A finished FIN-440 Topic 3 probate and transfer cost comparison example, pricing a lifetime gift, probate and a funded trust, and finding basis at death decides the answer. Searches like "fin 440 topic 3 assignment example", "fin440 topic 3 sample" and "fin-440 topic 3 example" land here.
What a finished FIN-440 Topic 3 probate and transfer cost comparison looks like
Illustrative figures carry the whole comparison. A composite widow, 79, holds 1,600,000: a 550,000 house, 350,000 in cash and certificates, a 250,000 rental condo in a second state and stock bought for 50,000 that is now worth 450,000. Her daughter suggests taking the stock as a gift now. As a gift it keeps the mother's 50,000 basis, so a later sale realizes 400,000 of gain, about 60,000 of tax at the case's 15 percent rate. Inherited, its basis would generally adjust to value at death and that tax largely disappears. Probate on the whole estate at the case's 3 percent costs about 48,000, only 13,500 of it on the stock, and the condo needs a second proceeding in its own state. Drafting and funding a revocable trust costs about 5,000.
How a FIN-440 Topic 3 example is structured
Three paths are priced in parallel: a lifetime gift, a will with probate, and a funded revocable trust. The case section describes the widow, her daughter and each asset with its value and basis, all labeled illustrative. A basis section contrasts carryover basis on a gift with the adjustment to value at death, stating the rule descriptively. The gift path follows, with the gift tax return it triggers and the reason no gift tax is due on the case's facts. The probate path adds fees, the ancillary proceeding for the condo and the months the daughter would wait. The trust path counts drafting and retitling, including a new deed for the condo. A table sets the three costs side by side. The recommendation keeps the stock until death inside the trust, and names the change in the widow's health or needs that would reopen the question.
Basis carried over versus adjusted
A gifted asset keeps the donor's 50,000 basis, while an inherited one generally takes its value at death, and that difference drives most of this comparison.
The tax a gift would realize
Selling the gifted stock for 450,000 realizes 400,000 of gain, about 60,000 of tax at the rate the case assigns for illustration.
Probate priced for the whole estate
At the case's 3 percent, probate on 1,600,000 costs about 48,000, and the condo in the second state adds an ancillary proceeding on top.
Retitling as the trust's real cost
A revocable trust avoids probate only for assets moved into it, so the example counts the deed, the account transfers and about 5,000 of drafting.
Timing that reverses the daughter's idea
Gifting the stock would save roughly 13,500 of probate cost on that asset while creating about 60,000 of tax on any later sale.
Where marks go in FIN-440 Topic 3
A comparison that stops at probate fees earns the fewest marks, since the cost that decides this case is income tax on a gift, which no fee table shows. Papers treating a lifetime gift as an inheritance delivered early miss the basis rule entirely. Stating the federal estate and gift tax exemption or the annual exclusion as a fixed dollar figure dates the paper, because both are set by statute and adjusted. Claiming that a revocable trust saves estate tax confuses avoiding probate with shrinking a taxable estate. A trust recommended with no account of retitling leaves the condo exposed to the very proceeding the trust was meant to avoid. Omitting what would change the answer, such as a later need to qualify for long-term care benefits, leaves the timing question unexamined.
Get a FIN-440 Topic 3 example written to your instructions
Send the FIN-440 Topic 3 instructions and the rubric your classroom provides, with the estate facts or case your section assigns. We write a custom example to them, with each transfer path priced, basis on gifts and at death distinguished, probate and retitling costs counted and no exemption stated as a fixed figure, in 24 to 48 hours. The first one is free.
FIN-440 Topic 3 questions, answered
What is a step-up in basis?
When property passes at death, its tax basis is generally reset to what the property was worth when the owner died, so gain that built up during the owner's life is not taxed to the heir who later sells. A lifetime gift works differently: the recipient usually takes the donor's original basis. The rule has exceptions and proposals to change it recur, so the example describes it without treating it as permanent.
Does a gift over the annual exclusion mean gift tax is owed?
Not usually. A gift above the annual exclusion generally requires a gift tax return, and the excess is counted against the donor's lifetime exemption, which is shared with the estate tax. Tax falls due only once cumulative taxable gifts and the estate exceed that exemption. Both the exclusion and the exemption are set by statute and adjusted periodically, which is why neither amount appears in the example.
Should my parent gift assets now or leave them in a trust?
No example can settle that for a real family. The widow, her assets, their basis and the fee and tax rates are illustrative, chosen so the timing effect shows clearly. Real decisions depend on the actual assets, state probate rules, health and care needs and current tax law, and they belong with an estate planning attorney and a tax professional. This is FIN-440 coursework, not legal or tax advice.