Tom and Rita have been married for 19 years. Tom has recently been
diagnosed with a malignant brain tumor. His prognosis is very poor – survival
beyond 18 months is unlikely. Rita is in good health. They have the following
children:
CHILDREN AGES
Colin 14
Elizabeth 9
Chet 6
Their children are healthy and attend school. Tom and Rita own a film production company called Playtone. Tom and Rita want to leave Playtone to their children. The following represents table Tom and Rita’s current financial position.
ASSETS
Cash/Cash Equivalents
JTROS Cash $ 460,000
Total Cash/Cash Equivalents $ 460,000
Invested Assets
CP Playtone $ 24,500,000
H Inherited Stock Portfolio $ 2,650,000
TC Quarterhorses $ 780,000
W Inherited Stock Portfolio $ 2,250,000
Total Investments $ 30,180,000
Personal Use Assets
CP Primary Residence $ 3,420,000
Lake House $ 2,280,000
CP Boat $ 380,000
CP Auto 1 $ 170,000
W Auto 2 $ 94,000
H Auto 3 $ 90,000
Total Personal Use $ 6,434,000
Total Assets $ 37,074,000
LIABILITIES AND NET WORTH
Liabilities
Current Liabilies
W Credit Card 1 $ 148,000
W Credit Card 2 $ 22,000
H Credit Card 3 $ 95,000
CP Credit Card 4 $ 26,000
Total Current Liabilities $ 291,000
Long-Term Liabilities
CP Mortgage – Primary $ 1,210,000
H Mortgage – Lake House $ 1,140,000
CP Loan – Boat $ 160,000
H Loan – Auto 3 $ 25,000
Total Long-Term Liabilities $ 2,535,000
Total Liabilities $ 2,826,000
Net Worth $ 34,248,000
Total Liabilities and Net Worth $ 37,074,000
Notes to Financial Statements:
1. Assets are stated at fair market value (rounded to even dollars).
2. Liabilities are stated at principal only (rounded to even dollars).
3. The adjusted basis of Playtone is $3,000,000.
4. Inherited Stock Portfolios have children designated as beneficiaries.
5. Property Ownership:
a. JTROS – Joint tenancy with right of survivorship (Tom and Rita are joint tenants of all property JTROS).
b. TC – tenants in common (assume Tom and Rita are 50/50 tenants in common unless question says otherwise.
c. CP – community property of Tom and Rita
d. H – Tom’s separate property.
e. W – Rita’s separate property.
Assume that Tom dies December 31, 2020. Calculate the total value of the Tom’s assets.
Assume that Tom dies on December 31, 2020. Calculate the value of assets that will pass through Tom’s probate estate.