Personal Financial Planning

14th Edition
by Randy Billingsley, Lawrence J. Gitman, Michael D. Joehnk
778 Solutions 15 Chapters 7336 Studied ISBN: 9781305636613 Finance 5 (1)

Chapters 15: 1

15-1 Discuss the importance and goals of estate planning. Explain why estates often               break up. Distinguish between the probate estate and the gross estate.


Step-By-Step Solution


probate estate

The real and personal property owned by a person that can be transferred at death.

gross estate

All property that might be subject to federal estate taxes on a person’s death.


The states versus federal interest in estates is that the property of the decedent goes to the person it is supposed to go to. At death property is transferred by property law and by probate law. Any property that is jointly owned with right of survivorship will be transferred by property to the joint owner—such property will not be a part of the probate estate. Also, if property held by contract (such as investment account, mutual funds, bank account, etc.) has a named beneficiary, that property will be transferred to the beneficiary by property law—such property will not be a part of the probate estate. All other property will be in the probate estate.

The gross estate is the federal term for all property owned in any way by the decedent. Thus, gross estate will include jointly owned property as well as property subject to a contract. Of course it also include the probate estate. The purpose of the gross estate is to compute the transfer tax on estates.


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