Exam 23: Estates and Trusts

Buddy,a dog,is cared for by a trust set up by his owner's will.The following transactions occurred for the trust. 1.The trust was established with $100,000 from his owner's estate,by deposit to a savings account. 2.A check is written to Paws and Claws Puppy Farm to cover the first month of Buddy's room and board,for $680. 3.A check is received for interest earned on the savings account amounting to $417. 4.Buddy dies.Paws and Claws sends a final room and board bill for $430,with additional charges for Buddy's burial of $270.The invoice is paid. 5.The balance of the trust is turned over to the Humane Society,as prescribed by Buddy's owner's will,and the trust is closed. Required: Prepare the journal entries for the listed transactions.Disregard the impact of estate and income taxes.

Cindy Lou's parents passed away while she was still dependent on them,and their will designated that a trust should be established with their estate proceeds to care for her.The following transactions occurred in the first two months following their deaths. 1.The trust account was opened with the $2,000,000 in funds received from the estate.The funds were deposited into a non-interest bearing checking account to be used for expenses. 2.$1,500,000 was put into a multi-year certificate of deposit which earned 3% annually,with interest paid monthly back to the checking account. 3.One month's interest from the certificates of deposit was received. 4.The bank's trust administration fee was paid for $65. 5.Tuition was paid for the boarding school where Cindy Lou was living for $6,500. Required: Prepare the journal entries for the listed transactions.Disregard the impact of estate and income taxes.

Philiam Benedict dies on October 1,2011,leaving his entire estate to his sole surviving niece,Muriel Finster.After all devise distributions and payments for estate expenses and liabilities,the fair value of Philiam's estate is $6,350,000. Required: Calculate the federal estate tax on Philiam's estate,assuming that federal estate taxes are paid at the 45% rate.

In reference to the probate process,which of the following statements is correct?

Which of the following phrases is frequently used to refer to estate or trust accounting?

If estate assets are insufficient to pay all claims in full,under the Uniform Probate Code which of the following would be paid first?

In reference to estates,which of the following statements is correct?

What is the document prepared by the executor or administrator to show accountability for estate property received and maintained or disbursed in accordance with the will?

In reference to the potential taxation of an estate,which of the following statements is correct?

Mason Dixon dies on November 30,2011,leaving a valid will.The will reads as follows: "I leave my boat to my son,George.I leave my automobile to my daughter,Georgia.I leave the income on my estate to be divided equally between George and Georgia.Estate expenses are to be paid from principal,not estate income.All other property,I leave to a trust to care for my wife,Gladys.Any remaining property at the time of her death is to be transferred into a trust to pay college education expenses of my grandchildren until such time as it is used up.I name my wife,Gladys,as executrix of my estate." Gladys prepares an estate inventory for all assets discovered and files the appropriate notice to potential creditors on December 15. A check for interest is received of $5,000,and estate liabilities (such as funeral expenses,administrative costs,and taxes)are settled for $20,000.The will is administered. Required: Prepare a charge-discharge statement for the estate of Mason Dixon on December 31,2011.Assume the life insurance proceeds have not been paid out.

Warren Peace passed away,with his will leaving the bulk of all his worldly possessions to his friend Leo.The following transactions occurred with respect to Warren's estate. 1.Warren's estate inventory included 10,000 shares of Newberry Industries,selling at the time of Warren's death at $56 per share.There were no outstanding dividends at the time Warren died,but two weeks later,a $1.00 per share dividend was declared. 2.Warren only designated one item that was not to be left to Leo.Warren's family had a signed,first-edition copy of a classic novel that was valued and included in the estate inventory at $67,000,which Warren left to the local library.The book is located and delivered. 3.Funeral expenses are paid in the amount of $7,880. 4.A statement comes from the insurance company indicating there are multiple charges from Warren's final hospital stay that will not be covered and are the responsibility of the estate.These fees amount to $39,000 and were not known at the time the estate inventory was prepared.The charges are confirmed and will be paid when the separate bills arrive from the hospital and professionals who billed them to the insurance company. 5.A check is received from Newberry Industries for the dividends declared in the first transaction,above. Required: Prepare the journal entries for the listed transactions.Disregard the impact of estate and income taxes.

What is the current annual gift amount that can be left to an individual donee,without being subject to a federal gift tax?

Which type of trust is created pursuant to a will?

Which of the following is a gift of an object to a devisee?

The executor or administrator of a will is required to prepare and file an inventory of property owned by the deceased within what time period?

Under the Uniform Probate Code,the term "personal representative" refers to which of the following?

Under the Uniform Probate Code,the personal representative must publish for what time period a notice in a newspaper of general circulation in the county in which the decedent resided?

John Doe's will states that all assets he had should be transferred to a trust to cover living expenses for his spouse,who he feels will not be able to handle her own financial affairs without advice and supervision.Upon his spouse's passing,the trust will be converted to cash and distributed to their only daughter,Jane.The probate court already ruled on which assets could be excluded from the estate,and all tax issues were addressed,leaving the following inventory of assets from the estate: Required: Prepare the journal entry for the creation of the trust.