Documente Academic
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Documente Cultură
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1: Estates
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Understanding Estates
Estates come into existence at the death of an individual
(decedent)
Testate (with a valid will)
Intestate (no will or will not validated by probate court)
Governed by state laws
Uniform Probate Code followed in text
Not all states have adopted it
Court-appointed administrator or executor
Personal representative of deceased
Administers the estate
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Intestate Succession
All passes to spouse if
Decedent has no living descendants, or
All surviving descendants are also
descendants of spouse
Otherwise
Spouse receives first $100,000
Plus one-half of remaining estate
Remainder to other descendants
Varies by state
Pearson Education, Inc. publishing as Prentice
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Exempt Property
Uniform Probate Code allows
Homestead allowance $15,000
Entitlement to personal property (furniture,
vehicles) $10,000
Family allowance
Reasonable amount during administration of
estate
To surviving spouse (equally to minor children if
none)
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Classification of Claims
If estate is insufficient to pay all claims,
payments are made
Administration costs and expenses
Reasonable funeral and medical expenses of
last illness
Debts and taxes with legal preference
All other claims
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Charge-Discharge Statement
Assets of estate
Included in inventory
Discovered after inventory
Payments and distributions of estate principal
Cash payments for expenses, debts, to heirs
and devisees
Distributions in kind in settlement of
expenses, debts, or made to heirs and
devisees
Estate income: receipts and disposition
Pearson Education, Inc. publishing as Prentice
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Record Inventory
Cash principal
30
Notes receivable
93
Interest receivable
40
Municipal bonds
15
Summer home
55
2005 Nissan
Estate principal
8
243
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Collect on Receivables
Cash - principal
95
Notes receivable
Interest receivable
93
2
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Cash income
2005 Nissan
Estate income
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Funeral expense
Medical expense
19
Debts of decedent
100
Cash - principal
128
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Distributions of Cash
Devise - L. Hunt
19
Devise - S. Tyson
Devise - Church
10
Cash principal
Devise - G. Olds
Cash income
35
1
1
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Distributions in Kind
Devise - summer home to L. Hunt
55
40
Summer home
55
40
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Measurement
Initial fair values are recorded at the
establishment of the
Estate or trust
Changes in value after that
Income (loss)
Adjustments for inaccurate fair values
Change to principal
Ex: Interest collected after establishing a trust
Principal, if receivable at start of trust
Income, if earned after start of trust
Pearson Education, Inc. publishing as Prentice
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Estate Income
Accounting for estates has two control tools for
income and principal
Use separate accounts for cash
Cash principal
Cash in original inventory
Cash from conversion of other principal
Use separate Estate accounts
Estate principal
Estate income
Pearson Education, Inc. publishing as Prentice
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3: Trusts
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Purpose of Trust
Accounting should provide sufficient evidence
to show that the applicable laws and
instructions of the particular trust
Control for income and principal
Use separate net asset accounts
Trust fund principal
Trust fund income
Often, trust funds do not segregate cash
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4: Estate Taxes
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Estate Taxes
Estates may be subject to federal and/or state
inheritance taxes
Economic Growth and Tax Relief Reconciliation Act
of 2001
Reduces inheritance taxes with total repeal in 2010
Act expires in 2011
Old inheritance tax rates will automatically
reapply
Unless Congress takes action
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