The document summarizes estate planning strategies in light of changing estate tax laws. It notes that current estate tax exemptions are set to expire after 2010. For clients with estates over $1 million, it recommends reviewing gifting options, life insurance trusts, and other strategies to minimize estate taxes and coordinate plans with beneficiary designations. Costs for basic estate planning range from $400 for individuals to $700-2,400 for married couples with children.

1. The Estate Tax: What’s on the Horizon? Prepared for Workman Securities Corporation September 23, 2010

2. How to Turn a $2.5M Estate into a $1.6M Estate…. DO NOTHING! or Get planning advice, which will cost less than 1% of penalty of non-action

3. Current Status At Present No Federal Estate Tax MN State Estate Tax (counterintuitive) Basis Issues 2011 Maximum 60% tax on estates in excess of $1M MN State Estate Tax expected to remain as-is

4. 2001 Economic Growth and Tax Relief Reconciliation Act Reduction of rate schedule Increased exemption amounts Fewer taxable estates 2010 – no estate tax 2011 - $1 million exemption and maximum rate of 60% (55% +5%)

5. What is the Problem? Planning during the past ten years has assumed high exemption amounts or no estate tax Therefore, nearly all planning is philosophically flawed

6. Do Not Forget the State Estate Taxes MN Tax calculator used to determine taxation Mandatory filing if estate more than $1M Decoupled from federal estate tax $99,600 $2,000,000 $391,600 $5,000,000 $64,400 $1,500,000 $38,800 $1,100,000 Total Due Total Gross Estate

7. We Suggest… Assume a $1 million exemption Assume all estates will be taxed until demonstrated to be otherwise Review gifting options Effect of basis Effect of future growth rate Effect of earnings of gift property

8. Where Are We Going? Taxes are going up There will be uncertainty in taxes Registered Representatives and Financial Advisors do a lot of financial planning inadvertently by selecting beneficiaries of retirement plans that may conflict with estate plans Registered Representatives and Financial Advisors will probably have a fiduciary duty

9. We Suggest… Registered Representatives and Financial Advisors work with lawyers to coordinate estate planning strategies Move life insurance contracts to non-insured owner, beware of gifting concerns Review all Buy/Sell Agreements and funding plans Update valuations Use gifting, insurance to fund cabin trust or cabin LLC Consider potential inheritances

10. Basic Estate Planning Documents Will Trust(s) Revocable – “Living Trust” Irrevocable ILIT Supplemental Needs Trust Healthcare Directive Power of Attorney

11. Will Provides guidance to the court Nomination of fiduciaries Payment of expense and taxes Distribution provisions No on-going management Prompt closing of estate Public information

12. Trust On-going management of assets Distributions to beneficiaries, may be discretionary Generally not court supervised Privacy

13. Health Care Directive Appoints health care agent Provides some direction as to wishes Medical treatment Donation of organs Disposition of remains

14. How does this affect your clients? Two Examples: Mr. Swenson with a $2M estate Unmarried, no children Mr. & Ms. Jones with a $3.5M estate Two children, four grandchildren

15. Scenario: Mr. Swenson Possible solutions for 2011 Will Trust(s) Gifting with life insurance to an ILIT Structure gifts to nieces and nephews Charitable trust options Gift $1M of depreciated assets – Real Estate Health Care Directive (No spouse or children) Power of Attorney (No spouse or children)

16. Scenario: Mr. & Ms. Jones Possible solutions for 2011 Will with exempted amount to trust Gifting with life insurance to an ILIT Gift $1M to remove appreciation Cabin Trust Charitable trust options Review beneficiaries of retirement plans and insurance policies

17. Costs & Process Single person, no children – $400 Married w/children – $700-$2,400 Process Estate planning form Meet and plan Draft and review Execute documents Re-title property or other implementation

18. Questions?

19. Thank You! For further information, please contact: Ben Skjold Litigation & Business Attorney Licensed in MN and IL [email_address] Paul Christensen Estate and Tax Attorney Licensed in MN and TX [email_address] [p] 612.746.2560 ■ [f] 612.746.2561 www.skjold-barthel.com