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1--Help the following couple form a strategy for reducing their estate taxes.

2--Calculate how much they can reduce their taxable estate through paying college tuition and gifting to their family each year.

3--Estimate the value of their taxable estate in 10 years ( assuming they do the above).

4--Assuming they both die at the end of year 10, calculate how much their estate will owe in estate taxes.

5--Recommend a strategy the couple may employ now, in order to pay or avoid the remaining taxes.

BACKGROUND:

Jerry and Jeannie (married) have 6 children (three are married) and 8 grandchildren. Four of the grandchildren are in college. The other four are scheduled to at least begin college sometime in the next 10 years. Jerry and Jeannie want to reduce their taxable estate by paying college tuition for their grandchildren as well as by gifting as much as they can to their family each year. Assume that the annual gift exclusion amount is $15,000 and that it will remain so indefinitely. Assume that they will give the maximum gift to each child/grandchild each year for a 10 year period. Assume that they will pay all of the college tuition due for their grandchildren during that 10 year period.

Jerry and Jeannie's total taxable estate TODAY is $18,350,000. Assume it will not grow in the next 10 years.

Calculate for each of the next 10 years:

1--Total amount paid in tuition

2--Total amount paid in gifts

BUILD a model that will calculate Jerry and Jeannie's college tuition and gift expenditures by year. Total the amounts at the end of 10 years.

Calculate the amount of their taxable estate at the end of 10 years.

Calculate their estate taxes due in year 10, if they were both to die.

RECOMMEND a strategy for further reducing their estate beginning now, OR a strategy for paying the estate taxes that will be due in 10 years.

INSTRUCTIONS:

--Begin with Step 1

--Decide which inputs to use. Enter the input description and accompanying input value.

--Decide what your output should be and label it. In the 'values' field enter the function or formula that will compute the output.

--Go to Step 2 and repeat the process...continue until all steps are complete and you have solved the original problem.

TOTAL both amounts (above) to calculate the amount that the taxable estate has been reduced by.

Compute the new TOTAL taxable estate.

ESTIMATE how much will be owed in estate taxes at the end of the 10 years (assuming both Jerry and Jeannie were to die that year).

Recommend any actions you believe will help them to:

1--Further reduce their taxable estate (if necessary) OR

2--Pay their estate taxes when they come due

ASSUMPTIONS

Tuition:

Each grandchild will pay $10,000 per year in tuition.

Number of grandchildren in college by year:

Year 1-2: 4

Year 3-4: 2

Year 5: 1

Year 6: none

Year 7: 1

Year 8: 2

Year 9: 2

Year 10: 4

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