InKnowVision’s Monthly  HNW Webinar Series               Case Study Webinar    ©2012. InKnowVision LLC. All rights reserve...
FAMILY WEALTH GOAL ACHIEVER™ - INITIAL                                                         PREPARED FOR:              ...
YOUR GOALS AND OBJECTIVES                                             ALLEN AND NANCY WILSONMaintain our customary lifesty...
ALLEN AND NANCY WILSONLIFETIME SPENDING  AND LIQUIDITY                              Page 3
YOUR LIQUID ASSETS - PROPOSED PLAN                                                           ALLEN AND NANCY WILSON$180,00...
ALLEN AND NANCY WILSONINCOME TAX PLANNING                               Page 5
PHASED PLANNING - INCOME TAXES                            ALLEN AND NANCY WILSON              Phase 1                     ...
GIFT ABC INTERESTS TO DONOR ADVISED FUND                                                     ALLEN AND NANCY WILSON       ...
CREATE A CHARITABLE REMAINDER UNITRUST                                                             ALLEN AND NANCY WILSON ...
FUND A CHARITABLE REMAINDER UNITRUST                                                       ALLEN AND NANCY WILSON         ...
INCOME FROM THE CRT                                                       ALLEN AND NANCY WILSON Wilson, M.D. receives ann...
DISTRIBUTION AT THE END OF THE CRT                                          ALLEN AND NANCY WILSONAt the termination of th...
ALLEN AND NANCY WILSONINCREASE INHERITANCEAND REDUCE ESTATE TAX                                Page 12
ASSETS PASSING TO YOUR FAMILY - CURRENT VS. PROPOSED                                                              ALLEN AN...
ESTATE TAX - CURRENT VS. PROPOSED                                                                    ALLEN AND NANCY WILSO...
ESTATE TAX vs. LIQUIDITY - PROPOSED PLAN                                                                     ALLEN AND NAN...
COMPARISON OF PLAN RESULTS - PLAN YEAR 2011                                                  ALLEN AND NANCY WILSON       ...
COMPARISON OF PLAN RESULTS - PLAN YEAR 2015                                                    ALLEN AND NANCY WILSON     ...
COMPARISON OF PLAN RESULTS - PLAN YEAR 2043                                                             ALLEN AND NANCY WI...
ALLEN AND NANCY WILSON  FAMILY WEALTHTRANSFER PLANNING                              Page 19
PHASED PLANNING - WEALTH TRANSFER                   ALLEN AND NANCY WILSON         Phase 1                            Phas...
CREATE GRANTOR DEEMED OWNER TRUSTS                                                   ALLEN AND NANCY WILSON               ...
GIFT TO GRANTOR DEEMED OWNER TRUST                                                   ALLEN AND NANCY WILSONAllen and Nancy...
SELL WILSON, M.D. INTERESTS TO EACH GDOT                                                     ALLEN AND NANCY WILSON       ...
TRANSFER EXISTING INSURANCE TO ILIT                                                  ALLEN AND NANCY WILSON               ...
CREATE AND FUND A QUALIFIED PERSONAL RESIDENCE TRUST                                                          ALLEN AND NA...
QPRT APPRAISAL - GIFT OF REAL ESTATE                                           ALLEN AND NANCY WILSON Nancy hires an appra...
AFTER THE QPRT TERM ENDS (I)                                          ALLEN AND NANCY WILSON Additional estate and gift ta...
AFTER THE QPRT TERM ENDS (II)                                            ALLEN AND NANCY WILSON     At death, the real est...
FURTHER PLANNING NOTES                                            ALLEN AND NANCY WILSONDiscuss the possibility of a Capti...
DETAILED FINANCIAL ANALYSIS                                    ALLEN AND NANCY WILSON                              INTRODU...
DETAILED FINANCIAL ANALYSIS                                   ALLEN AND NANCY WILSON                 CURRENT PLAN FINANCIA...
CURRENT NET WORTH STATEMENT                                            ALLEN AND NANCY WILSON                             ...
CURRENT NET WORTH STATEMENT (Page 2)                                                            ALLEN AND NANCY WILSON    ...
CURRENT NET WORTH STATEMENT (Page 3)                                              ALLEN AND NANCY WILSON                  ...
SCHEDULE OF LIFE INSURANCE BENEFITS - CURRENT PLAN                                               ALLEN AND NANCY WILSON   ...
FINANCIAL ANALYSIS - EXISTING PLAN          ASSET VALUE PROJECTIONS - EXISTING PLANYEAR                                   ...
TAXABLE INCOME PROJECTIONS - EXISTING PLANYEAR                                 Current           2011             2012    ...
INCOME TAX PROJECTIONS - EXISTING PLANYEAR                                  Current           2011            2012        ...
CASH FLOW PROJECTIONS - EXISTING PLANABC Basis                                         9,300,000        11,510,821        ...
FIRST ESTATE TAX ESTIMATION AND DISTRIBUTION - EXISTING PLANYEAR                                              Current     ...
SECOND ESTATE TAX ESTIMATION AND DISTRIBUTION - EXISTING PLANYEAR                                            Current      ...
SUMMARY OF BENEFITS TO FAMILY - EXISTING PLANYEAR                                             Current              2011   ...
DETAILS OF ALLENS QUALIFIED PLAN - EXISTING PLANYEAR                             Current        2011           2012       ...
DETAILS OF NANCYS QUALIFIED PLAN - EXISTING PLANYEAR                            Current    2011        2012        2013   ...
DETAILED FINANCIAL ANALYSIS                                    ALLEN AND NANCY WILSON                PROPOSED PLAN FINANCI...
NET WORTH STATEMENT AFTER PLAN IMPLEMENTATION                                     ALLEN AND NANCY WILSON                  ...
REVISED NET WORTH STATEMENT (Page 2)                                                         ALLEN AND NANCY WILSON       ...
REVISED NET WORTH STATEMENT (Page 3)                                              ALLEN AND NANCY WILSON                  ...
FINANCIAL ANALYSIS - PROPOSED PLA                   ASSET VALUE PROJECTIONS - PROPOSED PLANYEAR                           ...
TAXABLE INCOME PROJECTIONS - PROPOSED PLANYEAR                                            Current                 2011    ...
INCOME TAX PROJECTIONS - PROPOSED PLANYEAR                                           Current                2011          ...
CASH FLOW PROJECTIONS - PROPOSED PLANYEAR                                             Current                  2011       ...
Wilson Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Wilson Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Wilson Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Wilson Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Wilson Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Wilson Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Wilson Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Wilson Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Wilson Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Wilson Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Wilson Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Wilson Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Wilson Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Wilson Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Wilson Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Wilson Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Wilson Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Wilson Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Wilson Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Wilson Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Wilson Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Wilson Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
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Wilson Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning

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Transcript of "Wilson Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning"

  1. 1. InKnowVision’s Monthly HNW Webinar Series Case Study Webinar ©2012. InKnowVision LLC. All rights reserved. www.inknowvision.com
  2. 2. FAMILY WEALTH GOAL ACHIEVER™ - INITIAL PREPARED FOR: ALLEN AND NANCY WILSON November 1, 2011 DRAFT FOR DISCUSSION PURPOSES ONLY Planned Presented by: Scott Hamilton InKnowVision, LLC 715 Enterprise Drive Oak Brook, IL 60523 Scott@ikvllc.com Phone: (630) 596-5090 Draft for Discussion Purposes OnlyCopyright 2011 InKnowVision, LLC
  3. 3. YOUR GOALS AND OBJECTIVES ALLEN AND NANCY WILSONMaintain our customary lifestyle. This should take about $750,000 annually after taxes and gifts.Maintain adequate liquidity for emergencies and investment opportunities. We prefer to keep at least$2,000,000 in cash and readily marketable securities.Assure we have sufficient liquid assets available at our deaths to eliminate the forced sale of ABC or the realestate assets we desire to keep in the family.Provide a significant inheritance for our children.Reduce income taxes today and on the sale of ABC if possible.Eliminate or reduce estate taxes. Page 2
  4. 4. ALLEN AND NANCY WILSONLIFETIME SPENDING AND LIQUIDITY Page 3
  5. 5. YOUR LIQUID ASSETS - PROPOSED PLAN ALLEN AND NANCY WILSON$180,000,000$160,000,000$140,000,000$120,000,000$100,000,000 - Sale of ABC in 2015 $80,000,000 $60,000,000 $40,000,000 $20,000,000 $- 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Liquid Assets Proposed GDOTs Value Liquid Assets Current Page 4
  6. 6. ALLEN AND NANCY WILSONINCOME TAX PLANNING Page 5
  7. 7. PHASED PLANNING - INCOME TAXES ALLEN AND NANCY WILSON Phase 1 Phase 2 Wilson, M.D. establishes Establish Donor Advised a Charitable Remainder Fund (DAF) Unitrust (CRT) Wilson, M.D. transfers Gift ABC interests to DAF ABC interests to CRT **** To occur prior to sale of ABC Page 6
  8. 8. GIFT ABC INTERESTS TO DONOR ADVISED FUND ALLEN AND NANCY WILSON Gift ABC interests To Donor Advised Fund WILSON, M.D. (S Corp) DONOR ADVISED FUND Owns interests in ABCDeduction flows through to owners of Wilson, M.D.Advantages Income Tax Deduction 1,000,000Pre-fund charitable giving Value of deduction (approx.) 400,000Create a tax deduction todayReduce future income tax on ABC taxable incomeOngoing taxes on the active income associated with ABC interests owned by the DAF will be paid by the DAF.Taxes on the dividends generated by ABC investments should not be subject to income tax. Page 7
  9. 9. CREATE A CHARITABLE REMAINDER UNITRUST ALLEN AND NANCY WILSON Wilson, M.D. (S Corp) creates a charitable remainder unitrust (CRT). WILSON, M.D. (S Corp) CRT CRT AssumptionsTotal Return Rate 6.00%CRT payout rate 11.12%7520 rate 2.28%Term of trust (years) 20Income Tax Deduction - 2015 $ 2,000,400 Page 8
  10. 10. FUND A CHARITABLE REMAINDER UNITRUST ALLEN AND NANCY WILSON Prior to the sale of ABC, Wilson, M.D. transfers $20,000,000 of ABC interests to the CRT. WILSON, M.D. (S Corp) CRT $20,000,000 Detail of Assets Transferred to CRT ABC Business Interests 20,000,000 Total 20,000,000Note: There will be no capital gains taxes due at the time of the sale on the interests that are owned by the CRT.Note: Consideration will have to be given for handling UBTI and avoiding tax penalties. Page 9
  11. 11. INCOME FROM THE CRT ALLEN AND NANCY WILSON Wilson, M.D. receives annual payments beginning in 2016 for a term of 20 years. The S Corp can distribute the CRT payments it receives to Allen & Nancy. WILSON, M.D. (S Corp) CRT Receive annual incomeAllen & Nancy receive distributions from the S Corp Estimated Annual CRT Distributions to S Corp (Years 1-10) 2016 2,200,000 2017 2,100,000 2018 2,000,000 2019 1,900,000 2020 1,800,000 2021 1,700,000 2022 1,600,000 2023 1,500,000 2024 1,500,000 2025 1,400,000 Total (10 years) 17,700,000 Note: payment schedule assumes consistent 6% growth on CRT assets. Page 10
  12. 12. DISTRIBUTION AT THE END OF THE CRT ALLEN AND NANCY WILSONAt the termination of the CRT, the assets of the CRT will be distributed to the charity or charities of your choice. CRT FAMILY CHARITIES Page 11
  13. 13. ALLEN AND NANCY WILSONINCREASE INHERITANCEAND REDUCE ESTATE TAX Page 12
  14. 14. ASSETS PASSING TO YOUR FAMILY - CURRENT VS. PROPOSED ALLEN AND NANCY WILSON $200,000,000 $175,000,000 $150,000,000 $125,000,000 - $100,000,000 $75,000,000 $50,000,000 $25,000,000 nt 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 re 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 ur C Current Plan Proposed Plan Proposed Plan w/ Guar. Death Benefit Proposed Plan w/ Non-Guar Death BenefitThis 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 theproposed plan. Two proposed plan options illustrate the benefit to heirs including the death benefit of the new Life Insurance policy. Page 13
  15. 15. ESTATE TAX - CURRENT VS. PROPOSED ALLEN AND NANCY WILSON$120,000,000$100,000,000 $80,000,000 - $60,000,000 $40,000,000 $20,000,000 $- nt 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 re 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 ur C Current Plan Proposed PlanThis chart compares the amount of your estate taxes in the current plan as against the proposed plan. Page 14
  16. 16. ESTATE TAX vs. LIQUIDITY - PROPOSED PLAN ALLEN AND NANCY WILSON $45,000,000 $40,000,000 $35,000,000 $30,000,000 $25,000,000 - $20,000,000 $15,000,000 $10,000,000 $5,000,000 $- 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Liquid Assets Proposed Available for Taxes Estate Tax Due Liquid Assets w/ Guar. Death Benefit Liquid Assets w/ Non-Guar Death BenefitThis review illustrates the estate taxes due as against the liquid assets available to pay the taxes under the proposed plan. Liquid assets include cash,securities, retirement funds and life insurance. Two proposed plan options illustrate the liquid assets available to pay taxes from the death benefit of thenew Life Insurance policy. Page 15
  17. 17. COMPARISON OF PLAN RESULTS - PLAN YEAR 2011 ALLEN AND NANCY WILSON Existing Plan Proposed Plan Advantage Estate Value $ 64,116,470 $ 53,352,776 Heirs Receive Immediately $ 50,245,677 $ 54,029,419 $ 3,783,742 Total Benefits to Family $ 50,245,677 $ 54,029,419 $ 3,783,742 Estate and Income Tax $ 23,699,897 $ 20,049,154 $ 3,650,743This chart assumes that you both die this year and compares the results of the current plan with the proposed plan. Page 16
  18. 18. COMPARISON OF PLAN RESULTS - PLAN YEAR 2015 ALLEN AND NANCY WILSON Existing Plan Proposed Plan Advantage Estate Value $ 70,731,265 $ 43,012,160 Income Taxes $ 13,821,640 $ 9,329,634 $ 4,492,005 Heirs Receive Immediately $ 40,190,253 $ 59,365,530 $ 19,175,276 Total Benefits to Family $ 40,190,253 $ 59,365,530 $ 19,175,276 Family Charity $ - $ 2,178,370 $ 2,178,370 Estate and Income Tax $ 41,093,909 $ 24,623,674 $ 16,470,235This chart illustrates the plan results in the year of assumed sale of ABC interests. Page 17
  19. 19. COMPARISON OF PLAN RESULTS - PLAN YEAR 2043 ALLEN AND NANCY WILSON Existing Plan Proposed Plan Advantage Estate Value $ 200,612,646 $ 57,277,519 Heirs Receive Immediately $ 106,195,674 $ 173,432,825 $ 67,237,152 Total Benefits to Family $ 106,195,674 $ 173,432,825 $ 67,237,152 Family Charity $ - $ 6,986,326 $ 6,986,326 Estate and Income Tax $ 111,633,831 $ 32,371,216 $ 79,262,616 Present Value of total to Heirs $41,239,713 $67,350,389 Discount rate for PV calculation 3.00%This chart assumes that you both die at life expectancy and compares the results of the current plan with the proposed plan.The present value of the total passing to heirs is our attempt to put inheritance into todays dollars to provide perspective.We are using an inflation rate of 3% to calculate the present value numbers. Page 18
  20. 20. ALLEN AND NANCY WILSON FAMILY WEALTHTRANSFER PLANNING Page 19
  21. 21. PHASED PLANNING - WEALTH TRANSFER ALLEN AND NANCY WILSON Phase 1 Phase 2 Transfer existing termEstablish Grantor Deemed policy to Irrevocable Life Owner Trusts (GDOTs) Insurance Trust (ILIT) Qualified PersonalGift Wilson, M.D. interests Residence Trust (QPRT) to GDOTs for Vacation HomeSell Wilson, M.D. interests to GDOTs Page 20
  22. 22. CREATE GRANTOR DEEMED OWNER TRUSTS ALLEN AND NANCY WILSON Allen and Nancy create individual grantor deemed owner trusts (GDOT). The Trusts can be drafted to provide asset protection and long term estate tax savings through the use of dynasty trust provisions. ALLEN ALLENs GDOT NANCY NANCYs GDOT HEIRS Nancy may be a discretionary beneficiary of Allens GDOTNote: Allen may also be a discretionary beneficiary of Nancys trust. Attention should be paid to avoid reciprocal trust doctrine. Page 21
  23. 23. GIFT TO GRANTOR DEEMED OWNER TRUST ALLEN AND NANCY WILSONAllen and Nancy each make a gift of Wilson, M.D. stock worth $3,500,000 to their individual GDOTs. This gift is designed to giveeach trust economic substance. ALLEN Wilson, M.D. stock worth ALLENs GDOT $3,500,000 Wilson, M.D. stock worth NANCY NANCYs GDOT $3,500,000 Page 22
  24. 24. SELL WILSON, M.D. INTERESTS TO EACH GDOT ALLEN AND NANCY WILSON Allen and Nancy sell their Wilson, M.D. stock to their individual GDOTs for an installment note. Sell their combined Wilson, ALLEN & NANCY M.D. stock worth $43,000,000 GDOTsAllen and Nancy own an installment note The GDOTs own Wilson, M.D. stock worth after the sale Installment note with a value $43,000,000 after the sale of $43,000,000 that provides annual interest and principal paymentsThe sale price is based on the assumed value of the assetssold. HEIRSTransaction Notes:- Installment Note makes annual interest payments. Interest calculated Receive assets in the future according toon the Nov. 2011 Mid Term AFR at 1.20% terms of the trust- At the end of year 4, Wilson, M.D. interests are used to pay off theinstallment note.- Beginning in year 5, the grantor status of the trusts is revoked and thetrusts become responsible for paying its own income taxes. Page 23
  25. 25. TRANSFER EXISTING INSURANCE TO ILIT ALLEN AND NANCY WILSON Give existing term policy to ILIT. Gift annually to the ILIT ALLEN & NANCY to pay continued premiums. ILITYou own life insurance personally with Owns life insurance with a death benefit of death benefit of $3,000,000 $3,000,000 Policy proceeds will be included in the taxable estate if death occurs within three years of the date of the gift. HEIRS $3,000,000 in assets are distributed according to the terms of the ILIT. Page 24
  26. 26. CREATE AND FUND A QUALIFIED PERSONAL RESIDENCE TRUST ALLEN AND NANCY WILSON Nancy creates a qualified personal residence trust (QPRT) with a term of 32 years. She transfers her interest in the home listed below to the trust. NANCY Deed NANCYs QPRTNancy gifts her 1/2 undivided interest in property QPRT Nancy gifts a 1/2 undivided interest in property to each QPRTVacation Home 1 1,000,000 Vacation Home 1 500,000 Sub Total 1,000,000 Sub Total 500,000Note: If Nancy dies before the QPRT term ends, the property is back in her estate. Page 25
  27. 27. QPRT APPRAISAL - GIFT OF REAL ESTATE ALLEN AND NANCY WILSON Nancy hires an appraiser to value the real estate and the appropriate adjustment for the fractional interest gift to the QPRT. This fractional interest adjustment will take into consideration: ▪ Lack of liquidity ▪ Limited transferabilityNANCY Appraisal of Gift NANCYs QPRT The value of Nancys QPRT gift is expected to be $191,544 QPRT ASSUMPTIONS Term (years) 32 7520 Rate 1.40% Nancys age 53 Page 26
  28. 28. AFTER THE QPRT TERM ENDS (I) ALLEN AND NANCY WILSON Additional estate and gift tax advantages that can be obtained with QPRT after the term of the QPRT expires include: ▪ Increases in the value of the real estate are out of your estate ▪ Fair market rent can be paid to the trust to pass additional assets to your heirs without gift, estate or income tax. ▪ The QPRT should be structured as a grantor trust to neutralize income taxes and kept in place as a grantor trust after the QPRT term.NANCY Rental of the Property NANCYs QPRT Page 27
  29. 29. AFTER THE QPRT TERM ENDS (II) ALLEN AND NANCY WILSON At death, the real estate and any accumulated rental income, passes to your heirs without estate tax. The trust can be structured for distributions according to your particular goals and objectives.NANCYs QPRT HEIRS The value of the real estate is assumed to be $2,587,625 as of 2043 Note: This illustration assumes no rent is paid; however, under certain circumstances fair market rent may need to be paid. For example, once the QPRT term is over, if Allen is not living at the time, Nancy 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 28
  30. 30. FURTHER PLANNING NOTES ALLEN AND NANCY WILSONDiscuss the possibility of a Captive Insurance Company at the ABC level.Ensure notification of pending ABC sale prior to binding documents. Page 29
  31. 31. DETAILED FINANCIAL ANALYSIS ALLEN AND NANCY WILSON INTRODUCTIONThe following section of the plan contains all of the financial analysis used to show you where youstand 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 taxreturns. If numbers do not look correct, please let us know so that we can make appropriatechanges.Assumed growth and yield numbers are all listed on the Net Worth pages contained in these sections. Page 30
  32. 32. DETAILED FINANCIAL ANALYSIS ALLEN AND NANCY WILSON CURRENT PLAN FINANCIALSIn the Current Plan Section you will find a Net Worth Statement and a detailed cash flow and assetvalue projection analysis. Page 31
  33. 33. CURRENT NET WORTH STATEMENT ALLEN AND NANCY WILSON ALLEN NANCY JOINT TOTAL YIELD GROWTHCASH AND EQUIVALENTS Cash/Checking 42,500 42,500 - 85,000 1.0% 0.0% Cash Value of Life Insurance 280,000 - 280,000 0.0% 0.0% Total of Cash and Equivalents 322,500 42,500 - 365,000 0.2% 0.0%MARKETABLE SECURITIES - EQUITIES Account 1 1,500,000 1,500,000 - 3,000,000 2.0% 4.0% Account 2 11,500 11,500 - 23,000 2.0% 5.0% Total of Equities 1,511,500 1,511,500 - 3,023,000 2.0% 4.0% Page 32
  34. 34. CURRENT NET WORTH STATEMENT (Page 2) ALLEN AND NANCY WILSON ALLEN NANCY JOINT TOTAL YIELD GROWTHOTHER INVESTMENTS LP 1 75,000 75,000 - 150,000 0.0% 5.0% LP 2 15,000 15,000 - 30,000 0.0% 5.0% LP 3 22,500 22,500 - 45,000 0.0% 5.0% LP 4 10,000 10,000 - 20,000 0.0% 5.0% Loans to Life Insurance Trusts** 177,000 177,000 - 354,000 0.0% 2.0% Total of Other Investments 299,500 299,500 - 599,000 0.0% 3.2% ** Growth rate of 2% attached to account for any accrued interest on the promissory notes for insurance premiums.CLOSELY HELD BUSINESS Wilson, M.D. (S Corp) - ABC ** 25,000,000 25,000,000 - 50,000,000 11.0% 10.0% Total Closely Held Business 25,000,000 25,000,000 - 50,000,000 11.0% 10.0% ** Value is based on discussions and not a formal valuation. We also assume that $10M has been given to trusts using exemption. ** S Corp holds interests in ABC Practice.RETIREMENT PLANS/IRAs IRA 845,000 - 845,000 0.0% 6.0% IRA 123,000 - 123,000 0.0% 6.0% IRA 115,000 - 115,000 0.0% 6.0% IRA - 55,000 55,000 0.0% 6.0% Total Retirement Plans 1,083,000 55,000 1,138,000 0.0% 6.0%INVESTMENT REAL ESTATE Rental Home Property 1 750,000 750,000 - 1,500,000 -2.1% 3.0% Rental Home Property 2 750,000 750,000 - 1,500,000 -2.1% 3.0% Total of Real Estate Holdings 1,500,000 1,500,000 - 3,000,000 -2.1% 3.0% Page 33
  35. 35. CURRENT NET WORTH STATEMENT (Page 3) ALLEN AND NANCY WILSON ALLEN NANCY JOINT TOTAL YIELD GROWTHRESIDENTIAL REAL ESTATE 123 Main St. 3,000,000 3,000,000 - 6,000,000 0.0% 3.0% Vacation Home 1 1,000,000 1,000,000 - 2,000,000 0.0% 3.0% Vacation Home 2 750,000 750,000 - 1,500,000 0.0% 3.0% Vacant Land 175,000 175,000 - 350,000 0.0% 3.0% Vacation Home 3 157,500 157,500 - 315,000 0.0% 3.0% Total of Personal Residences 5,082,500 5,082,500 - 10,165,000 0.0% 3.0%PERSONAL PROPERTY Autos 100,000 100,000 - 200,000 0.0% 0.0% Total of Personal Property 100,000 100,000 - 200,000 0.0% 0.0%TOTAL ASSETS 34,899,000 33,591,000 - 68,490,000LIABILITIES 123 Main St. 1,750,000 1,750,000 - 3,500,000 Total Liabilities 1,750,000 1,750,000 - 3,500,000COMMERCIAL LIABILITIES Rental Home Property 1 550,000 550,000 - 1,100,000 Rental Home Property 2 600,000 600,000 - 1,200,000 Total Commercial Liabilities 1,150,000 1,150,000 - 2,300,000TOTAL LIABILITIES 2,900,000 2,900,000 - 5,800,000NET WORTH 31,999,000 30,691,000 - 62,690,000 Page 34
  36. 36. SCHEDULE OF LIFE INSURANCE BENEFITS - CURRENT PLAN ALLEN AND NANCY WILSON COMPANY INSURED POLICY # BENEFICIARY PREMIUM CASH VALUE DEATH BENEFITPolicies owned by AllenPolicy 1 (term to age 95) Allen # Nancy 5,630 - 3,000,000Policy 2 (variable) Allen # Nancy 10,000 100,000 800,000Policy 3 (419 plan) Allen # Nancy - 180,000 1,200,000 Totals 15,630 280,000 5,000,000Policies owned by ILITILIT Policy 1 Nancy # Trust 34,000 20,000 2,000,000ILIT Policy 2 Allen # Trust 84,000 500,000 2,000,000 Totals 118,000 520,000 4,000,000 Page 35
  37. 37. FINANCIAL ANALYSIS - EXISTING PLAN ASSET VALUE PROJECTIONS - EXISTING PLANYEAR Current 2011 2012 2013 2014 2015 2020 2030 2043Asset ValuesCash and cash equivalents 365,000 365,000 365,000 365,000 365,000 365,000 365,000 365,000 365,000Marketable securities - Equities 3,023,000 3,423,718 3,932,677 4,454,239 4,988,564 58,087,727 68,834,983 98,939,647 163,315,633Other investments 1 599,000 720,136 861,375 1,007,172 1,157,673 1,313,032 2,168,343 3,716,588 5,616,423Closely held business 2 50,000,000 50,789,540 55,868,494 61,455,344 67,600,878 - - - -Retirement plans/IRAs 1,138,000 1,188,953 1,300,290 1,418,307 1,543,406 1,676,010 2,242,879 3,051,445 2,849,500Investment real estate 3,000,000 3,014,612 3,105,051 3,198,202 3,294,148 3,392,973 3,933,385 5,286,141 7,762,876Personal residences 10,165,000 10,214,512 10,520,947 10,836,575 11,161,673 11,496,523 13,327,621 17,911,208 26,303,213Personal property 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000Total assets in estate 68,490,000 69,916,470 76,153,833 82,934,839 90,311,342 76,531,265 91,072,212 129,470,029 206,412,646Less estimated liabilities (5,800,000) (5,800,000) (5,800,000) (5,800,000) (5,800,000) (5,800,000) (5,800,000) (5,800,000) (5,800,000)Combined net worth $ 62,690,000 $ 64,116,470 $ 70,353,833 $ 77,134,839 $ 84,511,342 $ 70,731,265 $ 85,272,212 $ 123,670,029 $ 200,612,6461 Increased by new promissory notes for annual premiums currently being paid on the ILIT policies.2 We assume a sale of ABC in 2015.In the event that there is a cash flow surplus, the surplus is added to the marketable securities 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 marketable securities. Page 36
  38. 38. TAXABLE INCOME PROJECTIONS - EXISTING PLANYEAR Current 2011 2012 2013 2014 2015 2020 2030 2043Sources of taxable incomeCash and cash equivalents 850 850 850 850 850 850 850 850Marketable securities - Equities 60,460 68,474 78,654 89,085 99,771 1,330,405 1,905,461 3,140,757Closely held business 5,500,000 5,586,849 6,145,534 6,760,088 - - - -Retirement plans/IRAs - - - - - - 140,816 253,270Investment real estate (64,000) (64,000) (64,000) (64,000) (64,000) (64,000) (64,000) (64,000)Sale of ABC - - - - 49,030,948 - - -Client earned income 210,000 210,000 214,200 218,484 222,854 - - - -Spouse earned income 81,600 81,600 83,232 84,897 86,595 88,326 - - -Social security income - - - - - - 27,613 31,426Gross income $ 5,788,910 $ 5,889,606 $ 6,464,419 $ 7,095,471 $ 49,155,896 $ 1,267,255 $ 2,010,740 $ 3,362,303 Page 37
  39. 39. INCOME TAX PROJECTIONS - EXISTING PLANYEAR Current 2011 2012 2013 2014 2015 2020 2030 2043Income tax EstimationAdjusted gross income:Dividend income (marketable sec.) 60,460 68,474 78,654 89,085 99,771 1,330,405 1,905,461 3,140,757Capital Gains income - - - - 49,030,948 - - -Earned and other income 5,728,450 5,821,131 6,385,765 7,006,386 25,176 (63,150) 105,279 221,546 Adjusted gross income 5,788,910 5,889,606 6,464,419 7,095,471 49,155,896 1,267,255 2,010,740 3,362,303DeductionsReal estate tax 34,624 34,624 35,663 36,733 37,835 38,970 45,176 60,713 89,160State income taxes 549,946 559,513 614,120 674,070 4,669,810 120,389 191,020 319,419Interest 90,321 90,321 93,031 95,822 98,696 101,657 117,848 158,378 232,584Charitable gifts 24,152 24,152 24,877 25,623 26,392 27,183 31,513 42,351 62,193Charitable Deduction available 24,152 24,877 25,623 26,392 27,183 31,513 42,351 62,193Charitable Deduction allowed 24,152 24,877 25,623 26,392 27,183 31,513 42,351 62,193Total deductions 699,043 713,082 772,297 836,992 4,837,620 314,927 452,463 703,356Reductions - - (188,929) (207,860) (1,469,673) (33,014) (55,318) (95,865)Deductions allowed 699,043 713,082 583,368 629,132 3,367,947 281,913 397,145 607,491Taxable income 5,089,867 5,176,523 5,881,050 6,466,339 45,787,948 985,341 1,613,595 2,754,812Federal and State income tax $ 2,289,179 $ 2,327,472 $ 2,907,083 $ 3,198,807 $ 13,821,640 $ 474,651 $ 794,071 $ 1,374,391 Page 38
  40. 40. CASH FLOW PROJECTIONS - EXISTING PLANABC Basis 9,300,000 11,510,821 13,770,198 16,008,649 18,569,930 3,289,179 3,327,472 3,907,083 4,198,807YEAR Current 2011 2012 2013 2014 2015 2020 2030 2043Sources of income for LifestyleDistribution from Marketable Securities - - - - - 351,120 151,569 15,678Return of basis from ABC Sale - - - - 18,569,930 - - -Undistributed Consumable Income ** (2,210,821) (2,259,377) (2,238,452) (2,561,281) - - - -Non-taxable Social Security Income - - - - - - 4,873 5,546Consumable income (taxable) 5,788,910 5,889,606 6,464,419 7,095,471 49,155,896 1,267,255 2,010,740 3,362,303Total income available for lifestyle 3,578,089 3,630,229 4,225,967 4,534,190 67,725,826 1,618,374 2,167,181 3,383,527Uses of CashLiving expenses 750,000 772,500 795,675 819,545 844,132 978,580 1,315,130 1,931,312Income tax 2,289,179 2,327,472 2,907,083 3,198,807 13,821,640 474,651 794,071 1,374,391Personally held insurance premiums 15,630 15,630 15,630 15,630 15,630 15,630 15,630 15,630Cash loans to ILIT 1 118,000 118,000 118,000 118,000 118,000 118,000 - -Cash gifts to charity 24,152 24,877 25,623 26,392 27,183 31,513 42,351 62,193Total uses of cash 3,196,961 3,258,479 3,862,011 4,178,374 14,826,585 1,618,374 2,167,181 3,383,527Surplus $ 381,128 $ 371,750 $ 363,956 $ 355,816 $ 52,899,241 $ - $ - $ -1 We assume that loans are made annually to pay premiums on ILIT policices, we also assume that enough premiums are paid by 2025 to keep the policies in-force and premiums cease.** Assumes that ABC distributes an amount sufficient to pay income tax plus an additional $1M of excess cash.In the event that there is a cash flow surplus, the surplus is added to the marketable securities 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 inmarketable securities row on the "Asset Value Projections" 3 pages earlier. Page 39
  41. 41. FIRST ESTATE TAX ESTIMATION AND DISTRIBUTION - EXISTING PLANYEAR Current 2011 2012 2013 2014 2015 2020 2030 2043Tax calculation on Allens deathCombined net worth 62,690,000 64,116,470 70,353,833 77,134,839 84,511,342 70,731,265 85,272,212 123,670,029 200,612,646Allens estimated estate 31,999,000 32,727,116 35,910,868 39,372,112 43,137,318 36,103,521 43,525,690 63,125,176 102,399,172Death benefit exceeding CV 4,720,000 4,720,000 4,720,000 4,720,000 4,720,000 4,720,000 4,720,000 4,720,000 4,720,000Total gross estate 36,719,000 37,447,116 40,630,868 44,092,112 47,857,318 40,823,521 48,245,690 67,845,176 107,119,172Settlement expenses (208,595) (212,236) (228,154) (245,461) (264,287) (229,118) (266,228) (364,226) (560,596)Joint, personal and IRA to Nancy (1,183,000) (1,231,490) (1,337,446) (1,449,760) (1,568,812) (1,695,008) (2,234,480) (3,003,968) (2,811,783)Insurance passing to Nancy (5,000,000) (5,000,000) (5,000,000) (5,000,000) (5,000,000) (5,000,000) (5,000,000) (5,000,000) (5,000,000)Outright or in trust to Nancy (30,227,405) (30,903,391) (33,965,267) (37,396,892) (41,024,219) (33,899,396) (40,744,982) (59,476,982) (98,746,793)Taxable estate 100,000 100,000 100,000 - - - - - -Plus Allens lifetime taxable gifts 4,900,000 4,900,000 4,900,000 4,900,000 4,900,000 4,900,000 4,900,000 4,900,000 4,900,000Tax base 5,000,000 5,000,000 5,000,000 4,900,000 4,900,000 4,900,000 4,900,000 4,900,000 4,900,000Federal Estate Tax - - - - - - - - -Distribution of Allens estateSettlement expenses 208,595 212,236 228,154 245,461 264,287 229,118 266,228 364,226 560,596To family trust 100,000 100,000 100,000 - - - - - -Joint, personal and IRA to Nancy 1,183,000 1,231,490 1,337,446 1,449,760 1,568,812 1,695,008 2,234,480 3,003,968 2,811,783Insurance passing to Nancy 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000Outright or in trust to Nancy 30,227,405 30,903,391 33,965,267 37,396,892 41,024,219 33,899,396 40,744,982 59,476,982 98,746,793Total $ 36,719,000 $ 37,447,116 $ 40,630,868 $ 44,092,112 $ 47,857,318 $ 40,823,521 $ 48,245,690 $ 67,845,176 $ 107,119,172AssumptionsWe assume that Allen dies first, followed immediately by Nancy.Taxes under "Distribution of First Estate" include estate and income taxes. Page 40
  42. 42. SECOND ESTATE TAX ESTIMATION AND DISTRIBUTION - EXISTING PLANYEAR Current 2011 2012 2013 2014 2015 2020 2030 2043Tax Calculation on Nancys deathNancys assets 30,691,000 31,389,354 34,442,965 37,762,727 41,374,025 34,627,744 41,746,522 60,544,854 98,213,475Plus assets from Allens estate 36,410,405 37,134,881 40,302,714 43,846,652 47,593,031 40,594,404 47,979,462 67,480,950 106,558,576Nancys estimated estate 67,101,405 68,524,235 74,745,679 81,609,379 88,967,055 75,222,147 89,725,984 128,025,803 204,772,050Settlement expenses (696,014) (710,242) (772,457) (841,094) (914,671) (777,221) (922,260) (1,305,258) (2,072,721)Nancys taxable estate 66,405,391 67,813,992 73,973,222 80,768,285 88,052,385 74,444,926 88,803,724 126,720,545 202,699,330Plus Nancys lifetime taxable gifts 4,900,000 4,900,000 4,900,000 4,900,000 4,900,000 4,900,000 4,900,000 4,900,000 4,900,000Tax base 71,305,391 72,713,992 78,873,222 85,668,285 92,952,385 79,344,926 93,703,724 131,620,545 207,599,330Federal Estate Tax 23,206,887 23,699,897 25,855,628 44,571,757 48,578,012 41,093,909 48,991,248 69,845,500 111,633,831Total Estate Tax Due 23,206,887 23,699,897 25,855,628 44,571,757 48,578,012 41,093,909 48,991,248 69,845,500 111,633,831Distribution of Nancys estateSettlement expenses 696,014 710,242 772,457 841,094 914,671 777,221 922,260 1,305,258 2,072,721Taxes 23,206,887 23,699,897 25,855,628 44,571,757 48,578,012 41,093,909 48,991,248 69,845,500 111,633,831Qualified plan to heirs 1,138,000 1,188,953 1,300,290 1,418,307 1,543,406 1,676,010 2,242,879 3,051,445 2,849,500Residual estate to heirs 42,060,504 42,925,142 46,817,304 34,778,221 37,930,968 31,675,007 37,569,596 53,823,600 88,215,998Total $ 67,101,405 $ 68,524,235 $ 74,745,679 $ 81,609,379 $ 88,967,055 $ 75,222,147 $ 89,725,984 $ 128,025,803 $ 204,772,050AssumptionsWe assume that Allen dies first, followed immediately by Nancy.Taxes under "Distribution of Second Estate" include estate and income taxes. Page 41
  43. 43. SUMMARY OF BENEFITS TO FAMILY - EXISTING PLANYEAR Current 2011 2012 2013 2014 2015 2020 2030 2043Benefits to FamilyFamily trust 100,000 100,000 100,000 - - - - - -Residual estate 42,060,504 42,925,142 46,817,304 34,778,221 37,930,968 31,675,007 37,569,596 53,823,600 88,215,998Qualified plan assets 1,138,000 1,188,953 1,300,290 1,418,307 1,543,406 1,676,010 2,242,879 3,051,445 2,849,500ABC Gifted to Kids - Nevada Trusts 2,000,000 2,031,582 2,234,740 2,458,214 2,704,035 2,839,237 3,623,666 5,902,570 11,130,175Proceeds from ILIT 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000Total assets to heirs $ 49,298,504 $ 50,245,677 $ 54,452,334 $ 42,654,742 $ 46,178,408 $ 40,190,253 $ 47,436,141 $ 66,777,615 $ 106,195,674Total Taxes 23,206,887 23,699,897 25,855,628 44,571,757 48,578,012 41,093,909 48,991,248 69,845,500 $ 111,633,831Total Liquid Assets to Pay Taxes ** 13,526,000 13,977,670 14,597,966 15,237,546 15,896,969 69,128,737 80,442,863 111,356,092 $ 175,530,133Liquidity Surplus/Shortfall (9,680,887) (9,722,227) (11,257,661) (29,334,210) (32,681,042) 28,034,828 31,451,615 41,510,592 $ 63,896,302** Includes cash, securities, retirement plan funds and life insurance proceeds (ILIT and persoanlly owned policies) Page 42
  44. 44. DETAILS OF ALLENS QUALIFIED PLAN - EXISTING PLANYEAR Current 2011 2012 2013 2014 2015 2020 2030 2043Allens Qualified PlansAllens Age 58 59 60 61 62 67 77 90Nancys Age 53 54 55 56 57 62 72 85Minimum distribution factor 38.7 37.8 36.8 35.8 34.9 30.2 21.2 11.4Plan contributions 40,000 40,000 40,000 40,000 40,000 - - -Plan balance 1,083,000 1,133,423 1,241,429 1,355,914 1,477,269 1,605,905 2,149,064 2,895,388 2,677,276Minimum distribution - - - - - - 134,845 241,544Preferred distribution - - - - - - - -Actual distribution - - - - - - 134,845 241,544 Page 43
  45. 45. DETAILS OF NANCYS QUALIFIED PLAN - EXISTING PLANYEAR Current 2011 2012 2013 2014 2015 2020 2030 2043Nancys Qualified PlansNancys Age 53 54 55 56 57 62 72 85Allens Age 58 59 60 61 62 67 77 90Minimum distribution factor 43.6 42.6 41.6 40.7 39.7 34.9 25.6 14.8Plan contributions - - - - - - - -Plan balance 55,000 55,529 58,861 62,393 66,136 70,105 93,816 156,057 172,225Minimum distribution - - - - - - 5,971 11,726Preferred distribution - - - - - - - -Actual distribution - - - - - - 5,971 11,726 Page 44
  46. 46. DETAILED FINANCIAL ANALYSIS ALLEN AND NANCY WILSON PROPOSED PLAN FINANCIALSIn the Proposed Plan Section you will find a balance sheet which reflects the repositioning of assetsas set out in the step by step roadmap in the proceeding section. You will also find detailed cashflow and asset projection information on each of the proposed planning strategies. Page 45
  47. 47. NET WORTH STATEMENT AFTER PLAN IMPLEMENTATION ALLEN AND NANCY WILSON ALLEN NANCY JOINT TOTAL YIELD GROWTHCASH AND EQUIVALENTS Cash/Checking 42,500 42,500 - 85,000 1.0% 0.0% Cash Value of Life Insurance 280,000 - - 280,000 0.0% 0.0% Total of Cash and Equivalents 322,500 42,500 - 365,000 0.2% 0.0%MARKETABLE SECURITIES - EQUITIES Account 1 1,500,000 1,500,000 - 3,000,000 2.0% 4.0% Account 2 11,500 11,500 - 23,000 2.0% 5.0% Total of Equities 1,511,500 1,511,500 - 3,023,000 2.0% 4.0% Page 46
  48. 48. REVISED NET WORTH STATEMENT (Page 2) ALLEN AND NANCY WILSON ALLEN NANCY JOINT TOTAL YIELD GROWTHOTHER INVESTMENTS LP 1 75,000 75,000 - 150,000 0.0% 5.0% LP 2 15,000 15,000 - 30,000 0.0% 5.0% LP 3 22,500 22,500 - 45,000 0.0% 5.0% LP 4 10,000 10,000 - 20,000 0.0% 5.0% Loans to Life Insurance Trusts** 177,000 177,000 - 354,000 0.0% 2.0% Total of Other Investments 299,500 299,500 - 599,000 0.0% 3.2% ** Growth rate of 2% attached to account for any accrued interest on the promissory notes for insurance premiums.RETIREMENT PLANS/IRAs IRA 845,000 - 845,000 0.0% 6.0% IRA 123,000 - 123,000 0.0% 6.0% IRA 115,000 - 115,000 0.0% 6.0% IRA - 55,000 55,000 0.0% 6.0% Total Retirement Plans 1,083,000 55,000 1,138,000 0.0% 6.0%INVESTMENT REAL ESTATE Rental Home Property 1 750,000 750,000 - 1,500,000 -2.1% 3.0% Rental Home Property 2 750,000 750,000 - 1,500,000 -2.1% 3.0% Total of Real Estate Holdings 1,500,000 1,500,000 - 3,000,000 -2.1% 3.0% Page 47
  49. 49. REVISED NET WORTH STATEMENT (Page 3) ALLEN AND NANCY WILSON ALLEN NANCY JOINT TOTAL YIELD GROWTHRESIDENTIAL REAL ESTATE 123 Main St. 3,000,000 3,000,000 - 6,000,000 0.0% 3.0% Vacation Home 1 1,000,000 - - 1,000,000 0.0% 3.0% Vacation Home 2 750,000 750,000 - 1,500,000 0.0% 3.0% Vacant Land 175,000 175,000 - 350,000 0.0% 3.0% Vacation Home 3 157,500 157,500 - 315,000 0.0% 3.0% Total of Personal Residences 5,082,500 4,082,500 - 9,165,000 0.0% 3.0%PERSONAL PROPERTY Autos 100,000 100,000 - 200,000 0.0% 0.0% Total of Personal Property 100,000 100,000 - 200,000 0.0% 0.0%OTHER STRATEGY ASSETS GDOT Note 21,500,000 21,500,000 - 43,000,000 1.20% QPRT Property - 800,000 - 800,000 Total of Other Strategy Assets 21,500,000 22,300,000 - 43,800,000 1.20%TOTAL ASSETS 31,399,000 29,891,000 - 61,290,000LIABILITIES 123 Main St. 1,750,000 1,750,000 - 3,500,000 Total Liabilities 1,750,000 1,750,000 - 3,500,000COMMERCIAL LIABILITIES Rental Home Property 1 550,000 550,000 - 1,100,000 Rental Home Property 2 600,000 600,000 - 1,200,000 Total Commercial Liabilities 1,150,000 1,150,000 - 2,300,000TOTAL LIABILITIES 2,900,000 2,900,000 - 5,800,000NET WORTH 28,499,000 26,991,000 - 55,490,000 Page 48
  50. 50. FINANCIAL ANALYSIS - PROPOSED PLA ASSET VALUE PROJECTIONS - PROPOSED PLANYEAR Current 2011 2012 2013 2014 2015 2020 2030 2043Asset ValuesCash and cash equivalents 365,000 365,000 365,000 365,000 365,000 365,000 365,000 365,000 365,000Marketable securities - Equities 3,023,000 3,423,718 3,932,677 4,454,239 4,988,564 12,773,190 16,761,650 22,905,872 22,568,131Other investments 1 599,000 720,136 861,375 1,007,172 1,157,673 1,313,032 2,168,343 3,716,588 5,616,423Closely held business 2 - - - - 10,131,848 - - - -PV of future CRT Distributions in S Corp - - - - 18,500,000 17,821,630 12,460,544 3,866,905 -Retirement plans/IRAs 1,138,000 1,188,953 1,300,290 1,418,307 1,543,406 1,676,010 2,242,879 3,051,445 2,849,500Investment real estate 3,000,000 3,014,612 3,105,051 3,198,202 3,294,148 3,392,973 3,933,385 5,286,141 7,762,876Personal residences 9,165,000 9,209,641 9,485,930 9,770,508 10,063,623 10,365,532 12,016,493 16,149,161 23,715,588Residences in QPRTs 3 800,000 803,897 828,014 852,854 878,440 904,793 1,048,903 1,409,638 -Personal property 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000Note from childrens GDOT 43,000,000 40,226,821 37,382,070 33,923,572 - - - - -Total assets in estate 61,290,000 59,152,776 57,460,406 55,189,855 51,122,702 48,812,160 51,197,197 56,950,750 63,077,519Less estimated liabilities (5,800,000) (5,800,000) (5,800,000) (5,800,000) (5,800,000) (5,800,000) (5,800,000) (5,800,000) (5,800,000)Combined net worth $ 55,490,000 $ 53,352,776 $ 51,660,406 $ 49,389,855 $ 45,322,702 $ 43,012,160 $ 45,397,197 $ 51,150,750 $ 57,277,5191 Increased by new promissory notes for annual premiums currently being paid on the ILIT policies.2 GDOT note is paid off in 2014 with ABC interests. It is then assumed that $20M of those interests are contributed to a Charitable Remainder Trust.3 Residence in QPRTs are outside of the taxable estate at the end of the trust term in 2043.In the event that there is a cash flow surplus, the surplus is added to the marketable securities 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 marketable securities. Page 49
  51. 51. TAXABLE INCOME PROJECTIONS - PROPOSED PLANYEAR Current 2011 2012 2013 2014 2015 2020 2030 2043Sources of Taxable IncomeCash and cash equivalents 850 850 850 850 850 850 850 850Marketable securities - Equities 60,460 68,474 78,654 89,085 99,771 320,913 447,418 461,907Capital Gains from sale of ABC 1 - - - - 7,348,634 - - -Retirement plans/IRAs - - - - - - 140,816 253,270Investment real estate (64,000) (64,000) (64,000) (64,000) (64,000) (64,000) (64,000) (64,000)Other taxable earnings - GDOT 2 5,500,000 5,586,849 6,145,534 6,760,088 - - - - 3CRT Income distributed from S Corp - - - - - 1,802,585 1,065,381 -Client earned income 210,000 210,000 214,200 218,484 222,854 - - - -Spouse earned income 81,600 83,232 84,897 86,595 88,326 - - -Social security income - - - - - - 27,613 31,426Gross income $ 5,788,910 $ 5,889,606 $ 6,464,419 $ 7,095,471 $ 7,473,582 $ 2,060,347 $ 1,618,078 $ 683,4531 Assumes the sale of all ABC interests in 2015. The capital gains taxes reflected are on the remaining interests owned personally by Allen & Nancy.2 GDOT note is paid off in 2014 with ABC interests and grantor status is revoked. Trust begins paying income taxes in 2015.3 CRT is funded prior to ABC sale with business interests. CRT begins making annual payments for 20 years in 2016. Page 50
  52. 52. INCOME TAX PROJECTIONS - PROPOSED PLANYEAR Current 2011 2012 2013 2014 2015 2020 2030 2043Income Tax EstimationAdjusted gross income:Dividend income (Marketable Sec.) 60,460 68,474 78,654 89,085 99,771 320,913 447,418 461,907Capital Gains income - - - - 7,348,634 - - -Earned and other income 5,728,450 5,821,131 6,385,765 7,006,386 25,176 1,739,435 1,170,660 221,546Adjusted gross income 5,788,910 5,889,606 6,464,419 7,095,471 7,473,582 2,060,347 1,618,078 683,453DeductionsReal Estate Tax 34,624 35,663 36,733 37,835 38,970 45,176 60,713 89,160State income taxes 549,946 559,513 614,120 674,070 709,990 195,733 153,717 64,928Interest 90,321 93,031 95,822 98,696 101,657 117,848 158,378 232,584Cash charitable gifts 24,152 24,877 25,623 26,392 27,183 31,513 42,351 62,193Charitable Remainder Trust 1 - - - - 2,000,400 - - -Charitable Deduction available 24,152 24,877 25,623 26,392 2,027,583 31,513 42,351 62,193Charitable Deduction allowed 24,152 24,877 25,623 26,392 2,027,583 31,513 42,351 62,193Deduction carried over - - - - - - - -Total deductions 699,043 713,082 772,297 836,992 2,878,200 390,271 415,160 448,865Reductions - - (188,929) (207,860) (219,203) (56,806) (43,538) (15,500)Deductions allowed 699,043 713,082 583,368 629,132 2,658,997 333,464 371,622 433,366Taxable income 5,089,867 5,176,523 5,881,050 6,466,339 4,814,585 1,726,883 1,246,456 250,088Federal and State income tax $ 2,289,179 $ 2,327,472 $ 2,907,083 $ 3,198,807 $ 1,667,147 $ 843,646 $ 611,381 $ 132,6761 One time deduction in 2015 for contribution of $20M in ABC interests to the Charitable Remainder Trust. Page 51
  53. 53. CASH FLOW PROJECTIONS - PROPOSED PLANYEAR Current 2011 2012 2013 2014 2015 2020 2030 2043Sources of Income for LifestyleConsumable income (taxable) 288,910 302,756 318,884 335,383 7,473,582 2,060,347 1,618,078 683,453 1Return of basis from ABC Sale - - - - 2,783,214 - - -Non-taxable Social Security Income - - - - - - 4,873 5,546Distribution from Marketable Securities - - - - - - 361,541 1,452,813 2Note Payment from GDOT 3,289,179 3,327,472 3,907,083 4,198,807 - - - -Total income available for lifestyle 3,578,089 3,630,229 4,225,967 4,534,190 10,256,796 2,060,347 1,984,491 2,141,812Uses of CashLiving expenses 750,000 772,500 795,675 819,545 844,132 978,580 1,315,130 1,931,312Income tax 2,289,179 2,327,472 2,907,083 3,198,807 1,667,147 843,646 611,381 132,676Personally held insurance premiums 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000Cash gifts/loans to ILIT 3 123,630 123,630 123,630 123,630 123,630 123,630 5,630 5,630Cash gifts to charity 24,152 24,877 25,623 26,392 27,183 31,513 42,351 62,193Total uses of cash 3,196,961 3,258,479 3,862,011 4,178,374 2,672,092 1,987,369 1,984,491 2,141,812Surplus $ 381,128 $ 371,750 $ 363,956 $ 355,816 $ 7,584,704 $ 72,979 $ - $ -1 Reflects only the return of basis on the ABC interests still held by Allen & Nancy personally.2 Total payment reflects an assumption that ABC distributes an amount sufficient to pay income tax plus an additional $1M of excess cash.3 We assume that loans are made annually to pay premiums on ILIT policices, we also assume that enough premiums are paid by 2025 to keep the policies in-force and premiums cease.In the event that there is a cash flow surplus, the surplus is added to the marketable securities row on the "Asset Value Projections" 3 pages earlier. Page 52

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