Case Study Webinar

©2013. InKnowVision LLC. All rights reserved. www.inknowvision.com
FAMILY WEALTH GOAL ACHIEVER™ - INITIAL

PREPARED FOR:

DUNCAN AND TINA LEWIS
October 1, 2013

DRAFT FOR DISCUSSION PURPOSE...
YOUR GOALS AND OBJECTIVES
DUNCAN AND TINA LEWIS

Maintain our customary lifestyle. This should take about $1,600,000 annua...
PERIODIC TABLE OF ESTATE PLANNING ELEMENTS - RECOMMENDED
DUNCAN AND TINA LEWIS
The highlighted tools are those we have det...
DUNCAN AND TINA LEWIS

LIFETIME SPENDING
AND LIQUIDITY

Page 4
YOUR LIQUID ASSETS -PROPOSED PLAN
DUNCAN AND TINA LEWIS

$25,000,000

$20,000,000

$15,000,000
-

$10,000,000

$5,000,000
...
PERSONAL LIVING EXPENSES vs. AVAILABLE CASH FLOW
DUNCAN AND TINA LEWIS

$6,000,000

GDOT promissory notes
are paid off
$5,...
DUNCAN AND TINA LEWIS

INCREASE INHERITANCE
AND REDUCE ESTATE TAX

Page 7
COMPARISON OF PLAN RESULTS - PLAN YEAR 2013
DUNCAN AND TINA LEWIS

Existing Plan

Proposed Plan

Advantage

Estate Value

...
COMPARISON OF PLAN RESULTS - PLAN YEAR 2036
DUNCAN AND TINA LEWIS

Existing Plan

Proposed Plan

Advantage

Estate Value

...
ASSETS PASSING TO YOUR FAMILY - CURRENT VS. PROPOSED
DUNCAN AND TINA LEWIS

$130,000,000

$110,000,000

$90,000,000

$70,0...
INTRODUCTION TO THE PLAN STRATEGIES ROADMAP
DUNCAN AND TINA LEWIS

The following section of the plan contains a step by st...
CREATE GRANTOR DEEMED OWNER TRUSTS
DUNCAN AND TINA LEWIS

Duncan and Tina create individual grantor deemed owner trusts (G...
GIFT TO GRANTOR DEEMED OWNER TRUST
DUNCAN AND TINA LEWIS

Duncan and Tina each make a gift of $1,500,000 to their individu...
SELL DUNCAN'S, INC. SHARES TO EACH GDOT
DUNCAN AND TINA LEWIS

Duncan and Tina sell approximately 68% of their Duncan's, I...
GDOTs MAKE ANNUAL GIFTS TO CHARITY
DUNCAN AND TINA LEWIS

The GDOT Trustees make annual charitable gifts to the Lewis Fami...
PERMANENT LIFE INSURANCE TO PURCHASE DUNCAN'S, INC. SHARES
DUNCAN AND TINA LEWIS

The GDOT Trustees purchase permanent sec...
LIFE INSURANCE TO MEET INHERITANCE GOAL
DUNCAN AND TINA LEWIS

The GDOT Trustees purchase second-to-die life insurance wit...
MEETING YOUR INHERITANCE GOALS
DUNCAN AND TINA LEWIS

$140,000,000

$120,000,000

$100,000,000

$80,000,000
$60,000,000

$...
EXISTING STOCK REDEMPTION AGREEMENT - DUNCAN'S, INC.
DUNCAN AND TINA LEWIS

Under the existing scenario: At death, Duncan'...
PROPOSED BUY/SELL AGREEMENT - DUNCAN'S, INC.
DUNCAN AND TINA LEWIS

1

Notes:

2

4/5

4/5

1. At death of Tad Joiner, est...
CREATE AND FUND QUALIFIED PERSONAL RESIDENCE TRUSTS
DUNCAN AND TINA LEWIS

Duncan and Tina each create a qualified persona...
QPRT APPRAISAL - GIFT OF REAL ESTATE
DUNCAN AND TINA LEWIS

Duncan and Tina hire an appraiser to value the real estate.
▪
...
AFTER THE QPRT TERM ENDS (I)
DUNCAN AND TINA LEWIS

Each QPRT will name the other spouse as a beneficiary. As such, the ot...
AFTER THE QPRT TERM ENDS (II)
DUNCAN AND TINA LEWIS

At death, the real estate and any accumulated rental income, passes t...
LEAVE IRA TO CHARITY
DUNCAN AND TINA LEWIS

At the 2nd death, leave your IRA and qualified plans to charity.

$1,390,345

...
TESTAMENTARY CHARITABLE LEAD ANNUITY TRUST (Part I)
DUNCAN AND TINA LEWIS

Include language in your trust or Will that cre...
TESTAMENTARY CHARITABLE LEAD ANNUITY TRUST (Part II)
DUNCAN AND TINA LEWIS

At the end of the TCLAT term, your heirs will ...
DETAILED FINANCIAL ANALYSIS
DUNCAN AND TINA LEWIS

INTRODUCTION

The following section of the plan contains all of the fin...
DETAILED FINANCIAL ANALYSIS
DUNCAN AND TINA LEWIS

CURRENT PLAN FINANCIALS

In the Current Plan Section you will find a Ne...
CURRENT NET WORTH STATEMENT
DUNCAN AND TINA LEWIS
DUNCAN

TINA

JOINT

TOTAL

YIELD

GROWTH

CASH AND EQUIVALENTS
Bank
Ban...
CURRENT NET WORTH STATEMENT (Page 2)
DUNCAN AND TINA LEWIS
DUNCAN

TINA

JOINT

TOTAL

YIELD

GROWTH

NON-TAXABLE MARKETAB...
CURRENT NET WORTH STATEMENT (Page 3)
DUNCAN AND TINA LEWIS
DUNCAN

TINA

JOINT

TOTAL

YIELD

GROWTH

RESIDENTIAL REAL EST...
SCHEDULE OF LIFE INSURANCE BENEFITS - CURRENT PLAN
DUNCAN AND TINA LEWIS

COMPANY

INSURED

POLICY #

BENEFICIARY

PREMIUM...
FINANCIAL ANALYSIS - EXISTING PLAN

YEAR

ASSET VALUE PROJECTIONS - EXISTING PLAN

Current

2013

2014

2015

2016

2017

...
TAXABLE INCOME PROJECTIONS - EXISTING PLAN

YEAR

Current

2013

2014

2015

2016

2017

2026

2027

2036

Sources of taxa...
INCOME TAX PROJECTIONS - EXISTING PLAN

YEAR

Current

2013

2014

2015

2016

2017

2026

2027

2036

Income tax Estimati...
CASH FLOW PROJECTIONS - EXISTING PLAN

YEAR

Current

2013

2014

2015

2016

2017

2026

2027

2036

Sources of income fo...
FIRST ESTATE TAX ESTIMATION AND DISTRIBUTION - EXISTING PLAN

YEAR

Current

2013

2014

2015

2016

2017

2026

2027

203...
SECOND ESTATE TAX ESTIMATION AND DISTRIBUTION - EXISTING PLAN

YEAR

Current

2013

2014

2015

2016

2017

2026

2027

20...
SUMMARY OF BENEFITS TO FAMILY - EXISTING PLAN

YEAR

Current

2013

2014

2015

2016

2017

2026

2027

2036

Benefits to ...
DETAILS OF DUNCAN'S QUALIFIED PLAN - EXISTING PLAN

YEAR

Current

2013

2014

2015

2016

2017

2026

2027

2036

Duncan'...
DETAILED FINANCIAL ANALYSIS
DUNCAN AND TINA LEWIS

PROPOSED PLAN FINANCIALS

In the Proposed Plan Section you will find a ...
NET WORTH STATEMENT AFTER PLAN IMPLEMENTATION
DUNCAN AND TINA LEWIS
DUNCAN

TINA

JOINT

TOTAL

YIELD

GROWTH

CASH AND EQ...
REVISED NET WORTH STATEMENT (Page 2)
DUNCAN AND TINA LEWIS
DUNCAN

TINA

JOINT

TOTAL

YIELD

GROWTH

NON-TAXABLE MARKETAB...
REVISED NET WORTH STATEMENT (Page 3)
DUNCAN AND TINA LEWIS
DUNCAN

TINA

JOINT

TOTAL

YIELD

GROWTH

RESIDENTIAL REAL EST...
FINANCIAL ANALYSIS - PROPOSED PLAN

YEAR

ASSET VALUE PROJECTIONS - PROPOSED PLAN

Current

2013

2014

2015

2016

2017

...
TAXABLE INCOME PROJECTIONS - PROPOSED PLAN

YEAR

Current

2013

2014

2015

2016

2017

2026

2027

2036

Sources of Taxa...
INCOME TAX PROJECTIONS - PROPOSED PLAN

YEAR

Current

2013

2014

2015

2016

2017

2026

2027

2036

Income Tax Estimati...
CASH FLOW PROJECTIONS - PROPOSED PLAN

YEAR

Current

2013

2014

2015

2016

2017

2026

2027

2036

Sources of Income fo...
FIRST ESTATE TAX ESTIMATION AND DISTRIBUTION - PROPOSED PLAN

YEAR

Current

2013

2014

2015

2016

2017

2026

2027

203...
SECOND ESTATE TAX ESTIMATION AND DISTRIBUTION - PROPOSED PLAN

YEAR

Current

2013

2014

2015

2016

2017

2026

2027

20...
SUMMARY OF BENEFITS TO FAMILY - PROPOSED PLAN

YEAR

Current

2013

2014

2015

2016

2017

2026

2027

2036

Benefits to ...
GRANTOR DEEMED OWNER TRUST DETAILS - PROPOSED PLAN
Charitable Deduction available

-

Charitable Deduction allowed

-

-

...
QUALIFIED PERSONAL RESIDENCE TRUST DETAILS - PROPOSED PLAN

YEAR

Current

2013

2014

2015

2016

2017

2026

2027

2036
...
EXISTING CHARITABLE FOUNDATION DETAILS - PROPOSED PLAN

YEAR

Current

2013

2014

2015

2016

2017

2026

2027

2036

Lew...
TESTAMENTARY CHARITABLE LEAD TRUST DETAILS - PROPOSED PLAN

YEAR

Current

2013

2014

2015

2016

2017

2026

2027

2036
...
BENEFITS TO LEWIS FAMILY FOUNDATION - PROPOSED PLAN

YEAR
Lewis Family Foundation - Annual Gifts
Charitable gift of IRA as...
DETAILS OF DUNCAN'S QUALIFIED PLAN - PROPOSED PLAN

YEAR

Current

2013

2014

2015

2016

2017

2026

2027

2036

Duncan'...
PLAN ASSUMPTIONS
DUNCAN AND TINA LEWIS

The plan is based on numerous assumptions. Important among these are the yield and...
FAMILY INFORMATION
DUNCAN AND TINA LEWIS

CLIENTS
Duncan Lewis
Tina Lewis
123 Main Street

Date of Birth
Date of Birth

Ma...
DISCLAIMER AND DISCLOSURE
DUNCAN AND TINA LEWIS

InKnowVision, LLC does not give accounting or investment advice to its cl...
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InKnowVision October 2013 Case Study - Lewis FWGA

347

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Duncan and Tina are both 65. They live a comfortable lifestyle, spending about $1,600,000 a year after taxes and gifting about $2,000,000 a year to their family foundation. With assets worth approximately $62M and annual income of over $7M, they currently pay just over $2M a year in income taxes and have an increasing estate tax and ongoing income tax exposure.

The primary planning goals are to:
-Make sure that they have sufficient funds to live on for the rest of their lives (approx. $1,600,000/yr. after taxes and gifts).
-Assure that Duncan's, Inc. does not have to be liquidated as a result of their death.
-Provide a successful transition of the business to their son, Jason, while ensuring an equal inheritance for their son, Jeremy. They would like to leave 50% of their estate to Jason & Jeremy and another 25% to their grandchildren and other family members.
-They wish to continue annual giving to their family foundation and ultimately leave 25% of their estate to the foundation at death.
-Make sure the company buy/sell agreement accurately reflects the wishes of the family owners in the most tax efficient manner possible.
-Eliminate or reduce estate taxes.

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Transcript of "InKnowVision October 2013 Case Study - Lewis FWGA"

  1. 1. Case Study Webinar ©2013. InKnowVision LLC. All rights reserved. www.inknowvision.com
  2. 2. FAMILY WEALTH GOAL ACHIEVER™ - INITIAL PREPARED FOR: DUNCAN AND TINA LEWIS October 1, 2013 DRAFT FOR DISCUSSION PURPOSES ONLY PRESENTED BY Scott Hamilton InKnowVision, LLC 715 Enterprise Dr. Oak Brook, IL 60523 Phone: 630-596-5090 Copyright 2013 InKnowVision, LLC
  3. 3. YOUR GOALS AND OBJECTIVES DUNCAN AND TINA LEWIS Maintain our customary lifestyle. This should take about $1,600,000 annually after taxes and gifts. Provide for the financial security of the surviving spouse. Maintain adequate liquidity for emergencies and investment opportunities. We prefer to keep at least $1,000,000 in cash and readily marketable securities. Assure that Duncan's, Inc. does not have to be liquidated as a result of our death. Provide a successful transition of the business to our son, Jason, while ensuring an equal inheritance for our son, Jeremy. We would like to leave 50% of our estate to Jason & Jeremy and another 25% to our grandchildren and other family members. We wish to continue annual giving to our family foundation and ultimately leave 25% of our estate to the foundation at death. Make sure the company buy/sell agreement accurately reflects the wishes of the family owners in the most tax efficient manner possible. Reduce income taxes if possible. Eliminate or reduce estate taxes. Page 2
  4. 4. PERIODIC TABLE OF ESTATE PLANNING ELEMENTS - RECOMMENDED DUNCAN AND TINA LEWIS The highlighted tools are those we have determined are most suited to achieving your goals and objectives. Charitable Remainder UniTrust 412(e) Family Limited Partnership Private Annuity Grantor Retained Annuity Trust Family LLC TCLAT Qualified Personal Residence Trust Flip CRT Sale of Duncan's, Inc. shares for Installment Note Charitable Lead Annuity Trust SCIN Series Limited GDOT Owned Life Liability Company Insurance Premium Finance Beneficiary Continued Annual Defective Inheritor's Charitable Gifts Trust (BDIT) 529 Plans Gifting ILIT Corporate Recapitalization Walton GRAT Family Foundation Charitable Life Estate NIMCRUT Annuity Withdrawal Asset Protection SPIA/Life Arbitrage SPIA/Life in a CLAT Principal Protected Notes Revocable Living Trusts, DPAs and POAs Crummey Powers Dynasty Trust International VUL GDOT Supporting Organizations IRA to Charity Gift Annuity Amended Buy/Sell Agreement Life Estates International Business Risk Management LLC/CRTs Bargain Sales Business Succession Planning Risk Management Charitable Remainder Annuity Trust ESOP Planning Defined Benefit Plans Qualified Plan Limited Partnership Green equals a new planning tool for family Blue equals a social capital or charitable tool Yellow equals an existing planning tool Page 3
  5. 5. DUNCAN AND TINA LEWIS LIFETIME SPENDING AND LIQUIDITY Page 4
  6. 6. YOUR LIQUID ASSETS -PROPOSED PLAN DUNCAN AND TINA LEWIS $25,000,000 $20,000,000 $15,000,000 - $10,000,000 $5,000,000 $- Readily Liquid Assets - Proposed Most of our clients want to know that they have sufficient liquid assets (in addition to income) to pay their living expenses. This chart shows your liquid assets assuming full implementation of the proposed plan. For purposes of this chart, liquid assets include cash, stocks, bonds, annuities and qualified retirement accounts but do not include any other assets you might own such as promissory notes, businesses or real estate. Page 5
  7. 7. PERSONAL LIVING EXPENSES vs. AVAILABLE CASH FLOW DUNCAN AND TINA LEWIS $6,000,000 GDOT promissory notes are paid off $5,000,000 GDOT ceases to be a grantor trust and takes over income tax $4,000,000 - $3,000,000 $2,000,000 $1,000,000 $- Living Expenses Annual Cash Flow Illustration compares your living expenses under the proposed plan as against your annual cash flow available. Page 6
  8. 8. DUNCAN AND TINA LEWIS INCREASE INHERITANCE AND REDUCE ESTATE TAX Page 7
  9. 9. COMPARISON OF PLAN RESULTS - PLAN YEAR 2013 DUNCAN AND TINA LEWIS Existing Plan Proposed Plan Advantage Estate Value $ 63,485,283 $ 58,096,120 Heirs Receive Immediately $ 41,392,747 $ 53,940,093 $ 12,547,346 Heirs Receive from Deferred Inheritance $ $ 14,247,714 $ 14,247,714 Total Benefits to Family $ 41,392,747 $ 68,187,807 $ 26,795,060 Family Charity $ 6,019,797 $ 57,874,735 $ 51,854,938 Estate and Income Tax $ 21,676,498 $ $ 21,676,498 - - This chart assumes that you both die this year and compares the results of the current plan with the proposed plan. Deferred Inheritance is a gross approximation based on the long term performance of the TCLAT. Page 8
  10. 10. COMPARISON OF PLAN RESULTS - PLAN YEAR 2036 DUNCAN AND TINA LEWIS Existing Plan Proposed Plan Advantage Estate Value $ 141,515,391 $ 38,784,058 Heirs Receive Immediately $ 88,413,621 $ 118,570,414 $ 30,156,793 Heirs Receive from Deferred Inheritance $ $ 9,541,951 $ 9,541,951 Total Benefits to Family $ 88,413,621 $ 128,112,365 $ 39,698,744 Family Charity $ 67,182,540 $ 103,546,468 $ 36,363,928 Estate and Income Tax $ 52,501,723 $ $ 52,501,723 Present Value of total to Heirs * Discount rate for PV calculation - $28,784,938 - $41,709,710 5.00% This chart assumes that you both die at life expectancy and compares the results of the current plan with the proposed plan. Deferred Inheritance is a gross approximation based on the long term performance of the TCLAT. * The present value is lower than the "current" values on the previous page. This is a function of re-invested profits growing at low or no growth rates. Page 9
  11. 11. ASSETS PASSING TO YOUR FAMILY - CURRENT VS. PROPOSED DUNCAN AND TINA LEWIS $130,000,000 $110,000,000 $90,000,000 $70,000,000 $50,000,000 $30,000,000 Current Plan Proposed Plan This chart compares the amount of your assets that will pass to heirs after estate taxes and costs of implementation in the current plan as against the proposed plan. Page 10
  12. 12. INTRODUCTION TO THE PLAN STRATEGIES ROADMAP DUNCAN AND TINA LEWIS The following section of the plan contains a step by step roadmap for each of the strategies that we are recommending. You will notice that the strategies are often interdependent; that is, in order for one strategy to be successful, you must complete another strategy as well. It is the integration of each of these strategies that allows you to most efficiently accomplish your goals. Also keep in mind that there is often more than one way to get from point A to point B. This is true in wealth transfer planning. If a particular strategy or combination of strategies is not acceptable to you, we may be able to reach the desired result in a less efficient but perhaps more acceptable way. The following pages are a conceptual road map only, there are numerous details contained in each strategy that are not detailed in the overall plan that follows. Page 11
  13. 13. CREATE GRANTOR DEEMED OWNER TRUSTS DUNCAN AND TINA LEWIS Duncan and Tina create individual grantor deemed owner trusts (GDOT). The GDOTs can be drafted to provide asset protection and long term estate tax savings through the use of dynasty trust provisions. Page 12
  14. 14. GIFT TO GRANTOR DEEMED OWNER TRUST DUNCAN AND TINA LEWIS Duncan and Tina each make a gift of $1,500,000 to their individual GDOT. These gifts are composed of cash and approximately 7% of their shares in Duncan's, Inc. $1,500,000 $1,500,000 Page 13
  15. 15. SELL DUNCAN'S, INC. SHARES TO EACH GDOT DUNCAN AND TINA LEWIS Duncan and Tina sell approximately 68% of their Duncan's, Inc. shares to their individual GDOTs for an installment note. Sell 68% of their combined Duncan's, Inc. shares worth $21,983,874 Installment note worth $21,983,874 that provides annual payments of $2,013,079 The sale price is based on the assumed value of the assets sold. *Note payments are amortized over 14 years at the long term AFR of 3.50%. Note is paid off in 2026, and the grantor status is revoked. GDOTs begin paying their own income taxes in 2027. Note: Appoint special trustee with power to vote shares of Duncan's, Inc. Page 14
  16. 16. GDOTs MAKE ANNUAL GIFTS TO CHARITY DUNCAN AND TINA LEWIS The GDOT Trustees make annual charitable gifts to the Lewis Family Foundation. $2,000,000 Advantages Allows continued contribution to important charitable causes Income tax benefits and deductions of the annual gifts continue Discussion Points Trust should provide for minimum of $2,000,000 annual distributions to charity Trust Protector should be given power to increase or decrease annual distributions Page 15
  17. 17. PERMANENT LIFE INSURANCE TO PURCHASE DUNCAN'S, INC. SHARES DUNCAN AND TINA LEWIS The GDOT Trustees purchase permanent second-to-die life insurance with a small portion of the assets of the two GDOTs. Pay annual premiums of $171,420 Note: GDOTs purchase a survivorship universal life insurance where death benefit is guaranteed for life assuming annual premiums continue to be paid. This policy is specifically designed to purchase the Duncan's, Inc. shares remaining in Duncan & Tina's estate, thereby assuring that they pass to Jason. The premium is based on certain assumptions. This is for illustration purposes only. Actual insurance numbers can only be determined by applying for insurance. Page 16
  18. 18. LIFE INSURANCE TO MEET INHERITANCE GOAL DUNCAN AND TINA LEWIS The GDOT Trustees purchase second-to-die life insurance with a small portion of the assets of the two GDOTs. Pay annual premiums of $155,650 for years 1-10 and annual premiums of $50,000 for years 11-20 Note: The purpose of this policy is to allow Duncan & Tina to meet their inheritance goal to pass 75% of their estate to family in all years. The GDOTs purchase a survivorship universal life insurance policy designed with minimum premiums. We are using this type of policy instead of term for cost savings. This choice also allows for the possibility of continuing some or all of the policy death benefit beyond 20 years depending on the financial situation of the family and the GDOTs. The premium is based on certain assumptions. This is for illustration purposes only. Actual insurance numbers can only be determined by applying for insurance. Page 17
  19. 19. MEETING YOUR INHERITANCE GOALS DUNCAN AND TINA LEWIS $140,000,000 $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 $- 75% of Estate Proposed Plan to Heirs w/ Insurance Proposed Plan to Heirs - No Insurance This chart shows how the recommended strategies coupled with carefully managed amounts of life insurance will allow you to meet your inheritance goals. Page 18
  20. 20. EXISTING STOCK REDEMPTION AGREEMENT - DUNCAN'S, INC. DUNCAN AND TINA LEWIS Under the existing scenario: At death, Duncan's, Inc. redeems shares with life insurance proceeds. In the event of the death of Tad Joiner, this would unnecessarily increase Duncan and Tina's estate. Page 19
  21. 21. PROPOSED BUY/SELL AGREEMENT - DUNCAN'S, INC. DUNCAN AND TINA LEWIS 1 Notes: 2 4/5 4/5 1. At death of Tad Joiner, estate transfers shares to GDOT. 2. At death of Tad Joiner, GDOT pays his estate with insurance proceeds. Selling to the GDOT keeps Duncan and Tina's estate size smaller, saving tax. 3. At death of Duncan or Tina, shares go to survivor (marital deduction). 4. At second to die (Duncan/Tina) shares go to GDOT. 5. Insurance proceeds pay GDOT, which are used to buy stock from 3 the estate of the survivor of Duncan or Tina. Further Notes: Consider a corporate recapitalization to keep controlling stock in hands of senior family members while transferring equity to Jason. Page 20
  22. 22. CREATE AND FUND QUALIFIED PERSONAL RESIDENCE TRUSTS DUNCAN AND TINA LEWIS Duncan and Tina each create a qualified personal residence trust (QPRT) with a term of 10 years. Care to be taken to avoid reciprocal trust doctrine. Deed Deed Duncan gifts an undivided interest in property 456 Main St, Florida 765 Main Street, Philadelphia, PA Sub Total Tina gifts an undivided interest in property 1,750,000 1,750,000 456 Main St, Florida - 765 Main Street, Philadelphia, PA 4,000,000 Sub Total 4,000,000 Note: If one or both of you should die before the QPRT term ends, that property would be back in your estate(s). Page 21
  23. 23. QPRT APPRAISAL - GIFT OF REAL ESTATE DUNCAN AND TINA LEWIS Duncan and Tina hire an appraiser to value the real estate. ▪ ▪ Lack of liquidity Limited transferability Appraisal of Real Estate The value of Duncan's QPRT gift is expected to be $1,093,523 Appraisal of Real Estate The value of Tina's QPRT gift is expected to be $2,499,480 ASSUMPTIONS USED TO CALCULATE QPRT GIFT VALUES Term (years) 7520 Rate 10 2.31% Duncan's age 65 Tina's age 65 Page 22
  24. 24. AFTER THE QPRT TERM ENDS (I) DUNCAN AND TINA LEWIS Each QPRT will name the other spouse as a beneficiary. As such, the other spouse can continue to use the residence without rent. Page 23
  25. 25. AFTER THE QPRT TERM ENDS (II) DUNCAN AND TINA LEWIS At death, the real estate and any accumulated rental income, passes to your heirs without estate tax. The trusts can be structured for distributions according to your particular goals and objectives. Note: This illustration assumes no rent is paid; however, under certain circumstances fair market rent may need to be paid. For example, if Tina outlives Duncan and wants to continue to use the Pennsylvania property, she will need to pay fair market rent. The advantage to this is that rent is a very effective way to move additional assets outside of the taxable estate. Page 24
  26. 26. LEAVE IRA TO CHARITY DUNCAN AND TINA LEWIS At the 2nd death, leave your IRA and qualified plans to charity. $1,390,345 Advantages No estate tax No income in respect of a decedent tax Most tax efficient asset to satisfy charitable intent Helps to satisfy goal of leaving 25% of the estate to the family foundation Page 25
  27. 27. TESTAMENTARY CHARITABLE LEAD ANNUITY TRUST (Part I) DUNCAN AND TINA LEWIS Include language in your trust or Will that creates a testamentary charitable lead trust (TCLAT) at the second death. TCLAT Assumptions Asset growth rate TCLAT payout rate Present value discount rate Assumed date of death 5.00% 5.09% 5.00% 2013 Note: In this scenario the proceeds from the permanent life insurance policy would be utilized to buy the remaining Duncan's, Inc. interests from Duncan & Tina's estate. This would allow the business interests to pass to Jason and not end up in the charitable trust. Page 26
  28. 28. TESTAMENTARY CHARITABLE LEAD ANNUITY TRUST (Part II) DUNCAN AND TINA LEWIS At the end of the TCLAT term, your heirs will receive all of the remaining trust assets. Note: The amount passing to beneficiaries is entirely dependent on the rate of return of the assets in the trust. A higher rate of return means more passing to heirs and a lower rate of return could mean that nothing passes to heirs. Page 27
  29. 29. DETAILED FINANCIAL ANALYSIS DUNCAN AND TINA LEWIS INTRODUCTION The following section of the plan contains all of the financial analysis used to show you where you stand with your current plan and what is possible with the proposed plan. All of the numbers are based on information provided by you or gleaned from statements and tax returns. If numbers do not look correct, please let us know so that we can make appropriate changes. Assumed growth and yield numbers are all listed on the Net Worth pages contained in these sections. Page 28
  30. 30. DETAILED FINANCIAL ANALYSIS DUNCAN AND TINA LEWIS CURRENT PLAN FINANCIALS In the Current Plan Section you will find a Net Worth Statement and a detailed cash flow and asset value projection analysis. Page 29
  31. 31. CURRENT NET WORTH STATEMENT DUNCAN AND TINA LEWIS DUNCAN TINA JOINT TOTAL YIELD GROWTH CASH AND EQUIVALENTS Bank Bank Bank Bank Bank Bank Bank Bank Bank Bank Bank Bank Bank Bank Total of Cash and Equivalents 1,013,319 3,121,625 12,651 106,208 105,905 104,987 257,591 4,722,286 1,012,847 2,938,695 12,651 106,208 106,168 - 1,013,319 0.4% 0.0% - 1,012,847 0.4% 0.0% - 3,121,625 0.4% 0.0% - 2,938,695 0.4% 0.0% - 12,651 0.4% 0.0% - 12,651 0.4% 0.0% - 106,208 0.4% 0.0% - 106,208 0.4% 0.0% - 105,905 0.4% 0.0% - 106,168 0.4% 0.0% - 104,987 0.4% 0.0% - 104,987 0.4% 0.0% - 257,591 0.4% 0.0% 257,591 - 257,591 0.4% 0.0% 4,539,147 - 9,261,433 0.4% 0.0% 104,987 - MARKETABLE SECURITIES - EQUITIES Investment Company - 118,960 - 118,960 1.2% 5.0% Investment Company - 164,509 - 164,509 1.2% 5.0% Investment Company - 856,067 - 856,067 1.2% 5.0% Investment Company - 12,300 - 12,300 1.2% 5.0% - 12,012 Investment Company - 12,012 1.2% 5.0% Investment Company 127,868 - - 127,868 1.2% 5.0% Investment Company 146,218 - - 146,218 1.2% 5.0% Investment Company 854,949 - - 854,949 1.2% 5.0% - 2,292,883 1.2% 5.0% Total of Equities 1,129,035 1,163,848 Page 30
  32. 32. CURRENT NET WORTH STATEMENT (Page 2) DUNCAN AND TINA LEWIS DUNCAN TINA JOINT TOTAL YIELD GROWTH NON-TAXABLE MARKETABLE SECURITIES Muni Bonds Muni Bonds Total of Non-Taxable Marketable Securities 3,226,787 - - - 3,226,787 4.1% 0.0% 3,154,378 - 3,154,378 4.1% 0.0% 3,226,787 3,154,378 - 6,381,165 4.1% 0.0% 10,500 10,500 - 21,000 9.7% 3.0% 1,039,500 1,039,500 - 2,079,000 9.7% 3.0% 2,100,000 9.7% 3.0% OTHER INVESTMENTS Duncan Leasing Co, LLC Class A (.1750%/.1750%) Duncan Leasing Co, LLC Class B (17.325%/17.325%) Total of Other Investments Duncan's, Inc. (S Corp - 15.82%/15.37%) Property Company Corporate Property Total Closely Held Business 1,050,000 - 32,568,703 CLOSELY HELD BUSINESS 1,050,000 31.18% 16,524,664 16,044,038 - 32,568,702 20.6% 2.0% 47,297 47,297 - 94,594 0.2% 3.0% 33,034 32,568,703 51,750 51,750 - 103,500 5.0% 3.0% 16,623,711 16,143,085 - 32,766,796 20.5% 2.0% RETIREMENT PLANS/IRAs Duncan's, Inc. Total Retirement Plans 1,367,089 - 1,367,089 0.0% 7.0% 1,367,089 - 1,367,089 0.0% 7.0% Page 31
  33. 33. CURRENT NET WORTH STATEMENT (Page 3) DUNCAN AND TINA LEWIS DUNCAN TINA JOINT TOTAL YIELD GROWTH RESIDENTIAL REAL ESTATE 123 Main Street 456 Main St, Florida 1,750,000 750,000 - - 750,000 0.0% 3.0% - 1,750,000 0.0% 3.0% 678 Main Street, Florida - 850,000 - 850,000 0.0% 3.0% 765 Main Street, Philadelphia, PA - 4,000,000 - 4,000,000 0.0% 3.0% 5,600,000 - 7,350,000 0.0% 3.0% - 300,000 0.0% 0.0% Total of Personal Residences 1,750,000 160,000 PERSONAL PROPERTY Paintings Autos Total of Personal Property TOTAL ASSETS TOTAL LIABILITIES NET WORTH - 300,000 80,000 45,000 - 125,000 0.0% 0.0% 80,000 345,000 - 425,000 0.0% 0.0% 29,948,908 31,995,458 - 61,944,366 - 29,948,908 - 31,995,458 - - - 61,944,366 Page 32
  34. 34. SCHEDULE OF LIFE INSURANCE BENEFITS - CURRENT PLAN DUNCAN AND TINA LEWIS COMPANY INSURED POLICY # BENEFICIARY PREMIUM CASH VALUE DEATH BENEFIT Term Duncan Lewis # Duncan's, Inc. 43,825 - 18,000,000 Term Tina Lewis # Duncan's, Inc. 22,175 - 17,000,000 Term Tad Joiner # Duncan's, Inc. 81,975 - 65,000,000 Term Jason Lewis # Duncan's, Inc. 2,835 - 5,000,000 150,810 - 105,000,000 Policies owned by Duncan's, Inc. Totals Insurance Notes: All insurance is currently owned by Duncan's, Inc. and is designed to fund redemption of stock in the event of the death of a share holder. As shown earlier, insurance ownership should be rearranged (or in the case of Duncan and Tina, surrendered) after new insurance is put in place. Page 33
  35. 35. FINANCIAL ANALYSIS - EXISTING PLAN YEAR ASSET VALUE PROJECTIONS - EXISTING PLAN Current 2013 2014 2015 2016 2017 2026 2027 2036 Asset Values Cash and cash equivalents 9,261,433 10,518,475 11,766,312 13,064,136 14,413,075 15,814,280 30,903,080 32,894,365 54,227,900 Marketable securities - Equities 2,292,883 2,320,944 2,436,991 2,558,841 2,686,783 2,821,122 4,376,487 4,595,311 7,128,835 Municipal bonds 6,381,165 6,381,165 6,381,165 6,381,165 6,381,165 6,381,165 6,381,165 6,381,165 6,381,165 Other investments 2,100,000 2,115,533 2,178,999 2,244,369 2,311,700 2,381,051 3,106,732 3,199,934 4,175,187 32,766,796 32,929,455 33,590,035 34,263,867 34,951,215 35,652,353 42,630,596 43,485,785 51,997,267 Closely held business Retirement plans/IRAs 1,367,089 1,390,345 1,487,669 1,591,806 1,703,233 1,822,459 2,411,128 2,456,259 2,566,880 Personal residences 7,350,000 7,404,366 7,626,497 7,855,291 8,090,950 8,333,679 10,873,560 11,199,767 14,613,156 Personal property Total assets in estate Combined net worth 425,000 425,000 425,000 425,000 425,000 425,000 425,000 425,000 425,000 61,944,366 63,485,283 65,892,669 68,384,476 70,963,121 73,631,109 101,107,747 104,637,586 141,515,391 $ 61,944,366 $ 63,485,283 $ 65,892,669 $ 68,384,476 $ 70,963,121 $ 73,631,109 $ 101,107,747 $ 104,637,586 $ 141,515,391 In the event that there is a cash flow surplus, the surplus is added to the cash row by default. If there is a cash flow shortage (because of spending or gifting capital) then the shortage is treated as a reduction in cash. Page 34
  36. 36. TAXABLE INCOME PROJECTIONS - EXISTING PLAN YEAR Current 2013 2014 2015 2016 2017 2026 2027 2036 Sources of taxable income Cash and cash equivalents 38,998 44,291 49,546 55,010 60,691 122,034 130,127 216,995 Marketable securities - Equities 27,062 27,393 28,763 30,201 31,711 49,194 51,654 80,132 Other investments 202,975 Retirement plans/IRAs Client earned income Gross income 204,476 210,611 216,929 223,437 291,534 300,280 391,798 6,722,291 Closely held business 6,755,661 6,891,183 7,029,423 7,170,437 8,573,908 8,745,905 10,457,742 116,362 123,648 203,899 127,068 - 127,068 $ 7,118,394 - 127,068 $ 7,158,890 - 127,068 $ 7,307,170 - 127,068 $ 7,458,632 127,068 $ 7,613,343 $ 9,153,032 $ 9,351,613 $ 11,350,566 Page 35
  37. 37. INCOME TAX PROJECTIONS - EXISTING PLAN YEAR Current 2013 2014 2015 2016 2017 2026 2027 2036 Income tax Estimation Adjusted gross income: Dividend income (marketable sec.) 27,062 Earned and other income 27,393 28,763 30,201 31,711 49,194 51,654 80,132 7,091,332 7,131,497 7,278,407 7,428,431 7,581,632 9,103,838 9,299,959 11,270,433 7,118,394 Adjusted gross income 7,158,890 7,307,170 7,458,632 7,613,343 9,153,032 9,351,613 11,350,566 Deductions Real estate tax 41,548 41,548 Charitable gifts 2,000,000 42,379 43,227 44,091 44,973 53,747 54,822 65,517 459,136 State income taxes 461,748 471,312 481,082 491,061 590,371 603,179 732,111 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 Charitable Deduction available 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 Charitable Deduction allowed 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 Total deductions 2,500,684 2,504,127 2,514,539 2,525,173 2,536,034 2,644,117 2,658,001 2,797,628 Reductions (204,552) Deductions allowed 4,822,261 $ 2,311,094 (210,215) 2,298,361 2,296,133 Taxable income Federal and State income tax (205,767) 2,304,324 4,860,529 $ 2,328,795 (214,759) 2,310,414 5,002,846 $ 2,394,448 (219,400) 2,316,633 5,148,218 $ 2,461,503 (265,591) 2,378,526 5,296,710 $ 2,529,988 (271,548) 2,386,452 6,774,506 $ 3,211,079 (331,517) 2,466,112 6,965,161 $ 3,298,904 8,884,454 $ 4,182,295 Page 36
  38. 38. CASH FLOW PROJECTIONS - EXISTING PLAN YEAR Current 2013 2014 2015 2016 2017 2026 2027 2036 Sources of income for Lifestyle Consumable income (taxable) 7,118,394 7,158,890 7,307,170 7,458,632 7,613,343 9,153,032 9,351,613 11,350,566 Consumable income (tax exempt) 262,742 262,742 262,742 262,742 262,742 262,742 262,742 262,742 Total income available for lifestyle 7,381,136 7,421,632 7,569,912 7,721,374 7,876,085 9,415,774 9,614,355 11,613,308 Living expenses 1,600,000 1,632,000 1,664,640 1,697,933 1,731,891 2,069,771 2,111,166 2,523,039 Income tax 2,311,094 2,328,795 2,394,448 2,461,503 2,529,988 3,211,079 3,298,904 4,182,295 213,000 213,000 213,000 213,000 213,000 213,000 213,000 213,000 Cash gifts to charity 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 Total uses of cash 6,124,094 6,173,795 6,272,088 6,372,435 6,474,880 7,493,849 7,623,071 8,918,334 Uses of Cash Cash gifts to family Surplus $ 1,257,042 $ 1,247,837 $ 1,297,824 $ 1,348,938 $ 1,401,205 $ 1,921,925 $ 1,991,285 $ 2,694,973 In the event that there is a cash flow surplus, the surplus is added to the cash row on the "Asset Value Projections" 3 pages earlier. If there is a cash flow shortage (spending or gifting capital) then the shortage is treated as a reduction in cash on the "Asset Value Projections" 3 pages earlier. Page 37
  39. 39. FIRST ESTATE TAX ESTIMATION AND DISTRIBUTION - EXISTING PLAN YEAR Current 2013 2014 2015 2016 2017 2026 2027 2036 Tax calculation on Duncan's death Combined net worth 61,944,366 63,485,283 65,892,669 68,384,476 70,963,121 73,631,109 101,107,747 104,637,586 141,515,391 Duncan's estimated estate 29,948,908 30,693,912 31,857,836 33,062,577 34,309,302 35,599,223 48,883,649 50,590,257 68,419,966 Total gross estate 29,948,908 30,693,912 31,857,836 33,062,577 34,309,302 35,599,223 48,883,649 50,590,257 68,419,966 Settlement expenses Joint, personal and IRA to Tina Outright or in trust to Tina (174,745) (178,470) (184,289) (190,313) (196,547) (202,996) (269,418) (277,951) (367,100) (1,447,089) (1,470,345) (1,567,669) (1,671,806) (1,783,233) (1,902,459) (2,491,128) (2,536,259) (2,646,880) (24,077,074) (24,795,097) (25,855,878) (26,950,458) (28,079,523) (29,243,768) (41,873,102) (43,526,047) (61,155,986) Taxable estate 4,250,000 4,250,000 4,250,000 4,250,000 4,250,000 4,250,000 4,250,000 4,250,000 4,250,000 Plus Duncan's lifetime taxable gifts 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Tax base 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000 Federal Estate Tax - - - - - - - - - Distribution of Duncan's estate Settlement expenses 174,745 178,470 184,289 190,313 196,547 202,996 269,418 277,951 367,100 To family trust 4,250,000 4,250,000 4,250,000 4,250,000 4,250,000 4,250,000 4,250,000 4,250,000 4,250,000 Joint, personal and IRA to Tina 1,447,089 1,470,345 1,567,669 1,671,806 1,783,233 1,902,459 2,491,128 2,536,259 2,646,880 Outright or in trust to Tina Total 24,077,074 24,795,097 25,855,878 26,950,458 28,079,523 29,243,768 41,873,102 43,526,047 61,155,986 $ 29,948,908 $ 30,693,912 $ 31,857,836 $ 33,062,577 $ 34,309,302 $ 35,599,223 $ 48,883,649 $ 50,590,257 $ 68,419,966 Assumptions We assume that Duncan dies first, followed immediately by Tina. Taxes under "Distribution of First Estate" include estate and income taxes. Page 38
  40. 40. SECOND ESTATE TAX ESTIMATION AND DISTRIBUTION - EXISTING PLAN YEAR Current 2013 2014 2015 2016 2017 2026 2027 2036 Tax Calculation on Tina's death Tina's assets 31,995,458 32,791,372 34,034,832 35,321,899 36,653,819 38,031,886 52,224,099 54,047,328 73,095,425 Plus assets from Duncan's estate 25,524,163 26,265,442 27,423,547 28,622,264 29,862,756 31,146,227 44,364,230 46,062,306 63,802,867 Tina's estimated estate 57,519,621 59,056,814 61,458,380 63,944,163 66,516,574 69,178,112 96,588,329 100,109,634 136,898,292 Settlement expenses Tina's taxable estate (600,196) (615,568) (639,584) (664,442) (690,166) (716,781) (990,883) (1,026,096) (1,393,983) 56,919,425 58,441,246 60,818,796 63,279,721 65,826,409 68,461,331 95,597,446 99,083,538 135,504,309 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Tax base 57,919,425 59,441,246 61,818,796 64,279,721 66,826,409 69,461,331 96,597,446 100,083,538 136,504,309 Federal Estate Tax 21,067,770 21,676,498 22,627,518 23,611,888 24,630,563 25,684,533 36,538,978 37,933,415 52,501,723 Total Estate Tax Due 21,067,770 21,676,498 22,627,518 23,611,888 24,630,563 25,684,533 36,538,978 37,933,415 52,501,723 600,196 615,568 639,584 664,442 690,166 716,781 990,883 1,026,096 1,393,983 52,501,723 Plus Tina's lifetime taxable gifts Distribution of Tina's estate Settlement expenses 21,067,770 21,676,498 22,627,518 23,611,888 24,630,563 25,684,533 36,538,978 37,933,415 Qualified plan to heirs Taxes 1,367,089 1,390,345 1,487,669 1,591,806 1,703,233 1,822,459 2,411,128 2,456,259 2,566,880 Residual estate to heirs 34,484,566 35,374,402 36,703,608 38,076,027 39,492,613 40,954,340 56,647,339 58,693,863 80,435,705 $ 57,519,621 $ 59,056,814 $ 61,458,380 $ 63,944,163 $ 66,516,574 $ 69,178,112 $ 96,588,329 $ 100,109,634 $ 136,898,292 Total Assumptions We assume that Duncan dies first, followed immediately by Tina. Taxes under "Distribution of Second Estate" include estate and income taxes. Page 39
  41. 41. SUMMARY OF BENEFITS TO FAMILY - EXISTING PLAN YEAR Current 2013 2014 2015 2016 2017 2026 2027 2036 Benefits to Family Family trust 4,250,000 4,250,000 4,250,000 4,250,000 4,250,000 4,250,000 4,250,000 36,703,608 38,076,027 39,492,613 40,954,340 56,647,339 58,693,863 80,435,705 1,390,345 1,487,669 1,591,806 1,703,233 1,822,459 2,411,128 2,456,259 2,566,880 360,000 378,000 396,900 416,745 437,582 459,461 712,775 748,414 1,161,036 $ 40,461,655 Total assets to heirs 1 4,250,000 35,374,402 1,367,089 Qualified plan assets 529 Plans (Grandchildren) 1 4,250,000 34,484,566 Residual estate $ 41,392,747 $ 42,838,177 $ 44,334,578 $ 45,883,427 $ 47,486,260 $ 64,021,243 $ 66,148,537 $ 88,413,621 Assumed growth rate of 5% annually. LEWIS FAMILY FOUNDATION DETAILS - EXISTING PLAN YEAR Current 2013 2014 2015 2016 2017 2026 2027 2036 Lewis Family Foundation, Inc. 4,019,797 6,140,193 8,302,997 10,509,057 12,759,238 35,147,913 37,890,871 Annual Cash Contributions BOY Foundation Value 4,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 65,182,540 2,000,000 EOY Foundation Value to Charity 6,019,797 8,140,193 10,302,997 12,509,057 14,759,238 37,147,913 39,890,871 67,182,540 Page 40
  42. 42. DETAILS OF DUNCAN'S QUALIFIED PLAN - EXISTING PLAN YEAR Current 2013 2014 2015 2016 2017 2026 2027 2036 Duncan's Qualified Plans Duncan's Age 65 66 67 68 69 78 79 88 Tina's Age 65 66 67 68 69 78 79 88 32.0 31.1 30.2 29.2 28.3 20.3 19.5 12.7 - - - - - - - Minimum distribution factor Plan contributions Plan balance 1,367,089 1,390,345 1,487,669 - 1,591,806 - 1,703,233 - 1,822,459 Minimum distribution - - Preferred distribution - - - - - Actual distribution - - - - - - 2,411,128 2,456,259 2,566,880 116,362 123,648 203,899 116,362 123,648 203,899 Page 41
  43. 43. DETAILED FINANCIAL ANALYSIS DUNCAN AND TINA LEWIS PROPOSED PLAN FINANCIALS In the Proposed Plan Section you will find a balance sheet which reflects the repositioning of assets as set out in the step by step roadmap in the proceeding section. You will also find detailed cash flow and asset projection information on each of the proposed planning strategies. Page 42
  44. 44. NET WORTH STATEMENT AFTER PLAN IMPLEMENTATION DUNCAN AND TINA LEWIS DUNCAN TINA JOINT TOTAL YIELD GROWTH CASH AND EQUIVALENTS Bank Bank Bank 1,013,319 3,121,625 1,012,847 - 1,013,319 0.4% 0.0% - 1,012,847 0.4% 0.0% - 3,121,625 0.4% 0.0% Bank - - 2,938,695 0.4% 0.0% Bank 12,651 - - 12,651 0.4% 0.0% Bank - 12,651 - 12,651 0.4% 0.0% - - 106,208 0.4% 0.0% - 106,208 0.4% 0.0% - 105,905 0.4% 0.0% - 106,168 0.4% 0.0% - 104,987 0.4% 0.0% - 104,987 0.4% 0.0% - 257,591 0.4% 0.0% 257,591 - 257,591 0.4% 0.0% 4,539,147 - 9,261,433 0.4% 0.0% Bank Bank Bank Bank Bank Bank Bank Bank Total of Cash and Equivalents 106,208 105,905 104,987 257,591 4,722,286 2,938,695 - 106,208 106,168 104,987 - MARKETABLE SECURITIES - EQUITIES Investment Company - 118,960 - 118,960 1.2% 5.0% Investment Company - 164,509 - 164,509 1.2% 5.0% Investment Company - 856,067 - 856,067 1.2% 5.0% Investment Company - 12,300 - 12,300 1.2% 5.0% Investment Company - 12,012 - 12,012 1.2% 5.0% Investment Company 127,868 - - 127,868 1.2% 5.0% Investment Company 146,218 - - 146,218 1.2% 5.0% Investment Company 854,949 - - 854,949 1.2% 5.0% - 2,292,883 1.2% 5.0% Total of Equities 1,129,035 1,163,848 Page 43
  45. 45. REVISED NET WORTH STATEMENT (Page 2) DUNCAN AND TINA LEWIS DUNCAN TINA JOINT TOTAL YIELD GROWTH NON-TAXABLE MARKETABLE SECURITIES Muni Bonds Muni Bonds 3,226,787 - 3,226,787 4.1% 0.0% 3,154,378 - 3,154,378 4.1% 0.0% 3,226,787 3,154,378 - 6,381,165 4.1% 0.0% 10,500 10,500 - 21,000 9.7% 3.0% 1,039,500 1,039,500 - 2,079,000 9.7% 3.0% 1,050,000 1,050,000 - 2,100,000 9.7% 3.0% 4,131,166 4,011,010 - 8,142,176 20.6% 2.0% Property Company 47,297 47,297 - 94,594 0.2% 3.0% Corporate Property Total Closely Held Business 51,750 51,750 - 103,500 5.0% 3.0% 4,230,213 4,110,057 - 8,340,270 20.2% 2.0% Total of Non-Taxable Marketable Securities - - OTHER INVESTMENTS Duncan Leasing Co, LLC Class A (.1750%/.1750%) Duncan Leasing Co, LLC Class B (17.325%/17.325%) Total of Other Investments CLOSELY HELD BUSINESS Duncan's, Inc. (S Corp - 15.82%/15.37%) RETIREMENT PLANS/IRAs Duncan's, Inc. Total Retirement Plans 1,367,089 - 1,367,089 0.0% 7.0% 1,367,089 - 1,367,089 0.0% 7.0% Page 44
  46. 46. REVISED NET WORTH STATEMENT (Page 3) DUNCAN AND TINA LEWIS DUNCAN TINA JOINT TOTAL YIELD GROWTH RESIDENTIAL REAL ESTATE 123 Main Street - 750,000 - 750,000 0.0% 3.0% 678 Main Street, Florida - 850,000 - 850,000 0.0% 3.0% - 1,600,000 - 1,600,000 0.0% 3.0% - 300,000 - 300,000 0.0% 0.0% 80,000 45,000 - 125,000 0.0% 0.0% 80,000 345,000 - 425,000 0.0% 0.0% 10,991,937 10,991,937 - 21,983,874 3.50% Total of Personal Residences PERSONAL PROPERTY Paintings Autos Total of Personal Property OTHER STRATEGY ASSETS GDOT Note QPRT Property Total of Other Strategy Assets TOTAL ASSETS TOTAL LIABILITIES NET WORTH 1,750,000 4,000,000 - 5,750,000 12,741,937 14,991,937 - 27,733,874 28,547,347 30,954,366 - 59,501,713 - 28,547,347 - 30,954,366 - - 3.50% - 59,501,713 Page 45
  47. 47. FINANCIAL ANALYSIS - PROPOSED PLAN YEAR ASSET VALUE PROJECTIONS - PROPOSED PLAN Current 2013 2014 2015 2016 2017 2026 2027 2036 Asset Values Cash and cash equivalents** 9,261,433 8,936,502 9,129,770 9,268,544 9,351,572 9,377,579 6,745,112 6,265,380 1,637,299 Marketable securities - Equities 2,292,883 2,320,944 2,436,991 2,558,841 2,686,783 2,821,122 4,376,487 4,595,311 7,128,835 Municipal bonds 6,381,165 6,381,165 6,381,165 6,381,165 6,381,165 6,381,165 6,381,165 6,381,165 6,381,165 Other investments 2,100,000 2,115,533 2,178,999 2,244,369 2,311,700 2,381,051 3,106,732 3,199,934 4,175,187 13,288,596 Closely held business 8,340,270 8,382,035 8,551,666 8,724,731 8,901,297 9,081,438 10,875,925 11,096,027 Retirement plans/IRAs 1,367,089 1,390,345 1,487,669 1,591,806 1,703,233 1,822,459 2,411,128 2,456,259 2,566,880 Personal residences 1,600,000 1,611,835 1,660,190 1,709,995 1,761,295 1,814,134 2,367,034 2,438,045 3,181,095 Residences in QPRTs 1 5,750,000 5,792,531 5,966,307 6,145,296 6,329,655 6,519,545 Personal property - 425,000 425,000 425,000 425,000 425,000 425,000 Note from GDOT 2 21,983,874 20,740,230 19,453,059 18,120,837 16,741,987 15,314,877 Total assets in estate 59,501,713 58,096,120 57,670,817 57,170,584 56,593,687 55,938,370 36,688,582 $ 59,501,713 $ 58,096,120 $ 57,670,817 $ 57,170,584 $ 56,593,687 $ 55,938,370 $ 36,688,582 $ 36,857,120 - 36,857,120 Combined net worth 1 - 425,000 425,000 - 38,784,058 $ 38,784,058 QPRT term ends in 2022, beginning in 2023 the residences are outside of the estate. 2 425,000 - Note paid off in 2026. ** Reduced by additional seed gift money to the GDOTs in year 1. In the event that there is a cash flow surplus, the surplus is added to the cash row by default. If there is a cash flow shortage (because of spending or gifting capital) then the shortage is treated as a reduction in cash. Page 46
  48. 48. TAXABLE INCOME PROJECTIONS - PROPOSED PLAN YEAR Current 2013 2014 2015 2016 2017 2026 2027 2036 Sources of Taxable Income Cash and cash equivalents 38,998 37,630 38,444 39,028 39,378 30,739 28,402 9,175 Marketable securities - Equities 27,062 27,393 28,763 30,201 31,711 49,194 51,654 80,132 Cash - GDOT 1 - Retirement plans/IRAs Gross income 1 11,852 15,806 74,782 210,611 216,929 223,437 291,534 300,280 391,798 1,693,023 1,727,285 1,762,241 1,797,904 2,153,169 2,196,744 2,630,820 116,362 123,648 203,899 - Other taxable earnings - GDOT 1 Client earned income 8,349 204,476 1,684,587 Closely held business 5,284 202,975 Other investments - - - - 5,037,704 $ 5,163,890 5,267,168 5,372,511 127,068 127,068 5,062,637 127,068 127,068 127,068 127,068 7,118,394 $ 7,157,511 $ 7,304,409 $ 7,454,487 $ 7,607,815 - 6,420,648 - 9,136,429 $ - - $ - - 2,700,728 $ 3,315,823 Note is paid off in 2026 and the grantor status of the trust is revoked. Beginning in 2027, the trust will pay it's own income taxes. Page 47
  49. 49. INCOME TAX PROJECTIONS - PROPOSED PLAN YEAR Current 2013 2014 2015 2016 2017 2026 2027 2036 Income Tax Estimation Adjusted gross income: Dividend income (Marketable Sec.) 27,062 32,677 37,111 42,053 47,517 123,976 51,654 80,132 Earned and other income 7,091,332 7,124,834 7,267,297 7,412,434 7,560,298 9,012,453 2,649,075 3,235,691 Adjusted gross income 7,118,394 7,157,511 7,304,409 7,454,487 7,607,815 9,136,429 2,700,728 3,315,823 Deductions Real Estate Tax 41,548 42,379 43,227 44,091 44,973 53,747 54,822 65,517 459,136 State income taxes 461,659 471,134 480,814 490,704 589,300 174,197 213,871 Cash charitable gifts 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 - - Charitable Deduction available 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 - - Charitable Deduction allowed 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 - - Total deductions 2,500,684 2,504,038 2,514,361 2,524,905 2,535,677 2,643,046 Reductions (204,552) Deductions allowed 2,296,133 Taxable income Federal and State income tax (205,725) 2,298,313 4,822,261 $ 2,311,094 (210,132) 2,304,229 4,859,198 $ 2,327,143 (214,635) 2,310,271 5,000,180 $ 2,391,578 (219,234) 2,316,443 5,144,216 $ 2,457,328 2,524,420 3,189,003 (90,475) 156,997 6,758,475 $ 279,388 (72,022) 2,377,954 5,291,372 $ 229,019 (265,093) 188,913 2,543,732 $ 1,119,037 3,126,910 $ 1,384,067 Page 48
  50. 50. CASH FLOW PROJECTIONS - PROPOSED PLAN YEAR Current 2013 2014 2015 2016 2017 2026 2027 2036 Sources of Income for Lifestyle Consumable income (taxable) 2,080,690 Distribution from Cash 2,089,590 2,132,170 2,175,467 2,219,498 2,640,999 2,700,728 262,742 Consumable income (tax exempt) 262,742 262,742 262,742 262,742 262,742 262,742 262,742 554,953 479,732 541,541 - - - - - 3,315,823 Note Payment from GDOT 1 2,013,079 2,013,079 2,013,079 2,013,079 2,013,079 2,013,079 Total income available for lifestyle 4,356,511 4,365,411 4,407,992 4,451,288 4,495,319 5,471,773 3,443,203 4,120,106 Living expenses 1,600,000 1,632,000 1,664,640 1,697,933 1,731,891 2,069,771 2,111,166 2,523,039 Income tax 2,311,094 2,327,143 2,391,578 2,457,328 2,524,420 3,189,003 1,119,037 1,384,067 213,000 213,000 213,000 213,000 213,000 213,000 213,000 213,000 4,124,094 4,172,143 4,269,218 4,368,260 4,469,312 5,471,773 3,443,203 4,120,106 - - Uses of Cash Cash gifts to family Total uses of cash Surplus 1 $ 232,417 $ 193,268 $ 138,774 $ 83,028 $ 26,008 $ - $ - $ - Note is paid off in 2026 and the grantor status of the trust is revoked. Beginning in 2027, the trust will pay it's own income taxes. In the event that there is a cash flow surplus, the surplus is added to the cash row on the "Asset Value Projections" 3 pages earlier. If there is a cash flow shortage (spending or gifting capital) then the shortage is treated as a reduction in cash on the "Asset Value Projections" 3 pages earlier. Page 49
  51. 51. FIRST ESTATE TAX ESTIMATION AND DISTRIBUTION - PROPOSED PLAN YEAR Current 2013 2014 2015 2016 2017 2026 2027 2036 Tax calculation on Duncan's death Combined Net Worth 59,501,713 58,096,120 57,670,817 57,170,584 56,593,687 55,938,370 36,688,582 36,857,120 38,784,058 Duncan's estimated estate 28,547,347 27,872,980 27,668,931 27,428,933 27,152,153 26,837,749 17,602,210 17,683,070 18,607,564 Total gross estate 28,547,347 27,872,980 27,668,931 27,428,933 27,152,153 26,837,749 17,602,210 17,683,070 18,607,564 Settlement expenses Joint, personal and IRA to Tina Outright or in trust to Tina (167,737) (164,365) (163,345) (162,145) (160,761) (159,189) (113,011) (113,415) (118,038) (1,447,089) (1,470,345) (1,567,669) (1,671,806) (1,783,233) (1,902,459) (2,491,128) (2,536,259) (2,646,880) (24,182,522) (23,488,271) (23,187,918) (22,844,982) (22,458,160) (22,026,102) (13,341,594) (13,376,919) (14,186,169) Taxable estate 2,750,000 2,750,000 2,750,000 2,750,000 2,750,000 2,750,000 1,656,477 1,656,477 1,656,477 Plus Duncan's lifetime taxable gifts 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 3,593,523 3,593,523 3,593,523 Tax base 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000 Tentative Federal Estate Tax - - - - - - - - - Distribution of First Estate Settlement expenses 167,737 164,365 163,345 162,145 160,761 159,189 113,011 113,415 118,038 To family trust 2,750,000 2,750,000 2,750,000 2,750,000 2,750,000 2,750,000 1,656,477 1,656,477 1,656,477 Joint, personal and IRA to Tina 1,447,089 1,470,345 1,567,669 1,671,806 1,783,233 1,902,459 2,491,128 2,536,259 2,646,880 Outright or in trust to Tina Total 24,182,522 23,488,271 23,187,918 22,844,982 22,458,160 22,026,102 13,341,594 13,376,919 $ 28,547,347 $ 27,872,980 $ 27,668,931 $ 27,428,933 $ 27,152,153 $ 26,837,749 $ 17,602,210 $ 17,683,070 14,186,169 $ 18,607,564 Assumptions We assume that Duncan dies first, followed immediately by Tina. Taxes under "Distribution of First Estate" include estate and income taxes, if any. Page 50
  52. 52. SECOND ESTATE TAX ESTIMATION AND DISTRIBUTION - PROPOSED PLAN YEAR Current 2013 2014 2015 2016 2017 2026 2027 2036 Tax Calculation on Tina's death Tina's assets 30,954,366 30,223,139 30,001,885 29,741,651 29,441,534 29,100,621 19,086,371 19,174,050 20,176,494 Plus assets from Duncan's estate 25,629,611 24,958,616 24,755,587 24,516,788 24,241,392 23,928,561 15,832,722 15,913,178 16,833,049 Tina's estimated estate 56,583,977 55,181,755 54,757,472 54,258,440 53,682,927 53,029,181 34,919,093 35,087,227 37,009,543 Settlement expenses Charitable gift of IRA assets Charitable deduction from TCLAT (590,840) (576,818) (572,575) (567,584) (561,829) (555,292) (374,191) (375,872) (395,095) (1,367,089) (1,390,345) (1,487,669) (1,591,806) (1,703,233) (1,822,459) (2,411,128) (2,456,259) (2,566,880) (51,876,048) (50,464,593) (49,947,229) (49,349,050) (48,667,865) (47,901,431) (31,883,255) (32,004,576) (33,797,048) Taxable estate 2,750,000 2,750,000 2,750,000 2,750,000 2,750,000 2,750,000 250,520 250,520 250,520 Plus Tina's lifetime taxable gifts 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 4,999,480 4,999,480 4,999,480 Tax base 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000 5,250,000 Federal Estate Tax - - - - - - - - - Distribution of Second Estate Settlement expenses Taxes Other gifts to charity 590,840 576,818 - 572,575 - 1,367,089 - 1,390,345 1,487,669 567,584 1,591,806 561,829 1,703,233 555,292 1,822,459 374,191 2,411,128 375,872 395,095 - - 2,456,259 2,566,880 Residual estate to heirs 2,750,000 2,750,000 2,750,000 2,750,000 2,750,000 2,750,000 250,520 250,520 250,520 Contribution to TCLAT 51,876,048 50,464,593 49,947,229 49,349,050 48,667,865 47,901,431 31,883,255 32,004,576 33,797,048 $ 56,583,977 $ 55,181,755 $ 54,757,472 $ 54,258,440 $ 53,682,927 $ 53,029,181 $ 34,919,093 $ 35,087,227 Total $ 37,009,543 Assumptions We assume that Duncan dies first, followed immediately by Tina. Taxes under "Distribution of Second Estate" include estate and income taxes, if any. Page 51
  53. 53. SUMMARY OF BENEFITS TO FAMILY - PROPOSED PLAN YEAR Current 2013 2014 2015 2016 2017 2026 2027 2036 Benefits to Family Residual estate 2,750,000 2,750,000 2,750,000 2,750,000 2,750,000 2,750,000 250,520 250,520 250,520 Family trust 2,750,000 2,750,000 2,750,000 2,750,000 2,750,000 2,750,000 1,656,477 1,656,477 1,656,477 Value of GDOT Life insurance proceeds GDOT Existing 529 Plans Value of QPRTs 1 NPV of TCLAT benefits to heirs Total assets to heirs 1 2,442,653 5,062,094 7,567,985 10,233,064 13,061,567 16,057,844 51,775,193 55,005,584 89,070,321 43,000,000 43,000,000 43,000,000 43,000,000 43,000,000 43,000,000 28,000,000 28,000,000 15,000,000 360,000 378,000 396,900 416,745 437,582 459,461 - - - - - - 712,775 748,414 1,161,036 8,506,527 8,761,723 11,432,061 14,646,212 14,247,714 14,101,646 13,932,762 13,740,442 13,524,054 9,001,628 9,035,881 9,541,951 $ 65,948,864 $ 68,187,807 $ 70,566,531 $ 73,082,570 $ 75,739,591 $ 78,541,359 $ 99,903,120 $ 103,458,599 $ 128,112,365 QPRT term ends in 2022, beginning in 2023 the residences are outside of the estate. Page 52
  54. 54. GRANTOR DEEMED OWNER TRUST DETAILS - PROPOSED PLAN Charitable Deduction available - Charitable Deduction allowed - - - - - 2,000,000 2,000,000 - YEAR - - - - - 2013 Current 2014 2015 2016 2017 2026 2027 2036 GDOT Balance Sheet Additional Year One Seed Gifts - Cash - 557,348 557,348 557,348 557,348 557,348 557,348 557,348 557,348 Reinvested excess cash flow - 697,555 1,425,327 2,257,416 3,196,287 4,244,455 19,463,139 22,058,436 49,804,163 31,754,706 32,389,800 38,708,810 Duncan's, Inc. Shares 24,426,527 Net equity $ 24,547,421 25,038,369 25,539,137 26,049,919 26,570,918 (21,983,874) Note payable to Duncan and Tina (20,740,230) (19,453,059) (18,120,837) (16,741,987) (15,314,877) 2,442,653 $ 5,062,094 $ - - - 7,567,985 $ 10,233,064 $ 13,061,567 $ 16,057,844 $ 51,775,193 $ 55,005,584 $ 89,070,321 5,062,637 5,163,890 5,267,168 5,372,511 6,420,648 6,549,061 5,284 8,349 11,852 15,806 74,782 84,302 197,293 5,037,704 5,067,922 5,172,239 5,279,020 5,388,317 6,495,430 6,633,363 8,024,028 Annual Charitable Gifts (2,000,000) (2,000,000) (2,000,000) (2,000,000) (2,000,000) (2,000,000) (2,000,000) (2,000,000) Duncan's, Inc. Income 5,037,704 5,062,637 5,163,890 5,267,168 5,372,511 6,420,648 6,549,061 7,826,734 74,782 84,302 197,293 GDOT Income Tax Estimation Duncan's, Inc. Income 5,037,704 Earnings from reinvestment acct./Seed Gift - Total earnings 7,826,734 GDOT Cash Flow Cash flow from reinvestment acct./Seed Gift - Installment Note payments to Duncan and Tina 1 (2,013,079) Trust Income Taxes 1 - Insurance Premium 8,349 (2,013,079) - - 11,852 (2,013,079) 15,806 (2,013,079) - (327,070) (327,070) (327,070) 727,772 832,089 - (327,070) 697,555 Cash flow to reinvest 1 5,284 (2,013,079) (327,070) 938,871 (2,013,079) (221,420) - - (1,816,646) (2,345,203) (221,420) (171,420) 1,048,168 2,260,931 2,595,297 3,507,404 Note is paid off in 2026 and the grantor status of the trust is revoked. Beginning in 2027, the trust begins paying it's own income taxes. GDOT Insurance - Permanent SUL Net death benefit 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000 171,420 Premium 171,420 171,420 171,420 171,420 171,420 171,420 171,420 28,000,000 28,000,000 28,000,000 28,000,000 28,000,000 13,000,000 13,000,000 - 155,650 155,650 155,650 155,650 155,650 50,000 50,000 - GDOT Insurance - 20 yr** Net death benefit Premium 28,000,000 ** Beginning in year 11, the death benefit is dropped to $13M and the annual premiums drop to $50,000. Page 53
  55. 55. QUALIFIED PERSONAL RESIDENCE TRUST DETAILS - PROPOSED PLAN YEAR Current 2013 2014 2015 2016 2017 2026 2027 2036 QPRT Values Gross value of residence 5,750,000 5,792,531 5,966,307 6,145,296 6,329,655 6,519,545 8,506,527 8,761,723 11,432,061 Discounted value of residence 5,750,000 5,792,531 5,966,307 6,145,296 6,329,655 6,519,545 8,506,527 8,761,723 11,432,061 Diff. between gross and discount - Reversionary value in estate 5,750,000 Rent paid to heirs post-QPRT - - - - - - - - - - $ - - - $ - 6,519,545 - $ - 6,329,655 - $ - 6,145,296 - $ - 5,966,307 - $ - 5,792,531 - Value of home to heirs Total Value to Heirs - - - 8,506,527 $ 8,506,527 8,761,723 $ 8,761,723 11,432,061 $ 11,432,061 * QPRT term ends in 2022, beginning in 2023 the residences are outside of the estate. ** Residence values are aggregated for purposes of this summary. Page 54
  56. 56. EXISTING CHARITABLE FOUNDATION DETAILS - PROPOSED PLAN YEAR Current 2013 2014 2015 2016 2017 2026 2027 2036 Lewis Family Foundation, Inc. 4,019,797 6,140,193 8,302,997 10,509,057 12,759,238 35,147,913 37,890,871 Annual Cash Contributions BOY Foundation Value 4,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 65,182,540 2,000,000 EOY Foundation Value to Charity 6,019,797 8,140,193 10,302,997 12,509,057 14,759,238 37,147,913 39,890,871 67,182,540 Page 55
  57. 57. TESTAMENTARY CHARITABLE LEAD TRUST DETAILS - PROPOSED PLAN YEAR Current 2013 2014 2015 2016 2017 2026 2027 2036 Charitable Lead Annuity Trust Balance Sheet Tot. value of TCLAT assets 51,876,048 50,464,593 49,947,229 49,349,050 48,667,865 47,901,431 31,883,255 32,004,576 33,797,048 2,641,548 2,569,677 2,543,332 2,512,873 2,478,186 2,439,159 1,623,508 1,629,685 1,720,959 NPV of TCLAT income distributions** 51,876,048 50,464,593 49,947,229 49,349,050 48,667,865 47,901,431 31,883,255 32,004,576 33,797,048 Total of TCLAT distributions** 66,038,710 64,241,914 63,583,304 62,821,816 61,954,662 60,978,984 40,587,691 40,742,134 43,023,968 Annual payment to foundation if death occurs in the column year Benefits to Charity Benefits to Heirs Future benefits to heirs from TCLAT** 49,597,271 48,247,817 47,753,179 47,181,276 46,530,015 45,797,248 30,482,708 30,598,700 32,312,433 NPV of benefits to heirs** 14,646,212 14,247,714 14,101,646 13,932,762 13,740,442 13,524,054 9,001,628 9,035,881 9,541,951 **The values shown passing to charity and to heirs vary from year to year based on the projected size of your estate, and the applicable tax law. Note: NPV of benefits to heirs assumes a 5% linear growth of TCLAT assets. A higher actual rate of growth would mean more money to the heirs while a lower actual rate of growth would mean less money to the heirs. Page 56
  58. 58. BENEFITS TO LEWIS FAMILY FOUNDATION - PROPOSED PLAN YEAR Lewis Family Foundation - Annual Gifts Charitable gift of IRA assets NPV of TCLAT income distributions Total benefits to foundation Current 4,000,000 2013 6,019,797 2014 8,140,193 2015 10,302,997 2016 12,509,057 2017 14,759,238 2026 37,147,913 2027 39,890,871 2036 67,182,540 1,367,089 1,390,345 1,487,669 1,591,806 1,703,233 1,822,459 2,411,128 2,456,259 2,566,880 51,876,048 50,464,593 49,947,229 49,349,050 48,667,865 47,901,431 31,883,255 32,004,576 33,797,048 $ 57,243,137 $ 57,874,735 $ 59,575,091 $ 61,243,853 $ 62,880,155 $ 64,483,128 $ 71,442,296 $ 74,351,706 $ 103,546,468 Page 57
  59. 59. DETAILS OF DUNCAN'S QUALIFIED PLAN - PROPOSED PLAN YEAR Current 2013 2014 2015 2016 2017 2026 2027 2036 Duncan's Qualified Plans Duncan's age 65 66 67 68 69 78 79 88 Tina's age 65 66 67 68 69 78 79 88 32.0 31.1 30.2 29.2 28.3 20.3 19.5 12.7 Securities in plans Minimum distribution factor 1,367,089 1,390,345 1,487,669 1,591,806 1,703,233 1,822,459 2,411,128 2,456,259 2,566,880 Plan balance during life 1,367,089 1,390,345 1,487,669 1,591,806 1,703,233 1,822,459 2,411,128 2,456,259 2,566,880 Plan balance at death of survivor 1,367,089 1,390,345 1,487,669 1,591,806 1,703,233 1,822,459 2,411,128 2,456,259 2,566,880 Minimum distribution - - - - - 116,362 123,648 203,899 Actual distribution - - - - - 116,362 123,648 203,899 Page 58
  60. 60. PLAN ASSUMPTIONS DUNCAN AND TINA LEWIS The plan is based on numerous assumptions. Important among these are the yield and growth assumptions contained on the balance sheet in the Financial Analysis section. Other important assumptions are contained on this Plan Assumptions page. Tax Rate Assumptions State Income Tax Rate State Inheritance - Estate Tax 6% No state estate tax Tax on IRD Unless a qualified plan is given to charity, we assume the beneficiary designations are changed to provide for a stretch out distribution. 7520 Rates Highest rate Current rate Lowest rate 2.3% 2.3% 2.0% October, 2013 October, 2013 August, 2013 Long Term AFR Rate 3.5% October, 2013 0% 7 Annual increase in Duncan's earned income Number of years Duncan's income is expected to continue Lifestyle Need Assumptions Net annual outlay for Duncan and Tina's lifestyle needs, not including gifts or income taxes Annual cost of living increase used in the plan Settlement and Administrative Expenses Fixed estate settlement costs Variable estate settlement costs, 1st death Variable estate settlement costs, 2nd death $1,600,000 2% $25,000 0.50% (of assets) 1.00% (of assets) Page 59
  61. 61. FAMILY INFORMATION DUNCAN AND TINA LEWIS CLIENTS Duncan Lewis Tina Lewis 123 Main Street Date of Birth Date of Birth May 20, 1948 October 27, 1948 CHILDREN CHILD'S NAME DATE OF BIRTH Jason Lewis Jeremy Lewis May 2, 1967 September 15, 1971 SPOUSE'S NAME Cathy Jackie GRANDCHILDREN NAME #1 #2 #3 #4 #5 #6 AGE 12 10 7 5 2 3 Page 60
  62. 62. DISCLAIMER AND DISCLOSURE DUNCAN AND TINA LEWIS InKnowVision, LLC does not give accounting or investment advice to its clients. The effectiveness of any of the strategies described will depend on your individual situation and on a number of complex factors. You should consult with your other advisors on the accounting and investment implications of the proposed strategies before any strategy is implemented. Any discussion in this presentation relating to tax, accounting, investments, regulatory, or legal matters is based on our understanding as of the date of this presentation. Rules in these areas are constantly changing and are open to varying interpretations. Assumption Issues The plan involves numerous assumptions. While we believe that these assumptions are reasonable, it is important to understand that it is a virtual certainty that the actual results will differ from those illustrated. Returns on investment and performance of financial products can cause the results to vary. Changes in tax, trust or property laws can cause plan results to vary. Plan implementation that differs from that described in the plan will cause the results to vary. Provision of state law may cause the plan results to vary. Tax Opinions The IRS has recently issued new rules for tax practitioners regarding covered opinions, reliance opinions and marketed opinions. While this is an arcane area, suffice it to say that these opinions are often obtained by taxpayers for purposes of avoiding penalties. These opinions are obtained at substantial cost and after substantial legal analysis. If you believe that such an opinion would be helpful to you prior to entering into any of the transactions outlined in this plan, you should feel free do so. Be advised that nothing in this analysis should be construed by you, your advisors or any one else as a covered opinion, reliance opinion, marketed opinion or any other type of opinion regarding any of the transactions or outcomes outlined in this plan. Page 61

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