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InKnowVision November 2012 Case Study - Basic Family Wealth Goal Achiever

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Tom is 83 and Jane is 76. They have two children who are both well employed and live productive and happy lives. Tom was an attorney who headed a large patent firm in Washington DC. Jane served as an expert in international trade for much of her professional life. During the latter part of his career, Tom agreed to do work for a start up company that became very successful. Today, Tom’s share of the company is valued at $3.2M but generates $1.4M-$1.5M per year in taxable distributions. Several years ago, the company spun out one of its divisions and took the new company public. It has seen massive growth; almost no dividends have been distributed, and the company has a value to Tom today of approximately $6.4M. Tom and Jane also have approximately $5.2M in cash, $3.2M in retirement funds, and real estate of $4M for a total net worth of about $22M.
The primary planning goals are to:
Make sure that they have sufficient funds to live on for the rest of their lives
Maximize what they leave to their children and grandchildren
Increase the amount of charitable giving that they are currently doing
Equalize the financial positions of their son and daughter
Make a substantial provision for charity in place of estate tax if possible

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InKnowVision November 2012 Case Study - Basic Family Wealth Goal Achiever

  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: THOMAS AND JANE BASIC July 1, 2012 DRAFT FOR DISCUSSION PURPOSES ONLY PRESENTED BY Scott Hamilton InKnowVision, LLC 715 Enterprise Dr. Oak Brook, IL 60523 scott@ikvllc.com Phone: (630) 596-5090Copyright 2012 InKnowVision, LLC
  3. 3. YOUR GOALS AND OBJECTIVES THOMAS AND JANE BASICMaintain our customary lifestyle. This should take about $375,000 annually after taxes and gifts.Provide for the financial security of the surviving spouse.Prepare for any potential long term care needs.Maintain adequate liquidity for emergencies and investment opportunities. We prefer to keep at least$1,000,000 in cash and readily marketable securities.Provide an immediate financial benefit to Tim & Jeanne.Maximize the inheritance we leave to Tim & Jeanne, while creating equal inheritances to the greatest extentpossible.Provide for charitable giving during life and at death.Protect our assets from any future potential creditors or predators.Eliminate or reduce estate taxes. Page 2
  4. 4. PERIODIC TABLE OF ESTATE PLANNING ELEMENTS - RECOMMENDED THOMAS AND JANE BASICThe highlighted tools are those we have determined are most suited to achieving your goals and objectives. Charitable Family Limited Grantor Retained Charitable Lead Remainder Uni- 412(e) Private Annuity SCIN Partnership Annuity Trust Annuity Trust Trust Qualified Personal Sale for Installment Series Limited GDOT Owned Life Family LLC TCLAT Flip CRT Residence Trust Note Liability Company Insurance Beneficiary Preferred Limited Vacation Corporate Premium Finance Defective Inheritors 529 Plans Gifting partnership Maintenance Trust Recapitalization Trust (BDIT) Annual Long Term Care Annuity Walton GRAT Distributions from Charitable Life Estate Asset Protection SPIA/Life Arbitrage Insurance Withdrawal IRA to DAF Revocable Living Principal Protected InternationalSPIA/Life in a CLAT Trusts, DPAs and Crummey Powers Dynasty Trust GDOT Notes VUL POAs International Supporting IRA to Charity Gift Annuity Remainder Sales Life Estates Business Risk LLC/CRTs Organizations Management Charitable Succession Defined Benefit Qualified Plan Bargain Sales Buy/Sell Agreements Remainder Annuity ESOP Planning Planning Plans Limited Partnership TrustGreen equals a new Blue equals a social Yellow equals an planning tool for capital or existing planning family charitable tool tool Page 3
  5. 5. THOMAS AND JANE BASICLIFETIME SPENDING AND LIQUIDITY Page 4
  6. 6. YOUR LIQUID ASSETS - PROPOSED PLAN THOMAS AND JANE BASIC $14,000,000 $12,000,000 $10,000,000 $8,000,000 - $6,000,000 $4,000,000 $2,000,000 $- 12 13 14 15 16 17 18 19 20 21 22 23 20 20 20 20 20 20 20 20 20 20 20 20 Liquid Assets ProposedMost of our clients want to know that they have sufficient income and liquid assets to pay their living expenses for the rest of their lives. This chartassumes full implementation of the proposed plan and shows your liquid assets over your life expectancy. Liquid assets include cash, stocks, bonds,annuities, qualified retirement accounts and the Investment 1 interests due to the buy out agreement in place for the interests. Page 5
  7. 7. THOMAS AND JANE BASICINCREASE INHERITANCEAND REDUCE ESTATE TAX Page 6
  8. 8. COMPARISON OF PLAN RESULTS - PLAN YEAR 2012 THOMAS AND JANE BASIC Existing Plan Proposed Plan Advantage Estate Value $ 22,913,501 $ 22,448,884 Heirs Receive Immediately $ 18,408,313 $ 8,145,463 $ (10,262,850) Heirs Receive from Deferred Inheritance $ - $ 11,661,957 $ 11,661,957 Total Benefits to Family $ 18,408,313 $ 19,807,421 $ 1,399,108 Family Charity $ - $ 16,665,706 $ 16,665,706 Estate and Income Tax $ 4,474,784 $ - $ 4,474,784This chart assumes that you both die in 2012 and compares the results of the current plan with the proposed plan. Page 7
  9. 9. COMPARISON OF PLAN RESULTS - PLAN YEAR 2023 THOMAS AND JANE BASIC Existing Plan Proposed Plan Advantage Estate Value $ 34,122,345 $ 15,801,875 Heirs Receive Immediately $ 16,743,315 $ 19,964,716 $ 3,221,401 Heirs Receive from Deferred Inheritance $ - $ 11,974,124 $ 11,974,124 Total Benefits to Family $ 16,743,315 $ 31,938,840 $ 15,195,525 Family Charity $ - $ 17,792,324 $ 17,792,324 Estate and Income Tax $ 17,827,407 $ - $ 17,827,407 Present Value of total to Heirs $12,095,727 $23,073,297 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 8
  10. 10. ASSETS PASSING TO YOUR FAMILY - CURRENT VS. PROPOSED THOMAS AND JANE BASIC $35,000,000 $30,000,000 $25,000,000 - $20,000,000 $15,000,000 $10,000,000 nt 12 13 14 15 16 17 18 19 20 21 22 23 re 20 20 20 20 20 20 20 20 20 20 20 20 ur C Current Plan Proposed Plan Proposed Plan w/out Life InsThis 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. Page 9
  11. 11. THOMAS AND JANE BASIC INCREASE INCHARITABLE GIVING Page 10
  12. 12. COMPARISON OF CHARITY RESULTS - PLAN YEAR 2023 THOMAS AND JANE BASIC Existing Plan Proposed Plan Increase in Charity Charity Receives from TCLAT $ - $ 13,800,000 $ 13,800,000 Charitable gift of IRA assets $ - $ 1,400,000 $ 1,400,000Cumulative annual gifts to charity/DAF $ - $ 2,600,000 $ 2,600,000 Total to Family Charity $ - $ 17,800,000 $ 17,800,000 Page 11
  13. 13. INTRODUCTION TO THE PLAN STRATEGIES ROADMAP THOMAS AND JANE BASICThe 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 the desiredresult 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 12
  14. 14. GRANTOR RETAINED ANNUITY TRUST THOMAS AND JANE BASIC Thomas transfers all of his interests in Investment 2 & 90% of his interests in Investment 1 to his GRAT with a term of 7 years. Transfer interests worth THOMAS $9,280,000 GRATThomas receives quarterly payments for 7 The GRAT owns interests in Investment 1 and years Provides quarterly payments 2 worth $9,280,000 after the transfer of $360,037 totaling $1,440,149/yr for 7 years. Payments consist of cash and interests in Investment 1 The transfer value is based on the assumed value of the assets transferred. HEIRS Receive balance of GRAT at the end of the 7 year term Page 13
  15. 15. VACATION HOUSE MAINTENANCE TRUST THOMAS AND JANE BASIC Gift $77,653 each year to your VACATION HOUSE JANE Trust MAINTENANCE TRUST Owns life insurance with a death benefit of $2,000,000 HEIRSPremium Payment DetailsPremiums in the amount of $77,653 are paid annually bythe Trust. Premiums are scheduled to be paid for all years. $2,000,000 in assets are distributed according to the terms of the Trust.The premium is based on certain assumptions. This is for illustration purposes only. Actual insurance numbers can only be determined byapplying for insurance. Page 14
  16. 16. INTERNAL RATE OF RETURN ON LIFE INSURANCE THOMAS AND JANE BASICJANES AGE YEAR PREMIUM DEATH BENEFIT IRR 78 2012 77,653 2,000,000 2475.56% 79 2013 77,653 2,000,000 359.96% 80 2014 77,653 2,000,000 155.47% 81 2015 77,653 2,000,000 90.82% 82 2016 77,653 2,000,000 60.75% 83 2017 77,653 2,000,000 43.81% 84 2018 77,653 2,000,000 33.12% 85 2019 77,653 2,000,000 25.84% 86 2020 77,653 2,000,000 20.61% 87 2021 77,653 2,000,000 16.70% 88 2022 77,653 2,000,000 13.69% 89 2023 77,653 2,000,000 11.31% 90 2024 77,653 2,000,000 9.39% 91 2025 77,653 2,000,000 7.81% 92 2026 77,653 2,000,000 6.50% 93 2027 77,653 2,000,000 5.40% 94 2028 77,653 2,000,000 4.46% 95 2029 77,653 2,000,000 3.65% Page 15
  17. 17. CREATE AND FUND A QUALIFIED PERSONAL RESIDENCE TRUST THOMAS AND JANE BASIC Thomas and Jane each create a qualified personal residence trust (QPRT) with a term of 2 years. Then each transfer fractional interests in the homes listed below to the trusts. THOMAS Deed THOMASs QPRT JANE JANEs QPRT Deed Thomas gifts a 1/2 undivided interest in property Jane gifts a 1/2 undivided interest in propertyVacation House 825,000 Vacation House 825,000 Sub Total 825,000 Sub Total 825,000Note: If you die before the QPRT term ends, the property is back in your estate. Page 16
  18. 18. QPRT APPRAISAL - GIFT OF REAL ESTATE THOMAS AND JANE BASIC Thomas and Jane hire 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 transferabilityTHOMAS Appraisal of Gift THOMASs QPRT The value of Thomass QPRT gift is expected to be $571,718 JANE Appraisal of Gift JANEs QPRT The value of Janes QPRT gift is expected to be $635,164 QPRT ASSUMPTIONS Term (years) 2 7520 Rate 2.34% Thomass age 85 Janes age 78 Page 17
  19. 19. AFTER THE QPRT TERM ENDS (I) THOMAS AND JANE BASIC Additional estate and gift tax advantages that can be obtained with QPRTs 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 QPRTs should be structured as grantor trusts to neutralize income taxes and kept in place as grantor trusts after the QPRT term.THOMAS Rental of the Property THOMASs QPRT JANE Rental of the Property JANEs QPRT We have assumed a total fair market rent of $165,000 after the QPRT term. Page 18
  20. 20. AFTER THE QPRT TERM ENDS (II) THOMAS AND JANE BASIC At death, the real estate and any accumulated rental income, passes to your heirs without estate tax. The trusts can be structured for distributions according to your particular goals and objectives.THOMASs QPRT HEIRS Cumulative rent and the value of the real estate is assumed to be $2,149,547 as of 2023 JANEs QPRT HEIRS Cumulative rent and the value of the real estate is assumed to be $2,149,547 as of 2023 Page 19
  21. 21. PREFERRED ANNUAL DISTRIBUTIONS FROM IRA THOMAS AND JANE BASIC Thomas & Jane take preferred annual distributions in excess of the required minimum distributions starting at $200,000/yr from their qualified plans. These distributions are then used to make charitable gifts to a Donor Advised Fund. IRA THOMAS & JANE Receives annual preferred distributions each IRA makes distributions year Annual gifts to charity of $200,000 made with qualified plan distributionsMaking preferred annual distributions allows Tom and Jane to make largerannual gifts to charity while theyre still living. This ultimately reduces thesize of the taxable estate at death also. FAMILY CHARITY Premium Payment Details Donor Advised Fund Page 20
  22. 22. LEAVE YOUR IRA TO CHARITY THOMAS AND JANE BASIC At the 2nd death, leave your IRA and qualified plans to charity. IRA $3,224,902 FAMILY CHARITYAdvantagesNo estate taxNo income in respect of a decedent taxMost efficient asset to satisfy charitable intent Page 21
  23. 23. TESTAM TESTAMENTARY CHARITABLE LEAD ANNUITY TRUST (Part I) - 2012 THOMAS AND JANE BASIC Include language in your trust or Will that creates a testamentary charitable lead trust (TCLAT) at the second death. Funding of the TCLAT can be all or partly at the option of each of your children, thus providing maximum flexibility. THOMAS & JANE TCLAT At death $13,392,374 of the assets taxable TCLAT owns assets with a value of in your estate will pass to the TCLAT. This $13,392,374 after your death. should bring your estate tax to $0. BASIC FAMILY CHARITY TCLAT Assumptions The charity will receive payments of $805,658Asset growth rate 8.00% each year for a period of 20 years totalingTCLAT payout rate 6.02% $16,113,162.Present value discount rate 4.00%Assumed date of death 2012 Page 22
  24. 24. TESTAMENTARY CHARITABLE LEAD ANNUITY TRUST (Part II) - 2012 THOMAS AND JANE BASIC At the end of the TCLAT term, your heirs will receive all of the remaining trust assets. TCLAT HEIRS Based on the plan assumptions, your heirs could expect to inherit $11,661,957 from theAt the end of the 20 year term, the TCLAT TCLAT. The amount passing to heirs is a assets will be distributed to your heirs. present value number using a discount rate of 4%. Page 23
  25. 25. DETAILED FINANCIAL ANALYSIS THOMAS AND JANE BASIC 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 24
  26. 26. DETAILED FINANCIAL ANALYSIS THOMAS AND JANE BASIC CURRENT PLAN FINANCIALSIn the Current Plan Section you will find a Net Worth Statement and a detailed cash flow and assetvalue projection analysis. Page 25
  27. 27. CURRENT NET WORTH STATEMENT THOMAS AND JANE BASIC THOMAS JANE JOINT TOTAL YIELD GROWTHCASH AND EQUIVALENTS Bank - 7,266 - 7,266 0.0% 0.0% Bank - 56,133 - 56,133 0.0% 0.0% Bank - - 2,080 2,080 0.0% 0.0% Bank - 44,080 - 44,080 0.5% 0.0% Bank - - 23,187 23,187 0.0% 0.0% Bank - - 9,567 9,567 0.5% 0.0% Bank - - 305,415 305,415 0.0% 0.0% Bank - - 11,464 11,464 0.0% 0.0% Bank 2,300,000 - - 2,300,000 0.5% 0.0% Bank - 2,500,000 - 2,500,000 0.5% 0.0% Total of Cash and Equivalents 2,300,000 2,607,479 351,713 5,259,192 0.5% 0.0%OTHER INVESTMENTS Investment 1 6,400,000 - - 6,400,000 0.6% 3.0% Investment 2 3,200,000 - - 3,200,000 46.9% 3.0% Total of Other Investments 9,600,000 - - 9,600,000 16.0% 3.0%RETIREMENT PLANS/IRAs - Bank 3,100,000 - 3,100,000 0.0% 4.0% Bank - 48,577 48,577 0.0% 4.0% Bank - 76,325 76,325 0.0% 4.0% Total Retirement Plans 3,100,000 124,902 3,224,902 0.0% 4.0% Page 26
  28. 28. CURRENT NET WORTH STATEMENT (Page 2) THOMAS AND JANE BASIC THOMAS JANE JOINT TOTAL YIELD GROWTHINVESTMENT REAL ESTATE Property - - 100,000 100,000 0.0% 2.0% Property 125,000 - - 125,000 0.0% 2.0% Total of Real Estate Holdings 125,000 - 100,000 225,000 0.0% 2.0%RESIDENTIAL REAL ESTATE Primary House - 2,100,000 - 2,100,000 0.0% 3.0% Summer House - 1,650,000 - 1,650,000 0.0% 3.0% Total of Personal Residences - 3,750,000 - 3,750,000 0.0% 3.0%PERSONAL PROPERTY Jewelry ** - 25,000 - 25,000 0.0% 0.0% Antiques ** 100,000 100,000 - 200,000 0.0% 0.0% Autos - - 24,000 24,000 0.0% 0.0% Total of Personal Property 100,000 125,000 24,000 249,000 0.0% 0.0% ** Estimates subject to appraisalsTOTAL ASSETS 15,225,000 6,607,381 475,713 22,308,094TOTAL LIABILITIES - - - -NET WORTH 15,225,000 6,607,381 475,713 22,308,094 Page 27
  29. 29. FINANCIAL ANALYSIS - EXISTING PLAN ASSET VALUE PROJECTIONS - EXISTING PLAN 1,600,000 1,648,000 1,697,440 1,748,363 1,800,814 1,854,839 1,910,484YEAR Current 2012 2013 2014 2015 2016 2017 2018 2023Asset ValuesCash and cash equivalents 5,259,192 5,502,605 5,658,271 6,333,706 7,030,760 7,749,890 8,468,726 9,205,517 13,153,593Other investments 9,600,000 9,743,330 10,035,630 10,336,699 10,646,800 10,966,204 11,295,190 11,634,046 13,487,048529 Plans for Grandchildren - 312,000 234,000 156,000 78,000 - - - -Retirement plans/IRAs 3,224,902 3,073,332 2,980,679 2,880,003 2,771,136 2,653,946 2,530,313 2,400,376 1,681,775Investment real estate 225,000 227,245 231,790 236,426 241,154 245,977 250,897 255,915 282,551Personal residences 3,750,000 3,805,988 3,920,168 4,037,773 4,158,906 4,283,674 4,412,184 4,544,549 5,268,378Personal property 249,000 249,000 249,000 249,000 249,000 249,000 249,000 249,000 249,000Total assets in estate 22,308,094 22,913,501 23,309,539 24,229,607 25,175,757 26,148,691 27,206,310 28,289,403 34,122,345Combined net worth $ 22,308,094 $ 22,913,501 $ 23,309,539 $ 24,229,607 $ 25,175,757 $ 26,148,691 $ 27,206,310 $ 28,289,403 $ 34,122,345In the event that there is a cash flow surplus, the surplus is added to the cash row by default.If there is a cash flow shortage (because of spending or gifting capital) then the shortage is treated as a reduction in cash. Page 28
  30. 30. TAXABLE INCOME PROJECTIONS - EXISTING PLAN $20,000YEAR Current 2012 2013 2014 2015 2016 2017 2018 2023Sources of taxable incomeCash and cash equivalents 24,268 25,391 26,110 29,227 32,443 35,761 39,078 56,896Other investments 1,535,558 1,558,484 1,605,239 1,653,396 1,702,998 1,754,088 1,806,710 2,094,473Retirement plans/IRAs 215,612 215,586 219,904 224,067 228,036 229,790 231,150 222,191Social security income 28,861 29,438 30,027 30,627 31,240 31,865 32,502 35,885Consulting (Schedule C) 30,000 30,000 30,000 30,000 30,000 - - -Gross income $ 1,834,299 $ 1,858,900 $ 1,911,279 $ 1,967,317 $ 2,024,717 $ 2,051,504 $ 2,109,441 $ 2,409,444 Page 29
  31. 31. INCOME TAX PROJECTIONS - EXISTING PLANYEAR Current 2012 2013 2014 2015 2016 2017 2018 2023Income tax EstimationAdjusted gross income:Earned and other income 1,834,299 1,858,900 1,911,279 1,967,317 2,024,717 2,051,504 2,109,441 2,409,444 Adjusted gross income 1,834,299 1,858,900 1,911,279 1,967,317 2,024,717 2,051,504 2,109,441 2,409,444DeductionsReal estate tax 16,756 16,756 17,259 17,776 18,310 18,859 19,425 20,008 23,194 1Charitable gifts - DAF set-up gift 15,000 178,000 15,450 15,914 16,391 16,883 17,389 17,911 20,764Charitable Deduction available 178,000 15,450 15,914 16,391 16,883 17,389 17,911 20,764Charitable Deduction allowed 178,000 15,450 15,914 16,391 16,883 17,389 17,911 20,764Total deductions 194,756 32,709 33,690 34,701 35,742 36,814 37,918 43,958Reductions - (26,167) (26,952) (27,761) (28,593) (29,451) (30,335) (35,166)Deductions allowed 194,756 6,542 6,738 6,940 7,148 7,363 7,584 8,792Taxable income 1,639,543 1,852,358 1,904,541 1,960,377 2,017,568 2,044,141 2,101,857 2,400,653Federal income tax $ 542,980 $ 696,728 $ 717,393 $ 739,504 $ 762,151 $ 772,674 $ 795,530 $ 913,8531 Gift of $78,000 to newly created DAF in 2012 & other charitable gifts of $100,000 for 2012. Page 30
  32. 32. CASH FLOW PROJECTIONS - EXISTING PLANYEAR Current 2012 2013 2014 2015 2016 2017 2018 2023Sources of income for LifestyleNon-taxable Social Security Income 5,093 5,195 5,299 5,405 5,513 5,623 5,736 6,333Consumable income (taxable) 1,834,299 1,858,900 1,911,279 1,967,317 2,024,717 2,051,504 2,109,441 2,409,444Total income available for lifestyle 1,839,393 1,864,095 1,916,578 1,972,722 2,030,230 2,057,127 2,115,176 2,415,777Uses of CashLiving expenses 375,000 386,250 397,838 409,773 422,066 434,728 447,770 519,088Income tax 542,980 696,728 717,393 739,504 762,151 772,674 795,530 913,853529 Plan Contributions to Grandchildren 390,000 - - - - - - -Gift to Tims Gift Trust - 250,000 - - - - - -Gift to Jeannes Gift Trust - 250,000 - - - - - - 1Long Term Care Insurance & Care 70,000 70,000 70,000 70,000 70,000 73,500 77,175 98,497Cash gifts to family 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000Cash gifts to charity 178,000 15,450 15,914 16,391 16,883 17,389 17,911 20,764Total uses of cash 1,595,980 1,708,428 1,241,144 1,275,667 1,311,100 1,338,291 1,378,385 1,592,201Surplus $ 243,413 $ 155,667 $ 675,434 $ 697,055 $ 719,130 $ 718,836 $ 736,791 $ 823,5761 LTC premiums of $20k/yr start for Jane in year one. Annual premiums inflate at 5% after the 5 year premium lock. Also includes and additional $50k/yr in long term care expenses.In the event that there is a cash flow surplus, the surplus is added to the cash row on the "Asset Value Projections" 3 pages earlier.If there is a cash flow shortage (spending or gifting capital) then the shortage is treated as a reduction in the cashrow on the "Asset Value Projections" 3 pages earlier. Page 31
  33. 33. FIRST ESTATE TAX ESTIMATION AND DISTRIBUTION - EXISTING PLANYEAR Current 2012 2013 2014 2015 2016 2017 2018 2023Tax calculation on Thomass deathCombined net worth 22,308,094 22,913,501 23,309,539 24,229,607 25,175,757 26,148,691 27,206,310 28,289,403 34,122,345Thomass estimated estate 15,462,857 15,882,494 16,157,008 16,794,753 17,450,577 18,124,966 18,858,055 19,608,801 23,651,905Total gross estate 15,462,857 15,882,494 16,157,008 16,794,753 17,450,577 18,124,966 18,858,055 19,608,801 23,651,905Settlement expenses (102,314) (104,412) (105,785) (108,974) (112,253) (115,625) (119,290) (123,044) (143,260)Joint, personal and IRA to Jane (3,437,857) (3,298,612) (3,213,771) (3,126,804) (3,032,241) (2,929,963) (2,822,396) (2,709,040) (2,080,463)Outright or in trust to Jane (7,012,686) (7,569,470) (12,047,453) (12,768,976) (13,516,083) (14,289,378) (15,126,369) (15,986,718) (20,638,182)Taxable estate 4,910,000 4,910,000 790,000 790,000 790,000 790,000 790,000 790,000 790,000Plus Thomass lifetime taxable gifts 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000Tax base 5,120,000 5,120,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000Federal Estate Tax - - - - - - - - -Distribution of Thomass estateSettlement expenses 102,314 104,412 105,785 108,974 112,253 115,625 119,290 123,044 143,260To family trust 4,910,000 4,910,000 790,000 790,000 790,000 790,000 790,000 790,000 790,000Joint, personal and IRA to Jane 3,437,857 3,298,612 3,213,771 3,126,804 3,032,241 2,929,963 2,822,396 2,709,040 2,080,463Outright or in trust to Jane 7,012,686 7,569,470 12,047,453 12,768,976 13,516,083 14,289,378 15,126,369 15,986,718 20,638,182Total $ 15,462,857 $ 15,882,494 $ 16,157,008 $ 16,794,753 $ 17,450,577 $ 18,124,966 $ 18,858,055 $ 19,608,801 $ 23,651,905AssumptionsWe assume that Thomas dies first, followed immediately by Jane.Taxes under "Distribution of First Estate" include estate and income taxes. Page 32
  34. 34. SECOND ESTATE TAX ESTIMATION AND DISTRIBUTION - EXISTING PLANYEAR Current 2012 2013 2014 2015 2016 2017 2018 2023Tax Calculation on Janes deathJanes assets 6,845,238 7,031,007 7,152,531 7,434,854 7,725,180 8,023,724 8,348,255 8,680,602 10,470,440Plus assets from Thomass estate 10,450,542 10,868,082 15,261,223 15,895,779 16,548,324 17,219,342 17,948,765 18,695,757 22,718,645Janes estimated estate 17,295,780 17,899,088 22,413,754 23,330,633 24,273,504 25,243,066 26,297,020 27,376,359 33,189,085Settlement expenses (197,958) (203,991) (249,138) (258,306) (267,735) (277,431) (287,970) (298,764) (356,891)Janes taxable estate 17,097,822 17,695,097 22,164,617 23,072,327 24,005,769 24,965,635 26,009,050 27,077,596 32,832,194Plus Janes lifetime taxable gifts 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000Tax base 17,307,822 17,905,097 22,374,617 23,282,327 24,215,769 25,175,635 26,219,050 27,287,596 33,042,194Federal Estate Tax 4,265,738 4,474,784 8,947,100 9,301,107 12,972,873 13,500,799 14,074,677 14,662,378 17,827,407Total Estate Tax Due 4,265,738 4,474,784 8,947,100 9,301,107 12,972,873 13,500,799 14,074,677 14,662,378 17,827,407Distribution of Janes estateSettlement expenses 197,958 203,991 249,138 258,306 267,735 277,431 287,970 298,764 356,891Taxes 4,265,738 4,474,784 8,947,100 9,301,107 12,972,873 13,500,799 14,074,677 14,662,378 17,827,407Qualified plan to heirs 3,224,902 3,073,332 2,980,679 2,880,003 2,771,136 2,653,946 2,530,313 2,400,376 1,681,775Residual estate to heirs 9,607,182 10,146,981 10,236,837 10,891,216 8,261,760 8,810,890 9,404,059 10,014,842 13,323,012Total $ 17,295,780 $ 17,899,088 $ 22,413,754 $ 23,330,633 $ 24,273,504 $ 25,243,066 $ 26,297,020 $ 27,376,359 $ 33,189,085AssumptionsWe assume that Thomas dies first, followed immediately by Jane.Taxes under "Distribution of Second Estate" include estate and income taxes. Page 33
  35. 35. SUMMARY OF BENEFITS TO FAMILY - EXISTING PLANYEAR Current 2012 2013 2014 2015 2016 2017 2018 2023Benefits to FamilyFamily trust 4,910,000 4,910,000 790,000 790,000 790,000 790,000 790,000 790,000 790,000Residual estate 9,607,182 10,146,981 10,236,837 10,891,216 8,261,760 8,810,890 9,404,059 10,014,842 13,323,012Qualified plan assets 3,224,902 3,073,332 2,980,679 2,880,003 2,771,136 2,653,946 2,530,313 2,400,376 1,681,775 1529 Plans for Grandchildren 200,000 278,000 369,900 466,395 567,715 674,100 707,806 743,196 948,527Total assets to heirs $ 17,942,084 $ 18,408,313 $ 14,377,416 $ 15,027,614 $ 12,390,611 $ 12,928,936 $ 13,432,178 $ 13,948,414 $ 16,743,3151 Assumes growth of 5 % annually on the 529 Plans. Page 34
  36. 36. DETAILS OF THOMASS QUALIFIED PLAN - EXISTING PLANYEAR Current 2012 2013 2014 2015 2016 2017 2018 2023Thomass Qualified PlansThomass Age 85 86 87 88 89 90 91 96Janes Age 78 79 80 81 82 83 84 89Minimum distribution factor 14.8 14.1 13.4 12.7 12.0 11.4 10.8 8.1Plan contributions - - - - - - - -Plan balance 3,100,000 2,952,102 2,860,818 2,761,756 2,654,766 2,539,726 2,418,532 2,291,335 1,590,552Minimum distribution 209,459 209,369 213,494 217,461 221,230 222,783 223,938 214,245Preferred distribution - - - - - - - -Actual distribution 209,459 209,369 213,494 217,461 221,230 222,783 223,938 214,245 Page 35
  37. 37. DETAILS OF JANES QUALIFIED PLAN - EXISTING PLANYEAR Current 2012 2013 2014 2015 2016 2017 2018 2023Janes Qualified PlansJanes Age 78 79 80 81 82 83 84 89Thomass Age 85 86 87 88 89 90 91 96Minimum distribution factor 20.3 19.5 18.7 17.9 17.1 16.3 15.5 12.0Plan contributions - - - - - - - -Plan balance 124,902 121,230 119,862 118,247 116,371 114,220 111,781 109,041 91,223Minimum distribution 6,153 6,217 6,410 6,606 6,805 7,007 7,212 7,946Preferred distribution - - - - - - - -Actual distribution 6,153 6,217 6,410 6,606 6,805 7,007 7,212 7,946 Page 36
  38. 38. DETAILED FINANCIAL ANALYSIS THOMAS AND JANE BASIC 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 37
  39. 39. NET WORTH STATEMENT AFTER PLAN IMPLEMENTATION THOMAS AND JANE BASIC THOMAS JANE JOINT TOTAL YIELD GROWTHCASH AND EQUIVALENTS Bank - 7,266 - 7,266 0.0% 0.0% Bank - 56,133 - 56,133 0.0% 0.0% Bank - - 2,080 2,080 0.0% 0.0% Bank - 44,080 - 44,080 0.5% 0.0% Bank - - 23,187 23,187 0.0% 0.0% Bank - - 9,567 9,567 0.5% 0.0% Bank - - 305,415 305,415 0.0% 0.0% Bank - - 11,464 11,464 0.0% 0.0% Bank 2,300,000 - - 2,300,000 0.5% 0.0% Bank - 2,500,000 - 2,500,000 0.5% 0.0% Total of Cash and Equivalents 2,300,000 2,607,479 351,713 5,259,192 0.5% 0.0%OTHER INVESTMENTS Investment 2 320,000 - - 320,000 46.9% 3.0% Total of Other Investments 320,000 - - 320,000 46.9% 3.0%RETIREMENT PLANS/IRAs Bank 3,100,000 - 3,100,000 0.0% 4.0% Bank - 48,577 48,577 0.0% 4.0% Bank - 76,325 76,325 0.0% 4.0% Total Retirement Plans 3,100,000 124,902 3,224,902 0.0% 4.0% Page 38
  40. 40. REVISED NET WORTH STATEMENT (Page 2) THOMAS AND JANE BASIC THOMAS JANE JOINT TOTAL YIELD GROWTHINVESTMENT REAL ESTATE Property - - 100,000 100,000 0.0% 2.0% Property 125,000 - - 125,000 0.0% 2.0% Total of Real Estate Holdings 125,000 - 100,000 225,000 0.0% 2.0%RESIDENTIAL REAL ESTATE Primary House - 2,100,000 - 2,100,000 0.0% 3.0% Total of Personal Residences - 2,100,000 - 2,100,000 0.0% 3.0%PERSONAL PROPERTY Jewelry ** - 25,000 - 25,000 0.0% 0.0% Antiques ** 100,000 100,000 - 200,000 0.0% 0.0% Autos - - 24,000 24,000 0.0% 0.0% Total of Personal Property 100,000 125,000 24,000 249,000 0.0% 0.0% ** Estimates subject to appraisalsOTHER STRATEGY ASSETS GRAT Property 4,640,000 4,640,000 9,280,000 QPRT Property 742,500 742,500 - 1,485,000 Total of Other Strategy Assets 5,382,500 5,382,500 - 10,765,000 3.88%TOTAL ASSETS 11,327,500 10,339,881 475,713 22,143,094TOTAL LIABILITIES - - - -NET WORTH 11,327,500 10,339,881 475,713 22,143,094 Page 39
  41. 41. FINANCIAL ANALYSIS - PROPOSED PLAN ASSET VALUE PROJECTIONS - PROPOSED PLANYEAR Current 2012 2013 2014 2015 2016 2017 2018 2023Asset ValuesCash and cash equivalents 5,259,192 5,200,043 5,148,507 5,437,937 5,734,810 5,779,601 4,811,114 4,484,275 6,337,802Other investments 1 320,000 384,778 456,321 530,011 605,911 944,515 2,412,999 3,925,538 4,550,775529 Plans for Grandchildren - 312,000 234,000 156,000 78,000 - - - -Retirement plans/IRAs 3,224,902 3,073,332 2,980,679 2,880,003 2,770,052 2,648,947 2,516,043 2,370,662 1,431,457Investment real estate 225,000 227,245 231,790 236,426 241,154 245,977 250,897 255,915 282,551Personal residences 2,100,000 2,131,354 2,195,294 2,261,153 2,328,988 2,398,857 2,470,823 2,544,948 2,950,292Residences in QPRTs 1,485,000 1,507,171 1,552,387 - - - - - -Personal property 249,000 249,000 249,000 249,000 249,000 249,000 249,000 249,000 249,000Assets in GRAT 9,363,962 9,363,962 9,582,878 9,821,625 10,081,377 10,363,456 10,552,392 10,185,359 -Total assets in estate 22,227,056 22,448,884 22,630,856 21,572,154 22,089,291 22,630,353 23,263,267 24,015,696 15,801,875Combined net worth $ 22,227,056 $ 22,448,884 $ 22,630,856 $ 21,572,154 $ 22,089,291 $ 22,630,353 $ 23,263,267 $ 24,015,696 $ 15,801,8751 Increases over 7 years with the GRAT distribution consisting of interests in Investment 1In the event that there is a cash flow surplus, the surplus is added to the cash row by default.If there is a cash flow shortage (because of spending or gifting capital) then the shortage is treated as a reduction in cash. Page 40
  42. 42. TAXABLE INCOME PROJECTIONS - PROPOSED PLANYEAR Current 2012 2013 2014 2015 2016 2017 2018 2023Sources of Taxable IncomeCash and cash equivalents 24,268 23,995 23,757 25,093 26,463 26,670 22,201 27,350Marketable Securities-GRAT - 108 71 299 810 6,835 33,404 62,935Other investments 150,000 180,365 213,900 248,442 284,021 442,741 1,131,093 2,071,044Retirement plans/IRAs 215,612 215,586 219,904 225,151 231,907 238,862 246,022 284,793Other taxable earnings-GRAT 1,385,558 1,378,120 1,391,338 1,404,953 1,418,977 1,311,346 675,617 48,500Social security income 28,861 29,438 30,027 30,627 31,240 31,865 32,502 35,885Consulting (Schedule C) 30,000 30,000 30,000 30,000 30,000 - - -Gross income $ 1,834,299 $ 1,857,612 $ 1,908,998 $ 1,964,567 $ 2,023,418 $ 2,058,320 $ 2,140,839 $ 2,530,508 Page 41
  43. 43. INCOME TAX PROJECTIONS - PROPOSED PLANYEAR Current 2012 2013 2014 2015 2016 2017 2018 2023Income Tax EstimationAdjusted gross income:Dividend income (Marketable Sec.) - 108 71 299 810 6,835 33,404 62,935Earned and other income 1,834,299 1,857,504 1,908,927 1,964,268 2,022,608 2,051,484 2,107,435 2,467,573Adjusted gross income 1,834,299 1,857,612 1,908,998 1,964,567 2,023,418 2,058,320 2,140,839 2,530,508DeductionsReal Estate Tax 16,756 17,259 17,776 18,310 18,859 19,425 20,008 23,194Gifts to Charity/DAF from IRA Distributions 378,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000Charitable Deduction available 378,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000Charitable Deduction allowed 378,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000Total deductions 394,756 217,259 217,776 218,310 218,859 219,425 220,008 223,194Reductions - (50,724) (52,266) (53,933) (55,699) (56,746) (59,221) (70,911)Deductions allowed 394,756 166,534 165,510 164,377 163,160 162,679 160,786 152,283Taxable income 1,439,543 1,691,077 1,743,488 1,800,190 1,860,257 1,895,640 1,980,053 2,378,225Federal income tax $ 472,980 $ 632,861 $ 653,615 $ 676,070 $ 699,856 $ 713,868 $ 747,295 $ 904,972 Page 42
  44. 44. CASH FLOW PROJECTIONS - PROPOSED PLANYEAR Current 2012 2013 2014 2015 2016 2017 2018 2023Sources of Income for LifestyleConsumable income (taxable) 448,741 479,384 517,588 559,314 603,631 740,138 1,431,818 2,419,073Non-taxable Social Security Income 5,093 5,195 5,299 5,405 5,513 5,623 5,736 6,333Distribution from Marketable Securities 59,149 51,536 - - - 968,488 326,839 -GRAT - Cash Distribution 1,380,149 1,380,149 1,380,149 1,380,149 1,119,723 - - -Total income available for lifestyle 1,893,133 1,916,264 1,903,036 1,944,868 1,728,866 1,714,249 1,764,393 2,425,405Uses of CashLiving expenses 375,000 386,250 397,838 409,773 422,066 434,728 447,770 519,088Income tax 472,980 632,861 653,615 676,070 699,856 713,868 747,295 904,972 1Rent paid to trust post-QPRT - - 165,000 165,000 165,000 165,000 165,000 165,000Long Term Care Premiums 2 70,000 70,000 70,000 70,000 70,000 73,500 77,175 98,497Cash gifts to ILIT 77,653 77,653 77,653 77,653 77,653 77,653 77,653 77,653Cash gifts to family 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000529 Plan Contributions to Grandchildren 390,000 - - - - - - -Gift to Tims Gift Trust - 250,000 - - - - - -Gift to Jeannes Gift Trust - 250,000 - - - - - -Planning and maintenance Fees 89,500 9,500 9,500 9,500 9,500 9,500 9,500 9,500Cash gifts to charity 378,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000Total uses of cash 1,893,133 1,916,264 1,613,606 1,647,995 1,684,075 1,714,249 1,764,393 2,014,709Surplus $ - $ - $ 289,430 $ 296,873 $ 44,791 $ - $ - $ 410,6961 Rent payments begin in 2014, at the end of the QPRT term.2 LTC premiums of $20k/yr start for Jane in year one. Annual premiums inflate at 5% after the 5 year premium lock. Also includes and additional $50k/yr in long term care expenses.In the event that there is a cash flow surplus, the surplus is added to the cash row on the "Asset Value Projections" 3 pages earlier. Page 43
  45. 45. FIRST ESTATE TAX ESTIMATION AND DISTRIBUTION - PROPOSED PLANYEAR Current 2012 2013 2014 2015 2016 2017 2018 2023Tax calculation on Thomass deathCombined Net Worth 22,227,056 22,448,884 22,630,856 21,572,154 22,089,291 22,630,353 23,263,267 24,015,696 15,801,875Thomass estimated estate 11,609,210 11,725,071 11,820,115 11,267,154 11,537,255 11,819,852 12,150,424 12,543,418 8,253,333Total gross estate 11,609,210 11,725,071 11,820,115 11,267,154 11,537,255 11,819,852 12,150,424 12,543,418 8,253,333Settlement expenses (83,046) (83,625) (84,101) (81,336) (82,686) (84,099) (85,752) (87,717) (66,267)Joint, personal and IRA to Jane (3,438,758) (3,295,442) (3,208,332) (3,100,183) (3,000,045) (2,889,442) (2,768,484) (2,636,817) (1,645,756)Outright or in trust to Jane (3,177,405) (3,436,004) (7,737,682) (7,867,353) (8,236,242) (8,628,028) (9,077,905) (9,600,602) (6,323,028)Taxable estate 4,910,000 4,910,000 790,000 218,282 218,282 218,282 218,282 218,282 218,282Plus Thomass lifetime taxable gifts 210,000 210,000 210,000 781,718 781,718 781,718 781,718 781,718 781,718Tax base 5,120,000 5,120,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000Tentative Federal Estate Tax - - - - - - - - -Distribution of First EstateSettlement expenses 83,046 83,625 84,101 81,336 82,686 84,099 85,752 87,717 66,267To family trust 4,910,000 4,910,000 790,000 218,282 218,282 218,282 218,282 218,282 218,282Joint, personal and IRA to Jane 3,438,758 3,295,442 3,208,332 3,100,183 3,000,045 2,889,442 2,768,484 2,636,817 1,645,756Outright or in trust to Jane 3,177,405 3,436,004 7,737,682 7,867,353 8,236,242 8,628,028 9,077,905 9,600,602 6,323,028Total $ 11,609,210 $ 11,725,071 $ 11,820,115 $ 11,267,154 $ 11,537,255 $ 11,819,852 $ 12,150,424 $ 12,543,418 $ 8,253,333AssumptionsWe assume that Thomas dies first, followed immediately by Jane.Taxes under "Distribution of First Estate" include estate and income taxes, if any. Page 44
  46. 46. SECOND ESTATE TAX ESTIMATION AND DISTRIBUTION - PROPOSED PLANYEAR Current 2012 2013 2014 2015 2016 2017 2018 2023Tax Calculation on Janes deathJanes assets 10,617,846 10,723,813 10,810,741 10,305,000 10,552,036 10,810,501 11,112,843 11,472,278 7,548,543Plus assets from Thomass estate 6,616,164 6,731,446 10,946,014 10,967,536 11,236,287 11,517,471 11,846,389 12,237,419 7,968,784Janes estimated estate 17,234,010 17,455,259 21,756,755 21,272,536 21,788,323 22,327,972 22,959,233 23,709,696 15,517,326Settlement expenses (197,340) (199,553) (242,568) (237,725) (242,883) (248,280) (254,592) (262,097) (180,173)Charitable gift of IRA assets (3,224,902) (3,073,332) (2,980,679) (2,880,003) (2,770,052) (2,648,947) (2,516,043) (2,370,662) (1,431,457)Charitable deduction from TCLAT (13,021,768) (13,392,374) (17,743,508) (17,999,972) (18,620,552) (19,275,909) (20,033,762) (20,922,102) (13,750,861)Taxable estate 790,000 790,000 790,000 154,836 154,836 154,836 154,836 154,836 154,836Plus Janes lifetime taxable gifts 210,000 210,000 210,000 845,164 845,164 845,164 845,164 845,164 845,164Tax base 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000Federal Estate Tax - - - - - - - - -Distribution of Second EstateSettlement expenses 197,340 199,553 242,568 237,725 242,883 248,280 254,592 262,097 180,173Taxes - - - - - - - - -Other gifts to charity 3,224,902 3,073,332 2,980,679 2,880,003 2,770,052 2,648,947 2,516,043 2,370,662 1,431,457Residual estate to heirs 790,000 790,000 790,000 154,836 154,836 154,836 154,836 154,836 154,836Contribution to TCLAT 13,021,768 13,392,374 17,743,508 17,999,972 18,620,552 19,275,909 20,033,762 20,922,102 13,750,861Total $ 17,234,010 $ 17,455,259 $ 21,756,755 $ 21,272,536 $ 21,788,323 $ 22,327,972 $ 22,959,233 $ 23,709,696 $ 15,517,326AssumptionsWe assume that Thomas dies first, followed immediately by Jane.Taxes under "Distribution of Second Estate" include estate and income taxes, if any. Page 45
  47. 47. SUMMARY OF BENEFITS TO FAMILY - PROPOSED PLANYEAR Current 2012 2013 2014 2015 2016 2017 2018 2023Benefits to FamilyResidual estate 790,000 790,000 790,000 154,836 154,836 154,836 154,836 154,836 154,836Family trust 4,910,000 4,910,000 790,000 218,282 218,282 218,282 218,282 218,282 218,282 1529 Plans for Grandchildren 200,000 278,000 369,900 466,395 567,715 674,100 707,806 743,196 948,527Proceeds from ILIT 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000Value of QPRTs 165,000 167,463 172,487 1,941,620 2,166,519 2,399,880 2,642,027 2,893,295 4,299,094Value of GRAT - - - - - - - - 12,343,976NPV of TCLAT benefits to children 11,339,236 11,661,957 15,450,885 15,674,211 16,214,607 16,785,286 17,445,217 18,218,775 11,974,124Total assets to heirs $ 19,404,236 $ 19,807,421 $ 19,573,272 $ 20,455,345 $ 21,321,958 $ 22,232,385 $ 23,168,168 $ 24,228,384 $ 31,938,8401 Assumes growth of 5 % annually on the 529 Plans. Page 46
  48. 48. VACATION MAINTENANCE TRUST DETAILS - PROPOSED PLANYEAR Current 2012 2013 2014 2015 2016 2017 2018 2023Cash gift to new Trust 77,653 77,653 77,653 77,653 77,653 77,653 77,653 77,653 77,653Total outlay to Trust 77,653 77,653 77,653 77,653 77,653 77,653 77,653 77,653 77,653Premium 77,653 77,653 77,653 77,653 77,653 77,653 77,653 77,653 -Net death benefit from new Trust 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000Total potential death benefit $ 2,000,000 $ 2,000,000 $ 2,000,000 $ 2,000,000 $ 2,000,000 $ 2,000,000 $ 2,000,000 $ 2,000,000 $ 2,000,000 Page 47
  49. 49. GRANTOR RETAINED ANNUITY TRUST DETAILS - PROPOSED PLAN 304,123 296,854YEAR Current 2012 2013 2014 2015 2016 2017 2018 2023GRAT Balance SheetMarketable Securities - Equities - 5,409 3,569 14,936 40,487 341,766 1,670,201 2,429,328 3,352,611Investment 2 6,400,000 6,495,554 6,690,420 6,891,133 7,097,867 7,310,803 7,530,127 7,756,031 8,991,365Investment 1 2,880,000 2,862,999 2,888,889 2,915,556 2,943,022 2,710,887 1,352,064 - -Total $ 9,280,000 $ 9,363,962 $ 9,582,878 $ 9,821,625 $ 10,081,377 $ 10,363,456 $ 10,552,392 $ 10,185,359 $ 12,343,976Taxable IncomeMarketable Securities - Equities - 108 71 299 810 6,835 33,404 62,935.44Investment 2 35,558 36,089 37,172 38,287 39,435 40,618 41,837 48,500.45Investment 1 1,350,000 1,342,031 1,354,167 1,366,667 1,379,542 1,270,728 633,780 -Total Taxable Income 1,385,558 1,378,228 1,391,410 1,405,252 1,419,787 1,318,182 709,021 111,436Cash FlowYield on asset contributed 1,385,558 1,378,228 1,391,410 1,405,252 1,419,787 1,318,182 709,021 111,436Distribution of closely held stock 60,000 60,000 60,000 60,000 320,426 1,440,149 1,440,149 -GRAT payment (1,440,149) (1,440,149) (1,440,149) (1,440,149) (1,440,149) (1,440,149) (1,440,149) -Net cash to reinvest 5,409 (1,921) 11,261 25,103 300,064 1,318,182 709,021 111,436GRAT PaymentsDistribution of closely held stock 60,000 60,000 60,000 60,000 320,426 1,440,149 1,440,149 -Cash Distribution 1,380,149 1,380,149 1,380,149 1,380,149 1,119,723 - - -Total Annual Payment 1,440,149 1,440,149 1,440,149 1,440,149 1,440,149 1,440,149 1,440,149 -Total Quarterly Payments 360,037 360,037 360,037 360,037 360,037 360,037 360,037 -Grantors end of year value 9,363,962 9,363,962 9,582,878 9,821,625 10,081,377 10,363,456 10,552,392 10,185,359 -Benefit to heirs $ - $ - $ - $ - $ - $ - $ - $ 12,343,976Note: GRAT term ends in 7 years and assets remaining in the GRAT pass to heirs. During the 7 year term, part of the annual payments consist of interests in Investment 1** Investment 1 dividend of $1,500,000 given by client. Estimation based on previous years dividends. Page 48
  50. 50. QUALIFIED PERSONAL RESIDENCE TRUST DETAILS - PROPOSED PLANYEAR Current 2012 2013 2014 2015 2016 2017 2018 2023QPRT ValuesGross value of residence 1,650,000 1,674,635 1,724,874 1,776,620 1,829,919 1,884,816 1,941,361 1,999,602 2,318,086Discounted value of residence 1,485,000 1,507,171 1,552,387 1,598,958 1,646,927 1,696,335 1,747,225 1,799,641 2,086,278Diff. between gross and discount 165,000 167,463 172,487 177,662 182,992 188,482 194,136 199,960 231,809Reversionary value in estate 1,485,000 1,507,171 1,552,387 - - - - - -Rent paid to heirs post-QPRT - - - 165,000 165,000 165,000 165,000 165,000 165,000Value of home to heirs - - - 1,776,620 1,829,919 1,884,816 1,941,361 1,999,602 2,318,086Cumulative rent paid to QPRT - 4.0% return - - - 165,000 336,600 515,064 700,667 893,693 1,981,008Total Value to Heirs $ - $ - $ - $ 1,941,620 $ 2,166,519 $ 2,399,880 $ 2,642,027 $ 2,893,295 $ 4,299,094 Page 49
  51. 51. TESTAMENTARY CHARITABLE LEAD TRUST DETAILS - PROPOSED PLANYEAR Current 2012 2013 2014 2015 2016 2017 2018 2023Charitable Lead Annuity TrustBalance SheetTot. value of TCLAT assets 13,021,768 13,392,374 17,743,508 17,999,972 18,620,552 19,275,909 20,033,762 20,922,102 13,750,861Annual payment to charity if deathoccurs in the column year 783,363 805,658 1,067,414 1,082,842 1,120,175 1,159,600 1,205,191 1,258,631 827,224Benefits to CharityNPV of TCLAT income distributions** 13,021,768 13,392,374 17,743,508 17,999,972 18,620,552 19,275,909 20,033,762 20,922,102 13,750,861Total of TCLAT distributions** 15,667,263 16,113,162 21,348,270 21,656,837 22,403,494 23,191,993 24,103,811 25,172,625 16,544,479Benefits to ChildrenFuture Benefits to Heirs from TCLAT** 24,845,663 25,552,785 33,854,792 34,344,127 35,528,200 36,778,628 38,224,619 39,919,580 26,236,780NPV of benefits to children** 11,339,236 11,661,957 15,450,885 15,674,211 16,214,607 16,785,286 17,445,217 18,218,775 11,974,124 Page 50
  52. 52. BENEFITS TO BASIC FAMILY CHARITY - PROPOSED PLANYEAR Current 2012 2013 2014 2015 2016 2017 2018 2023Charitable gift of IRA assets 3,224,902 3,073,332 2,980,679 2,880,003 2,770,052 2,648,947 2,516,043 2,370,662 1,431,457Cumulative of new gifts to charity/DAF - 200,000 390,550 586,353 787,553 994,297 1,206,736 1,425,028 2,610,007NPV of TCLAT income distributions 13,021,768 13,392,374 17,743,508 17,999,972 18,620,552 19,275,909 20,033,762 20,922,102 13,750,861Total benefits to foundation $ 16,246,670 $ 16,665,706 $ 21,114,738 $ 21,466,328 $ 22,178,156 $ 22,919,153 $ 23,756,541 $ 24,717,791 $ 17,792,324 Page 51

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