Schweser study guide / Module Quiz 12.3 / Study session 5 Estate planning

Question 3

Answer says waiting to do bequest is more favorable, but there is estate tax mentioned too . If we consider estate tax then it comes in favor to gift now v/s bequest later.

Earning 6.5 % by remaining in estate is definitely better than after tax return if gifted now but if estate tax of 30% considered then ratio is 1.4209 that favors gifting now.

Please explain why answer says bequest is only better?

Are you talking about part B? If it is the case, then it is better to wait to make a bequest because the gift tax rate is 40% vs a estate tax rate of just 30%. Even that, the after-tax return of donor is 6.5% vs 6.0% of receiver, so it is better to bequest.

The weird explanation is in part A. Didn’t understand the solution, probably an erratum there or simply bad worded.