Exam 23: Estates and Trusts

In reference to accounting for trusts or estates,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.

Under the Revised Uniform Principal and Income Act,gains or losses incurred on investments that occur after the death of the decedent

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

Under the Uniform Probate Code,the personal representative must inform the heirs and devisees of his or her appointment and provide other selected information within how many days of the appointment?

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

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?

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: Asset Cost Fair Value Cash 160,750 160,750 Certificates of Deposit 100,000 100,000 Investments/Mutual Funds 487,160 3,506,490 Residence 185,000 368,000 Lake cottage 12,000 123,000 Cookie Jar collection 8,785 74,000 1966 Alpha Romeo 42,000 79,750 Required: Prepare an inventory of estate assets as of September 2,2011.

Oscar Lloyd is the trustee for the Petra/Hobbes Trust.The following transactions occurred during 2014.Petra and Hobbes,two cats are going to reside with Oscar Lloyd,the trustee and devoted cat lover. February 18 $\quad$ The Petra/Hobbes Trust was established at First State Bank by depositing $\$ 200,000$ cash. February $19 \quad \$ 195,000$ was deposited into a three-year certificate of deposit earning $6 \%$ a year. Interest is paid semi-annually. $5,000 was deposited into a money market account paying $4 \%$ ansual interest. Interest is paid on the average daily balance for the past year. $\text { February 20 \quad Paid \$36B for cat food, cat toys, and kitty litter at Cats R Us. }$ February 24 $\quad$ Bought assorted cat DVDs for Hobbes and Petra. The DVDs were a combination of fish, bird, and squirrel movies. Paid $182 for the DVDs. $\text { June } 25 \quad \text { Paid \$405 for cat food, toys, and kitty litter }$ $\text { August } 19 \quad\text { Deposited one-half year's interest income of \$5,850 into the money market account. }$ $\text { December } 22 \quad\text { Paid \$722 for cat food, cat toys, kitty litter, Christmas presents for Petra and Hobbes. }$ Required: Prepare the necessary journal entries for the above transactions.You may ignore any tax effects.

You are serving as the executor for the estate of Dr.Mary Carlson.The following transactions occur during August 2014.Dr.Carlson died on July 30,2014. 1.On August 6,you received interest of $3,000 on State of Colorado general revenue bonds.Interest of $1,600 was earned after the date of death.The balance was earned prior to death,and had been accrued.The bonds were included in the estate's initial inventory.The maturity value and fair market values of the bond are $100,000. 2.On August 11,you issued a check to pay a probate court fee of $1,120. 3.The estate included 10,000 shares of Dasher International's common stock,valued at $40 per share,which were properly included in the estate's initial inventory.On the date of her death,there were no outstanding dividends receivable.On August 14,you read that a dividend of $1 per share was declared. 4.In Mary's will,she wanted $100,000 given to the National Zoo.After examining the assets,you determined that the estate's assets will adequately cover all expenses and specific devises,so on August 23,you issued a check to the Zoo for $100,000. 5.On August 25,you issued a check to pay Mary's final medical expenses of $16,700. 6.On August 28,you received a check for $10,000 for the common stock dividends paid by Dash International. Required: Prepare the necessary journal entries for the above transactions.You may ignore any estate or income taxes.

The charge-discharge statement shows the accountability of 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?

Josh Drake died on May 1,2014.He left his entire estate,with a fair value of $6,200,000 to his sole surviving family member,his daughter,DeeDee. Prior to any distribution of assets,Josh's estate reflected the following details: Funeral expenses \ 11,300 Expcutor's fees 10,800 Estate liabilities 14,000 Final medical expenses 40,700 Required: Calculate the federal estate tax on Mr.Drake's estate.You may ignore any state-level inheritance taxes and assume that the federal estate tax rate is 45%.

Intestate succession is the order in which estate property is distributed,if any estate property is not effectively distributed by will.

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

A fiduciary is an individual or an entity authorized to take possession of the property of others.

Residual beneficiaries are persons entitled to the remainder of the estate after all other rightful claims on the estate have been satisfied.

Which type of trust is created pursuant to a will?

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: Asset Cost Fair Value Cash 206,000 206,000 Certificates of Deposit 250,000 250,000 Investments/Mutual Funds 354,116 2,780,500 Residence 34,000 190,000 Ocean front cottage 78,000 560,000 Pepper mill collection 2,070 3,900 Required: Prepare the journal entry for the creation of the trust.

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