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Donfrio Family Wealth Goal Achiever- InKnowVision Advanced Estate Planning

The document outlines a wealth management plan for Anthony and Dina Donfrio, focusing on financial security, estate planning, and charitable giving strategies. Key elements include maintaining a lifestyle requiring $850,000 annually, ensuring liquidity, and structuring significant charitable contributions totaling 75% of their estate. The proposed plan aims to alleviate estate taxes and project $3,900,000 in income tax savings over the next decade.

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FAMILY WEALTH GOAL ACHIEVER™ - INITIAL PREPARED FOR: ANTHONY AND DINA DONFRIO February 22, 2011 PRESENTED BY Scott Hamilton InKnowVision, LLC 715 Enterprise DR Oak Brook, IL Scott@ikvllc.com Phone: (630) 596-5090 Copyright 2011 InKnowVision, LLC
YOUR GOALS AND OBJECTIVES ACCOMPLISHED ANTHONY AND DINA DONFRIO Maintain our customary lifestyle. This should take about $850,000 annually after taxes and gifts. Provide for the financial security of the surviving spouse. Maintain adequate liquidity for emergencies and investment opportunities. We prefer to keep at least $1,000,000 in cash and readily marketable securities. Assure we have sufficient liquid assets available at our deaths to eliminate the forced liquidation of our business or real estate assets. Under the proposed plan your heirs could expect to receive approximately 25% of your estate today. Under the proposed plan charity could expect to receive as much as 75% of your estate today. Income tax savings could be as much as $3,900,000 over the next 10 years. Eliminate or reduce estate taxes. Page 2
FAMILY INFORMATION ANTHONY AND DINA DONFRIO CLIENTS Anthony Donfrio Date of Birth April 27, 1956 Dina Donfrio Date of Birth February 27, 1959 15 N. Berwyn Northbrook, IL 60670 CHILDREN CHILD'S NAME YEAR OF BIRTH Dave Donfrio 1992 Tony Donfrio 1993 Cathy Donfrio 1995 Debbie Donfrio 1996 Peter Donfrio 1998 Mary Donfrio 2000 Page 3
PERIODIC TABLE OF ESTATE PLANNING ELEMENTS - CONSIDERED ANTHONY AND DINA DONFRIO In our planning process, we start with the universe of available planning tools. While this universe is constantly changing, the following chart outlines many 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 Grantor Retained Charitable Lead Remainder Uni- 412(e) Private Annuity SCIN Liability Company 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 Outright gift to Long Term Care Corporate Premium Finance 529 Plans Family Trusts New ILIT charity at death Insurance Recapitalization Charitable Life Walton GRAT Private Foundations NIMCRUT Valuation Planning Asset Protection SPIA/Life Arbitrage Estate Revocable Living Increased Annual International Delaware Asset SPIA/Life in a CLAT Trusts, DPAs and Crummey Powers Dynasty Trust Charitable Giving VUL Protection Trust POAs Supporting Transfer of Captive IRA to Charity Gift Annuity Remainder Sales Life Estates LLC/CRTs Organizations Ownership to ILIT Charitable Succession Defined Benefit Qualified Plan Bargain Sales Risk Management Remainder Annuity ESOP Planning Planning Plans Limited Partnership Trust Page 4
PLAN ASSUMPTIONS ANTHONY AND DINA DONFRIO The plan is based on numerous assumptions. Important among these are the yield and growth assumptions contained on the balance sheet in the Financial Analysis section. Other important assumptions are contained on this Plan Assumptions page. Tax Rate Assumptions State Income Tax Rate 5% State Inheritance - Estate Tax No state estate tax Tax on IRD Unless a qualified plan is given to charity, we assume the beneficiary designations are changed to provide for a stretch out distribution. Salary and Other Earned Income Assumptions Annual increase in Anthony's earned income 5% Number of years Anthony's income is expected to continue 20 Lifestyle Need Assumptions Net annual outlay for Anthony and Dina's lifestyle needs, not including gifts or income taxes $850,000 Annual cost of living increase used in the plan 2% Settlement and Administrative Expenses Fixed estate settlement costs $25,000 Variable estate settlement costs, 1st death 0.50% (of assets) Variable estate settlement costs, 2nd death 1.00% (of assets) Page 5
INTRODUCTION TO THE PLAN STRATEGIES ROADMAP ANTHONY AND DINA DONFRIO The following section of the plan contains a step by step roadmap for each of the strategies that we are recommending. You will notice that the strategies are often interdependent; that is, in order for one strategy to be successful, you must complete another strategy as well. It is the integration of each of these strategies that allows you to most efficiently accomplish your goals. Also keep in mind that there is often more than one way to get from point A to point B. This is true in wealth transfer planning. If a particular strategy or combination of strategies is not acceptable to you, we may be able to reach the desired result in a less efficient but perhaps more acceptable way. The following pages are a conceptual road map only, there are numerous details contained in each strategy that are not detailed in the overall plan that follows. Page 6
CREATE AND FUND A FAMILY LIMITED LIABILITY COMPANY ANTHONY AND DINA DONFRIO Anthony and Dina create a limited liability company. They receive membership units including management shares. The new entity is organized to develop new investments, protect family members, streamline business succession planning, create a gifting mechanism and provide centralized management of investments. ANTHONY & DINA FAMILY LIMITED LIABILITY COMPANY Management & Member interests are split between Anthony & Dina MANAGEMENT MEMBER INTERESTS INTERESTS 1% 99% Page 7
DONFRIO CONSTUCTION DISTRIBUTION ANTHONY AND DINA DONFRIO Donfrio Construction distributes $20,000,000 of cash to Anthony. This distribution is subject to approval from all lien holders (including Edward and Tess Donfrio) and the bonding company. This distribution is also subject to agreement to issuance of guarantees to the bonding company and Edward and Tess. DONFIO CONSTRUCTION Distributes $20,000,000 of ANTHONY DONFRIO cash Note: There are additional distributions contemplated in the future. Page 8
CREATE AND FUND A FAMILY LIMITED LIABILITY COMPANY ANTHONY AND DINA DONFRIO Anthony and Dina transfer $20,000,000 of cash to the limited liability company. ANTHONY & DINA FAMILY LIMITED LIABILITY COMPANY $20,000,000 Detail of Assets Transferred Cash from Donfrio Construction Acquisition Trust 20,000,000 Total Assets Contributed 20,000,000 Note: There are expected to be future capital contributions to the FLLC. Page 9
BONDING COMPANY INTERESTS ANTHONY AND DINA DONFRIO Donfrio Construction pays a DONFRIO CONSTRUCTION fee to FLLC for pledging FLLC assets FLLC pledges assets to bonding company to secure Donfrio Construction performance obligation BONDING COMPANY Page 10
EDWARD AND TESS SECURITY INTEREST ANTHONY AND DINA DONFRIO Donfrio Construction pays a DONFRIO CONSTRUCTION FLLC fee to FLLC for pledging assets FLLC pledges assets to Edward and Tess to secure Donfrio Family Trust performance on SCIN payments EDWARD AND TESS Page 11
CAPTIVE INSURANCE COMPANY OWNERSHIP ANTHONY AND DINA DONFRIO Donfrio Construction transfers ownership so that Anthony's existing ILIT is the owner of his captive interest. The ownership for Anthony's captive will be set-up such that the profits of the company are outside of his estate for estate tax purposes. This transfer is a gift. Valuation of Anthony's interests will need to be done in order to determine the value of the gift. Anthony's interest in the ANTHONY DONFRIO Captive Insurance Company is ANTHONY'S ILIT gifted to his ILIT Owns interests in Captive Insurance Owns interests in Captive Insurance Company after transfer. Profits from Company Captive are distributed to ILIT Note: Anthony's interest in the captive is held in a single member LLC. The LLC interests will be gifted to the ILIT. Page 12
IRREVOCABLE LIFE INSURANCE TRUST ANTHONY AND DINA DONFRIO Captive insurance company profits can be distributed to Anthony's existing ILIT. Distributions could be used to purchase life insurance. Money could also be loaned to the ILIT to pay premiums. The loan could be repaid from later captive distributions. CAPTIVE INSURANCE COMPANY Profits ILIT Owns life insurance with a death benefit of $50,000,000 Premium Payment Details Survivorship policy on Anthony & Dina, annual premium payment in all years of $227,350. The first premium will be loaned to the ILIT. HEIRS Death benefit of $50,000,000, less any money lent to the ILIT for premiums, are distributed according to the terms of the ILIT. Page 13
INCREASE ANNUAL CHARITABLE GIVING ANTHONY AND DINA DONFRIO Increase charitable giving during life through annual gifts to charity from Donfrio Construction. ANTHONY & DINA $1,000,000 FAMILY CHARITY Give annually through Donfrio Construction Advantages No estate tax No income in respect of a decedent tax Most efficient asset to satisfy charitable intent Page 14
CASH AVAILABLE TO DINA IN THE EVENT OF ANTHONY'S PREMATURE DEATH - 2011 ANTHONY AND DINA DONFRIO CASH DONFRIO CONSTRUCTION - EQUITY FAMILY LLC RETIREMENT FUNDS MARKETABLE SECURITIES 621,616 42,124,690 20,000,000 149,395 209,146 In the event of Anthony's premature death DINA 63,104,847 Note: Eight years of projected available cash are shown on the next page. Page15
FINANCIAL ANALYSIS - PROPOSED PLA CASH AVAILABLE TO Dina YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Asset Values Cash and cash equivalents 621,616 621,616 621,616 621,616 621,616 621,616 621,616 621,616 621,616 Marketable securities - Equities 600,000 209,146 1,304,005 2,443,312 3,096,324 3,785,795 4,514,275 5,284,492 7,875,793 Donfrio Construction - Cash 42,124,690 42,124,690 41,459,127 41,673,666 41,771,565 44,673,464 43,095,363 41,517,262 36,992,953 Retirement plans/IRAs 141,000 149,395 159,853 171,042 183,015 195,826 209,534 224,202 274,657 Value of Family Limited Liability Comp. 20,000,000 20,000,000 30,000,000 40,000,000 45,000,000 45,000,000 50,000,000 55,000,000 60,000,000 Total Cash Available to Dinaa $ 63,487,306 $ 63,104,847 $ 73,544,601 $ 84,909,637 $ 90,672,520 $ 94,276,702 $ 98,440,788 $ 102,647,572 $ 105,765,019 Figures above reflect the cash available to Dina, each year, in the event of Anthony's premature death. Page 16
ANTHONY AND DINA DONFRIO STRATEGIES CONSIDERED BUT NOT BEING PURSUED AT THIS TIME Page 17
CREATE DELAWARE ASSET PROTECTION TRUSTS ANTHONY AND DINA DONFRIO Anthony and Dina create individual Delaware Asset Protection trusts (DAPTs). It's recommended that an independent trustee is used for the trusts. ANTHONY ANTHONY's DAPT DINA DINA's DAPT HEIRS Page 18
TRANSFER FUNDS TO DELAWARE ASSET PROTECTION TRUST ANTHONY AND DINA DONFRIO Anthony and Dina each transfer their Family Limited Liability Company assets to their individual DAPT. The transfer of FLLC units to the DAPTs will be incomplete gifts for gift tax purposes. ANTHONY ANTHONY's DAPT 50% of FLLC interests DINA DINA's DAPT 50% of FLLC interests ANTHONY AND DINA Anthony & Dina are discretionary beneficiaries of the DAPT assets Page 19
NEW CAPTIVE INSURANCE COMPANY ANTHONY AND DINA DONFRIO Consider creating a new captive insurance for Donfrio Construction to insure other risks. The ownership would be set-up such that the profits of the company are outside of his estate for estate tax purposes. DONFRIO CONSTRUCTION Premium NEW 831(b) CAPTIVE COMPANY Coverage for other risks not covered under existing Captive ANTHONY'S ILIT Owns Anthony's Captive interest Page 20
TESTAM TESTAMENTARY CHARITABLE LEAD ANNUITY TRUST (Part I) - 2011 ANTHONY AND DINA DONFRIO Include language in your trust or Will that creates a testamentary charitable lead trust (TCLAT) at the second death. ANTHONY & DINA TCLAT At death $205,481,887 of the assets taxable TCLAT owns assets with a value of in your estate will pass to the TCLAT. This $205,481,887 after your death. should bring your estate tax to $0. DONFRIO FAMILY CHARITY TCLAT Assumptions The charity will receive payments of Asset growth rate 5.00% $11,578,010 each year for a period of 25 years TCLAT payout rate 5.63% totaling $289,450,245. Present value discount rate 5.00% Assumed date of death 2011 Page 21
TESTAMENTARY CHARITABLE LEAD ANNUITY TRUST (Part II) - 2011 ANTHONY AND DINA DONFRIO 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 $42,302,058 from the At the end of the 25 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 5%. Page 22
TRANSFER XYZ ANTHONY AND DINA DONFRIO Anthony and Dina own Series A & Series B stock in XYZ, Inc. Transfer stock in XYZ, Inc. to a trust established outside Anthony & Dina's taxable estate. Transfer stock in XYZ ANTHONY & DINA worth $966,000 IRREVOCABLE TRUST Owns XYZ stock outside of Anthony & Own Series A & Series B stock in XYZ, Inc. Dina's estate after transfer HEIRS Page 23
PERIODIC TABLE OF ESTATE PLANNING ELEMENTS - RECOMMENDED ANTHONY AND DINA DONFRIO The 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 Liability Company 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 Outright gift to Long Term Care Anthony Donfrio Corporate Premium Finance 529 Plans New ILIT charity at death Insurance Family Trust Recapitalization Charitable Life Anthony Donfrio Walton GRAT Private Foundations NIMCRUT Asset Protection SPIA/Life Arbitrage Estate ILIT Revocable Living Increased Annual Donfrio International Delaware Asset SPIA/Life in a CLAT Trusts, DPAs and Crummey Powers Charitable Giving Construction Trust VUL Protection Trust POAs Supporting Transfer of Captive IRA to Charity Gift Annuity Remainder Sales Life Estates LLC/CRTs Organizations Ownership to ILIT Charitable Succession Defined Benefit Qualified Plan Bargain Sales Risk Management Remainder Annuity ESOP Planning Planning Plans Limited Partnership Trust Green equals a new Blue equals a social Yellow equals an planning tool for capital or existing planning family charitable tool tool Page 24
ANTHONY AND DINA DONFRIO INCREASE IN CHARITABLE GIVING Page 25
COMPARISON OF CHARITY RESULTS - PLAN YEAR 2011 ANTHONY AND DINA DONFRIO Existing Plan Proposed Plan Increase in Charity Outright Gift to Charity (at 2nd death) $ - $ 205,482,000 $ 205,482,000 Cumulative annual gifts $ 425,000 $ 1,000,000 $ 575,000 Family Charity $ 425,000 $ 206,631,000 $ 206,206,000 Page 26
COMPARISON OF CHARITY RESULTS - PLAN YEAR 2020 ANTHONY AND DINA DONFRIO Existing Plan Proposed Plan Increase in Charity Outright Gift to Charity (at 2nd death) $ - $ 263,037,000 $ 263,037,000 Cumulative annual gifts $ 4,654,000 $ 10,950,000 $ 6,296,000 Family Charity $ 4,654,000 $ 274,261,000 $ 269,607,000 Page 27
GIFTING TO CHARITY - EXISTING PLAN VS. PROPOSED PLAN ANTHONY AND DINA DONFRIO $280,000,000 $240,000,000 $200,000,000 $160,000,000 - $120,000,000 $80,000,000 $40,000,000 $- 11 12 13 14 15 16 17 18 19 20 20 20 20 20 20 20 20 20 20 20 Proposed Plan Charity Current Plan Charity This chart compares the amount of your gifts to charity in the current plan as against the proposed plan. Page 28
ANTHONY AND DINA DONFRIO INCOME TAX SAVINGS Page 29
COMPARISON OF INCOME TAX RESULTS - PLAN YEAR 2011 ANTHONY AND DINA DONFRIO Existing Plan Proposed Plan Income Tax Saved 2011 Estimated Income Tax $ 12,946,000 $ 12,556,000 $ 390,000 2012 Estimated Income Tax $ 8,063,000 $ 7,673,000 $ 390,000 2013 Estimated Income Tax $ 8,626,000 $ 8,236,000 $ 390,000 2014 Estimated Income Tax $ 5,248,000 $ 4,858,000 $ 390,000 2015 Estimated Income Tax $ 3,844,000 $ 3,454,000 $ 390,000 2016 Estimated Income Tax $ 3,844,000 $ 3,454,000 $ 390,000 2017 Estimated Income Tax $ 3,844,000 $ 3,454,000 $ 390,000 2018 Estimated Income Tax $ 3,844,000 $ 3,454,000 $ 390,000 2019 Estimated Income Tax $ 3,844,000 $ 3,454,000 $ 390,000 2020 Estimated Income Tax $ 3,844,000 $ 3,454,000 $ 390,000 10 Year Estimated Income Tax Saved $ 3,900,000 Note: These income tax estimations represent the income taxes due inside of the Donfrio Construction. Savings are created through increase in annual charitable giving. Page 30
INCOME TAXES DUE - CURRENT VS. PROPOSED ANTHONY AND DINA DONFRIO $13,000,000 $12,000,000 $11,000,000 $10,000,000 $9,000,000 $8,000,000 - $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Current Plan Proposed Plan Page 31
COMPARISON OF PLAN RESULTS - PLAN YEAR 2020 ANTHONY AND DINA DONFRIO Existing Plan Proposed Plan Advantage Estate Value $ 205,382,022 $ 267,450,791 Heirs Receive Immediately $ 97,025,133 $ 56,747,790 $ (40,277,344) Family Charity $ 4,653,631 $ 274,261,005 $ 269,607,373 Estate and Income Tax $ 111,363,538 $ - $ 111,363,538 ** This does not include $20M of life insurance on Anthony's life. This chart assumes that you both die at life expectancy and compares the results of the current plan with the proposed plan. Page 32
DETAILED FINANCIAL ANALYSIS ANTHONY AND DINA DONFRIO INTRODUCTION The following section of the plan contains all of the financial analysis used to show you where you stand with your current plan and what is possible with the proposed plan. All of the numbers are based on information provided by you or gleaned from statements and tax returns. If numbers do not look correct, please let us know so that we can make appropriate changes. Assumed growth and yield numbers are all listed on the Net Worth pages contained in these sections. Page 33
DETAILED FINANCIAL ANALYSIS ANTHONY AND DINA DONFRIO CURRENT PLAN FINANCIALS In the Current Plan Section you will find a Net Worth Statement and a detailed cash flow and asset value projection analysis. Page 34
CURRENT NET WORTH STATEMENT ANTHONY AND DINA DONFRIO ANTHONY DINA JOINT TOTAL YIELD GROWTH CASH AND EQUIVALENTS Bank 300,000 300,000 - 600,000 0.7% 0.0% Brokerage 10,808 10,808 - 21,616 2.0% 0.0% Total of Cash and Equivalents 310,808 310,808 - 621,616 0.8% 0.0% MARKETABLE SECURITIES - EQUITIES Brokerage 300,000 300,000 - 600,000 1.2% 5.0% Total of Equities 300,000 300,000 - 600,000 1.2% 5.0% 529 PLANS 529 Plans 390,000 - - 390,000 0.0% 0.0% Total of 529 Plans 390,000 - - 390,000 0.0% 0.0% Page 35
CURRENT NET WORTH STATEMENT (Page 2) ANTHONY AND DINA DONFRIO ANTHONY DINA JOINT TOTAL YIELD GROWTH OTHER INVESTMENTS XYZ-A 163,000 163,000 - 326,000 0.0% 5.0% XYZ-B 320,000 320,000 - 640,000 0.0% 5.0% Captive Insurance Company 100,000 100,000 - 200,000 0.0% 0.0% Total of Other Investments 583,000 583,000 - 1,166,000 0.0% 4.1% Donfrio Construction Donfrio Construction 192,000,000 - - 192,000,000 0.0% 3.0% Total of Donfrio Construction 192,000,000 - - 192,000,000 0.0% 3.0% RETIREMENT PLANS/IRAs Donfrio Construction Co. 401(k) 120,000 - 120,000 0.0% 7.0% Brokerage IRA 5,000 - 5,000 0.0% 7.0% Brokerage IRA - 16,000 16,000 0.0% 7.0% Total Retirement Plans 125,000 16,000 141,000 0.0% 7.0% Page 36
CURRENT NET WORTH STATEMENT (Page 3) ANTHONY AND DINA DONFRIO ANTHONY DINA JOINT TOTAL YIELD GROWTH CLOSELY HELD BUSINESS Other Trust 200,000 - - 200,000 0.0% 0.0% Total of Closely Held Business 200,000 - - 200,000 0.0% 0.0% RESIDENTIAL REAL ESTATE 15 N. Berwyn 1,000,000 1,000,000 - 2,000,000 0.0% 3.0% Total of Personal Residences 1,000,000 1,000,000 - 2,000,000 0.0% 3.0% PERSONAL PROPERTY Toys 5,000 5,000 - 10,000 0.0% 0.0% Jewelry 20,000 20,000 - 40,000 0.0% 0.0% Furnishings 90,000 90,000 - 180,000 0.0% 0.0% Personal Property 5,000 5,000 - 10,000 0.0% 0.0% Total of Personal Property 120,000 120,000 - 240,000 0.0% 0.0% TOTAL ASSETS 195,028,808 2,329,808 - 197,358,616 TOTAL LIABILITIES - - - - NET WORTH 195,028,808 2,329,808 - 197,358,616 Page 37
SCHEDULE OF LIFE INSURANCE BENEFITS - CURRENT PLAN ANTHONY AND DINA DONFRIO COMPANY INSURED POLICY # BENEFICIARY PREMIUM CASH VALUE DEATH BENEFIT Policies owned by Anthony Term Insurance Anthony # Dina - - 1,250,000 Term Insurance Anthony # Dina - - 250,000 Totals - - 1,500,000 Other Policies - Owned by ANTHONY DONFRIO Irrevocable Trust Term Insurance Anthony # Donfrio Family Trust 17,000 - 20,000,000 Totals 17,000 - 20,000,000 Policies owned by ILIT VUL Anthony # Donfrio ILIT 3,000 200,000 4,000,000 Totals 3,000 200,000 4,000,000 Page 38
FINANCIAL ANALYSIS - EXISTING PLAN ASSET VALUE PROJECTIONS - EXISTING PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Asset Values Cash and cash equivalents 621,616 621,616 621,616 621,616 621,616 621,616 621,616 621,616 621,616 Marketable securities - Equities 600,000 (138,363) 592,003 1,364,458 1,638,537 1,935,005 2,256,019 2,603,915 3,833,415 529 Plans (value inside estate) 390,000 312,000 234,000 156,000 78,000 - - - - Other investments 1,166,000 1,477,164 1,808,354 2,153,263 2,512,459 2,886,534 3,006,105 3,130,629 3,536,013 Donfrio Construction Trust 192,000,000 192,000,000 192,000,000 192,000,000 192,000,000 192,000,000 192,000,000 192,000,000 192,000,000 Retirement plans/IRAs 141,000 149,395 159,853 171,042 183,015 195,826 209,534 224,202 274,657 Closely Held Business 1 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 2,200,000 Personal residences 2,000,000 2,051,177 2,112,713 2,176,094 2,241,377 2,308,618 2,377,877 2,449,213 2,676,321 Personal property 240,000 240,000 240,000 240,000 240,000 240,000 240,000 240,000 240,000 Total assets in estate 197,358,616 197,112,990 198,368,538 199,682,473 200,515,003 201,387,599 202,111,151 202,869,574 205,382,022 Combined net worth $ 197,358,616 $ 197,112,990 $ 198,368,538 $ 199,682,473 $ 200,515,003 $ 201,387,599 $ 202,111,151 $ 202,869,574 $ 205,382,022 1 Projected growth for Trust is $200k annually. 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 39
TAXABLE INCOME PROJECTIONS - EXISTING PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Sources of taxable income Cash and cash equivalents 4,898 4,898 4,898 4,898 4,898 4,898 4,898 4,898 Marketable securities - Equities 7,402 (1,707) 7,303 16,833 20,214 23,872 27,832 41,824 Client earned income 500,000 500,000 525,000 551,250 578,813 607,753 638,141 670,048 775,664 Gross income $ 512,300 $ 528,191 $ 563,452 $ 600,544 $ 632,866 $ 666,911 $ 702,778 $ 822,386 Page 40
INCOME TAX PROJECTIONS - EXISTING PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Income tax Estimation Adjusted gross income: Dividend income (marketable sec.) 7,402 (1,707) 7,303 16,833 20,214 23,872 27,832 41,824 Earned and other income 504,898 529,898 556,148 583,711 612,651 643,039 674,946 780,562 Adjusted gross income 512,300 528,191 563,452 600,544 632,866 666,911 702,778 822,386 Deductions Real estate tax 47,650 47,650 48,603 49,575 50,567 51,578 52,609 53,662 56,946 Illinois state income taxes 25,615 26,410 28,173 30,027 31,643 33,346 35,139 41,119 Interest 78,521 78,521 80,091 81,693 83,327 84,994 86,694 88,427 93,840 Charitable gifts 425,000 425,000 425,000 425,000 425,000 425,000 425,000 425,000 425,000 Charitable Deduction available 425,000 425,000 425,000 425,000 425,000 425,000 425,000 425,000 Charitable Deduction allowed 256,150 264,096 281,726 300,272 316,433 333,455 351,389 411,193 Deduction carried over 168,850 160,904 143,274 124,728 108,567 91,545 73,611 13,807 Total deductions 407,936 419,200 441,167 464,193 484,648 506,104 528,617 603,098 Reductions - - (11,900) (13,012) (13,982) (15,003) (16,079) (19,668) Deductions allowed 407,936 419,200 429,267 451,180 470,666 491,100 512,538 583,431 Taxable income 104,364 108,992 134,184 149,363 162,200 175,810 190,240 238,955 Federal and State income tax $ 43,216 $ 45,907 $ 58,256 $ 64,661 $ 70,257 $ 76,178 $ 82,445 $ 104,860 Note: Does not include income taxes being paid by DFT. All company income and tax is computed on the DFT equity forecast pages. Page 41
CASH FLOW PROJECTIONS - EXISTING PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Sources of income for Lifestyle Distribution from Marketable Securities 763,916 - - - - - - - Distribution from DFT 1,545,000 1,550,000 1,550,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Consumable income (taxable) 512,300 528,191 563,452 600,544 632,866 666,911 702,778 822,386 Total income available for lifestyle 2,821,216 2,078,191 2,113,452 1,600,544 1,632,866 1,666,911 1,702,778 1,822,386 Uses of Cash Living expenses 850,000 867,000 884,340 902,027 920,067 938,469 957,238 1,015,829 Income tax 43,216 45,907 58,256 64,661 70,257 76,178 82,445 104,860 Cash gifts to ILIT 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 Mortgage Pay Off 1,500,000 - - - - - - - Cash gifts to charity 425,000 425,000 425,000 425,000 425,000 425,000 425,000 425,000 Total uses of cash 2,821,216 1,340,907 1,370,596 1,394,688 1,418,324 1,442,647 1,467,683 1,548,688 Surplus $ - $ 737,284 $ 742,855 $ 205,856 $ 214,541 $ 224,264 $ 235,095 $ 273,698 In the event that there is a cash flow surplus, the surplus is added to the marketable securities row on the "Asset Value Projections" 3 pages earlier. If there is a cash flow shortage (spending or gifting capital) then the shortage is treated as a reduction in marketable securities row on the "Asset Value Projections" 3 pages earlier. Page 42
FIRST ESTATE TAX ESTIMATION AND DISTRIBUTION - EXISTING PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Tax calculation on Anthony's death Combined net worth 197,358,616 197,112,990 198,368,538 199,682,473 200,515,003 201,387,599 202,111,151 202,869,574 205,382,022 Anthony's estimated estate 195,028,808 194,786,081 196,026,808 197,325,232 198,147,934 199,010,229 199,725,239 200,474,709 202,957,498 Death benefit exceeding CV 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 Total gross estate 196,528,808 196,286,081 197,526,808 198,825,232 199,647,934 200,510,229 201,225,239 201,974,709 204,457,498 Settlement expenses (1,007,644) (1,006,430) (1,012,634) (1,019,126) (1,023,240) (1,027,551) (1,031,126) (1,034,874) (1,047,287) Joint, personal and IRA to Dina (245,000) (252,442) (261,713) (271,633) (282,248) (293,605) (305,757) (318,760) (363,490) Insurance passing to Dina (1,500,000) (1,500,000) (1,500,000) (1,500,000) (1,500,000) (1,500,000) (1,500,000) (1,500,000) (1,500,000) Outright or in trust to Dina (189,126,164) (188,877,208) (190,102,460) (195,384,473) (196,192,447) (197,039,073) (197,738,356) (198,471,076) (200,896,721) Taxable estate 4,650,000 4,650,000 4,650,000 650,000 650,000 650,000 650,000 650,000 650,000 Plus Anthony's lifetime taxable gifts 350,000 350,000 350,000 350,000 350,000 350,000 350,000 350,000 350,000 Tax base 5,000,000 5,000,000 5,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Federal Estate Tax - - - - - - - - - Distribution of Anthony's estate Settlement expenses 1,007,644 1,006,430 1,012,634 1,019,126 1,023,240 1,027,551 1,031,126 1,034,874 1,047,287 To family trust 4,650,000 4,650,000 4,650,000 650,000 650,000 650,000 650,000 650,000 650,000 Joint, personal and IRA to Dina 245,000 252,442 261,713 271,633 282,248 293,605 305,757 318,760 363,490 Insurance passing to Dina 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 Outright or in trust to Dina 189,126,164 188,877,208 190,102,460 195,384,473 196,192,447 197,039,073 197,738,356 198,471,076 200,896,721 Total $ 196,528,808 $ 196,286,081 $ 197,526,808 $ 198,825,232 $ 199,647,934 $ 200,510,229 $ 201,225,239 $ 201,974,709 $ 204,457,498 Assumptions We assume that Anthony dies first, followed immediately by Dina. Taxes under "Distribution of First Estate" include estate and income taxes. Page 43
SECOND ESTATE TAX ESTIMATION AND DISTRIBUTION - EXISTING PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Tax Calculation on Dina's death Dina's assets 2,329,808 2,326,908 2,341,730 2,357,241 2,367,069 2,377,370 2,385,911 2,394,865 2,424,524 Plus assets from Anthony's estate 190,871,164 190,629,651 191,864,174 197,156,106 197,974,695 198,832,678 199,544,113 200,289,836 202,760,211 Dina's estimated estate 193,200,972 192,956,559 194,205,904 199,513,347 200,341,764 201,210,048 201,930,024 202,684,700 205,184,735 Settlement expenses (1,957,010) (1,954,566) (1,967,059) (2,020,133) (2,028,418) (2,037,100) (2,044,300) (2,051,847) (2,076,847) Dina's taxable estate 191,243,962 191,001,994 192,238,845 197,493,213 198,313,346 199,172,948 199,885,724 200,632,853 203,107,887 Tax base 191,243,962 191,001,994 192,238,845 197,493,213 198,313,346 199,172,948 199,885,724 200,632,853 203,107,887 Federal Estate Tax 65,185,387 65,100,698 65,533,596 108,275,467 108,726,540 109,199,321 109,591,348 110,002,269 111,363,538 Total Estate Tax Due 65,185,387 65,100,698 65,533,596 108,275,467 108,726,540 109,199,321 109,591,348 110,002,269 111,363,538 Distribution of Dina's estate Settlement expenses 1,957,010 1,954,566 1,967,059 2,020,133 2,028,418 2,037,100 2,044,300 2,051,847 2,076,847 Taxes 65,185,387 65,100,698 65,533,596 108,275,467 108,726,540 109,199,321 109,591,348 110,002,269 111,363,538 Qualified plan to heirs 141,000 149,395 159,853 171,042 183,015 195,826 209,534 224,202 274,657 Residual estate to heirs 125,917,575 125,751,901 126,545,396 89,046,704 89,403,790 89,777,800 90,084,842 90,406,382 91,469,693 Total $ 193,200,972 $ 192,956,559 $ 194,205,904 $ 199,513,347 $ 200,341,764 $ 201,210,048 $ 201,930,024 $ 202,684,700 $ 205,184,735 Assumptions We assume that Anthony dies first, followed immediately by Dina. Taxes under "Distribution of Second Estate" include estate and income taxes. Page 44
SUMMARY OF BENEFITS TO FAMILY - EXISTING PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Benefits to Family Family trust 4,650,000 4,650,000 4,650,000 650,000 650,000 650,000 650,000 650,000 650,000 Residual estate 125,917,575 125,751,901 126,545,396 89,046,704 89,403,790 89,777,800 90,084,842 90,406,382 91,469,693 Qualified plan assets 141,000 149,395 159,853 171,042 183,015 195,826 209,534 224,202 274,657 529 Plan 130,000 135,536 142,313 149,429 156,900 164,745 172,983 181,632 210,261 529 Plan 130,000 135,536 142,313 149,429 156,900 164,745 172,983 181,632 210,261 529 Plan 130,000 135,536 142,313 149,429 156,900 164,745 172,983 181,632 210,261 Proceeds from Donfrio Accumulation Trust 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 Total assets to heirs $ 135,098,575 $ 134,957,905 $ 135,782,189 $ 94,316,033 $ 94,707,507 $ 95,117,862 $ 95,463,324 $ 95,825,479 $ 97,025,133 Page 45
BENEFITS TO CHARITY - EXISTING PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Cumulative Annual Gifts to Charity Annual gift to charity 425,000 425,000 425,000 425,000 425,000 425,000 425,000 425,000 Cumulative Annual Gifts to Charity 425,000 858,500 1,300,670 1,751,683 2,211,717 2,680,951 3,159,570 4,653,631 Page 46
DETAILS OF ANTHONY'S QUALIFIED PLAN - EXISTING PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Anthony's Qualified Plans Anthony's Age 55 56 57 58 59 60 61 64 Dina's Age 52 53 54 55 56 57 58 61 Minimum distribution factor 41.6 40.7 39.7 38.7 37.8 36.8 35.8 33.0 Plan contributions - - - - - - - - Plan balance 125,000 132,442 141,713 151,633 162,248 173,605 185,757 198,760 243,490 Page 47
DETAILS OF DINA'S QUALIFIED PLAN - EXISTING PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Dina's Qualified Plans Dina's Age 52 53 54 55 56 57 58 61 Anthony's Age 55 56 57 58 59 60 61 64 Minimum distribution factor 44.6 43.6 42.6 41.6 40.7 39.7 38.7 35.8 Plan contributions - - - - - - - - Plan balance 16,000 16,953 18,139 19,409 20,768 22,221 23,777 25,441 31,167 Page 48
DETAILED FINANCIAL ANALYSIS ANTHONY AND DINA DONFRIO PROPOSED PLAN FINANCIALS In the Proposed Plan Section you will find a balance sheet which reflects the repositioning of assets as set out in the step by step roadmap in the proceeding section. You will also find detailed cash flow and asset projection information on each of the proposed planning strategies. Page 49
NET WORTH STATEMENT AFTER PLAN IMPLEMENTATION ANTHONY AND DINA DONFRIO ANTHONY DINA JOINT TOTAL YIELD GROWTH CASH AND EQUIVALENTS Bank 300,000 300,000 - 600,000 0.7% 0.0% Brokerage 10,808 10,808 - 21,616 2.0% 0.0% Total of Cash and Equivalents 310,808 310,808 - 621,616 0.8% 0.0% MARKETABLE SECURITIES - EQUITIES Brokerage 300,000 300,000 - 600,000 1.2% 5.0% Total of Equities 300,000 300,000 - 600,000 1.2% 5.0% 529 PLANS 529 Plans 390,000 - - 390,000 0.0% 0.0% Total of 529 Plans 390,000 - - 390,000 0.0% 0.0% Page 50
REVISED NET WORTH STATEMENT (Page 2) ANTHONY AND DINA DONFRIO ANTHONY DINA JOINT TOTAL YIELD GROWTH OTHER INVESTMENTS XYZ-A 163,000 163,000 - 326,000 0.0% 5.0% XYZ-B 320,000 320,000 - 640,000 0.0% 5.0% Total of Other Investments 483,000 483,000 - 966,000 0.0% 5.0% Donfrio Construction Donfrio Construction 192,000,000 - - 192,000,000 0.0% 3.0% Total of Donfrio Construction 192,000,000 - - 192,000,000 0.0% 3.0% RETIREMENT PLANS/IRAs Donfrio Construction Co. 401(k) 120,000 - 120,000 0.0% 7.0% Brokerage IRA 5,000 - 5,000 0.0% 7.0% Brokerage IRA - 16,000 16,000 0.0% 7.0% Total Retirement Plans 125,000 16,000 141,000 0.0% 7.0% Page 51
REVISED NET WORTH STATEMENT (Page 3) ANTHONY AND DINA DONFRIO ANTHONY DINA JOINT TOTAL YIELD GROWTH CLOSELY HELD BUSINESS Other Trust 200,000 - - 200,000 0.0% 0.0% Total of Closely Held Business 200,000 - - 200,000 0.0% 0.0% RESIDENTIAL REAL ESTATE 15 N. Berwyn 1,000,000 1,000,000 - 2,000,000 0.0% 3.0% Total of Personal Residences 1,000,000 1,000,000 - 2,000,000 0.0% 3.0% PERSONAL PROPERTY Toys 5,000 5,000 - 10,000 0.0% 0.0% Jewelry 20,000 20,000 - 40,000 0.0% 0.0% Furnishings 90,000 90,000 - 180,000 0.0% 0.0% Personal Property 5,000 5,000 - 10,000 0.0% 0.0% Total of Personal Property 120,000 120,000 - 240,000 0.0% 0.0% OTHER STRATEGY ASSETS Family Limited Liability Company 10,000,000 10,000,000 - 20,000,000 Total of Other Strategy Assets 10,000,000 10,000,000 - 20,000,000 TOTAL ASSETS 204,928,808 12,229,808 - 217,158,616 TOTAL LIABILITIES - - - - NET WORTH 204,928,808 12,229,808 - 217,158,616 Page 52
FINANCIAL ANALYSIS - PROPOSED PLA ASSET VALUE PROJECTIONS - PROPOSED PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Asset Values Cash and cash equivalents 621,616 621,616 621,616 621,616 621,616 621,616 621,616 621,616 621,616 Marketable securities - Equities 600,000 209,146 1,304,005 2,443,312 3,096,324 3,785,795 4,514,275 5,284,492 7,875,793 529 Plans (value inside estate) 390,000 312,000 234,000 156,000 78,000 - - - - Other investments 966,000 1,007,139 1,057,496 1,110,371 1,165,890 1,224,184 1,285,394 1,349,663 1,562,404 Donfrio Construction Trust 192,000,000 192,000,000 192,000,000 192,000,000 192,000,000 192,000,000 192,000,000 192,000,000 192,000,000 Retirement plans/IRAs 141,000 149,395 159,853 171,042 183,015 195,826 209,534 224,202 274,657 Closely Held Business 1 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 2,200,000 Personal residences 2,000,000 2,051,177 2,112,713 2,176,094 2,241,377 2,308,618 2,377,877 2,449,213 2,676,321 Personal property 240,000 240,000 240,000 240,000 240,000 240,000 240,000 240,000 240,000 Value of Family Limited Liability Company 20,000,000 20,000,000 30,000,000 40,000,000 45,000,000 45,000,000 50,000,000 55,000,000 60,000,000 Total assets in estate 217,158,616 216,990,474 228,329,683 239,718,436 245,626,222 246,576,040 252,648,696 258,769,186 267,450,791 Combined net worth $ 217,158,616 $ 216,990,474 $ 228,329,683 $ 239,718,436 $ 245,626,222 $ 246,576,040 $ 252,648,696 $ 258,769,186 $ 267,450,791 1 Projected growth for Trust is $200k annually. 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 53
TAXABLE INCOME PROJECTIONS - PROPOSED PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Sources of Taxable Income Cash and cash equivalents 4,898 4,898 4,898 4,898 4,898 4,898 4,898 4,898 Marketable securities - Equities 7,402 2,580 16,087 30,142 38,198 46,704 55,691 85,888 Client earned income 500,000 500,000 525,000 551,250 578,813 607,753 638,141 670,048 775,664 Gross income $ 512,300 $ 532,478 $ 572,235 $ 613,853 $ 650,850 $ 689,743 $ 730,637 $ 866,451 Note: All company income and tax is computed on the DFT equity forecast pages. Page 54
INCOME TAX PROJECTIONS - PROPOSED PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Income Tax Estimation Adjusted gross income: Dividend income (Marketable Sec.) 7,402 2,580 16,087 30,142 38,198 46,704 55,691 85,888 Earned and other income 504,898 529,898 556,148 583,711 612,651 643,039 674,946 780,562 Adjusted gross income 512,300 532,478 572,235 613,853 650,850 689,743 730,637 866,451 Deductions Real Estate Tax 47,650 48,603 49,575 50,567 51,578 52,609 53,662 56,946 Illinois state income taxes 25,615 26,624 28,612 30,693 32,542 34,487 36,532 43,323 Interest 78,521 80,091 81,693 83,327 84,994 86,694 88,427 93,840 Total deductions 151,786 155,318 159,880 164,586 169,114 173,790 178,621 194,109 Reductions - - (12,163) (13,412) (14,521) (15,688) (16,915) (20,990) Deductions allowed 151,786 155,318 147,717 151,175 154,593 158,102 161,706 173,119 Taxable income 360,514 377,160 424,518 462,678 496,257 531,641 568,931 693,332 Federal and State income tax $ 120,707 $ 128,077 $ 160,788 $ 177,980 $ 193,127 $ 209,084 $ 225,896 $ 281,949 Note: Does not include income taxes being paid by DFT. All company income and tax is computed on the DFT equity forecast pages. Page 55
CASH FLOW PROJECTIONS - PROPOSED PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Sources of Income for Lifestyle Consumable income (taxable) 512,300 532,478 572,235 613,853 650,850 689,743 730,637 866,451 Distribution from DFT 1,545,000 1,550,000 1,550,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Distribution from Marketable Securities 416,407 - - - - - - - Total income available for lifestyle 2,473,707 2,082,478 2,122,235 1,613,853 1,650,850 1,689,743 1,730,637 1,866,451 Uses of Cash Living expenses 850,000 867,000 884,340 902,027 920,067 938,469 957,238 1,015,829 Income tax 120,707 128,077 160,788 177,980 193,127 209,084 225,896 281,949 Mortgage Pay Off 1,500,000 - - - - - - - Cash gifts to ILIT 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 Total uses of cash 2,473,707 998,077 1,048,128 1,083,007 1,116,195 1,150,553 1,186,134 1,300,778 Surplus $ - $ 1,084,402 $ 1,074,107 $ 530,846 $ 534,655 $ 539,190 $ 544,503 $ 565,673 In the event that there is a cash flow surplus, the surplus is added to the marketable securities row on the "Asset Value Projections" 3 pages earlier. Page 56
FIRST ESTATE TAX ESTIMATION AND DISTRIBUTION - PROPOSED PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Tax calculation on Anthony's death Combined Net Worth 217,158,616 216,990,474 228,329,683 239,718,436 245,626,222 246,576,040 252,648,696 258,769,186 267,450,791 Anthony's estimated estate 204,928,808 204,770,135 215,470,749 226,218,118 231,793,192 232,689,519 238,420,179 244,195,979 252,388,658 Death benefit exceeding CV 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 Total gross estate 206,428,808 206,270,135 216,970,749 227,718,118 233,293,192 234,189,519 239,920,179 245,695,979 253,888,658 Settlement expenses (1,057,144) (1,056,351) (1,109,854) (1,163,591) (1,191,466) (1,195,948) (1,224,601) (1,253,480) (1,294,443) Joint, personal and IRA to Dina (245,000) (252,442) (261,713) (271,633) (282,248) (293,605) (305,757) (318,760) (363,490) Insurance passing to Dina (1,500,000) (1,500,000) (1,500,000) (1,500,000) (1,500,000) (1,500,000) (1,500,000) (1,500,000) (1,500,000) Outright or in trust to Dina (198,976,664) (198,811,342) (209,449,182) (224,132,894) (229,669,479) (230,549,967) (236,239,820) (241,973,739) (250,080,725) Taxable estate 4,650,000 4,650,000 4,650,000 650,000 650,000 650,000 650,000 650,000 650,000 Plus Anthony's lifetime taxable gifts 350,000 350,000 350,000 350,000 350,000 350,000 350,000 350,000 350,000 Tax base 5,000,000 5,000,000 5,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Tentative Federal Estate Tax - - - - - - - - - Distribution of First Estate Settlement expenses 1,057,144 1,056,351 1,109,854 1,163,591 1,191,466 1,195,948 1,224,601 1,253,480 1,294,443 To family trust 4,650,000 4,650,000 4,650,000 650,000 650,000 650,000 650,000 650,000 650,000 Joint, personal and IRA to Dina 245,000 252,442 261,713 271,633 282,248 293,605 305,757 318,760 363,490 Insurance passing to Dina 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 Outright or in trust to Dina 198,976,664 198,811,342 209,449,182 224,132,894 229,669,479 230,549,967 236,239,820 241,973,739 250,080,725 Total $ 206,428,808 $ 206,270,135 $ 216,970,749 $ 227,718,118 $ 233,293,192 $ 234,189,519 $ 239,920,179 $ 245,695,979 $ 253,888,658 Assumptions We assume that Anthony dies first, followed immediately by Dina. Taxes under "Distribution of First Estate" include estate and income taxes, if any. Page 57
SECOND ESTATE TAX ESTIMATION AND DISTRIBUTION - PROPOSED PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Tax Calculation on Dina's death Dina's assets 12,229,808 12,220,339 12,858,933 13,500,318 13,833,029 13,886,521 14,228,517 14,573,207 15,062,132 Plus assets from Anthony's estate 200,721,664 200,563,784 211,210,895 225,904,527 231,451,726 232,343,572 238,045,578 243,792,499 251,944,215 Dina's estimated estate 212,951,472 212,784,123 224,069,829 239,404,845 245,284,756 246,230,092 252,274,095 258,365,706 267,006,347 Settlement expenses (2,154,515) (2,152,841) (2,265,698) (2,419,048) (2,477,848) (2,487,301) (2,547,741) (2,608,657) (2,695,063) Charitable gift of IRA assets (141,000) (149,395) (159,853) (171,042) (183,015) (195,826) (209,534) (224,202) (274,657) Deduction from Gift to Charity (205,655,957) (205,481,887) (216,644,278) (235,814,755) (241,623,893) (242,546,965) (248,516,819) (254,532,847) (263,036,627) Taxable estate 5,000,000 5,000,000 5,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Tax base 5,000,000 5,000,000 5,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Federal Estate Tax - - - - - - - - - Distribution of Second Estate Settlement expenses 2,154,515 2,152,841 2,265,698 2,419,048 2,477,848 2,487,301 2,547,741 2,608,657 2,695,063 Taxes - - - - - - - - - Other gifts to charity 141,000 149,395 159,853 171,042 183,015 195,826 209,534 224,202 274,657 Residual estate to heirs 5,000,000 5,000,000 5,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Outright Gift to Charity 205,655,957 205,481,887 216,644,278 235,814,755 241,623,893 242,546,965 248,516,819 254,532,847 263,036,627 Total $ 212,951,472 $ 212,784,123 $ 224,069,829 $ 239,404,845 $ 245,284,756 $ 246,230,092 $ 252,274,095 $ 258,365,706 $ 267,006,347 Assumptions We assume that Anthony dies first, followed immediately by Dina. Taxes under "Distribution of Second Estate" include estate and income taxes, if any. Page 58
SUMMARY OF BENEFITS TO FAMILY - PROPOSED PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Benefits to Family Residual estate 5,000,000 5,000,000 5,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Family trust 4,650,000 4,650,000 4,650,000 650,000 650,000 650,000 650,000 650,000 650,000 Captive Insurance Company 42,650 42,650 86,153 130,526 175,787 221,952 269,041 317,072 467,006 529 Plan 130,000 135,536 142,313 149,429 156,900 164,745 172,983 181,632 210,261 529 Plan 130,000 135,536 142,313 149,429 156,900 164,745 172,983 181,632 210,261 529 Plan 130,000 135,536 142,313 149,429 156,900 164,745 172,983 181,632 210,261 Proceeds from ILIT 54,000,000 54,000,000 54,000,000 54,000,000 54,000,000 54,000,000 54,000,000 54,000,000 54,000,000 Total assets to heirs $ 64,082,650 $ 64,099,259 $ 64,163,093 $ 56,228,813 $ 56,296,487 $ 56,366,188 $ 56,437,989 $ 56,511,967 $ 56,747,790 Page 59
CAPTIVE INSURANCE COMPANY DETAILS - PROPOSED PLAN Transferred YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Cash Flow Details Anthony's share of Captive profits 270,000 270,000 270,000 270,000 270,000 270,000 270,000 270,000 Annual Profits distributed to ILIT (227,350) (227,350) (227,350) (227,350) (227,350) (227,350) (227,350) (227,350) Excess Cash Flow in Captive 42,650 42,650 42,650 42,650 42,650 42,650 42,650 42,650 Cumulative Excess Cash Flow in Captive 42,650 86,153 130,526 175,787 221,952 269,041 317,072 467,006 Page 60
FAMILY LIMITED LIABILITY COMPANY DETAILS - PROPOSED PLAN 0% YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Balance Sheet Family Limited Liability Company Assets Cumulative Capital Contribution from DFT 20,000,000 30,000,000 40,000,000 45,000,000 45,000,000 50,000,000 55,000,000 60,000,000 Total 20,000,000 30,000,000 40,000,000 45,000,000 45,000,000 50,000,000 55,000,000 60,000,000 Annual Capital Contributions 20,000,000 10,000,000 10,000,000 5,000,000 - 5,000,000 5,000,000 Assets in Family Limited Liability Company $ 20,000,000 $ 30,000,000 $ 40,000,000 $ 45,000,000 $ 45,000,000 $ 50,000,000 $ 55,000,000 $ 60,000,000 Page 61
IRREVOCABLE LIFE INSURANCE TRUST DETAILS - PROPOSED PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Premiums for Existing ILIT 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 Total outlay to ILITs 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 - New Policy Premiums funded by profits from the transferred Captive Insurance Company interests New Policy - Annual Premium 227,350 227,350 227,350 227,350 227,350 227,350 227,350 227,350 DB from Donfrio Accumulation Trust 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 Net death benefit from new ILIT 50,000,000 50,000,000 50,000,000 50,000,000 50,000,000 50,000,000 50,000,000 50,000,000 50,000,000 Total potential death benefit $ 54,000,000 $ 54,000,000 $ 54,000,000 $ 54,000,000 $ 54,000,000 $ 54,000,000 $ 54,000,000 $ 54,000,000 $ 54,000,000 Page 62
BENEFITS TO DONFRIO FAMILY CHARITY - PROPOSED PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Charitable gift of IRA assets 141,000 149,395 159,853 171,042 183,015 195,826 209,534 224,202 274,657 Cumulative annual gifts to charity - 1,000,000 2,020,000 3,060,400 4,121,608 5,204,040 6,308,121 7,434,283 10,949,721 Outright Gift to Charity at 2nd death 205,655,957 205,481,887 216,644,278 235,814,755 241,623,893 242,546,965 248,516,819 254,532,847 263,036,627 Total benefits to foundation $ 205,796,957 $ 206,631,282 $ 218,824,131 $ 239,046,197 $ 245,928,516 $ 247,946,832 $ 255,034,475 $ 262,191,332 $ 274,261,005 Page 63
DETAILS OF ANTHONY'S QUALIFIED PLAN - PROPOSED PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Anthony's Qualified Plans Anthony's age 55 56 57 58 59 60 61 64 Dina's age 52 53 54 55 56 57 58 61 Minimum distribution factor 41.6 40.7 39.7 38.7 37.8 36.8 35.8 33.0 Securities in plans 125,000 132,442 141,713 151,633 162,248 173,605 185,757 198,760 243,490 Plan balance during life 125,000 132,442 141,713 151,633 162,248 173,605 185,757 198,760 243,490 Plan balance at death of survivor 125,000 132,442 141,713 151,633 162,248 173,605 185,757 198,760 243,490 Page 64
DETAILS OF DINA'S QUALIFIED PLAN - PROPOSED PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Dina's Qualified Plans Dina's age 52 53 54 55 56 57 58 61 Anthony's age 55 56 57 58 59 60 61 64 Minimum distribution factor 44.6 43.6 42.6 41.6 40.7 39.7 38.7 35.8 Securities in plans 16,000 16,953 18,139 19,409 20,768 22,221 23,777 25,441 31,167 Plan contributions - - - - - - - - Plan balance during life 16,000 16,953 18,139 19,409 20,768 22,221 23,777 25,441 31,167 Plan balance at death of survivor 16,000 16,953 18,139 19,409 20,768 22,221 23,777 25,441 31,167 Page 65
DISCLAIMER AND DISCLOSURE ANTHONY AND DINA DONFRIO InKnowVision, LLC does not give tax, accounting or legal advice to its clients. The effectiveness of any of the strategies described will depend on your individual situation and on a number of complex factors. Any discussion in this presentation relating to tax, accounting, investments, regulatory, or legal matters is based on our understanding as of the date of this presentation. Rules in these areas are constantly changing and are open to varying interpretations. Assumption Issues The plan involves numerous assumptions. While we believe that these assumptions are reasonable, it is important to understand that it is a virtual certainty that the actual results will differ from those illustrated. Returns on investment and performance of financial products can cause the results to vary. Changes in tax, trust or property laws can cause plan results to vary. Plan implementation that differs from that described in the plan will cause the results to vary. Provision of state law may cause the plan results to vary. Tax Opinions The IRS has recently issued new rules for tax practitioners regarding covered opinions, reliance opinions and marketed opinions. While this is an arcane area, suffice it to say that these opinions are often obtained by taxpayers for purposes of avoiding penalties. These opinions are obtained at substantial cost and after substantial legal analysis. If you believe that such an opinion would be helpful to you prior to entering into any of the transactions outlined in this plan, you should feel free do so. Be advised that nothing in this analysis should be construed by you, your advisors or any one else as a covered opinion, reliance opinion, marketed opinion or any other type of opinion regarding any of the transactions or outcomes outlined in this plan. Page 66

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Donfrio Family Wealth Goal Achiever- InKnowVision Advanced Estate Planning

  • 1.
    InKnowVision’s Monthly HNW Webinar Series Case Study Webinar ©2012. InKnowVision LLC. All rights reserved. www.inknowvision.com
  • 2.
    FAMILY WEALTH GOALACHIEVER™ - INITIAL PREPARED FOR: ANTHONY AND DINA DONFRIO February 22, 2011 PRESENTED BY Scott Hamilton InKnowVision, LLC 715 Enterprise DR Oak Brook, IL Scott@ikvllc.com Phone: (630) 596-5090 Copyright 2011 InKnowVision, LLC
  • 3.
    YOUR GOALS ANDOBJECTIVES ACCOMPLISHED ANTHONY AND DINA DONFRIO Maintain our customary lifestyle. This should take about $850,000 annually after taxes and gifts. Provide for the financial security of the surviving spouse. Maintain adequate liquidity for emergencies and investment opportunities. We prefer to keep at least $1,000,000 in cash and readily marketable securities. Assure we have sufficient liquid assets available at our deaths to eliminate the forced liquidation of our business or real estate assets. Under the proposed plan your heirs could expect to receive approximately 25% of your estate today. Under the proposed plan charity could expect to receive as much as 75% of your estate today. Income tax savings could be as much as $3,900,000 over the next 10 years. Eliminate or reduce estate taxes. Page 2
  • 4.
    FAMILY INFORMATION ANTHONY AND DINA DONFRIO CLIENTS Anthony Donfrio Date of Birth April 27, 1956 Dina Donfrio Date of Birth February 27, 1959 15 N. Berwyn Northbrook, IL 60670 CHILDREN CHILD'S NAME YEAR OF BIRTH Dave Donfrio 1992 Tony Donfrio 1993 Cathy Donfrio 1995 Debbie Donfrio 1996 Peter Donfrio 1998 Mary Donfrio 2000 Page 3
  • 5.
    PERIODIC TABLE OFESTATE PLANNING ELEMENTS - CONSIDERED ANTHONY AND DINA DONFRIO In our planning process, we start with the universe of available planning tools. While this universe is constantly changing, the following chart outlines many 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 Grantor Retained Charitable Lead Remainder Uni- 412(e) Private Annuity SCIN Liability Company 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 Outright gift to Long Term Care Corporate Premium Finance 529 Plans Family Trusts New ILIT charity at death Insurance Recapitalization Charitable Life Walton GRAT Private Foundations NIMCRUT Valuation Planning Asset Protection SPIA/Life Arbitrage Estate Revocable Living Increased Annual International Delaware Asset SPIA/Life in a CLAT Trusts, DPAs and Crummey Powers Dynasty Trust Charitable Giving VUL Protection Trust POAs Supporting Transfer of Captive IRA to Charity Gift Annuity Remainder Sales Life Estates LLC/CRTs Organizations Ownership to ILIT Charitable Succession Defined Benefit Qualified Plan Bargain Sales Risk Management Remainder Annuity ESOP Planning Planning Plans Limited Partnership Trust Page 4
  • 6.
    PLAN ASSUMPTIONS ANTHONY AND DINA DONFRIO The plan is based on numerous assumptions. Important among these are the yield and growth assumptions contained on the balance sheet in the Financial Analysis section. Other important assumptions are contained on this Plan Assumptions page. Tax Rate Assumptions State Income Tax Rate 5% State Inheritance - Estate Tax No state estate tax Tax on IRD Unless a qualified plan is given to charity, we assume the beneficiary designations are changed to provide for a stretch out distribution. Salary and Other Earned Income Assumptions Annual increase in Anthony's earned income 5% Number of years Anthony's income is expected to continue 20 Lifestyle Need Assumptions Net annual outlay for Anthony and Dina's lifestyle needs, not including gifts or income taxes $850,000 Annual cost of living increase used in the plan 2% Settlement and Administrative Expenses Fixed estate settlement costs $25,000 Variable estate settlement costs, 1st death 0.50% (of assets) Variable estate settlement costs, 2nd death 1.00% (of assets) Page 5
  • 7.
    INTRODUCTION TO THEPLAN STRATEGIES ROADMAP ANTHONY AND DINA DONFRIO The following section of the plan contains a step by step roadmap for each of the strategies that we are recommending. You will notice that the strategies are often interdependent; that is, in order for one strategy to be successful, you must complete another strategy as well. It is the integration of each of these strategies that allows you to most efficiently accomplish your goals. Also keep in mind that there is often more than one way to get from point A to point B. This is true in wealth transfer planning. If a particular strategy or combination of strategies is not acceptable to you, we may be able to reach the desired result in a less efficient but perhaps more acceptable way. The following pages are a conceptual road map only, there are numerous details contained in each strategy that are not detailed in the overall plan that follows. Page 6
  • 8.
    CREATE AND FUNDA FAMILY LIMITED LIABILITY COMPANY ANTHONY AND DINA DONFRIO Anthony and Dina create a limited liability company. They receive membership units including management shares. The new entity is organized to develop new investments, protect family members, streamline business succession planning, create a gifting mechanism and provide centralized management of investments. ANTHONY & DINA FAMILY LIMITED LIABILITY COMPANY Management & Member interests are split between Anthony & Dina MANAGEMENT MEMBER INTERESTS INTERESTS 1% 99% Page 7
  • 9.
    DONFRIO CONSTUCTION DISTRIBUTION ANTHONY AND DINA DONFRIO Donfrio Construction distributes $20,000,000 of cash to Anthony. This distribution is subject to approval from all lien holders (including Edward and Tess Donfrio) and the bonding company. This distribution is also subject to agreement to issuance of guarantees to the bonding company and Edward and Tess. DONFIO CONSTRUCTION Distributes $20,000,000 of ANTHONY DONFRIO cash Note: There are additional distributions contemplated in the future. Page 8
  • 10.
    CREATE AND FUNDA FAMILY LIMITED LIABILITY COMPANY ANTHONY AND DINA DONFRIO Anthony and Dina transfer $20,000,000 of cash to the limited liability company. ANTHONY & DINA FAMILY LIMITED LIABILITY COMPANY $20,000,000 Detail of Assets Transferred Cash from Donfrio Construction Acquisition Trust 20,000,000 Total Assets Contributed 20,000,000 Note: There are expected to be future capital contributions to the FLLC. Page 9
  • 11.
    BONDING COMPANY INTERESTS ANTHONY AND DINA DONFRIO Donfrio Construction pays a DONFRIO CONSTRUCTION fee to FLLC for pledging FLLC assets FLLC pledges assets to bonding company to secure Donfrio Construction performance obligation BONDING COMPANY Page 10
  • 12.
    EDWARD AND TESSSECURITY INTEREST ANTHONY AND DINA DONFRIO Donfrio Construction pays a DONFRIO CONSTRUCTION FLLC fee to FLLC for pledging assets FLLC pledges assets to Edward and Tess to secure Donfrio Family Trust performance on SCIN payments EDWARD AND TESS Page 11
  • 13.
    CAPTIVE INSURANCE COMPANYOWNERSHIP ANTHONY AND DINA DONFRIO Donfrio Construction transfers ownership so that Anthony's existing ILIT is the owner of his captive interest. The ownership for Anthony's captive will be set-up such that the profits of the company are outside of his estate for estate tax purposes. This transfer is a gift. Valuation of Anthony's interests will need to be done in order to determine the value of the gift. Anthony's interest in the ANTHONY DONFRIO Captive Insurance Company is ANTHONY'S ILIT gifted to his ILIT Owns interests in Captive Insurance Owns interests in Captive Insurance Company after transfer. Profits from Company Captive are distributed to ILIT Note: Anthony's interest in the captive is held in a single member LLC. The LLC interests will be gifted to the ILIT. Page 12
  • 14.
    IRREVOCABLE LIFE INSURANCETRUST ANTHONY AND DINA DONFRIO Captive insurance company profits can be distributed to Anthony's existing ILIT. Distributions could be used to purchase life insurance. Money could also be loaned to the ILIT to pay premiums. The loan could be repaid from later captive distributions. CAPTIVE INSURANCE COMPANY Profits ILIT Owns life insurance with a death benefit of $50,000,000 Premium Payment Details Survivorship policy on Anthony & Dina, annual premium payment in all years of $227,350. The first premium will be loaned to the ILIT. HEIRS Death benefit of $50,000,000, less any money lent to the ILIT for premiums, are distributed according to the terms of the ILIT. Page 13
  • 15.
    INCREASE ANNUAL CHARITABLEGIVING ANTHONY AND DINA DONFRIO Increase charitable giving during life through annual gifts to charity from Donfrio Construction. ANTHONY & DINA $1,000,000 FAMILY CHARITY Give annually through Donfrio Construction Advantages No estate tax No income in respect of a decedent tax Most efficient asset to satisfy charitable intent Page 14
  • 16.
    CASH AVAILABLE TODINA IN THE EVENT OF ANTHONY'S PREMATURE DEATH - 2011 ANTHONY AND DINA DONFRIO CASH DONFRIO CONSTRUCTION - EQUITY FAMILY LLC RETIREMENT FUNDS MARKETABLE SECURITIES 621,616 42,124,690 20,000,000 149,395 209,146 In the event of Anthony's premature death DINA 63,104,847 Note: Eight years of projected available cash are shown on the next page. Page15
  • 17.
    FINANCIAL ANALYSIS -PROPOSED PLA CASH AVAILABLE TO Dina YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Asset Values Cash and cash equivalents 621,616 621,616 621,616 621,616 621,616 621,616 621,616 621,616 621,616 Marketable securities - Equities 600,000 209,146 1,304,005 2,443,312 3,096,324 3,785,795 4,514,275 5,284,492 7,875,793 Donfrio Construction - Cash 42,124,690 42,124,690 41,459,127 41,673,666 41,771,565 44,673,464 43,095,363 41,517,262 36,992,953 Retirement plans/IRAs 141,000 149,395 159,853 171,042 183,015 195,826 209,534 224,202 274,657 Value of Family Limited Liability Comp. 20,000,000 20,000,000 30,000,000 40,000,000 45,000,000 45,000,000 50,000,000 55,000,000 60,000,000 Total Cash Available to Dinaa $ 63,487,306 $ 63,104,847 $ 73,544,601 $ 84,909,637 $ 90,672,520 $ 94,276,702 $ 98,440,788 $ 102,647,572 $ 105,765,019 Figures above reflect the cash available to Dina, each year, in the event of Anthony's premature death. Page 16
  • 18.
    ANTHONY AND DINADONFRIO STRATEGIES CONSIDERED BUT NOT BEING PURSUED AT THIS TIME Page 17
  • 19.
    CREATE DELAWARE ASSETPROTECTION TRUSTS ANTHONY AND DINA DONFRIO Anthony and Dina create individual Delaware Asset Protection trusts (DAPTs). It's recommended that an independent trustee is used for the trusts. ANTHONY ANTHONY's DAPT DINA DINA's DAPT HEIRS Page 18
  • 20.
    TRANSFER FUNDS TODELAWARE ASSET PROTECTION TRUST ANTHONY AND DINA DONFRIO Anthony and Dina each transfer their Family Limited Liability Company assets to their individual DAPT. The transfer of FLLC units to the DAPTs will be incomplete gifts for gift tax purposes. ANTHONY ANTHONY's DAPT 50% of FLLC interests DINA DINA's DAPT 50% of FLLC interests ANTHONY AND DINA Anthony & Dina are discretionary beneficiaries of the DAPT assets Page 19
  • 21.
    NEW CAPTIVE INSURANCECOMPANY ANTHONY AND DINA DONFRIO Consider creating a new captive insurance for Donfrio Construction to insure other risks. The ownership would be set-up such that the profits of the company are outside of his estate for estate tax purposes. DONFRIO CONSTRUCTION Premium NEW 831(b) CAPTIVE COMPANY Coverage for other risks not covered under existing Captive ANTHONY'S ILIT Owns Anthony's Captive interest Page 20
  • 22.
    TESTAM TESTAMENTARY CHARITABLE LEAD ANNUITY TRUST (Part I) - 2011 ANTHONY AND DINA DONFRIO Include language in your trust or Will that creates a testamentary charitable lead trust (TCLAT) at the second death. ANTHONY & DINA TCLAT At death $205,481,887 of the assets taxable TCLAT owns assets with a value of in your estate will pass to the TCLAT. This $205,481,887 after your death. should bring your estate tax to $0. DONFRIO FAMILY CHARITY TCLAT Assumptions The charity will receive payments of Asset growth rate 5.00% $11,578,010 each year for a period of 25 years TCLAT payout rate 5.63% totaling $289,450,245. Present value discount rate 5.00% Assumed date of death 2011 Page 21
  • 23.
    TESTAMENTARY CHARITABLE LEADANNUITY TRUST (Part II) - 2011 ANTHONY AND DINA DONFRIO 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 $42,302,058 from the At the end of the 25 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 5%. Page 22
  • 24.
    TRANSFER XYZ ANTHONY AND DINA DONFRIO Anthony and Dina own Series A & Series B stock in XYZ, Inc. Transfer stock in XYZ, Inc. to a trust established outside Anthony & Dina's taxable estate. Transfer stock in XYZ ANTHONY & DINA worth $966,000 IRREVOCABLE TRUST Owns XYZ stock outside of Anthony & Own Series A & Series B stock in XYZ, Inc. Dina's estate after transfer HEIRS Page 23
  • 25.
    PERIODIC TABLE OFESTATE PLANNING ELEMENTS - RECOMMENDED ANTHONY AND DINA DONFRIO The 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 Liability Company 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 Outright gift to Long Term Care Anthony Donfrio Corporate Premium Finance 529 Plans New ILIT charity at death Insurance Family Trust Recapitalization Charitable Life Anthony Donfrio Walton GRAT Private Foundations NIMCRUT Asset Protection SPIA/Life Arbitrage Estate ILIT Revocable Living Increased Annual Donfrio International Delaware Asset SPIA/Life in a CLAT Trusts, DPAs and Crummey Powers Charitable Giving Construction Trust VUL Protection Trust POAs Supporting Transfer of Captive IRA to Charity Gift Annuity Remainder Sales Life Estates LLC/CRTs Organizations Ownership to ILIT Charitable Succession Defined Benefit Qualified Plan Bargain Sales Risk Management Remainder Annuity ESOP Planning Planning Plans Limited Partnership Trust Green equals a new Blue equals a social Yellow equals an planning tool for capital or existing planning family charitable tool tool Page 24
  • 26.
    ANTHONY AND DINADONFRIO INCREASE IN CHARITABLE GIVING Page 25
  • 27.
    COMPARISON OF CHARITYRESULTS - PLAN YEAR 2011 ANTHONY AND DINA DONFRIO Existing Plan Proposed Plan Increase in Charity Outright Gift to Charity (at 2nd death) $ - $ 205,482,000 $ 205,482,000 Cumulative annual gifts $ 425,000 $ 1,000,000 $ 575,000 Family Charity $ 425,000 $ 206,631,000 $ 206,206,000 Page 26
  • 28.
    COMPARISON OF CHARITYRESULTS - PLAN YEAR 2020 ANTHONY AND DINA DONFRIO Existing Plan Proposed Plan Increase in Charity Outright Gift to Charity (at 2nd death) $ - $ 263,037,000 $ 263,037,000 Cumulative annual gifts $ 4,654,000 $ 10,950,000 $ 6,296,000 Family Charity $ 4,654,000 $ 274,261,000 $ 269,607,000 Page 27
  • 29.
    GIFTING TO CHARITY- EXISTING PLAN VS. PROPOSED PLAN ANTHONY AND DINA DONFRIO $280,000,000 $240,000,000 $200,000,000 $160,000,000 - $120,000,000 $80,000,000 $40,000,000 $- 11 12 13 14 15 16 17 18 19 20 20 20 20 20 20 20 20 20 20 20 Proposed Plan Charity Current Plan Charity This chart compares the amount of your gifts to charity in the current plan as against the proposed plan. Page 28
  • 30.
    ANTHONY AND DINADONFRIO INCOME TAX SAVINGS Page 29
  • 31.
    COMPARISON OF INCOMETAX RESULTS - PLAN YEAR 2011 ANTHONY AND DINA DONFRIO Existing Plan Proposed Plan Income Tax Saved 2011 Estimated Income Tax $ 12,946,000 $ 12,556,000 $ 390,000 2012 Estimated Income Tax $ 8,063,000 $ 7,673,000 $ 390,000 2013 Estimated Income Tax $ 8,626,000 $ 8,236,000 $ 390,000 2014 Estimated Income Tax $ 5,248,000 $ 4,858,000 $ 390,000 2015 Estimated Income Tax $ 3,844,000 $ 3,454,000 $ 390,000 2016 Estimated Income Tax $ 3,844,000 $ 3,454,000 $ 390,000 2017 Estimated Income Tax $ 3,844,000 $ 3,454,000 $ 390,000 2018 Estimated Income Tax $ 3,844,000 $ 3,454,000 $ 390,000 2019 Estimated Income Tax $ 3,844,000 $ 3,454,000 $ 390,000 2020 Estimated Income Tax $ 3,844,000 $ 3,454,000 $ 390,000 10 Year Estimated Income Tax Saved $ 3,900,000 Note: These income tax estimations represent the income taxes due inside of the Donfrio Construction. Savings are created through increase in annual charitable giving. Page 30
  • 32.
    INCOME TAXES DUE- CURRENT VS. PROPOSED ANTHONY AND DINA DONFRIO $13,000,000 $12,000,000 $11,000,000 $10,000,000 $9,000,000 $8,000,000 - $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Current Plan Proposed Plan Page 31
  • 33.
    COMPARISON OF PLANRESULTS - PLAN YEAR 2020 ANTHONY AND DINA DONFRIO Existing Plan Proposed Plan Advantage Estate Value $ 205,382,022 $ 267,450,791 Heirs Receive Immediately $ 97,025,133 $ 56,747,790 $ (40,277,344) Family Charity $ 4,653,631 $ 274,261,005 $ 269,607,373 Estate and Income Tax $ 111,363,538 $ - $ 111,363,538 ** This does not include $20M of life insurance on Anthony's life. This chart assumes that you both die at life expectancy and compares the results of the current plan with the proposed plan. Page 32
  • 34.
    DETAILED FINANCIAL ANALYSIS ANTHONY AND DINA DONFRIO INTRODUCTION The following section of the plan contains all of the financial analysis used to show you where you stand with your current plan and what is possible with the proposed plan. All of the numbers are based on information provided by you or gleaned from statements and tax returns. If numbers do not look correct, please let us know so that we can make appropriate changes. Assumed growth and yield numbers are all listed on the Net Worth pages contained in these sections. Page 33
  • 35.
    DETAILED FINANCIAL ANALYSIS ANTHONY AND DINA DONFRIO CURRENT PLAN FINANCIALS In the Current Plan Section you will find a Net Worth Statement and a detailed cash flow and asset value projection analysis. Page 34
  • 36.
    CURRENT NET WORTHSTATEMENT ANTHONY AND DINA DONFRIO ANTHONY DINA JOINT TOTAL YIELD GROWTH CASH AND EQUIVALENTS Bank 300,000 300,000 - 600,000 0.7% 0.0% Brokerage 10,808 10,808 - 21,616 2.0% 0.0% Total of Cash and Equivalents 310,808 310,808 - 621,616 0.8% 0.0% MARKETABLE SECURITIES - EQUITIES Brokerage 300,000 300,000 - 600,000 1.2% 5.0% Total of Equities 300,000 300,000 - 600,000 1.2% 5.0% 529 PLANS 529 Plans 390,000 - - 390,000 0.0% 0.0% Total of 529 Plans 390,000 - - 390,000 0.0% 0.0% Page 35
  • 37.
    CURRENT NET WORTHSTATEMENT (Page 2) ANTHONY AND DINA DONFRIO ANTHONY DINA JOINT TOTAL YIELD GROWTH OTHER INVESTMENTS XYZ-A 163,000 163,000 - 326,000 0.0% 5.0% XYZ-B 320,000 320,000 - 640,000 0.0% 5.0% Captive Insurance Company 100,000 100,000 - 200,000 0.0% 0.0% Total of Other Investments 583,000 583,000 - 1,166,000 0.0% 4.1% Donfrio Construction Donfrio Construction 192,000,000 - - 192,000,000 0.0% 3.0% Total of Donfrio Construction 192,000,000 - - 192,000,000 0.0% 3.0% RETIREMENT PLANS/IRAs Donfrio Construction Co. 401(k) 120,000 - 120,000 0.0% 7.0% Brokerage IRA 5,000 - 5,000 0.0% 7.0% Brokerage IRA - 16,000 16,000 0.0% 7.0% Total Retirement Plans 125,000 16,000 141,000 0.0% 7.0% Page 36
  • 38.
    CURRENT NET WORTHSTATEMENT (Page 3) ANTHONY AND DINA DONFRIO ANTHONY DINA JOINT TOTAL YIELD GROWTH CLOSELY HELD BUSINESS Other Trust 200,000 - - 200,000 0.0% 0.0% Total of Closely Held Business 200,000 - - 200,000 0.0% 0.0% RESIDENTIAL REAL ESTATE 15 N. Berwyn 1,000,000 1,000,000 - 2,000,000 0.0% 3.0% Total of Personal Residences 1,000,000 1,000,000 - 2,000,000 0.0% 3.0% PERSONAL PROPERTY Toys 5,000 5,000 - 10,000 0.0% 0.0% Jewelry 20,000 20,000 - 40,000 0.0% 0.0% Furnishings 90,000 90,000 - 180,000 0.0% 0.0% Personal Property 5,000 5,000 - 10,000 0.0% 0.0% Total of Personal Property 120,000 120,000 - 240,000 0.0% 0.0% TOTAL ASSETS 195,028,808 2,329,808 - 197,358,616 TOTAL LIABILITIES - - - - NET WORTH 195,028,808 2,329,808 - 197,358,616 Page 37
  • 39.
    SCHEDULE OF LIFEINSURANCE BENEFITS - CURRENT PLAN ANTHONY AND DINA DONFRIO COMPANY INSURED POLICY # BENEFICIARY PREMIUM CASH VALUE DEATH BENEFIT Policies owned by Anthony Term Insurance Anthony # Dina - - 1,250,000 Term Insurance Anthony # Dina - - 250,000 Totals - - 1,500,000 Other Policies - Owned by ANTHONY DONFRIO Irrevocable Trust Term Insurance Anthony # Donfrio Family Trust 17,000 - 20,000,000 Totals 17,000 - 20,000,000 Policies owned by ILIT VUL Anthony # Donfrio ILIT 3,000 200,000 4,000,000 Totals 3,000 200,000 4,000,000 Page 38
  • 40.
    FINANCIAL ANALYSIS -EXISTING PLAN ASSET VALUE PROJECTIONS - EXISTING PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Asset Values Cash and cash equivalents 621,616 621,616 621,616 621,616 621,616 621,616 621,616 621,616 621,616 Marketable securities - Equities 600,000 (138,363) 592,003 1,364,458 1,638,537 1,935,005 2,256,019 2,603,915 3,833,415 529 Plans (value inside estate) 390,000 312,000 234,000 156,000 78,000 - - - - Other investments 1,166,000 1,477,164 1,808,354 2,153,263 2,512,459 2,886,534 3,006,105 3,130,629 3,536,013 Donfrio Construction Trust 192,000,000 192,000,000 192,000,000 192,000,000 192,000,000 192,000,000 192,000,000 192,000,000 192,000,000 Retirement plans/IRAs 141,000 149,395 159,853 171,042 183,015 195,826 209,534 224,202 274,657 Closely Held Business 1 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 2,200,000 Personal residences 2,000,000 2,051,177 2,112,713 2,176,094 2,241,377 2,308,618 2,377,877 2,449,213 2,676,321 Personal property 240,000 240,000 240,000 240,000 240,000 240,000 240,000 240,000 240,000 Total assets in estate 197,358,616 197,112,990 198,368,538 199,682,473 200,515,003 201,387,599 202,111,151 202,869,574 205,382,022 Combined net worth $ 197,358,616 $ 197,112,990 $ 198,368,538 $ 199,682,473 $ 200,515,003 $ 201,387,599 $ 202,111,151 $ 202,869,574 $ 205,382,022 1 Projected growth for Trust is $200k annually. 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 39
  • 41.
    TAXABLE INCOME PROJECTIONS- EXISTING PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Sources of taxable income Cash and cash equivalents 4,898 4,898 4,898 4,898 4,898 4,898 4,898 4,898 Marketable securities - Equities 7,402 (1,707) 7,303 16,833 20,214 23,872 27,832 41,824 Client earned income 500,000 500,000 525,000 551,250 578,813 607,753 638,141 670,048 775,664 Gross income $ 512,300 $ 528,191 $ 563,452 $ 600,544 $ 632,866 $ 666,911 $ 702,778 $ 822,386 Page 40
  • 42.
    INCOME TAX PROJECTIONS- EXISTING PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Income tax Estimation Adjusted gross income: Dividend income (marketable sec.) 7,402 (1,707) 7,303 16,833 20,214 23,872 27,832 41,824 Earned and other income 504,898 529,898 556,148 583,711 612,651 643,039 674,946 780,562 Adjusted gross income 512,300 528,191 563,452 600,544 632,866 666,911 702,778 822,386 Deductions Real estate tax 47,650 47,650 48,603 49,575 50,567 51,578 52,609 53,662 56,946 Illinois state income taxes 25,615 26,410 28,173 30,027 31,643 33,346 35,139 41,119 Interest 78,521 78,521 80,091 81,693 83,327 84,994 86,694 88,427 93,840 Charitable gifts 425,000 425,000 425,000 425,000 425,000 425,000 425,000 425,000 425,000 Charitable Deduction available 425,000 425,000 425,000 425,000 425,000 425,000 425,000 425,000 Charitable Deduction allowed 256,150 264,096 281,726 300,272 316,433 333,455 351,389 411,193 Deduction carried over 168,850 160,904 143,274 124,728 108,567 91,545 73,611 13,807 Total deductions 407,936 419,200 441,167 464,193 484,648 506,104 528,617 603,098 Reductions - - (11,900) (13,012) (13,982) (15,003) (16,079) (19,668) Deductions allowed 407,936 419,200 429,267 451,180 470,666 491,100 512,538 583,431 Taxable income 104,364 108,992 134,184 149,363 162,200 175,810 190,240 238,955 Federal and State income tax $ 43,216 $ 45,907 $ 58,256 $ 64,661 $ 70,257 $ 76,178 $ 82,445 $ 104,860 Note: Does not include income taxes being paid by DFT. All company income and tax is computed on the DFT equity forecast pages. Page 41
  • 43.
    CASH FLOW PROJECTIONS- EXISTING PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Sources of income for Lifestyle Distribution from Marketable Securities 763,916 - - - - - - - Distribution from DFT 1,545,000 1,550,000 1,550,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Consumable income (taxable) 512,300 528,191 563,452 600,544 632,866 666,911 702,778 822,386 Total income available for lifestyle 2,821,216 2,078,191 2,113,452 1,600,544 1,632,866 1,666,911 1,702,778 1,822,386 Uses of Cash Living expenses 850,000 867,000 884,340 902,027 920,067 938,469 957,238 1,015,829 Income tax 43,216 45,907 58,256 64,661 70,257 76,178 82,445 104,860 Cash gifts to ILIT 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 Mortgage Pay Off 1,500,000 - - - - - - - Cash gifts to charity 425,000 425,000 425,000 425,000 425,000 425,000 425,000 425,000 Total uses of cash 2,821,216 1,340,907 1,370,596 1,394,688 1,418,324 1,442,647 1,467,683 1,548,688 Surplus $ - $ 737,284 $ 742,855 $ 205,856 $ 214,541 $ 224,264 $ 235,095 $ 273,698 In the event that there is a cash flow surplus, the surplus is added to the marketable securities row on the "Asset Value Projections" 3 pages earlier. If there is a cash flow shortage (spending or gifting capital) then the shortage is treated as a reduction in marketable securities row on the "Asset Value Projections" 3 pages earlier. Page 42
  • 44.
    FIRST ESTATE TAXESTIMATION AND DISTRIBUTION - EXISTING PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Tax calculation on Anthony's death Combined net worth 197,358,616 197,112,990 198,368,538 199,682,473 200,515,003 201,387,599 202,111,151 202,869,574 205,382,022 Anthony's estimated estate 195,028,808 194,786,081 196,026,808 197,325,232 198,147,934 199,010,229 199,725,239 200,474,709 202,957,498 Death benefit exceeding CV 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 Total gross estate 196,528,808 196,286,081 197,526,808 198,825,232 199,647,934 200,510,229 201,225,239 201,974,709 204,457,498 Settlement expenses (1,007,644) (1,006,430) (1,012,634) (1,019,126) (1,023,240) (1,027,551) (1,031,126) (1,034,874) (1,047,287) Joint, personal and IRA to Dina (245,000) (252,442) (261,713) (271,633) (282,248) (293,605) (305,757) (318,760) (363,490) Insurance passing to Dina (1,500,000) (1,500,000) (1,500,000) (1,500,000) (1,500,000) (1,500,000) (1,500,000) (1,500,000) (1,500,000) Outright or in trust to Dina (189,126,164) (188,877,208) (190,102,460) (195,384,473) (196,192,447) (197,039,073) (197,738,356) (198,471,076) (200,896,721) Taxable estate 4,650,000 4,650,000 4,650,000 650,000 650,000 650,000 650,000 650,000 650,000 Plus Anthony's lifetime taxable gifts 350,000 350,000 350,000 350,000 350,000 350,000 350,000 350,000 350,000 Tax base 5,000,000 5,000,000 5,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Federal Estate Tax - - - - - - - - - Distribution of Anthony's estate Settlement expenses 1,007,644 1,006,430 1,012,634 1,019,126 1,023,240 1,027,551 1,031,126 1,034,874 1,047,287 To family trust 4,650,000 4,650,000 4,650,000 650,000 650,000 650,000 650,000 650,000 650,000 Joint, personal and IRA to Dina 245,000 252,442 261,713 271,633 282,248 293,605 305,757 318,760 363,490 Insurance passing to Dina 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 Outright or in trust to Dina 189,126,164 188,877,208 190,102,460 195,384,473 196,192,447 197,039,073 197,738,356 198,471,076 200,896,721 Total $ 196,528,808 $ 196,286,081 $ 197,526,808 $ 198,825,232 $ 199,647,934 $ 200,510,229 $ 201,225,239 $ 201,974,709 $ 204,457,498 Assumptions We assume that Anthony dies first, followed immediately by Dina. Taxes under "Distribution of First Estate" include estate and income taxes. Page 43
  • 45.
    SECOND ESTATE TAXESTIMATION AND DISTRIBUTION - EXISTING PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Tax Calculation on Dina's death Dina's assets 2,329,808 2,326,908 2,341,730 2,357,241 2,367,069 2,377,370 2,385,911 2,394,865 2,424,524 Plus assets from Anthony's estate 190,871,164 190,629,651 191,864,174 197,156,106 197,974,695 198,832,678 199,544,113 200,289,836 202,760,211 Dina's estimated estate 193,200,972 192,956,559 194,205,904 199,513,347 200,341,764 201,210,048 201,930,024 202,684,700 205,184,735 Settlement expenses (1,957,010) (1,954,566) (1,967,059) (2,020,133) (2,028,418) (2,037,100) (2,044,300) (2,051,847) (2,076,847) Dina's taxable estate 191,243,962 191,001,994 192,238,845 197,493,213 198,313,346 199,172,948 199,885,724 200,632,853 203,107,887 Tax base 191,243,962 191,001,994 192,238,845 197,493,213 198,313,346 199,172,948 199,885,724 200,632,853 203,107,887 Federal Estate Tax 65,185,387 65,100,698 65,533,596 108,275,467 108,726,540 109,199,321 109,591,348 110,002,269 111,363,538 Total Estate Tax Due 65,185,387 65,100,698 65,533,596 108,275,467 108,726,540 109,199,321 109,591,348 110,002,269 111,363,538 Distribution of Dina's estate Settlement expenses 1,957,010 1,954,566 1,967,059 2,020,133 2,028,418 2,037,100 2,044,300 2,051,847 2,076,847 Taxes 65,185,387 65,100,698 65,533,596 108,275,467 108,726,540 109,199,321 109,591,348 110,002,269 111,363,538 Qualified plan to heirs 141,000 149,395 159,853 171,042 183,015 195,826 209,534 224,202 274,657 Residual estate to heirs 125,917,575 125,751,901 126,545,396 89,046,704 89,403,790 89,777,800 90,084,842 90,406,382 91,469,693 Total $ 193,200,972 $ 192,956,559 $ 194,205,904 $ 199,513,347 $ 200,341,764 $ 201,210,048 $ 201,930,024 $ 202,684,700 $ 205,184,735 Assumptions We assume that Anthony dies first, followed immediately by Dina. Taxes under "Distribution of Second Estate" include estate and income taxes. Page 44
  • 46.
    SUMMARY OF BENEFITSTO FAMILY - EXISTING PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Benefits to Family Family trust 4,650,000 4,650,000 4,650,000 650,000 650,000 650,000 650,000 650,000 650,000 Residual estate 125,917,575 125,751,901 126,545,396 89,046,704 89,403,790 89,777,800 90,084,842 90,406,382 91,469,693 Qualified plan assets 141,000 149,395 159,853 171,042 183,015 195,826 209,534 224,202 274,657 529 Plan 130,000 135,536 142,313 149,429 156,900 164,745 172,983 181,632 210,261 529 Plan 130,000 135,536 142,313 149,429 156,900 164,745 172,983 181,632 210,261 529 Plan 130,000 135,536 142,313 149,429 156,900 164,745 172,983 181,632 210,261 Proceeds from Donfrio Accumulation Trust 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 Total assets to heirs $ 135,098,575 $ 134,957,905 $ 135,782,189 $ 94,316,033 $ 94,707,507 $ 95,117,862 $ 95,463,324 $ 95,825,479 $ 97,025,133 Page 45
  • 47.
    BENEFITS TO CHARITY- EXISTING PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Cumulative Annual Gifts to Charity Annual gift to charity 425,000 425,000 425,000 425,000 425,000 425,000 425,000 425,000 Cumulative Annual Gifts to Charity 425,000 858,500 1,300,670 1,751,683 2,211,717 2,680,951 3,159,570 4,653,631 Page 46
  • 48.
    DETAILS OF ANTHONY'SQUALIFIED PLAN - EXISTING PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Anthony's Qualified Plans Anthony's Age 55 56 57 58 59 60 61 64 Dina's Age 52 53 54 55 56 57 58 61 Minimum distribution factor 41.6 40.7 39.7 38.7 37.8 36.8 35.8 33.0 Plan contributions - - - - - - - - Plan balance 125,000 132,442 141,713 151,633 162,248 173,605 185,757 198,760 243,490 Page 47
  • 49.
    DETAILS OF DINA'SQUALIFIED PLAN - EXISTING PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Dina's Qualified Plans Dina's Age 52 53 54 55 56 57 58 61 Anthony's Age 55 56 57 58 59 60 61 64 Minimum distribution factor 44.6 43.6 42.6 41.6 40.7 39.7 38.7 35.8 Plan contributions - - - - - - - - Plan balance 16,000 16,953 18,139 19,409 20,768 22,221 23,777 25,441 31,167 Page 48
  • 50.
    DETAILED FINANCIAL ANALYSIS ANTHONY AND DINA DONFRIO PROPOSED PLAN FINANCIALS In the Proposed Plan Section you will find a balance sheet which reflects the repositioning of assets as set out in the step by step roadmap in the proceeding section. You will also find detailed cash flow and asset projection information on each of the proposed planning strategies. Page 49
  • 51.
    NET WORTH STATEMENTAFTER PLAN IMPLEMENTATION ANTHONY AND DINA DONFRIO ANTHONY DINA JOINT TOTAL YIELD GROWTH CASH AND EQUIVALENTS Bank 300,000 300,000 - 600,000 0.7% 0.0% Brokerage 10,808 10,808 - 21,616 2.0% 0.0% Total of Cash and Equivalents 310,808 310,808 - 621,616 0.8% 0.0% MARKETABLE SECURITIES - EQUITIES Brokerage 300,000 300,000 - 600,000 1.2% 5.0% Total of Equities 300,000 300,000 - 600,000 1.2% 5.0% 529 PLANS 529 Plans 390,000 - - 390,000 0.0% 0.0% Total of 529 Plans 390,000 - - 390,000 0.0% 0.0% Page 50
  • 52.
    REVISED NET WORTHSTATEMENT (Page 2) ANTHONY AND DINA DONFRIO ANTHONY DINA JOINT TOTAL YIELD GROWTH OTHER INVESTMENTS XYZ-A 163,000 163,000 - 326,000 0.0% 5.0% XYZ-B 320,000 320,000 - 640,000 0.0% 5.0% Total of Other Investments 483,000 483,000 - 966,000 0.0% 5.0% Donfrio Construction Donfrio Construction 192,000,000 - - 192,000,000 0.0% 3.0% Total of Donfrio Construction 192,000,000 - - 192,000,000 0.0% 3.0% RETIREMENT PLANS/IRAs Donfrio Construction Co. 401(k) 120,000 - 120,000 0.0% 7.0% Brokerage IRA 5,000 - 5,000 0.0% 7.0% Brokerage IRA - 16,000 16,000 0.0% 7.0% Total Retirement Plans 125,000 16,000 141,000 0.0% 7.0% Page 51
  • 53.
    REVISED NET WORTHSTATEMENT (Page 3) ANTHONY AND DINA DONFRIO ANTHONY DINA JOINT TOTAL YIELD GROWTH CLOSELY HELD BUSINESS Other Trust 200,000 - - 200,000 0.0% 0.0% Total of Closely Held Business 200,000 - - 200,000 0.0% 0.0% RESIDENTIAL REAL ESTATE 15 N. Berwyn 1,000,000 1,000,000 - 2,000,000 0.0% 3.0% Total of Personal Residences 1,000,000 1,000,000 - 2,000,000 0.0% 3.0% PERSONAL PROPERTY Toys 5,000 5,000 - 10,000 0.0% 0.0% Jewelry 20,000 20,000 - 40,000 0.0% 0.0% Furnishings 90,000 90,000 - 180,000 0.0% 0.0% Personal Property 5,000 5,000 - 10,000 0.0% 0.0% Total of Personal Property 120,000 120,000 - 240,000 0.0% 0.0% OTHER STRATEGY ASSETS Family Limited Liability Company 10,000,000 10,000,000 - 20,000,000 Total of Other Strategy Assets 10,000,000 10,000,000 - 20,000,000 TOTAL ASSETS 204,928,808 12,229,808 - 217,158,616 TOTAL LIABILITIES - - - - NET WORTH 204,928,808 12,229,808 - 217,158,616 Page 52
  • 54.
    FINANCIAL ANALYSIS -PROPOSED PLA ASSET VALUE PROJECTIONS - PROPOSED PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Asset Values Cash and cash equivalents 621,616 621,616 621,616 621,616 621,616 621,616 621,616 621,616 621,616 Marketable securities - Equities 600,000 209,146 1,304,005 2,443,312 3,096,324 3,785,795 4,514,275 5,284,492 7,875,793 529 Plans (value inside estate) 390,000 312,000 234,000 156,000 78,000 - - - - Other investments 966,000 1,007,139 1,057,496 1,110,371 1,165,890 1,224,184 1,285,394 1,349,663 1,562,404 Donfrio Construction Trust 192,000,000 192,000,000 192,000,000 192,000,000 192,000,000 192,000,000 192,000,000 192,000,000 192,000,000 Retirement plans/IRAs 141,000 149,395 159,853 171,042 183,015 195,826 209,534 224,202 274,657 Closely Held Business 1 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 2,200,000 Personal residences 2,000,000 2,051,177 2,112,713 2,176,094 2,241,377 2,308,618 2,377,877 2,449,213 2,676,321 Personal property 240,000 240,000 240,000 240,000 240,000 240,000 240,000 240,000 240,000 Value of Family Limited Liability Company 20,000,000 20,000,000 30,000,000 40,000,000 45,000,000 45,000,000 50,000,000 55,000,000 60,000,000 Total assets in estate 217,158,616 216,990,474 228,329,683 239,718,436 245,626,222 246,576,040 252,648,696 258,769,186 267,450,791 Combined net worth $ 217,158,616 $ 216,990,474 $ 228,329,683 $ 239,718,436 $ 245,626,222 $ 246,576,040 $ 252,648,696 $ 258,769,186 $ 267,450,791 1 Projected growth for Trust is $200k annually. 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 53
  • 55.
    TAXABLE INCOME PROJECTIONS- PROPOSED PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Sources of Taxable Income Cash and cash equivalents 4,898 4,898 4,898 4,898 4,898 4,898 4,898 4,898 Marketable securities - Equities 7,402 2,580 16,087 30,142 38,198 46,704 55,691 85,888 Client earned income 500,000 500,000 525,000 551,250 578,813 607,753 638,141 670,048 775,664 Gross income $ 512,300 $ 532,478 $ 572,235 $ 613,853 $ 650,850 $ 689,743 $ 730,637 $ 866,451 Note: All company income and tax is computed on the DFT equity forecast pages. Page 54
  • 56.
    INCOME TAX PROJECTIONS- PROPOSED PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Income Tax Estimation Adjusted gross income: Dividend income (Marketable Sec.) 7,402 2,580 16,087 30,142 38,198 46,704 55,691 85,888 Earned and other income 504,898 529,898 556,148 583,711 612,651 643,039 674,946 780,562 Adjusted gross income 512,300 532,478 572,235 613,853 650,850 689,743 730,637 866,451 Deductions Real Estate Tax 47,650 48,603 49,575 50,567 51,578 52,609 53,662 56,946 Illinois state income taxes 25,615 26,624 28,612 30,693 32,542 34,487 36,532 43,323 Interest 78,521 80,091 81,693 83,327 84,994 86,694 88,427 93,840 Total deductions 151,786 155,318 159,880 164,586 169,114 173,790 178,621 194,109 Reductions - - (12,163) (13,412) (14,521) (15,688) (16,915) (20,990) Deductions allowed 151,786 155,318 147,717 151,175 154,593 158,102 161,706 173,119 Taxable income 360,514 377,160 424,518 462,678 496,257 531,641 568,931 693,332 Federal and State income tax $ 120,707 $ 128,077 $ 160,788 $ 177,980 $ 193,127 $ 209,084 $ 225,896 $ 281,949 Note: Does not include income taxes being paid by DFT. All company income and tax is computed on the DFT equity forecast pages. Page 55
  • 57.
    CASH FLOW PROJECTIONS- PROPOSED PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Sources of Income for Lifestyle Consumable income (taxable) 512,300 532,478 572,235 613,853 650,850 689,743 730,637 866,451 Distribution from DFT 1,545,000 1,550,000 1,550,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Distribution from Marketable Securities 416,407 - - - - - - - Total income available for lifestyle 2,473,707 2,082,478 2,122,235 1,613,853 1,650,850 1,689,743 1,730,637 1,866,451 Uses of Cash Living expenses 850,000 867,000 884,340 902,027 920,067 938,469 957,238 1,015,829 Income tax 120,707 128,077 160,788 177,980 193,127 209,084 225,896 281,949 Mortgage Pay Off 1,500,000 - - - - - - - Cash gifts to ILIT 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 Total uses of cash 2,473,707 998,077 1,048,128 1,083,007 1,116,195 1,150,553 1,186,134 1,300,778 Surplus $ - $ 1,084,402 $ 1,074,107 $ 530,846 $ 534,655 $ 539,190 $ 544,503 $ 565,673 In the event that there is a cash flow surplus, the surplus is added to the marketable securities row on the "Asset Value Projections" 3 pages earlier. Page 56
  • 58.
    FIRST ESTATE TAXESTIMATION AND DISTRIBUTION - PROPOSED PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Tax calculation on Anthony's death Combined Net Worth 217,158,616 216,990,474 228,329,683 239,718,436 245,626,222 246,576,040 252,648,696 258,769,186 267,450,791 Anthony's estimated estate 204,928,808 204,770,135 215,470,749 226,218,118 231,793,192 232,689,519 238,420,179 244,195,979 252,388,658 Death benefit exceeding CV 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 Total gross estate 206,428,808 206,270,135 216,970,749 227,718,118 233,293,192 234,189,519 239,920,179 245,695,979 253,888,658 Settlement expenses (1,057,144) (1,056,351) (1,109,854) (1,163,591) (1,191,466) (1,195,948) (1,224,601) (1,253,480) (1,294,443) Joint, personal and IRA to Dina (245,000) (252,442) (261,713) (271,633) (282,248) (293,605) (305,757) (318,760) (363,490) Insurance passing to Dina (1,500,000) (1,500,000) (1,500,000) (1,500,000) (1,500,000) (1,500,000) (1,500,000) (1,500,000) (1,500,000) Outright or in trust to Dina (198,976,664) (198,811,342) (209,449,182) (224,132,894) (229,669,479) (230,549,967) (236,239,820) (241,973,739) (250,080,725) Taxable estate 4,650,000 4,650,000 4,650,000 650,000 650,000 650,000 650,000 650,000 650,000 Plus Anthony's lifetime taxable gifts 350,000 350,000 350,000 350,000 350,000 350,000 350,000 350,000 350,000 Tax base 5,000,000 5,000,000 5,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Tentative Federal Estate Tax - - - - - - - - - Distribution of First Estate Settlement expenses 1,057,144 1,056,351 1,109,854 1,163,591 1,191,466 1,195,948 1,224,601 1,253,480 1,294,443 To family trust 4,650,000 4,650,000 4,650,000 650,000 650,000 650,000 650,000 650,000 650,000 Joint, personal and IRA to Dina 245,000 252,442 261,713 271,633 282,248 293,605 305,757 318,760 363,490 Insurance passing to Dina 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 Outright or in trust to Dina 198,976,664 198,811,342 209,449,182 224,132,894 229,669,479 230,549,967 236,239,820 241,973,739 250,080,725 Total $ 206,428,808 $ 206,270,135 $ 216,970,749 $ 227,718,118 $ 233,293,192 $ 234,189,519 $ 239,920,179 $ 245,695,979 $ 253,888,658 Assumptions We assume that Anthony dies first, followed immediately by Dina. Taxes under "Distribution of First Estate" include estate and income taxes, if any. Page 57
  • 59.
    SECOND ESTATE TAXESTIMATION AND DISTRIBUTION - PROPOSED PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Tax Calculation on Dina's death Dina's assets 12,229,808 12,220,339 12,858,933 13,500,318 13,833,029 13,886,521 14,228,517 14,573,207 15,062,132 Plus assets from Anthony's estate 200,721,664 200,563,784 211,210,895 225,904,527 231,451,726 232,343,572 238,045,578 243,792,499 251,944,215 Dina's estimated estate 212,951,472 212,784,123 224,069,829 239,404,845 245,284,756 246,230,092 252,274,095 258,365,706 267,006,347 Settlement expenses (2,154,515) (2,152,841) (2,265,698) (2,419,048) (2,477,848) (2,487,301) (2,547,741) (2,608,657) (2,695,063) Charitable gift of IRA assets (141,000) (149,395) (159,853) (171,042) (183,015) (195,826) (209,534) (224,202) (274,657) Deduction from Gift to Charity (205,655,957) (205,481,887) (216,644,278) (235,814,755) (241,623,893) (242,546,965) (248,516,819) (254,532,847) (263,036,627) Taxable estate 5,000,000 5,000,000 5,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Tax base 5,000,000 5,000,000 5,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Federal Estate Tax - - - - - - - - - Distribution of Second Estate Settlement expenses 2,154,515 2,152,841 2,265,698 2,419,048 2,477,848 2,487,301 2,547,741 2,608,657 2,695,063 Taxes - - - - - - - - - Other gifts to charity 141,000 149,395 159,853 171,042 183,015 195,826 209,534 224,202 274,657 Residual estate to heirs 5,000,000 5,000,000 5,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Outright Gift to Charity 205,655,957 205,481,887 216,644,278 235,814,755 241,623,893 242,546,965 248,516,819 254,532,847 263,036,627 Total $ 212,951,472 $ 212,784,123 $ 224,069,829 $ 239,404,845 $ 245,284,756 $ 246,230,092 $ 252,274,095 $ 258,365,706 $ 267,006,347 Assumptions We assume that Anthony dies first, followed immediately by Dina. Taxes under "Distribution of Second Estate" include estate and income taxes, if any. Page 58
  • 60.
    SUMMARY OF BENEFITSTO FAMILY - PROPOSED PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Benefits to Family Residual estate 5,000,000 5,000,000 5,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Family trust 4,650,000 4,650,000 4,650,000 650,000 650,000 650,000 650,000 650,000 650,000 Captive Insurance Company 42,650 42,650 86,153 130,526 175,787 221,952 269,041 317,072 467,006 529 Plan 130,000 135,536 142,313 149,429 156,900 164,745 172,983 181,632 210,261 529 Plan 130,000 135,536 142,313 149,429 156,900 164,745 172,983 181,632 210,261 529 Plan 130,000 135,536 142,313 149,429 156,900 164,745 172,983 181,632 210,261 Proceeds from ILIT 54,000,000 54,000,000 54,000,000 54,000,000 54,000,000 54,000,000 54,000,000 54,000,000 54,000,000 Total assets to heirs $ 64,082,650 $ 64,099,259 $ 64,163,093 $ 56,228,813 $ 56,296,487 $ 56,366,188 $ 56,437,989 $ 56,511,967 $ 56,747,790 Page 59
  • 61.
    CAPTIVE INSURANCE COMPANYDETAILS - PROPOSED PLAN Transferred YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Cash Flow Details Anthony's share of Captive profits 270,000 270,000 270,000 270,000 270,000 270,000 270,000 270,000 Annual Profits distributed to ILIT (227,350) (227,350) (227,350) (227,350) (227,350) (227,350) (227,350) (227,350) Excess Cash Flow in Captive 42,650 42,650 42,650 42,650 42,650 42,650 42,650 42,650 Cumulative Excess Cash Flow in Captive 42,650 86,153 130,526 175,787 221,952 269,041 317,072 467,006 Page 60
  • 62.
    FAMILY LIMITED LIABILITYCOMPANY DETAILS - PROPOSED PLAN 0% YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Balance Sheet Family Limited Liability Company Assets Cumulative Capital Contribution from DFT 20,000,000 30,000,000 40,000,000 45,000,000 45,000,000 50,000,000 55,000,000 60,000,000 Total 20,000,000 30,000,000 40,000,000 45,000,000 45,000,000 50,000,000 55,000,000 60,000,000 Annual Capital Contributions 20,000,000 10,000,000 10,000,000 5,000,000 - 5,000,000 5,000,000 Assets in Family Limited Liability Company $ 20,000,000 $ 30,000,000 $ 40,000,000 $ 45,000,000 $ 45,000,000 $ 50,000,000 $ 55,000,000 $ 60,000,000 Page 61
  • 63.
    IRREVOCABLE LIFE INSURANCETRUST DETAILS - PROPOSED PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Premiums for Existing ILIT 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 Total outlay to ILITs 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 - New Policy Premiums funded by profits from the transferred Captive Insurance Company interests New Policy - Annual Premium 227,350 227,350 227,350 227,350 227,350 227,350 227,350 227,350 DB from Donfrio Accumulation Trust 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 Net death benefit from new ILIT 50,000,000 50,000,000 50,000,000 50,000,000 50,000,000 50,000,000 50,000,000 50,000,000 50,000,000 Total potential death benefit $ 54,000,000 $ 54,000,000 $ 54,000,000 $ 54,000,000 $ 54,000,000 $ 54,000,000 $ 54,000,000 $ 54,000,000 $ 54,000,000 Page 62
  • 64.
    BENEFITS TO DONFRIOFAMILY CHARITY - PROPOSED PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Charitable gift of IRA assets 141,000 149,395 159,853 171,042 183,015 195,826 209,534 224,202 274,657 Cumulative annual gifts to charity - 1,000,000 2,020,000 3,060,400 4,121,608 5,204,040 6,308,121 7,434,283 10,949,721 Outright Gift to Charity at 2nd death 205,655,957 205,481,887 216,644,278 235,814,755 241,623,893 242,546,965 248,516,819 254,532,847 263,036,627 Total benefits to foundation $ 205,796,957 $ 206,631,282 $ 218,824,131 $ 239,046,197 $ 245,928,516 $ 247,946,832 $ 255,034,475 $ 262,191,332 $ 274,261,005 Page 63
  • 65.
    DETAILS OF ANTHONY'SQUALIFIED PLAN - PROPOSED PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Anthony's Qualified Plans Anthony's age 55 56 57 58 59 60 61 64 Dina's age 52 53 54 55 56 57 58 61 Minimum distribution factor 41.6 40.7 39.7 38.7 37.8 36.8 35.8 33.0 Securities in plans 125,000 132,442 141,713 151,633 162,248 173,605 185,757 198,760 243,490 Plan balance during life 125,000 132,442 141,713 151,633 162,248 173,605 185,757 198,760 243,490 Plan balance at death of survivor 125,000 132,442 141,713 151,633 162,248 173,605 185,757 198,760 243,490 Page 64
  • 66.
    DETAILS OF DINA'SQUALIFIED PLAN - PROPOSED PLAN YEAR Current 2011 2012 2013 2014 2015 2016 2017 2020 Dina's Qualified Plans Dina's age 52 53 54 55 56 57 58 61 Anthony's age 55 56 57 58 59 60 61 64 Minimum distribution factor 44.6 43.6 42.6 41.6 40.7 39.7 38.7 35.8 Securities in plans 16,000 16,953 18,139 19,409 20,768 22,221 23,777 25,441 31,167 Plan contributions - - - - - - - - Plan balance during life 16,000 16,953 18,139 19,409 20,768 22,221 23,777 25,441 31,167 Plan balance at death of survivor 16,000 16,953 18,139 19,409 20,768 22,221 23,777 25,441 31,167 Page 65
  • 67.
    DISCLAIMER AND DISCLOSURE ANTHONY AND DINA DONFRIO InKnowVision, LLC does not give tax, accounting or legal advice to its clients. The effectiveness of any of the strategies described will depend on your individual situation and on a number of complex factors. Any discussion in this presentation relating to tax, accounting, investments, regulatory, or legal matters is based on our understanding as of the date of this presentation. Rules in these areas are constantly changing and are open to varying interpretations. Assumption Issues The plan involves numerous assumptions. While we believe that these assumptions are reasonable, it is important to understand that it is a virtual certainty that the actual results will differ from those illustrated. Returns on investment and performance of financial products can cause the results to vary. Changes in tax, trust or property laws can cause plan results to vary. Plan implementation that differs from that described in the plan will cause the results to vary. Provision of state law may cause the plan results to vary. Tax Opinions The IRS has recently issued new rules for tax practitioners regarding covered opinions, reliance opinions and marketed opinions. While this is an arcane area, suffice it to say that these opinions are often obtained by taxpayers for purposes of avoiding penalties. These opinions are obtained at substantial cost and after substantial legal analysis. If you believe that such an opinion would be helpful to you prior to entering into any of the transactions outlined in this plan, you should feel free do so. Be advised that nothing in this analysis should be construed by you, your advisors or any one else as a covered opinion, reliance opinion, marketed opinion or any other type of opinion regarding any of the transactions or outcomes outlined in this plan. Page 66