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Comparative Analysis of Estate Tax Implications: Current vs. Proposed Estate Plans

This document provides a detailed analysis of estate tax calculations and implications for Rich's estate upon the second death. It compares the current estate plan against a proposed tandem trust plan. The current estate plan results in a net estate to family of $3,397,538 after taxes, while the proposed plan aims to reduce the taxable estate significantly through strategic charitable deductions and trust allocations. Key figures include estate taxes, tentative tax amounts, and the effective use of unified credits to optimize inheritances for heirs and charitable organizations.

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Comparative Analysis of Estate Tax Implications: Current vs. Proposed Estate Plans

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  1. 2nd Death Occurs CURRENT ESTATE PLAN... ESTATE Heirs Outright $4,072,538 Estate Tax $2,864,212 (plus $63,250 in settlement charges Charitable Organizations $-0-

  2. ESTATE TAX CALCULATION... ESTATE………………………….$6,325,000 COSTS……………………………...($63,250) NET TAXABLE ESTATE………$6,261,750 TENTATIVE TAX……………….$3,084,762

  3. UNIFIED CREDIT………………….$220,550 ESTATE TAX……………………..$2,864,212 NET TO FAMILY………………...$3,397,538 FIRST DECEASED’S ESTATE + $675,000 Outright $4,072,538 to heirs

  4. 2nd Death Occurs PROPOSED ESTATE PLAN... RICH’S ESTATE Lead Trust $2,600,000 Remainder Trust $2,600,000 Estate Tax $1,036,265 + $63,250 Heirs Outright $700,485

  5. Lead Trust $2,600,000 Remainder Trust $2,600,000 10% 6.25% Income Income each each year year (Charity) (Heirs) 15 Years Pass (Charity) (Heirs)

  6. A LOOK AT THE APPROXIMATE DEDUCTIONS… USED TO LOWER THE RICH’S ESTATE VALUE (assumed AFR of 8.0%)

  7. A LOOK AT THE APPROXIMATE DEDUCTIONS... ESTATE VALUE…………………………….$6,325,000 • 1% for settlement charges…………………..($63,250) • $6,261,750 • *Charitable estate deduction • for a 15-year, 6.25% payout • CRT funded with $2,600,000……………...($1,034,751) • * Charitable estate deduction • for a 15-year, 10% CLAT • funded with $2,600,000…………………...($2,291,121) • TAXABLE ESTATE…….……..…$2,935,878

  8. Tentative Tax……………………...…………..$1,256,815 • Unified Credit…..………….……………………$220,550 Estate Tax due………………$1,036,265 * NOTE:Deductions available at the time this case illustration was created

  9. NET EFFECT OF CURRENT ESTATE PLAN versus TANDEM TRUST ESTATE PLAN CURRENT ESTATE PLAN VS TANDEM PLAN NET - PRESENT VALUE ASSUMING 3.5% DISCOUNT

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