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2 CH 2 BASIC APPLICATION OF THE ESTATE TAX the trust. Dan's will provides that any balance on Sam's note is to be cancelled upon his death. Dan's will is silent as to the installment note issued by the trust; however, the promissory note itself provides that any remaining principal obli- gation will be cancelled upon Dan's death. What amounts, if any, will be included in Dan's estate on account of these promissory notes? If you need additional information, what questions would you like to have answered? 5. Candace is the owner of what is referred to as a payable on death ("POD") bank account. Pursuant to the account agreement withdrawals can be made only by Candace during her lifetime. Yet upon her death, the account balance does not become part of her probate estate; rather, it is paid to the "POD payee" on the account, which Candace designates to be her niece. Upon Candace's death, is the balance in the account included in her gross estate under $2033? 6. How would your answer to Question 5 above change, if at all, had Candace irre- vocably designated her niece as the POD payee of the account? 7. You represent Bob in connection with drafting his estate-planning documents, and you have asked him to provide a detailed inventory of his assets. After going through the standard items, Bob mentions to you, "Oh yeah, I think I may be a beneficiary under my uncle's trust." You ask Bob to get a copy of the trust docu- ment for you to review. He does so, and the trust provides as follows: Upon my death, the Trustee shall retain the property in trust, and pay the net income therefrom to my wife in regular installments but not less frequently than annually. The Trustee may also distribute as much of the trust principal to my wife as the Trustee deems necessary for her health, maintenance, and support in her accustomed manner of living Upon my wife's death, the trust assets shall be distributed one-half to my nephew Bob and one-half to my niece Betty. Bob's uncle passed away years ago, but Bob's aunt is still living. After produc- ing the trust document, Bob says "I shouldn't have to worry about this from an estate tax standpoint should I? I mean, I haven't seen one dime from this trust yet, and I'm not sure I ever will." What is your advice? 8. Return to the hypothetical provided at the beginning of $2.02. Pursuant to the Tax Court's decision in Newman v. Commissioner, the amount of the checks writ- ten and delivered to the family members would not be deducted from the dece- dent's bank account in determining the amount included in his gross estate under $2033. What, if anything, could be done to achieve the desired result? 2 CH 2 BASIC APPLICATION OF THE ESTATE TAX the trust. Dan's will provides that any balance on Sam's note is to be cancelled upon his death. Dan's will is silent as to the installment note issued by the trust; however, the promissory note itself provides that any remaining principal obli- gation will be cancelled upon Dan's death. What amounts, if any, will be included in Dan's estate on account of these promissory notes? If you need additional information, what questions would you like to have answered? 5. Candace is the owner of what is referred to as a payable on death ("POD") bank account. Pursuant to the account agreement withdrawals can be made only by Candace during her lifetime. Yet upon her death, the account balance does not become part of her probate estate; rather, it is paid to the "POD payee" on the account, which Candace designates to be her niece. Upon Candace's death, is the balance in the account included in her gross estate under $2033? 6. How would your answer to Question 5 above change, if at all, had Candace irre- vocably designated her niece as the POD payee of the account? 7. You represent Bob in connection with drafting his estate-planning documents, and you have asked him to provide a detailed inventory of his assets. After going through the standard items, Bob mentions to you, "Oh yeah, I think I may be a beneficiary under my uncle's trust." You ask Bob to get a copy of the trust docu- ment for you to review. He does so, and the trust provides as follows: Upon my death, the Trustee shall retain the property in trust, and pay the net income therefrom to my wife in regular installments but not less frequently than annually. The Trustee may also distribute as much of the trust principal to my wife as the Trustee deems necessary for her health, maintenance, and support in her accustomed manner of living Upon my wife's death, the trust assets shall be distributed one-half to my nephew Bob and one-half to my niece Betty. Bob's uncle passed away years ago, but Bob's aunt is still living. After produc- ing the trust document, Bob says "I shouldn't have to worry about this from an estate tax standpoint should I? I mean, I haven't seen one dime from this trust yet, and I'm not sure I ever will." What is your advice? 8. Return to the hypothetical provided at the beginning of $2.02. Pursuant to the Tax Court's decision in Newman v. Commissioner, the amount of the checks writ- ten and delivered to the family members would not be deducted from the dece- dent's bank account in determining the amount included in his gross estate under $2033. What, if anything, could be done to achieve the desired result

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