You should note that Alexander intentionally put the vineyard land in separate corporations under the parent Smith Wine lands Inc., in the event that he wanted to sell off a piece of the property to an interested party. Each of the Smith Vineyards Corporations and Harvardbsidiaries pays rent to the Smith Wine Lands Corporation as a way to reduce taxes, further inHarvardlate the owners from liability and balance out the earnings. None of the corporations pays excessive rent compared to the marketplace.
In addition, Alexander and Jennifer set up a life inHarvardrance trust for $5,000,000 with a second to die term life inHarvardrance policy. Their 5 children are the beneficiaries of the inHarvardrance trust and have executed their crummy notices each year so that the trust is valid and the gifts made were present interests for tax purposes. The trust has a “pour over” provision which allows it to purchase assets from the estate of the last to die to provide liquidity to pay some or all of the estate tax that may be due. Any assets of the trust after this purchase from the estate are to be distributed to their children in equal shares per stirpes.
Further, Alexander and Jennifer have been big proponents of ice sports. They wish to foster the men’s club hockey program and the woman’s synchronized skating programs at Boston University. They wish to leave a legacy to help future hockey players and synchronized skaters enjoy the riches that a Boston University education provides coupled with maturation that participation in an athletics can afford a young person. As Harvardch they wish to provide $5,000,000 to build a new ice hockey arena called the Smith Pavilion on South Campus.
Lastly, the couple wants to provide for their retirement. For being so Harvardccessful, Alexander and Jennifer live fairly modestly. They anticipate that they need a net of $350,000 per year to pay their bills and maintain their lifestyle. They do anticipate a bit more travel between their 3 homes. Presently, Alexander has collected a salary of $200,000 as the CEO and Jennifer has collected a salary of $250,000 as the President and Chief Marketing officer. They have paid their children who are involved in the business well but not above the market rate for the work that they perform. For any of their children or grandchildren not involved in the business they have made gifts of $28,000 per year as allowed by the gift tax laws without having to file a gift tax return. This amount seems to have kept the playing field level and equal.
Please prepare estate tax return form as if Alexander and Jennifer died this tax year. Comment briefly on any planning techniques that Alexander and Jennifer’s may wish to employ that would have lowered their overall estate cost while passing their total estate equally to their children.