Exam 23: Estates and Trusts

In reference to estate principal and income,which of the following statements is correct?

Mary Contrary is the executor for the estate of Belle Silver.Belle owned a home with a fair value of $200,000.The home has a remaining mortgage amount of $80,000.Mary also has personal effects worth $8,000,an investment portfolio with a fair value of $150,000 on the date of death,and approximately $7,500 in cash in various accounts.The home was left to her daughter in the valid will that Belle had executed prior to her death. Belle did not have a surviving spouse,but her daughter is a minor,who is independently wealthy after inventing a cutting-edge software program.The state in which Belle resided,allows a $15,000 homestead allowance,and a $10,000 personal effects entitlement. After taking an inventory,and converting all of the assets,except for the home and the personal effects,into cash,there is $159,000 for Mary to distribute to the appropriate devises,beneficiaries,and creditors. Mary has identified the following expenses and devises: 1.Belle's unpaid final medical expenses were $24,000. 2.Belle left a devise of $100,000 to her church. 3.The costs and expenses of administering the estate were $21,000. 4.Real estate taxes of $3,600 are past due. 5.The unpaid funeral expenses were $8,700. Required: Prepare a schedule that will list the disbursements of assets.Assume that the state in which Belle resided has adopted the Uniform Probate Code.

Suzanne Quincy passed away on October 25,2014.Suzanne left behind a limited estate,so there are no tax issues to address,however,she owned a dog,Buddy,and Suzanne provided for Buddy in the will.Suzanne left $100,000 for Buddy's care,and the remainder of her estate was left to her neighbor,Agnes.Suzanne's estate had the following events and transactions in the month following her death. 1.Her assets were converted to cash at their fair value as inventoried: Mutual funds,$270,000;and Residence,$209,000.There were no other reportable assets. 2.Transferred $100,000 to a trust account at Second National Bank to provide care for Buddy,and delivered Buddy to Paws and Claws Pet Farm,his new home. 3.Wrote check to pay for funeral expenses for $9,600. 4.Wrote check to pay for executor fees as designated in the will of $1,000. 5.Wrote check to pay balance of estate to Agnes. Required: Prepare the journal entries for the listed transactions.Disregard the impact of estate and income taxes.

You are serving as the executor for the estate of Scott Michaels,who passed away on June 28,2014.The following transactions occur during the balance of June and July,2014. 1.On July 11,you issued a check to pay Scott's final medical expenses of $28,000. 2.In Scott's will,he wanted $90,000 given to the American Society for the Prevention of Cruelty to Animals (ASPCA).After examining the assets,you determined that the estate's assets will adequately cover all expenses and specific devises,so on July 13,you issued a check to the ASPCA for $90,000. 3.On July 15,you received a check in the amount of $27,900 from First State Bank of Greenville.It is the maturity value and interest from a certificate of deposit in the amount of $25,000 that was not included in the estate's initial inventory.The CD matured on June 30,2014. 4.On July 26,you received interest of $2,000 on Greenville City bonds.Interest of $180 was earned after the date of death.The balance was earned prior to death,and had been accrued.The bonds were included in the initial inventory. 5.On July 28,you issued a check to pay Scott's funeral expenses of $7,600. Required: Prepare the necessary journal entries for the above transactions.You may ignore any estate or income taxes.

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?

Oscar Lloyd is serving as the executor for the estate of Dixie Cooper,who passed away on January 28,2011,at the age of 98.Dixie's estate consisted of Treasury bonds with a maturity value and fair market value of $1,400,000,$4,000 in her checking account,and $50,000 in a Certificate of Deposit with First State Bank of Springfield.Total accrued interest at the time of death was $44,000,made up of $2,000 from the CD and $42,000 from the bonds. Dixie left a valid will,which provided that most of her estate would be inherited by her two nephews,Jimmy Johns and Joey Johns.In addition,Dixie provided that $200,000 be transferred to a trust account for her faithful cats,Petra and Hobbes.Income from the trust would be used to care for Hobbes and Petra.Upon their passing,the remaining funds would then transfer to Operation Kindness,an organization that cares for cats and dogs. Mr.Lloyd will also serve as the fiduciary for the trust.He has determined that no state or federal inheritance taxes are due.The limited estate income is also free from any federal or state income tax.The following transactions occurred during February. 1.On February 3,Oscar sold the treasury bonds for $1,460,000.$1,400,000 was for the fair market value of the bonds,$42,000 was for interest accrued to the time of Dixie's death,and the remaining $18,000 was for accrued interest since Dixie's death.Estate income will be used to pay final medical expenses,and if anything is left,funeral expenses. 2.On February 11,Oscar issued a check to pay Dixie's final medical expenses of $11,900. 3.On February 15,Oscar received a check in the amount of $52,000 from First State Bank of Springfield.It is the maturity value and interest from a certificate of deposit in the amount of $50,000.The CD matured on January 22,2011. 4.In Dixie's will,she wanted to give $150,000 to the American Humane Society.After examining the assets,Oscar determined that the estate's assets will adequately cover all expenses and specific devises,so on February 3,he issued a check to the organization for $150,000. 5.On February 18,Oscar transferred $200,000 to a trust account at First State Bank to fund the trust,to care for the cats. 6.On February 25,Oscar issued a check to pay Dixie's funeral expenses of $9,800. 7.On February 26,Oscar paid himself the $4,000 executor's fee specified in Dixie's will. 8.On February 28,Oscar finalized the estate and transferred the balance of the estate's assets equally between Dixie's nephews,Jimmy Johns and Joey Johns. Required: 1.Prepare an inventory of estate assets at the time of Dixie's death and record the necessary journal entries to create the estate. 2.Prepare journal entries to record the estate's transactions during February.

Which of the following are entitled to the remainder of the estate after all other rightful claims on the estate have been satisfied?

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

Philiam Benedict dies on October 1,2014,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.

Mason Dixon dies on November 30,2014,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 31,2014.Assume the life insurance proceeds have not been paid out.

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

Oscar Lloyd is serving as the executor for the estate of Dixie Cooper,who passed away on January 28,2014,at the age of 98.Dixie's estate consisted of Treasury bonds with a maturity value and fair market value of $1,400,000,$4,000 in her checking account,and $50,000 in a Certificate of Deposit with First State Bank of Springfield.Total accrued interest at the time of death was $44,000,made up of $2,000 from the CD and $42,000 from the bonds. Dixie left a valid will,which provided that most of her estate would be inherited by her two nephews,Jimmy Johns and Joey Johns.In addition,Dixie provided that $200,000 be transferred to a trust account for her faithful cats,Petra and Hobbes.Income from the trust would be used to care for Hobbes and Petra.Upon their passing,the remaining funds would then transfer to Operation Kindness,an organization that cares for cats and dogs. Mr.Lloyd will also serve as the fiduciary for the trust.He has determined that no state or federal inheritance taxes are due.The limited estate income is also free from any federal or state income tax.The following transactions occurred during February. 1.On February 3,Oscar sold the treasury bonds for $1,460,000.$1,400,000 was for the fair market value of the bonds,$42,000 was for interest accrued to the time of Dixie's death,and the remaining $18,000 was for accrued interest since Dixie's death.Estate income will be used to pay final medical expenses,and if anything is left,funeral expenses. 2.On February 11,Oscar issued a check to pay Dixie's final medical expenses of $11,900. 3.On February 15,Oscar received a check in the amount of $52,000 from First State Bank of Springfield.It is the maturity value and interest from a certificate of deposit in the amount of $50,000.The CD matured on January 22,2014. 4.In Dixie's will,she wanted to give $150,000 to the American Humane Society.After examining the assets,Oscar determined that the estate's assets will adequately cover all expenses and specific devises,so on February 3,he issued a check to the organization for $150,000. 5.On February 18,Oscar transferred $200,000 to a trust account at First State Bank to fund the trust,to care for the cats. 6.On February 25,Oscar issued a check to pay Dixie's funeral expenses of $9,800. 7.On February 26,Oscar paid himself the $4,000 executor's fee specified in Dixie's will. Assume that on February 28,2014,Oscar finalized the estate and transferred the balance of the estate assets to Dixie's nephews,Jimmy Johns and Joey Johns.Each received one-half of the residual estate. Required: 1.Prepare the closing entry on February 28,2014. 2.Prepare the charge-discharge statement for the estate of Dixie Cooper for the period January 28 through February 28,2014.

Richard Stands passed away at on September 2,2011.The probate court ruled that most assets could be excluded from estate inventory.Ty Republic has been appointed to serve as executor for the estate.The estate assets consisted of the following at that date: Required: Prepare an inventory of estate assets as of September 2,2011.

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.

In reference to accounting for trusts or estates,which of the following statements is correct?

Silvia Peacock has been appointed to serve as the executor of the estate of Mr.Mickey Babay,who passed away at the age of 104 on April 5,2011.On April 5,2011,Mr.Babay's assets consisted of the following: The probate court has ruled that any other personal effects may be excluded from Mr.Babay's estate inventory. Required: Prepare an inventory of estate assets on April 5,2011.