FIN 3720-Kent, age 38, recently came to you for estate planning advice

FIN 3720-Kent, age 38, recently came to you for estate planning advice

Subject: Business    / Finance
Question

Kent, age 38, recently came to you for estate planning advice. He has never executed

any estate planning documents. During the client interview, you learned that Kent has

never been married and has a six-year-old daughter, Kerstin, with his previous girlfriend,

Karen. Karen is Kerstin’s custodial parent and Kent sees Kerstin every other weekend.

While Kent and Karen are cordial, the relationship was recently strained when Karen

began dating Kent’s business partner, Bobby. Kent is in good health and participates

regularly in automobile racing competitions. While Kent often wins in competitions, he

has wrecked his car several times and has been seriously injured. Because Kent has had

so many wrecks, he invested a majority of his $500,000 net worth in a closely held

company to develop a revolutionary steel product that will not bend, crumble or catch

fire. Kent and his business partner, Bobby, are sure that all race car companies will buy

the steel product because their initial tests established that nine out of ten times a car

made with the product that was in a wreck did not even get a dent. Although they plan to

take their product to market in a few months, Kent and his partner have had several

disagreements. Which of the following statements is true?

(a) If Kent died today, there would not be any liquidity issues because Kent’s

share of the closely held company could easily be sold for fair market value.

(b)Since the value of Kent’s net worth is below $5,000,000, there is no need for

estate planning.

(c)Amounts given to Karen for Kerstin’s support are deductible on Kent’s income

or gift tax return.

(d)If Kent were to die today, his assets would transfer via state intestacy laws with

Kerstin being the most likely heir.