Ted transferred $5,000,000 to a living revocable trust two years before his death. The trust terms permit Ted to distribute the money to himself or his children as he selects. The trust also provides: "at the time of my death, transfer to my children, Timothy and Tabitha, in equal shares the maximum applicable exclusion exemption amount available at the time of my death. . . .and transfer the remaining trust estate to the person who is my wife at the time of my death." Assume the trust principal has shrunk to $4,000,000 million at the time of his death (we must have the same broker).
  • Ted transferred a personal residence used as a vacation home worth $1 million to an irrevocable trust five years ago. The trust provided Ted with the exclusive right to live in the residence for 10 years. This trust is known as a qualified personal residence trust (QPRT). Assume the trust has five years until termination at his death. At the termination of the trust, his children are the remainder beneficiaries. At the time of his death, the residence is still worth $1 million.
  • Ted's employer entered into a nonqualified deferred compensation agreement with him that would provide $50,000 annually for 10 years, at retirement. Assume Ted retired two years ago and has received two annual payments. On his employer's forms, he designated his wife as beneficiary. Assume the actuarial value of the remaining payments is $300,000 at the time of his death.
  • Ted has an interest in a trust created by his father in his father's will. The trust is valued at $1,000,000 at the time of Ted's death. The trust provided Ted with all income while he was alive and the ability to appoint the principal at his death to any individual who is one of his father's heirs at law as he chooses through specific reference to the power in his last will. If no reference is made to the power in Ted's will, the property passes to his children in equal shares. Ted failed to exercise the power in his will.
  • Ted created an irrevocable trust four years ago. The trust provides for income for life to Teri with the remainder at her death to his two children, or their estates, in equal shares at her death. Ted took his existing life insurance policy with a face amount of $1,500,000 and assigns the policy to the trustee. He then places $20,000 each year in the trust for premium payments. The trustee is named as the designated beneficiary of the policy at the time Ted assigns the policy to the trust. The fair market value of the policy at the time of the assignment is $100,000.
  • Ted has a life income interest in a trust created for him five years ago by his previous wife, Tammy, with the principal worth $1,000,000 at the time of his death. The trust provides him with all income for life with the remainder at his death distributed to their two children. Tammy filed a gift tax return when creating the trust and elected to take the gift tax marital deduction for the property transferred to the trust for Ted's benefit.

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