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                                             JONATHAN AND SUSAN GILBERTMaintain our customary lif...
JONATHAN AND SUSAN GILBERTLIFETIME SPENDING  AND LIQUIDITY                                 Page 3
YOUR LIQUID ASSETS - CURRENT PLAN VS. PROPOSED PLAN                                                                  JONAT...
JONATHAN AND SUSAN GILBERTINCOME TAX SAVINGS                                 Page 5
COMPARISON OF INCOME TAX RESULTS - PLAN YEAR 2011                                      JONATHAN AND SUSAN GILBERT         ...
INCOME TAXES PAID - CURRENT VS. PROPOSED                                                           JONATHAN AND SUSAN GILB...
CREATE A CHARITABLE LIFE ESTATE                                                    JONATHAN AND SUSAN GILBERT             ...
DISTRIBUTION OF HOME UPON SECOND DEATH                         JONATHAN AND SUSAN GILBERTUpon the second death, the home w...
BEGIN MAKING ANNUAL CHARITABLE GIFTS                                                   JONATHAN AND SUSAN GILBERT         ...
JONATHAN AND SUSAN GILBERTINCREASE INHERITANCEAND REDUCE ESTATE TAX                                   Page 11
COMPARISON OF PLAN RESULTS - PLAN YEAR 2011                                                 JONATHAN AND SUSAN GILBERT    ...
COMPARISON OF PLAN RESULTS - PLAN YEAR 2011                                                            JONATHAN AND SUSAN ...
COMPARISON OF PLAN RESULTS - PLAN YEAR 2026                                                             JONATHAN AND SUSAN...
COMPARISON OF PLAN RESULTS - PLAN YEAR 2026                                                            JONATHAN AND SUSAN ...
ASSETS PASSING TO YOUR FAMILY - CURRENT VS. PROPOSED                                                              JONATHAN...
ASSETS PASSING TO YOUR FAMILY - CURRENT VS. PROPOSED                                                               JONATHA...
BENEFITS - PLAN YEAR - VALUE OF LIFE INSURANCE                                                          JONATHAN AND SUSAN...
JONATHAN AND SUSAN GILBERT   INCREASE INCHARITABLE GIVING                                 Page 19
COMPARISON OF CHARITY RESULTS - PLAN YEAR 2011                              JONATHAN AND SUSAN GILBERT                    ...
COMPARISON OF CHARITY RESULTS - PLAN YEAR 2026                              JONATHAN AND SUSAN GILBERT                    ...
GIFTING TO CHARITY - EXISTING PLAN VS. PROPOSED PLAN                                                  JONATHAN AND SUSAN G...
PERIODIC TABLE OF ESTATE PLANNING ELEMENTS - CONSIDERED                                                         JONATHAN A...
PERIODIC TABLE OF ESTATE PLANNING ELEMENTS - RECOMMENDED                                                       JONATHAN AN...
ESTATE PLAN OVERVIEW AND ESTATE DISTRIBUTION - 2008                                                             JONATHAN A...
INTRODUCTION TO THE PLAN STRATEGIES ROADMAP                                              JONATHAN AND SUSAN GILBERTThe fol...
HAVE THE MONSTER BIZ SHARES APPRAISED                                                   JONATHAN AND SUSAN GILBERTHire an ...
CREATE GRANTOR DEEMED OWNER TRUST                JONATHAN AND SUSAN GILBERT   Jonathan creates an individual grantor deeme...
SELL MONSTER BIZ SHARES TO THE GDOT                                                   JONATHAN AND SUSAN GILBERT          ...
LOAN TO GRANTOR DEEMED OWNER TRUST                   JONATHAN AND SUSAN GILBERT Jonathan makes a short term loan to the gr...
BENEFICIARIES GUARANTEE GDOT OBLIGATION                      JONATHAN AND SUSAN GILBERT                 The heirs guarante...
PURCHASE LIFE INSURANCE IN THE GDOT                                                  JONATHAN AND SUSAN GILBERT           ...
WHY USE A ONE PAY WITH CATCH UP STRUCTURE FOR PREMIUMSReasons to use a one pay with catch up:1. Allows you to wait and see...
GDOT PURCHASES LIFE INSURANCE FROM LLC 1                                                   JONATHAN AND SUSAN GILBERT     ...
TESTAM              TESTAMENTARY CHARITABLE LEAD ANNUITY TRUST (Part I)                                                   ...
TESTAMENTARY CHARITABLE LEAD ANNUITY TRUST (Part II)                             JONATHAN AND SUSAN GILBERT      At the en...
COST BENEFIT ANALYSIS                                                             JONATHAN AND SUSAN GILBERTAll strategies...
COST BENEFIT ANALYSIS (Continued)Interest (cost of money)  Interest is charged on late tax payments by the IRS at the rate...
DETAILED FINANCIAL ANALYSIS                                  JONATHAN AND SUSAN GILBERT                                INT...
DETAILED FINANCIAL ANALYSIS                                  JONATHAN AND SUSAN GILBERT                  CURRENT PLAN FINA...
CURRENT NET WORTH STATEMENT                                          JONATHAN AND SUSAN GILBERT                           ...
CURRENT NET WORTH STATEMENT (Page 2)                                           JONATHAN AND SUSAN GILBERT                 ...
CURRENT NET WORTH STATEMENT (Page 3)                                           JONATHAN AND SUSAN GILBERT                 ...
SCHEDULE OF LIFE INSURANCE BENEFITS - CURRENT PLAN                                                 JONATHAN AND SUSAN GILB...
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 PLANYEAR                                                        Current                  ...
FIRST ESTATE TAX ESTIMATION AND DISTRIBUTION - EXISTING PLANYEAR                                                       Cur...
SECOND ESTATE TAX ESTIMATION AND DISTRIBUTION - EXISTING PLANYEAR                                                     Curr...
SUMMARY OF BENEFITS TO FAMILY - EXISTING PLANYEAR                                                       Current           ...
DETAILED FINANCIAL ANALYSIS                                   JONATHAN AND SUSAN GILBERT                 PROPOSED PLAN FIN...
NET WORTH STATEMENT AFTER PLAN IMPLEMENTATION                                   JONATHAN AND SUSAN GILBERT                ...
REVISED NET WORTH STATEMENT (Page 2)                                           JONATHAN AND SUSAN GILBERT                 ...
REVISED NET WORTH STATEMENT (Page 3)                                              JONATHAN AND SUSAN GILBERT              ...
FINANCIAL ANALYSIS - PROPOSED PLA                          ASSET VALUE PROJECTIONS - PROPOSED PLANYEAR                    ...
TAXABLE INCOME PROJECTIONS - PROPOSED PLANYEAR                          Current            2011             2012          ...
INCOME TAX PROJECTIONS - PROPOSED PLANYEAR                                   Current            2011             2012     ...
CASH FLOW PROJECTIONS - PROPOSED PLANYEAR                                                   Current                       ...
FIRST ESTATE TAX ESTIMATION AND DISTRIBUTION - PROPOSED PLANYEAR                                                  Current ...
SECOND ESTATE TAX ESTIMATION AND DISTRIBUTION - PROPOSED PLANYEAR                                                 Current ...
SUMMARY OF BENEFITS TO FAMILY - PROPOSED PLANYEAR                                    Current                   2011       ...
CORPORATE RECAPITALIZATION - PROPOSED PLANYEAR                                       Current                2011          ...
Gilbert Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Gilbert Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Gilbert Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Gilbert Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Gilbert Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Gilbert Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Gilbert Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Gilbert Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Gilbert Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Gilbert Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Gilbert Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Gilbert Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Gilbert Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Gilbert Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Gilbert Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Gilbert Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Gilbert Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Upcoming SlideShare
Loading in …5
×

Gilbert Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning

935 views

Published on

Learn more at www.inknowvision.com

  • Be the first to comment

  • Be the first to like this

Gilbert 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: JONATHAN AND SUSAN GILBERT January 1, 2011 PRESENTED BY Scott Hamilton InKnowVisionCopyright InKnowVision, LLC 2011
  3. 3. YOUR GOALS AND OBJECTIVES JONATHAN AND SUSAN GILBERTMaintain our customary lifestyle. This should take about $2,000,000 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 $2,000,000 incash and readily marketable securities.Maximize the inheritance that we leave to our daughters and our grandchildren.Provide for lifetime annual charitable gifts for Cancer Research (or other charitable causes) and a significantcharitable gift at death.Reduce income taxes.Eliminate or reduce estate taxes.Provide asset protection for our estate as well as our children. Page 2
  4. 4. JONATHAN AND SUSAN GILBERTLIFETIME SPENDING AND LIQUIDITY Page 3
  5. 5. YOUR LIQUID ASSETS - CURRENT PLAN VS. PROPOSED PLAN JONATHAN AND SUSAN GILBERT $200,000,000 $180,000,000 $160,000,000 $140,000,000 $120,000,000 $100,000,000 - $80,000,000 $60,000,000 $40,000,000 $20,000,000 $20 000 000 $- Liquid Assets Current Liquid Assets Proposed Total Living ExpensesMost of our clients want to know that they have sufficient income and liquid assets to pay for their living expenses for the rest of their lives. This chart assumes fullimplementation of the proposed plan and shows your liquid assets over your life expectancy compared with liquid assets if you left your current planning in place.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 4
  6. 6. JONATHAN AND SUSAN GILBERTINCOME TAX SAVINGS Page 5
  7. 7. COMPARISON OF INCOME TAX RESULTS - PLAN YEAR 2011 JONATHAN AND SUSAN GILBERT Existing Plan Proposed Plan Income Tax Saved 2011 Estimated Income Tax $ 4,500,000 $ 3,400,000 $ 1,100,000 2012 Estimated Income Tax $ 4,700,000 $ 4,300,000 $ 400,0002 Year Estimated Income Tax Savings $ 1,500,000 Page 6
  8. 8. INCOME TAXES PAID - CURRENT VS. PROPOSED JONATHAN AND SUSAN GILBERT $12,000,000 $10,000,000 $8,000,000 - $6,000,000 $4,000,000 $2,000,000 $- 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Current Plan Proposed PlanThis chart compares the amount of income taxes paid in the current plan as against the proposed plan. Page 7
  9. 9. CREATE A CHARITABLE LIFE ESTATE JONATHAN AND SUSAN GILBERT Jonathan & Susan create a charitable life estate with a DAF or Cancer Research Charity.Assumptions:Value of Property $ 3,500,000Life of Property 40 What am I keeping?Salvage Value $ 350,000 -The right to live in the houseLand Value $ 700,000 -The right to make improvements7520 Rate 3.20% -The right to rent the propertyAge of Donor 76Age of Donor Spouse 74Remainder Interest* $ 1,977,402Potential Tax Savings $ 680,507*(Value of Income Tax Deduction) Page 8
  10. 10. DISTRIBUTION OF HOME UPON SECOND DEATH JONATHAN AND SUSAN GILBERTUpon the second death, the home will be distributed to the DAF or Cancer Research Charity. Page 9
  11. 11. BEGIN MAKING ANNUAL CHARITABLE GIFTS JONATHAN AND SUSAN GILBERT Jonathan & Susan make charitable gifts.Assumptions:Annual Gifts $ 600,000Approx Annual Tax Savings 230,250Amount of gift is for illustration only.Gift is built into liquidity results. Page 10
  12. 12. JONATHAN AND SUSAN GILBERTINCREASE INHERITANCEAND REDUCE ESTATE TAX Page 11
  13. 13. COMPARISON OF PLAN RESULTS - PLAN YEAR 2011 JONATHAN AND SUSAN GILBERT Existing Plan Proposed Plan Advantage Estate Value $ 141,785,579 $ 136,933,458 Heirs Receive Immediately $ 113,798,140 $ 139,786,697 $ 25,988,557 Heirs Receive Benefits from TCLAT $ - $ 74,608,048 $ 74,608,048 Total Benefits to Family $ 113,798,140 $ 214,394,745 $ 100,596,605 Family Charity $ - $ 127,030,966 $ 127,030,966 Estate and Income Tax $ 45,923,753 $ - $ 45,923,753This chart assumes that you both die this year and compares the results of the current plan with the proposed plan. Page 12
  14. 14. COMPARISON OF PLAN RESULTS - PLAN YEAR 2011 JONATHAN AND SUSAN GILBERT CURRENT PLAN PROPOSED PLAN Heirs Estate Tax Charity Heirs Estate Tax Charity Heirs $113,798,140 Heirs $214,394,745 Estate Tax $45,923,753 Estate Tax $0 Charity $0 Charity $127,030,966In the current plan, a portion of the benefit to heirs is qualified plan money. Withdrawals from these plans will be treated as ordinary income. Page 13
  15. 15. COMPARISON OF PLAN RESULTS - PLAN YEAR 2026 JONATHAN AND SUSAN GILBERT Existing Plan Proposed Plan Advantage Estate Value $ 397,435,879 $ 261,714,223 Heirs Receive Immediately $ 199,577,351 $ 192,956,191 $ (6,621,160) Heirs Receive Benefits from TCLAT $ - $ 152,896,387 $ 152,896,387 Total Benefits to Family $ 199,577,351 $ 345,852,577 $ 146,275,226 Family Charity $ - $ 267,377,348 $ 267,377,348 Estate and Income Tax $ 215,276,801 $ - $ 215,276,801 Present Value of total to Heirs $128,101,107 $221,989,609 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 14
  16. 16. COMPARISON OF PLAN RESULTS - PLAN YEAR 2026 JONATHAN AND SUSAN GILBERT CURRENT PLAN PROPOSED PLAN Heirs Estate Tax Charity Heirs Estate Tax Charity Heirs $199,577,351 Heirs $192,956,191 Estate Tax $215,276,801 Estate Tax $0 Charity $0 Charity $267,377,348In the current plan, a portion of the benefit to heirs is qualified plan money. Withdrawals from these plans will be treated as ordinary income. Page 15
  17. 17. ASSETS PASSING TO YOUR FAMILY - CURRENT VS. PROPOSED JONATHAN AND SUSAN GILBERT $360,000,000 $320,000,000 $280,000,000 $240,000,000 - $200,000,000 $160,000,000 $120,000,000 $80,000,000 Current Plan Proposed Plan Proposed Plan w/out Life Ins Proposed Plan w/out TCLATThis 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 proposedplan. Page 16
  18. 18. ASSETS PASSING TO YOUR FAMILY - CURRENT VS. PROPOSED JONATHAN AND SUSAN GILBERT $360,000,000 $320,000,000 $280,000,000 $240,000,000 - $200,000,000 $160,000,000 $120,000,000 $80,000,000 Proposed Plan - Heirs Receive at Death Proposed Plan - Heirs Receive 16 years after death Current Plan Proposed Plan Without TCLATThis chart compares the amount of money passing to your heirs at death in the various plans against a background of assets passing to heirs immediately and assetspassing to heirs at the end of the TCLAT. Page 17
  19. 19. BENEFITS - PLAN YEAR - VALUE OF LIFE INSURANCE JONATHAN AND SUSAN GILBERT With Life Insurance Without Life Insurance Advantage Death Occurs Today - Heirs Receive $ 218,757,960 $ 98,757,960 $ 120,000,000 Death Occurs in 2026 - Heirs Receive $ 345,852,577 $ 327,845,601 $ 18,006,976The benefits are based on certain assumptions. This is for illustration purposes only. Actual insurance numbers can only be determined by applying for insurance. Page 18
  20. 20. JONATHAN AND SUSAN GILBERT INCREASE INCHARITABLE GIVING Page 19
  21. 21. COMPARISON OF CHARITY RESULTS - PLAN YEAR 2011 JONATHAN AND SUSAN GILBERT Existing Plan Proposed Plan Increase in CharityCharity Receives from TCLAT $ - $ 122,800,000 $ 122,800,000 Family Charity $ - $ 127,000,000 $ 127,000,000 Page 20
  22. 22. COMPARISON OF CHARITY RESULTS - PLAN YEAR 2026 JONATHAN AND SUSAN GILBERT Existing Plan Proposed Plan Increase in CharityCharity Receives from TCLAT $ - $ 251,700,000 $ 251,700,000 Family Charity $ - $ 267,400,000 $ 267,400,000 Page 21
  23. 23. GIFTING TO CHARITY - EXISTING PLAN VS. PROPOSED PLAN JONATHAN AND SUSAN GILBERT$280,000,000$240,000,000$200,000,000$160,000,000 -$120,000,000 $80,000,000 $40,000,000 $- Current Plan Charity Proposed Plan Charity This chart compares the amount of your gifts to charity in the current plan as against the proposed plan. Page 22
  24. 24. PERIODIC TABLE OF ESTATE PLANNING ELEMENTS - CONSIDERED JONATHAN AND SUSAN GILBERTIn our planning process, we start with the universe of available planning tools. While this universe is constantly changing, the following chart outlinesmany of the available tools. We examine each of these strategies and discard those that are not suitable for meeting your goals and objectives. Charitable Family Limited Charitable Lead Remainder Uni- 412(i) Private Annuity GDOT SCIN Partnership Annuity Trust Trust Qualified Personal Sale for Installment Series Limited GDOT Owned Life Family LLC TCLAT Flip CRT Residence Trust Note Liability Company Insurance Preferred Limited Long Term Care Sell 60% Monster Premium Finance 529 Plans Gifting ILIT partnership Insurance Biz Stock to GDOT Charitable Life Walton GRAT Private Foundations NIMCRUT Annuity Withdrawal Asset Protection SPIA/Life Arbitrage Estate New Annual Revocable Living GDOT Purchases SPIA/Life in a Lifetime Gifts to Trusts, DPAs and Crummey Powers Dynasty Trust Life Insurance GDOT CLAT Charity of $600,000 POAs Policy From LLC 1 Supporting Short-Term Loan to IRA Maximizer Gift Annuity Remainder Sales Life Estates LLC/CRTs Organizations GDOT Charitable Defined Benefit Qualified Plan Bargain Sales Succession Planning Risk Management Remainder Annuity ESOP Planning Plans Limited Partnership Trust Page 23
  25. 25. PERIODIC TABLE OF ESTATE PLANNING ELEMENTS - RECOMMENDED JONATHAN AND SUSAN GILBERTThe highlighted tools are those we have determined are most suited to achieving your goals and objectives. Charitable Family Limited Charitable Lead Remainder Uni- 412(i) Private Annuity GDOT SCIN Partnership Annuity Trust Trust Qualified Personal Sale for Installment Series Limited GDOT Owned Life Family LLC TCLAT Flip CRT Residence Trust Note Liability Company Insurance Preferred Limited Long Term Care Sell 60% Monster Premium Finance 529 Plans Gifting ILIT partnership Insurance Biz Stock to GDOT Charitable Life Walton GRAT Private Foundations NIMCRUT Annuity Withdrawal Asset Protection SPIA/Life Arbitrage Estate New Annual Revocable Living GDOT Purchases SPIA/Life in a Lifetime Gifts to Trusts, DPAs and Crummey Powers Dynasty Trust Life Insurance GDOT CLAT Charity of $600,000 POAs Policy From LLC 1 Supporting Short-Term Loan to IRA Maximizer Gift Annuity Remainder Sales Life Estates LLC/CRTs Organizations GDOT Charitable Defined Benefit Qualified Plan Bargain Sales Succession Planning Risk Management Remainder Annuity ESOP Planning Plans Limited Partnership TrustGreen equals a new Blue equals a social Yellow equals an planning tool for capital or charitable existing planning family tool tool Page 24
  26. 26. ESTATE PLAN OVERVIEW AND ESTATE DISTRIBUTION - 2008 JONATHAN AND SUSAN GILBERT Gifts to ILIT NET WORTH 129,801,661 EXISTING ILIT LIFE ESTATE Short term loan to GDOT 1,055,324 3,500,000 INSURANCE Sell Monster Biz Shares to GDOT 15,000,000 GDOT Installment note Owns Monster Biz GDOT Purchases Life Insurance from LLC 1 Stock INSURANCE GDOT Purchases New Life Insurance 120,000,000First Death FAMILY TRUST / SUSAN MARITAL TRUST / SUSAN SUSAN ADMIN irst 4,235,543 119 736 945 119,736,945 745,348 745 348 651,848Second Death TCLAT ADMIN Heirs From HEIRS TCLAT 115,904,584 1,274,143 218,757,960 FAMILY CHARITY 120,004,584 Page25
  27. 27. INTRODUCTION TO THE PLAN STRATEGIES ROADMAP JONATHAN AND SUSAN GILBERTThe 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 mustcomplete another strategy as well. It is the integration of each of these strategies that allows you to most efficientlyaccomplish 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 transferplanning. If a particular strategy or combination of strategies is not acceptable to you, we may be able to reach thedesired 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 notdetailed in the overall plan that follows. Page 26
  28. 28. HAVE THE MONSTER BIZ SHARES APPRAISED JONATHAN AND SUSAN GILBERTHire an appraiser to value 6.12% of the Monster Biz shares. The appraiser will value the shares taking all of the following into account: ▪ Liquidity of the shares ▪ Transferability of the shares ▪ Degree of control that accompanies ownership of the shares ▪ The assets owned by the corporation AppraisalThe assumed value of the Monster Biz stock is for illustration purposes only.Note: Business appraisal is not an exact science. The IRS does not like valuation adjustments.A well regarded appraiser should be retained to value the interests being sold. Page 27
  29. 29. CREATE GRANTOR DEEMED OWNER TRUST JONATHAN AND SUSAN GILBERT Jonathan creates an individual grantor deemed owner trust (GDOT). Page 28
  30. 30. SELL MONSTER BIZ SHARES TO THE GDOT JONATHAN AND SUSAN GILBERT Jonathan sells 60% of his Monster Biz stock to the GDOT for an installment note. Sells his Monster Biz stock worth $42,165,000 An installment note worth $42,165,000 that provides annual payments of $1,880,559The sale price is based on the assumed value of the assetssold.*Note payments are interest only at 4.46%. Page 29
  31. 31. LOAN TO GRANTOR DEEMED OWNER TRUST JONATHAN AND SUSAN GILBERT Jonathan makes a short term loan to the grantor deemed owner trust (GDOT). Page 30
  32. 32. BENEFICIARIES GUARANTEE GDOT OBLIGATION JONATHAN AND SUSAN GILBERT The heirs guarantee the obligation of the GDOT. Installment note Beneficiaries of th GDOT ( others) B fi i i f the (or th ) guarantee a portion of the GDOT obligation. Page 31
  33. 33. PURCHASE LIFE INSURANCE IN THE GDOT JONATHAN AND SUSAN GILBERT The GDOT Trustees purchase second-to-die life insurance with the assets of the GDOT.Premium Payment DetailsPremium in the amount of $13,440,000 is paid in the first year with assets of theGDOT. No premium payments are made for 10 years, then beginning in year 11,premiums in the amount of $9,363,183 are paid annually thereafter.The premium is based on certain assumptions. This is for illustration purposesonly. Actual insurance numbers can only be determined by applying forinsurance. Page 32
  34. 34. WHY USE A ONE PAY WITH CATCH UP STRUCTURE FOR PREMIUMSReasons to use a one pay with catch up:1. Allows you to wait and see what will happen with the estate tax.2. You may decide to keep all of the death benefit or you might keep the policy but reduce the death benefit. Clients in theirlate 70s and 80s can consider selling the policy if they decide they do not want to keep it.3. Better economics. Allows you to keep the “unpaid” premium dollars and invest as you normally would. You will usually bebetter off than with level premiums.4. Relatively small commitment compared to death benefit. Usually less than the equivalent of two normal premiums.5. Works nicely with a TCLAT. Allows you to zero out the tax and give money to your kids. Keep in mind that your kids couldbe in their 70s or 80s before they inherit any money from the TCLAT.6. Policy is guaranteed (if required first year and catch up premiums are paid).7. People often lose guarantees because they pay premiums late. Because there are no premiums to pay until the catch-uppremiums begin, there is no need to worry about losing guarantees during this time period.8. Less administration and headache. Because you pay only one premium now, you only need to send Crummey notices thisyear. Then none until premiums start up again. Page 33
  35. 35. GDOT PURCHASES LIFE INSURANCE FROM LLC 1 JONATHAN AND SUSAN GILBERT The GDOT Trustees purchase insurance policies from LLC 1 GDOT purchases insurance policies from LLC 1 for a note issued by the GDOT to LLC 1.The GDOT will issue a mid term note to LLC 1 collateralized by the policy.This reduces the value of LLC 1 over time and shifts assets to your daughters. Page 34
  36. 36. TESTAM TESTAMENTARY CHARITABLE LEAD ANNUITY TRUST (Part I) JONATHAN AND SUSAN GILBERT Include language in your trust or Will that creates a testamentary charitable lead trust (TCLAT) at the second death. TCLAT AssumptionsAsset growth rate 8.00%TCLAT payout rate 8.08%Present value discount rate 3.00%Assumed date of death 2011 Page 35
  37. 37. TESTAMENTARY CHARITABLE LEAD ANNUITY TRUST (Part II) JONATHAN AND SUSAN GILBERT At the end of the TCLAT term, your heirs will receive all of the remaining trust assets. Page 36
  38. 38. COST BENEFIT ANALYSIS JONATHAN AND SUSAN GILBERTAll strategies have an element of risk; a chance that the program adopted does not work as planned. Estate planning strategies carry an element of risk aswell. Many advisors warn their clients of risk but do not make an effort to quantify those risks. We have taken the position in our planning that if a risk isquantifiable, it should be identified as such and the cost of the risk should be disclosed to our client. When the risk is not quantifiable, this should also bedisclosed.Any risk analysis begins with two questions: What is the reward to be gained by taking the risk? What is the cost of the potential loss if the plan fails totally? If you are satisfied that the reward is worth the risk and that the risk of loss is acceptable, it would then make sense to pursue the strategy. If the risk is such that you could not comfortably accept the loss, then the risk should not be taken.Is the reward worth the risk?The reward of the proposed plan results in an advantage to your heirs today of $100,596,605 over your existing plan.The reward of the proposed plan results in an advantage to your heirs at life expectancy of $146,275,226 over your existing plan.What if the Plan fails totally?There are 4 basic areas of potential risk involved in this comprehensive plan. We assume total failure of all planning techniques in order to provide a worstcase analysis. Transaction costs Attorneys Fees 200,000 Valuation Fees 15,000 Total $ 215,000 Annual Maintenance Fee $ 15,000 Taxes This represents the taxes that will have to be paid if the plan fails entirely. Note that this is the same amount that would be paid without the planning. Total additional tax over current plan = $0 Page 37
  39. 39. COST BENEFIT ANALYSIS (Continued)Interest (cost of money) Interest is charged on late tax payments by the IRS at the rate of the applicable federal rate plus 3%. You must invest at a rate less than this rate to lose money. Assuming that assets earn in excess of that rate, there should be no risk of loss due to cost of money. Nonetheless, we assume that assets actually earn 2% less than the IRS interest rates, and the risk of loss would be $835,828.Penalties Assuming the plan is implemented with the help of knowledgeable advisors, the only potential penalty is for substantial undervaluation. The penalty comes into play in the case of a challenge to asset valuation. If the value reported for a transaction is less than 65% of the value as finally determined for tax purposes (by the IRS or the courts) then there is a 25% substantial undervaluation penalty. The valuation adjustment assumed in this plan is 0.00%. Therefore, an adjustment should not result in a substantial undervaluation penalty. Risk Analysis $160,000,000 $140,000,000 $120 000 000 $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 $- Benefit to Heirs 2011 Benefit to Heirs 2026 Potential Loss (Total Failure) Page 38
  40. 40. DETAILED FINANCIAL ANALYSIS JONATHAN AND SUSAN GILBERT INTRODUCTIONThe following section of the plan contains all of the financial analysis used to show you where you standwith 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. Ifnumbers 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 39
  41. 41. DETAILED FINANCIAL ANALYSIS JONATHAN AND SUSAN GILBERT CURRENT PLAN FINANCIALSIn the Current Plan Section you will find a Net Worth Statement and a detailed cash flow and asset valueprojection analysis. Page 40
  42. 42. CURRENT NET WORTH STATEMENT JONATHAN AND SUSAN GILBERT JONATHAN SUSAN JOINT TOTAL YIELD GROWTHCASH AND EQUIVALENTS Private Bank 536,343 - - 536,343 2.0% 0.0% Private Bank CD 15,000,000 2,400,000 - 17,400,000 5.5% 0.0% Private Bank MMF 5,304,042 583,353 - 5,887,395 3.0% 0.0% National City - 23,997 - 23,997 2.0% 0.0% Bank of America MMF 100,686 - - 100,686 2.0% 0.0% Bank of America 31,425 - - 31,425 2.0% 0.0% Bank of America 320,235 - - 320,235 2.0% 0.0% LLC 1 - 3,756 - 3,756 2.0% 0.0% LLC 2 - 3,054 - 3,054 2.0% 0.0% LLC 3 - 3,507 - 3,507 2.0% 0.0% LLC 4 - 5,556 - 5,556 2.0% 0.0% Cash on Hand - - 25,500 25,500 2.0% 0.0% Total of Cash and Equivalents 21,292,731 3,023,223 25,500 24,341,454 4.7% 0.0% Page 41
  43. 43. CURRENT NET WORTH STATEMENT (Page 2) JONATHAN AND SUSAN GILBERT JONATHAN SUSAN JOINT TOTAL YIELD GROWTHOTHER INVESTMENTS Note 1 1,059,000 - - 1,059,000 5.0% 5.0% Note 2 893,352 - - 893,352 0.0% 10.0% Total of Other Investments 1,952,352 - - 1,952,352 2.7% 7.3%CLOSELY HELD BUSINESS Monster Biz (10.2%) 70,275,000 - - 70,275,000 13.0% 3.0% Total Closely Held Business 70,275,000 - - 70,275,000 13.0% 3.0%INVESTMENT REAL ESTATE LLC 1 3,900,000 - - 3,900,000 2.4% 4.0% LLC 2 4,647,000 - - 4,647,000 8.4% 4.0% LLC 3 6,000,000 - - 6,000,000 0.0% 4.0% LLC 4 19,800,000 - - 19,800,000 4.6% 4.0% LLC 5 13,926,000 - - 13,926,000 4.3% 4.0% LLC 6 11,010,000 - - 11,010,000 3.3% 4.0% LLC 7 13,500,000 - - 13,500,000 1.6% 4.0% LLC 8 2,400,000 - - 2,400,000 0.0% 4.0% LLC 9 3,000,000 - - 3,000,000 4.0% 4.0% Total of Real Estate Holdings 78,183,000 - - 78,183,000 3.4% 4.0% Page 42
  44. 44. CURRENT NET WORTH STATEMENT (Page 3) JONATHAN AND SUSAN GILBERT JONATHAN SUSAN JOINT TOTAL YIELD GROWTHRESIDENTIAL REAL ESTATE 12345 Main St - 3,500,000 - 3,500,000 0.0% 3.0% Florida Condo 3,500,000 - - 3,500,000 0.0% 3.0% Total of Personal Residences 3,500,000 3,500,000 - 7,000,000 0.0% 3.0%PERSONAL PROPERTY Personal Property - - 1,500,000 1,500,000 0.0% 0.0% Total of Personal Property - - 1,500,000 1,500,000 0.0% 0.0%TOTAL ASSETS 175,203,083 6,523,223 1,525,500 183,251,806LIABILITIES 12345 Main St - 686,001 - 686,001 LLC 1 3,113,664 - - 3,113,664 LLC 2 15,641,955 - - 15,641,955 LLC 3 10,427,970 - - 10,427,970 LLC 4 8,689,974 - - 8,689,974 LLC 5 10,315,581 - - 10,315,581 LLC 6 - - 75,000 75,000 LLC 7 2,250,000 2,250,000 - 4,500,000 Total Liabilities 50,439,144 2,936,001 75,000 53,450,145TOTAL LIABILITIES 50,439,144 2,936,001 75,000 53,450,145NET WORTH 124,763,939 3,587,222 1,450,500 129,801,661 Page 43
  45. 45. SCHEDULE OF LIFE INSURANCE BENEFITS - CURRENT PLAN JONATHAN AND SUSAN GILBERT COMPANY INSURED POLICY # BENEFICIARY PREMIUM CASH VALUE DEATH BENEFITPolicies owned by LLC 1John Hancock Jonathan & Susan 1234567 LLC 1 240,330 482,209 10,000,000Metlife Jonathan & Susan 2345678 LLC 1 108,968 197,729 5,000,000 Totals 349,298 679,938 15,000,000Policies owned by ILITAXA Jonathan 3456789 ILIT DTD 03/12/1996 20,251 103,349 1,055,324 Totals 20,251 103,349 1,055,324 Page 44
  46. 46. FINANCIAL ANALYSIS - EXISTING PLAN ASSET VALUE PROJECTIONS - EXISTING PLANYEAR Current 2011 2012 2013 2014 2018 2023 2026Asset ValuesCash and cash equivalents 24,341,454 30,753,104 37,571,662 44,118,551 51,058,392 83,130,976 134,542,064 172,557,606Other investments 1,059,000 1,111,801 1,167,391 1,225,761 1,287,049 1,564,416 1,996,636 2,311,355Closely held business 70,275,000 72,377,388 74,548,710 76,785,171 79,088,727 89,015,058 103,192,850 112,761,613Note 2 1 893,352 982,431 1,080,674 1,188,741 1,307,615 1,914,479 3,083,288 4,103,857Investment real estate 78,183,000 81,301,583 84,553,647 87,935,793 91,453,224 106,987,337 130,166,454 146,419,559Personal residences 7,000,000 7,209,416 7,425,699 7,648,470 7,877,924 8,866,672 10,278,904 11,232,035Personal property 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000Total assets in estate 183,251,806 195,235,724 207,847,783 220,402,486 233,572,930 292,978,940 384,760,196 450,886,024Less estimated liabilities (53,450,145) (53,450,145) (53,450,145) (53,450,145) (53,450,145) (53,450,145) (53,450,145) (53,450,145)Combined net worth $ 129,801,661 $ 141,785,579 $ 154,397,638 $ 166,952,341 $ 180,122,785 $ 239,528,795 $ 331,310,051 $ 397,435,8791 Were assuming the note will not be paid off, and it will continue accruing at 10%. Our assumption is that the 10% interest is taxable.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 45
  47. 47. TAXABLE INCOME PROJECTIONS - EXISTING PLANYEAR Current 2011 2012 2013 2014 2018 2023 2026Sources of taxable incomeCash and cash equivalents 1,154,703 1,458,857 1,782,314 2,092,883 3,530,573 5,840,892 7,554,666Other investments 52,950 55,590 58,370 61,288 74,496 95,078 110,065Closely held business 9,135,750 9,409,060 9,691,332 9,982,072 11,234,910 13,024,340 14,232,048Investment real estate 2,692,896 2,800,311 2,912,323 3,028,816 3,543,287 4,310,950 4,849,232Social security income 17,856 18,213 18,577 18,949 20,511 22,646 24,032Pension income 48,000 48,000 48,000 48,000 48,000 48,000 48,000Gross income $ 13,102,155 $ 13,790,032 $ 14,510,917 $ 15,232,009 $ 18,451,777 $ 23,341,905 $ 26,818,043 Page 46
  48. 48. INCOME TAX PROJECTIONS - EXISTING PLANYEAR Current 2011 2012 2013 2014 2018 2023 2026Income tax EstimationAdjusted gross income:Earned and other income 13,102,155 13,790,032 14,510,917 15,232,009 18,451,777 23,341,905 26,818,043 Adjusted gross income 13,102,155 13,790,032 14,510,917 15,232,009 18,451,777 23,341,905 26,818,043DeductionsReal estate tax 50,956 50,956 51,975 53,015 54,075 58,532 64,625 68,580Interest 25,000 25,000 25,500 26,010 26,530 28,717 31,706 33,647Charitable gifts 57,250 57,250 58,395 59,563 60,754 65,762 72,607 77,051Charitable Deduction available 57,250 58,395 59,563 60,754 65,762 72,607 77,051Charitable Deduction allowed 57,250 58,395 59,563 60,754 65,762 72,607 77,051Total deductions 133,206 135,870 138,588 141,359 153,012 168,937 179,278Reductions - - (110,870) (113,087) (122,409) (135,150) (143,422)Deductions allowed 133,206 135,870 27,718 28,272 30,602 33,787 35,856Taxable income 12,968,949 13,654,162 14,483,199 15,203,737 18,421,174 23,308,118 26,782,188Federal and State income tax $ 4,509,004 $ 4,748,828 $ 5,699,414 $ 5,984,747 $ 7,258,852 $ 9,194,082 $ 10,569,813 Page 47
  49. 49. CASH FLOW PROJECTIONS - EXISTING PLANYEAR Current 2011 2012 2013 2014 2018 2023 2026Sources of income for LifestyleDepreciation Add Back 52,000 52,000 52,000 52,000 52,000 52,000 -Consumable income (taxable) 13,102,155 13,790,032 14,510,917 15,232,009 18,451,777 23,341,905 26,818,043Total income available for lifestyle 13,154,155 13,842,032 14,562,917 15,284,009 18,503,777 23,393,905 26,818,043Uses of CashLiving expenses 2,000,000 2,040,000 2,080,800 2,122,416 2,297,371 2,536,484 2,691,737Income tax 4,509,004 4,748,828 5,699,414 5,984,747 7,258,852 9,194,082 10,569,813Cash gifts to ILIT 20,251 20,251 20,251 20,251 20,251 20,251 20,251Cash gifts to family 156,000 156,000 156,000 156,000 156,000 156,000 156,000Cash gifts to charity 57,250 58,395 59,563 60,754 65,762 72,607 77,051Total uses of cash 6,742,505 7,023,474 8,016,028 8,344,168 9,798,237 11,979,423 13,514,852Surplus $ 6,411,650 $ 6,818,558 $ 6,546,889 $ 6,939,841 $ 8,705,540 $ 11,414,482 $ 13,303,191In 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 in marketable securities rowon the "Asset Value Projections" 3 pages earlier. Page 48
  50. 50. FIRST ESTATE TAX ESTIMATION AND DISTRIBUTION - EXISTING PLANYEAR Current 2011 2012 2013 2014 2018 2023 2026Tax calculation on Jonathans deathCombined net worth 129,801,661 141,785,579 154,397,638 166,952,341 180,122,785 239,528,795 331,310,051 397,435,879Jonathans estimated estate 125,489,189 137,074,959 149,268,000 161,405,592 174,138,467 231,570,798 320,302,754 384,231,648Total gross estate 125,489,189 137,074,959 149,268,000 161,405,592 174,138,467 231,570,798 320,302,754 384,231,648Settlement expenses (652,446) (710,375) (771,340) (832,028) (895,692) (1,182,854) (1,626,514) (1,946,158)Joint, personal and IRA to Susan (725,250) (792,209) (862,677) (932,825) (1,006,413) (1,338,336) (1,851,152) (2,220,622)Outright or in trust to Susan (119,875,950) (131,336,833) (143,398,440) (159,405,196) (172,000,819) (228,814,065) (316,589,546) (379,829,325)Taxable estate 4,235,543 4,235,543 4,235,543 235,543 235,543 235,543 235,543 235,543Plus Jonathans lifetime taxable gifts 764,457 764,457 764,457 764,457 764,457 764,457 764,457 764,457Tax base 5,000,000 5,000,000 5,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000Federal Estate Tax - - - - - - - -Distribution of Jonathans estateSettlement expenses 652,446 710,375 771,340 832,028 895,692 1,182,854 1,626,514 1,946,158To family trust 4,235,543 4,235,543 4,235,543 235,543 235,543 235,543 235,543 235,543Joint, personal and IRA to Susan 725,250 792,209 862,677 932,825 1,006,413 1,338,336 1,851,152 2,220,622Outright or in trust to Susan 119,875,950 131,336,833 143,398,440 159,405,196 172,000,819 228,814,065 316,589,546 379,829,325Total $ 125,489,189 $ 137,074,959 $ 149,268,000 $ 161,405,592 $ 174,138,467 $ 231,570,798 $ 320,302,754 $ 384,231,648AssumptionsWe assume that Jonathan dies first, followed immediately by Susan.Taxes under "Distribution of First Estate" include estate and income taxes. Page 49
  51. 51. SECOND ESTATE TAX ESTIMATION AND DISTRIBUTION - EXISTING PLANYEAR Current 2011 2012 2013 2014 2018 2023 2026Tax Calculation on Susans deathSusans assets 4,312,472 4,710,620 5,129,638 5,546,749 5,984,318 7,957,997 11,007,296 13,204,231Plus assets from Jonathans estate 120,601,200 132,129,041 144,261,117 160,338,021 173,007,231 230,152,401 318,440,698 382,049,947Susans estimated estate 124,913,672 136,839,661 149,390,755 165,884,770 178,991,550 238,110,398 329,447,994 395,254,178Settlement expenses (1,274,137) (1,393,397) (1,518,908) (1,683,848) (1,814,915) (2,406,104) (3,319,480) (3,977,542)Susans taxable estate 123,639,535 135,446,265 147,871,847 164,200,923 177,176,634 235,704,294 326,128,514 391,276,636Plus Susans lifetime taxable gifts 764,457 764,457 764,457 764,457 764,457 764,457 764,457 764,457Tax base 124,403,992 136,210,722 148,636,304 164,965,380 177,941,091 236,468,751 326,892,971 392,041,093Federal Estate Tax 41,791,397 45,923,753 50,272,706 90,385,159 97,521,800 129,712,013 179,445,334 215,276,801Total Estate Tax Due 41,791,397 45,923,753 50,272,706 90,385,159 97,521,800 129,712,013 179,445,334 215,276,801Distribution of Susans estateSettlement expenses 1,274,137 1,393,397 1,518,908 1,683,848 1,814,915 2,406,104 3,319,480 3,977,542Taxes 41,791,397 45,923,753 50,272,706 90,385,159 97,521,800 129,712,013 179,445,334 215,276,801Residual estate to heirs 81,848,138 89,522,512 97,599,141 73,815,764 79,654,834 105,992,281 146,683,180 175,999,835Total $ 124,913,672 $ 136,839,661 $ 149,390,755 $ 165,884,770 $ 178,991,550 $ 238,110,398 $ 329,447,994 $ 395,254,178AssumptionsWe assume that Jonathan dies first, followed immediately by Susan.Taxes under "Distribution of Second Estate" include estate and income taxes. Page 50
  52. 52. SUMMARY OF BENEFITS TO FAMILY - EXISTING PLANYEAR Current 2011 2012 2013 2014 2018 2023 2026Benefits to FamilyFamily trust 4,235,543 4,235,543 4,235,543 235,543 235,543 235,543 235,543 235,543Residual estate 81,848,138 89,522,512 97,599,141 73,815,764 79,654,834 105,992,281 146,683,180 175,999,835Grandchildrens Trust 378,010 396,857 416,700 437,535 459,412 558,418 712,699 825,038LLC 1 (Insurance Policies) 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000LLC 1 (Other)1 3,449,907 3,587,903 3,731,419 3,880,676 4,035,903 4,721,436 5,744,349 6,461,611Proceeds from ILIT 1,055,324 1,055,324 1,055,324 1,055,324 1,055,324 1,055,324 1,055,324 1,055,324Total assets to heirs $ 105,966,922 $ 113,798,140 $ 122,038,127 $ 94,424,842 $ 100,441,016 $ 127,563,002 $ 169,431,095 $ 199,577,3511 LLC 1: 34567 Main St, Fairview Heights, IL $4,000,000 ($7.5 M value, debt of $3.5M) John Hancock 2nd to die policy 1234567 $15,000,000 (death benefit) Debt owed to Jonathan -$353,000 Private Bank Accounts $475,539 Page 51
  53. 53. DETAILED FINANCIAL ANALYSIS JONATHAN AND SUSAN GILBERT PROPOSED PLAN FINANCIALSIn the Proposed Plan Section you will find a balance sheet which reflects the repositioning of assets as setout in the step by step roadmap in the proceeding section. You will also find detailed cash flow and assetprojection information on each of the proposed planning strategies. Page 52
  54. 54. NET WORTH STATEMENT AFTER PLAN IMPLEMENTATION JONATHAN AND SUSAN GILBERT JONATHAN SUSAN JOINT TOTAL YIELD GROWTHCASH AND EQUIVALENTS Private Bank 536,343 - - 536,343 2.0% 0.0% Private Bank CD 15,000,000 2,400,000 - 17,400,000 5.5% 0.0% Private Bank MMF 5,304,042 583,353 - 5,887,395 3.0% 0.0% National City - 23,997 - 23,997 2.0% 0.0% Bank of America MMF 100,686 - - 100,686 2.0% 0.0% Bank of America 31,425 - - 31,425 2.0% 0.0% Bank of America 320,235 - - 320,235 2.0% 0.0% LLC 1 - 3,756 - 3,756 2.0% 0.0% LLC 2 - 3,054 - 3,054 2.0% 0.0% LLC 3 - 3,507 - 3,507 2.0% 0.0% LLC 4 - 5,556 - 5,556 2.0% 0.0% Cash on Hand - - 25,500 25,500 2.0% 0.0% Total o Cas a d Equivalents ota of Cash and qu va e ts 21,292,731 , 9 ,73 3,0 3, 3 3,023,223 25,500 5,500 24,341,454 ,3 , 5 4.7% .7% 0.0% Page 53
  55. 55. REVISED NET WORTH STATEMENT (Page 2) JONATHAN AND SUSAN GILBERT JONATHAN SUSAN JOINT TOTAL YIELD GROWTHOTHER INVESTMENTS Note 1 1,059,000 - - 1,059,000 5.0% 5.0% Note 2 893,352 - - 893,352 0.0% 10.0% Total of Other Investments 1,952,352 - - 1,952,352 2.7% 7.3%CLOSELY HELD BUSINESS Monster Biz (10.2%) 28,110,000 - - 28,110,000 13.0% 3.0% Total Closely Held Business 28,110,000 - - 28,110,000 13.0% 3.0%INVESTMENT REAL ESTATE LLC 1 3,900,000 - - 3,900,000 2.4% 4.0% LLC 2 4,647,000 - - 4,647,000 8.4% 4.0% LLC 3 6,000,000 - - 6,000,000 0.0% 4.0% LLC 4 19,800,000 - - 19,800,000 4.6% 4.0% LLC 5 13,926,000 - - 13,926,000 4.3% 4.0% LLC 6 11,010,000 - - 11,010,000 3.3% 4.0% LLC 7 13,500,000 - - 13,500,000 1.6% 4.0% LLC 8 2,400,000 - - 2,400,000 0.0% 4.0% LLC 9 3,000,000 - - 3,000,000 4.0% 4.0% Total of Real Estate Holdings 78,183,000 - - 78,183,000 3.4% 4.0% Page 54
  56. 56. REVISED NET WORTH STATEMENT (Page 3) JONATHAN AND SUSAN GILBERT JONATHAN SUSAN JOINT TOTAL YIELD GROWTHRESIDENTIAL REAL ESTATE 12345 Main St - 3,500,000 - 3,500,000 0.0% 3.0% Total of Personal Residences - 3,500,000 - 3,500,000 0.0% 3.0%PERSONAL PROPERTY Personal Property - - 1,500,000 1,500,000 0.0% 0.0% Total of Personal Property - - 1,500,000 1,500,000 0.0% 0.0%OTHER STRATEGY ASSETS GDOT Note 42,165,000 - - 42,165,000 4.46% Total of Other Strategy Assets 42,165,000 - - 42,165,000 4.46%TOTAL ASSETS 171,703,083 6,523,223 1,525,500 179,751,806LIABILITIES 12345 Main St - 686,001 - 686,001 LLC 1 3,113,664 - - 3,113,664 LLC 2 15,641,955 - - 15,641,955 LLC 3 10,427,970 - - 10,427,970 LLC 4 8,689,974 - - 8,689,974 LLC 5 10,315,581 - - 10,315,581 LLC 6 - - 75,000 75,000 LLC 7 2,250,000 2,250,000 - 4,500,000 Total Liabilities 50,439,144 2,936,001 75,000 53,450,145TOTAL LIABILITIES 50,439,144 2,936,001 75,000 53,450,145NET WORTH 121,263,939 3,587,222 1,450,500 126,301,661 Page 55
  57. 57. FINANCIAL ANALYSIS - PROPOSED PLA ASSET VALUE PROJECTIONS - PROPOSED PLANYEAR Current 2011 2012 2013 2014 2018 2023 2026Asset ValuesCash and cash equivalents 13,091,454 15,912,416 18,454,642 20,350,452 22,297,614 41,946,149 58,764,580 67,327,917Other investments 1,059,000 1,111,801 1,167,391 1,225,761 1,287,049 1,564,416 1,996,636 2,311,355Closely held business 28,110,000 28,950,955 29,819,484 30,714,069 31,635,491 35,606,023 41,277,140 45,104,645Note 2 1 893,352 982,431 1,080,674 1,188,741 1,307,615 1,914,479 3,083,288 4,103,857Loan to the GDOT 11,250,000 11,250,000 11,250,000 11,250,000 11,250,000 - - -Investment real estate 78,183,000 81,301,583 84,553,647 87,935,793 91,453,224 106,987,337 130,166,454 146,419,559Personal residences 3,500,000 3,604,708 3,712,849 3,824,235 3,938,962 4,433,336 5,139,452 5,616,018Residences in charitable life estate 3,500,000 3,604,708 3,712,849 3,824,235 3,938,962 4,433,336 5,139,452 5,616,018Personal property 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000Note from childrens GDOT 42,165,000 42,165,000 42,165,000 42,165,000 42,165,000 42,165,000 37,165,000 37,165,000Total assets in estate 183,251,806 190,383,603 197,416,536 203,978,285 210,773,916 240,550,077 284,232,002 315,164,368Less estimated liabilities (53,450,145) (53,450,145) (53,450,145) (53,450,145) (53,450,145) (53,450,145) (53,450,145) (53,450,145)Combined net worth $ 129,801,661 $ 136,933,458 $ 143,966,391 $ 150,528,140 $ 157,323,771 $ 187,099,932 $ 230,781,857 $ 261,714,2231 Were assuming the note will not be paid off, and it will continue accruing at 10%. Our assumption is that the 10% interest is taxable.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 56
  58. 58. TAXABLE INCOME PROJECTIONS - PROPOSED PLANYEAR Current 2011 2012 2013 2014 2018 2023 2026Sources of Taxable IncomeCash and cash equivalents 621,029 754,849 875,446 965,379 1,885,341 2,436,646 3,052,715Other investments 52,950 55,590 58,370 61,288 74,496 95,078 110,065Closely held business 3,654,300 3,763,624 3,876,533 3,992,829 4,493,964 5,209,736 5,692,819Investment real estate 2,692,896 2,800,311 2,912,323 3,028,816 3,543,287 4,310,950 4,849,232Other taxable earnings-GDOT 5,481,450 5,670,718 5,902,963 6,148,077 7,040,483 8,410,579 8,940,761Social security income 17,856 18,213 18,577 18,949 20,511 22,646 24,032Pension income 48,000 48,000 48,000 48,000 48,000 48,000 48,000Gross income $ 12,568,481 $ 13,111,305 $ 13,692,212 $ 14,263,338 $ 17,106,082 $ 20,533,634 $ 22,717,624 Page 57
  59. 59. INCOME TAX PROJECTIONS - PROPOSED PLANYEAR Current 2011 2012 2013 2014 2018 2023 2026Income Tax EstimationAdjusted gross income:Earned and other income 12,568,481 13,111,305 13,692,212 14,263,338 17,106,082 20,533,634 22,717,624Adjusted gross income 12,568,481 13,111,305 13,692,212 14,263,338 17,106,082 20,533,634 22,717,624DeductionsReal Estate Tax 50,956 51,975 53,015 54,075 58,532 64,625 68,580Interest 25,000 25,500 26,010 26,530 28,717 31,706 33,647Cash charitable gifts 657,250 658,395 659,563 660,754 665,762 672,607 677,051LTCapGains property charitable gifts 1,977,402 - - - - - -Charitable Deduction available 2,634,652 658,395 659,563 660,754 665,762 672,607 677,051Charitable Deduction allowed 2,634,652 658,395 659,563 660,754 665,762 672,607 677,051Total deductions 2,710,608 735,870 738,588 741,359 753,012 768,937 779,278Reductions - - (405,762) (422,896) (508,178) (611,005) (623,422)Deductions allowed 2,710,608 735,870 332,825 318,463 244,833 157,932 155,856Taxable income 9,857,873 12,375,435 13,359,387 13,944,875 16,861,248 20,375,702 22,561,769Federal and State income tax $ 3,420,127 $ 4,301,274 $ 5,254,384 $ 5,486,238 $ 6,641,121 $ 8,032,845 $ 8,898,527 Page 58
  60. 60. CASH FLOW PROJECTIONS - PROPOSED PLANYEAR Current 2011 2012 2013 2014 2018 2023 2026Sources of Income for LifestyleConsumable income (taxable) 7,087,031 7,440,587 7,789,249 8,115,261 10,065,599 12,123,055 13,776,863Payment from GDOT (Initial Loan) 360,000 360,000 360,000 360,000 - - -Depreciation Add Back 52,000 52,000 52,000 52,000 52,000 52,000 -Payment from GDOT 1,880,559 1,880,559 1,880,559 1,880,559 1,880,559 6,657,559 1,657,559Total income available for lifestyle 9,379,590 9,733,146 10,081,808 10,407,820 11,998,158 18,832,614 15,434,422Uses of CashLiving expenses 2,000,000 2,040,000 2,080,800 2,122,416 2,297,371 2,536,484 2,691,737Income tax 3,420,127 4,301,274 5,254,384 5,486,238 6,641,121 8,032,845 8,898,527Cash gifts to ILIT 20,251 20,251 20,251 20,251 20,251 20,251 20,251Cash gifts to family 156,000 156,000 156,000 156,000 156,000 156,000 156,000Planning and maintenance Fees 305,000 15,000 15,000 15,000 15,000 15,000 15,000Cash gifts to charity 57,250 58,395 59,563 60,754 65,762 72,607 77,051New Cash gifts to charity 600,000 600,000 600,000 600,000 600,000 600,000 600,000Total uses of cash 6,558,628 7,190,920 8,185,998 8,460,659 9,795,506 11,433,186 12,458,566Surplus $ 2,820,962 $ 2,542,226 $ 1,895,810 $ 1,947,161 $ 2,202,652 $ 7,399,428 $ 2,975,856In 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 59
  61. 61. FIRST ESTATE TAX ESTIMATION AND DISTRIBUTION - PROPOSED PLANYEAR Current 2011 2012 2013 2014 2018 2023 2026Tax calculation on Jonathans deathCombined Net Worth 129,801,661 136,933,458 143,966,391 150,528,140 157,323,771 187,099,932 230,781,857 261,714,223Jonathans estimated estate 125,369,684 132,257,971 139,050,771 145,388,474 151,952,074 180,711,551 222,901,990 252,778,194Total gross estate 125,369,684 132,257,971 139,050,771 145,388,474 151,952,074 180,711,551 222,901,990 252,778,194Settlement expenses (651,848) (686,290) (720,254) (751,942) (784,760) (928,558) (1,139,510) (1,288,891)Joint, personal and IRA to Susan (745,348) (786,300) (826,684) (864,363) (903,385) (1,074,366) (1,325,197) (1,502,817)Outright or in trust to Susan (119,736,945) (126,549,838) (133,268,290) (143,536,625) (150,028,385) (178,473,084) (220,201,740) (249,750,943)Taxable estate 4,235,543 4,235,543 4,235,543 235,543 235,543 235,543 235,543 235,543Plus Jonathans lifetime taxable gifts 764,457 764,457 764,457 764,457 764,457 764,457 764,457 764,457Tax base 5,000,000 5,000,000 5,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000Tentative estate tax - - - - - - - -Distribution of First EstateSettlement expenses 651,848 686,290 720,254 751,942 784,760 928,558 1,139,510 1,288,891To family trust 4,235,543 4,235,543 4,235,543 235,543 235,543 235,543 235,543 235,543Joint, personal and IRA to Susan 745,348 786,300 826,684 864,363 903,385 1,074,366 1,325,197 1,502,817Outright or in trust to Susan 119,736,945 126,549,838 133,268,290 143,536,625 150,028,385 178,473,084 220,201,740 249,750,943Total $ 125,369,684 $ 132,257,971 $ 139,050,771 $ 145,388,474 $ 151,952,074 $ 180,711,551 $ 222,901,990 $ 252,778,194AssumptionsWe assume that Jonathan dies first, followed immediately by Susan.Taxes under "Distribution of First Estate" include estate and income taxes, if any. Page 60
  62. 62. SECOND ESTATE TAX ESTIMATION AND DISTRIBUTION - PROPOSED PLANYEAR Current 2011 2012 2013 2014 2018 2023 2026Tax Calculation on Susans deathSusans assets 4,431,977 4,675,486 4,915,620 5,139,666 5,371,698 6,388,382 7,879,867 8,936,029Plus assets from Jonathans estate 120,482,293 127,336,138 134,094,974 144,400,988 150,931,770 179,547,450 221,526,937 251,253,760Susans estimated estate 124,914,270 132,011,625 139,010,595 149,540,655 156,303,468 185,935,831 229,406,804 260,189,789Settlement expenses (1,274,143) (1,345,116) (1,415,106) (1,520,407) (1,588,035) (1,884,358) (2,319,068) (2,626,898)Charitable life estate transfer of home (3,500,000) (3,604,708) (3,712,849) (3,824,235) (3,938,962) (4,433,336) (5,139,452) (5,616,018)Charitable deduction from TCLAT (115,904,584) (122,826,257) (129,647,096) (143,960,470) (150,540,929) (179,382,594) (221,712,741) (251,711,330)Taxable estate 4,235,543 4,235,543 4,235,543 235,543 235,543 235,543 235,543 235,543Plus Susans lifetime taxable gifts 764,457 764,457 764,457 764,457 764,457 764,457 764,457 764,457Tax base 5,000,000 5,000,000 5,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000Federal Estate Tax - - 0 - - - 0 -Distribution of Second EstateSettlement expenses 1,274,143 1,345,116 1,415,106 1,520,407 1,588,035 1,884,358 2,319,068 2,626,898Taxes - - 0 - - - 0 -Residual estate to heirs 4,235,543 4,235,543 4,235,543 235,543 235,543 235,543 235,543 235,543Charitable Life Estate Gift 3,500,000 3,604,708 3,712,849 3,824,235 3,938,962 4,433,336 5,139,452 5,616,018Contribution to TCLAT 115,904,584 122,826,257 129,647,096 143,960,470 150,540,929 179,382,594 221,712,741 251,711,330Total $ 124,914,270 $ 132,011,625 $ 139,010,595 $ 149,540,655 $ 156,303,468 $ 185,935,831 $ 229,406,804 $ 260,189,789AssumptionsWe assume that Jonathan dies first, followed immediately by Susan.Taxes under "Distribution of Second Estate" include estate and income taxes, if any. Page 61
  63. 63. SUMMARY OF BENEFITS TO FAMILY - PROPOSED PLANYEAR Current 2011 2012 2013 2014 2018 2023 2026Benefits to FamilyResidual estate 4,235,543 4,235,543 4,235,543 235,543 235,543 235,543 235,543 235,543Family trust 4,235,543 4,235,543 4,235,543 235,543 235,543 235,543 235,543 235,543Value of GDOT (1,560,041) (10,334,436) (5,939,096) (1,116,873) 4,165,695 29,773,231 45,730,433 46,560,806Life insurance proceeds GDOT 120,000,000 120,000,000 120,000,000 120,000,000 120,000,000 120,000,000 120,000,000 120,000,000Grandchildrens Trust 378,010 396,857 416,700 437,535 459,412 558,418 712,699 825,038LLC 1 (Insurance Policies) 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000LLC (Other and loan from GDOT) 5,009,948 5,197,865 5,392,900 5,595,324 5,805,420 6,728,556 8,093,830 9,043,937Proceeds from ILIT 1,055,324 1,055,324 1,055,324 1,055,324 1,055,324 1,055,324 1,055,324 1,055,324NPV of TCLAT benefits to children 70,403,633 74,608,048 78,751,213 87,445,550 91,442,701 108,961,922 134,674,418 152,896,387Total assets to heirs $ 218,757,960 $ 214,394,745 $ 223,148,127 $ 228,887,947 $ 238,399,639 $ 282,548,538 $ 325,737,790 $ 345,852,577 Page 62
  64. 64. CORPORATE RECAPITALIZATION - PROPOSED PLANYEAR Current 2011 2012 2013 2014 2018 2023 2026Balance sheetRe-capitalized closely held business 42,165,000 43,426,433 44,729,226 46,071,103 47,453,236 53,409,035 61,915,710 67,656,968Total Value $ 42,165,000 $ 43,426,433 $ 44,729,226 $ 46,071,103 $ 47,453,236 $ 53,409,035 $ 61,915,710 $ 67,656,968Adjusted value of shares 42,165,000 43,426,433 44,729,226 46,071,103 47,453,236 53,409,035 61,915,710 67,656,968Taxable IncomeRe-capitalized closely held business 5,481,450 5,645,436 5,814,799 5,989,243 6,740,946 7,814,604 8,539,229Taxable income 5,481,450 5,645,436 5,814,799 5,989,243 6,740,946 7,814,604 8,539,229Total distribution to shareholders $ 5,481,450 $ 5,645,436 $ 5,814,799 $ 5,989,243 $ 6,740,946 $ 7,814,604 $ 8,539,229 Page 63

×