Leon has a gross estate estimated at $14.3 million. He is not married but does have two adult children who he wants to receive all of his estate. Leon is the sole owner of income-producing real estate valued at $900,000. He currently depends on the income produced by this real estate to maintain his standard of living. However, Leon is certain that when he retires in 10 years, at age 65, he will no longer need this income due to a generous income from a defined benefit retirement plan. Leon's financial planner has told Leon that his estate could face a severe liquidity crisis if in retirement. In which one of the following trusts would it be best for Leon to place his income-producing property in order to improve his estate's liquidity position in retirement? A)A revocable trust to last for Leon’s lifetime, with all trust assets to be distributed to his children at his death B)An irrevocable trust to last for 10 years that will annually pay Leon income at the trustee’s discretion, with the remainder to his children (GRIT) C)An irrevocable trust to last for 10 years that will pay Leon a fixed percentage of the value of the trust assets as of January 1 of each year, with the remainder to his children (GRAT) D)An irrevocable charitable lead trust to last for 10 years that will pay the remainder to his children
Leon has a gross estate estimated at $14.3 million. He is not married but does have two adult children who he wants to receive all of his estate. Leon is the sole owner of income-producing real estate valued at $900,000. He currently depends on the income produced by this real estate to maintain his standard of living. However, Leon is certain that when he retires in 10 years, at age 65, he will no longer need this income due to a generous income from a defined benefit retirement plan. Leon's financial planner has told Leon that his estate could face a severe liquidity crisis if in retirement. In which one of the following trusts would it be best for Leon to place his income-producing property in order to improve his estate's liquidity position in retirement? A)A revocable trust to last for Leon’s lifetime, with all trust assets to be distributed to his children at his death B)An irrevocable trust to last for 10 years that will annually pay Leon income at the trustee’s discretion, with the remainder to his children (GRIT) C)An irrevocable trust to last for 10 years that will pay Leon a fixed percentage of the value of the trust assets as of January 1 of each year, with the remainder to his children (GRAT) D)An irrevocable charitable lead trust to last for 10 years that will pay the remainder to his children
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Leon has a gross estate estimated at $14.3 million. He is not married but does have two adult children who he wants to receive all of his estate. Leon is the sole owner of income-producing real estate valued at $900,000. He currently depends on the income produced by this real estate to maintain his standard of living. However, Leon is certain that when he retires in 10 years, at age 65, he will no longer need this income due to a generous income from a defined benefit retirement plan. Leon's financial planner has told Leon that his estate could face a severe liquidity crisis if in retirement.
In which one of the following trusts would it be best for Leon to place his income-producing property in order to improve his estate's liquidity position in retirement?
A)A revocable trust to last for Leon’s lifetime, with all trust assets to be distributed to his children at his death
B)An irrevocable trust to last for 10 years that will annually pay Leon income at the trustee’s discretion, with the remainder to his children (GRIT)
C)An irrevocable trust to last for 10 years that will pay Leon a fixed percentage of the value of the trust assets as of January 1 of each year, with the remainder to his children (GRAT)
D)An irrevocable charitable lead trust to last for 10 years that will pay the remainder to his children
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