InKnowVision November 2013 HNW Technical PPT - Liquidity Planning

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In this presentation we looked at the problem seen in many large estates - the lack of liquidity to deal with estate equalization, estate taxes and charitable funding. Many of our clients have significant private businesses or extensive real estate holdings that represent a large percentage of the family wealth. There is often a large shortage of liquidity to deal with the division of these illiquid assets among family members as well as pay any estate taxes that may be levied on the estate. Of course if estate taxes do need to be paid there is a limited window when money can be raised and often times this means selling property at a less than opportune time. View this recording to see various designs for creating liquidity.

Education Business Economy & Finance

Technical Webinar

©2013. InKnowVision LLC. All rights reserved. www.inknowvision.com

(630) 596-5090

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@InKnowVision
InKnowVision, LLC
InKnowVision
TheComplexEstate

 Buy-Sell Buddies
 Fantastic Farmers

 Business Owner | Real Estate | Family Stock Lover

www.InKnowVision.com

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 Second generation company owners

 Business thriving
 FMV-$60M plus

 Each partner’s net worth - $35M
 Unfunded buy sell
 No cash for estate tax
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 How much liquidity needed?
 Determining value of business
Appraisal?
 Agreement?


 Settling on terms
 Single pay
 Pay over time
 Insurance choices
 Term vs. permanent

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 Individual Ownership vs. Trust Ownership
 Estate tax reduction vs. capital gains

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 Health underwriting
 Tobacco
 Lifestyle


Drug and Alcohol

 Dangerous activity underwriting
 Mountain climbing
 Scuba
 Car racing
 Financial underwriting
 Substantiating the need for insurance
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 Review of all
 Corporate documents
 Ownership interests
 Shareholder agreements
 Bank covenants
 Estate planning documents
 Buy sell agreement

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 $25M of term insurance issued to fund buy-sell

agreement

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 Two farming families
 Net worth
 Family 1 - $40M
 Family 2 - $40M
 Partners in all ventures
 10 year plan to sell out of family real estate

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ASSETS

VALUES

CASH AND EQUIVALENTS

616,632

MARKETABLE SECURITIES - EQUITIES
CLOSELY HELD BUSINESS

34,034,000

RESIDENTIAL REAL ESTATE

1,175,000

TOTAL

Husband
Wife

1,758,000

37,583,632

77 Years Old
78 Years Old

www.InKnowVision.com

Uninsurable
Table B-D

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Year

Estate Tax

Liquidity

2013

$10,800,000

$2,350,000

Where will the money come from?

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 Sell business interests to GDOT for a note
 32 year note
 Accruing interest/balloon note
 Leave note to charity in event of death
 No estate tax
 Insure children to pay off the note
 Children have the use of the property during their lives

 Re-evaluate as farm sales occur
 Look for new opportunities
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 $10M of term-daughter
 $10M of term-son
 $20M or GUL-survivorship on siblings
 Paid for with business profits

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 Client owns
 Business - $15M
 Family Corporation Stock - $25M (public company)
 Real Estate - $10M
 Collectibles - $7M
 Goals
 Keep business
 Keep family stock
 Keep real estate
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Th is ch art com p ares th e am ou n t o f you r Fam ily sto ck so ld to p ay e state taxe s un d er th e p rop o se d p lan .

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 Income - $1.2M
 Expenses - $1.2M
 Need cash flow for premium ($250k per year)

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 Suggestion #1
 Sell collectibles
 Objection – no basis – high tax rate (28% plus state)
 Solution
 CRT for collectibles

www.InKnowVision.com

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 Suggestion #2
 Refinance commercial real estate

www.InKnowVision.com

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 Suggestion #3
 Captive Insurance Company
 Use reserves in future to pay life premiums

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 $15M of GUL in force

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715 Enterprise Drive
Oak Brook, IL 60523
(630) 596-5090
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Scott@ikvllc.com
(630) 470-6480

@InKnowVision
InKnowVision, LLC
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TheComplexEstate
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All Content Copyright © 2013

5 HNW Content Strategies You Won't Want To Miss Recently we’ve shared with you why you need to use high net worth content and how to find it. Now it’s time to learn how to deploy high net worth content and start measuring your results. In this high net worth marketing webinar, we will show you: -What top 5 strategies are most important in reaching the high net worth -How these top 5 strategies are used to deploy high net worth content -Why they have the most impact on your high net worth audience -Who will benefit most using these 5 top strategies

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InKnowVision December 2013 Case Study - Watson FWGA

InKnowVision

Ben and Sara Watson are 55 and 54 respectively. They own and operate a very profitable well drilling and maintenance business that has allowed them to acquire and accumulate oil and gas rights totaling $30M over the last 5 years. These oil and gas rights are generating in excess of $1.5M a year on top of the $925k of income from their separate drilling and maintenance business. Ben and Sara have 3 daughters. Their youngest daughter, Katie, and her husband have played key roles in growing Watson Drilling. Ben would like to begin transitioning the business to them and ultimately leave them with the benefit of the business. With the business going to just one of the daughters, Ben and Sara want to equalize the inheritance to their other two daughters. For this, they have already purchased four whole life insurance policies. Two of these policies have significant loans against them and very little cash surrender value. With premiums totaling $400k for the four policies, all owned inside their estate, and insufficient death benefit to cover potential estate taxes and equalize the daughters’ inheritances, these policies may not meet the family’s needs. The primary planning goals are to: -Maintain their customary base lifestyle need of $250,000, with approximately another $750,000 for discretionary and other expenses. -Provide for the financial security of the surviving spouse. Provide a succession plan that will allow for a smooth transition of Watson Drilling to their daughter, Katie. -Assure they have sufficient liquid assets available at their deaths to eliminate the forced liquidation of business or real estate assets. -Maximize the inheritance that they leave for their children and grandchildren.

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Jerry and Susan Carter are both 63. They own and operate a very profitable manufacturing business in a small town. Jerry and Susan spend about $650,000 a year, giving generously to family ($200,000/yr.) and their favorite charitable causes ($150,000/yr.). Although the business provides significant taxable income of over $5M a year, Jerry and Susan have been re-investing excess cash back into the business to keep it thriving through the latest recession. With assets totaling over $60M, a growing business and an income tax bill surpassing $2M/yr., their estate tax and income tax exposure is quickly increasing. The primary planning goals are to: Provide for the financial security of the surviving spouse. Maintain Carter Manufacturing as a viable company in their hometown after they exit the business.Maintain their customary lifestyle and gifting. This should take approx. $650,000 annually after taxes. Eliminate or reduce estate taxes. Maintain adequate gifting to their children and grandchildren. Their main priority is providing funds for their grandchildren’s educations. Maximize the inheritance they leave to their children and grandchildren. Establish a family foundation for lifetime and future family charitable giving. Learn more at www.inknowvision.com

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InKnowVision

Duncan and Tina are both 65. They live a comfortable lifestyle, spending about $1,600,000 a year after taxes and gifting about $2,000,000 a year to their family foundation. With assets worth approximately $62M and annual income of over $7M, they currently pay just over $2M a year in income taxes and have an increasing estate tax and ongoing income tax exposure. The primary planning goals are to: -Make sure that they have sufficient funds to live on for the rest of their lives (approx. $1,600,000/yr. after taxes and gifts). -Assure that Duncan's, Inc. does not have to be liquidated as a result of their death. -Provide a successful transition of the business to their son, Jason, while ensuring an equal inheritance for their son, Jeremy. They would like to leave 50% of their estate to Jason & Jeremy and another 25% to their grandchildren and other family members. -They wish to continue annual giving to their family foundation and ultimately leave 25% of their estate to the foundation at death. -Make sure the company buy/sell agreement accurately reflects the wishes of the family owners in the most tax efficient manner possible. -Eliminate or reduce estate taxes.

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The Roman Empire, a vast and enduring power, stands as one of history's most remarkable civilizations, leaving an indelible imprint on the world. It emerged from the Roman Republic, transitioning into an imperial powerhouse under the leadership of Augustus Caesar in 27 BCE. This transformation marked the beginning of an era defined by unprecedented territorial expansion, architectural marvels, and profound cultural influence. The empire's roots lie in the city of Rome, founded, according to legend, by Romulus in 753 BCE. Over centuries, Rome evolved from a small settlement to a formidable republic, characterized by a complex political system with elected officials and checks on power. However, internal strife, class conflicts, and military ambitions paved the way for the end of the Republic. Julius Caesar’s dictatorship and subsequent assassination in 44 BCE created a power vacuum, leading to a civil war. Octavian, later Augustus, emerged victorious, heralding the Roman Empire’s birth. Under Augustus, the empire experienced the Pax Romana, a 200-year period of relative peace and stability. Augustus reformed the military, established efficient administrative systems, and initiated grand construction projects. The empire's borders expanded, encompassing territories from Britain to Egypt and from Spain to the Euphrates. Roman legions, renowned for their discipline and engineering prowess, secured and maintained these vast territories, building roads, fortifications, and cities that facilitated control and integration. The Roman Empire’s society was hierarchical, with a rigid class system. At the top were the patricians, wealthy elites who held significant political power. Below them were the plebeians, free citizens with limited political influence, and the vast numbers of slaves who formed the backbone of the economy. The family unit was central, governed by the paterfamilias, the male head who held absolute authority. Culturally, the Romans were eclectic, absorbing and adapting elements from the civilizations they encountered, particularly the Greeks. Roman art, literature, and philosophy reflected this synthesis, creating a rich cultural tapestry. Latin, the Roman language, became the lingua franca of the Western world, influencing numerous modern languages. Roman architecture and engineering achievements were monumental. They perfected the arch, vault, and dome, constructing enduring structures like the Colosseum, Pantheon, and aqueducts. These engineering marvels not only showcased Roman ingenuity but also served practical purposes, from public entertainment to water supply.

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Letter from the Congress of the United States regarding Anti-Semitism sent June 3rd to MIT President Sally Kornbluth, MIT Corp Chair, Mark Gorenberg Dear Dr. Kornbluth and Mr. Gorenberg, The US House of Representatives is deeply concerned by ongoing and pervasive acts of antisemitic harassment and intimidation at the Massachusetts Institute of Technology (MIT). Failing to act decisively to ensure a safe learning environment for all students would be a grave dereliction of your responsibilities as President of MIT and Chair of the MIT Corporation. This Congress will not stand idly by and allow an environment hostile to Jewish students to persist. The House believes that your institution is in violation of Title VI of the Civil Rights Act, and the inability or unwillingness to rectify this violation through action requires accountability. Postsecondary education is a unique opportunity for students to learn and have their ideas and beliefs challenged. However, universities receiving hundreds of millions of federal funds annually have denied students that opportunity and have been hijacked to become venues for the promotion of terrorism, antisemitic harassment and intimidation, unlawful encampments, and in some cases, assaults and riots. The House of Representatives will not countenance the use of federal funds to indoctrinate students into hateful, antisemitic, anti-American supporters of terrorism. Investigations into campus antisemitism by the Committee on Education and the Workforce and the Committee on Ways and Means have been expanded into a Congress-wide probe across all relevant jurisdictions to address this national crisis. The undersigned Committees will conduct oversight into the use of federal funds at MIT and its learning environment under authorities granted to each Committee. • The Committee on Education and the Workforce has been investigating your institution since December 7, 2023. The Committee has broad jurisdiction over postsecondary education, including its compliance with Title VI of the Civil Rights Act, campus safety concerns over disruptions to the learning environment, and the awarding of federal student aid under the Higher Education Act. • The Committee on Oversight and Accountability is investigating the sources of funding and other support flowing to groups espousing pro-Hamas propaganda and engaged in antisemitic harassment and intimidation of students. The Committee on Oversight and Accountability is the principal oversight committee of the US House of Representatives and has broad authority to investigate “any matter” at “any time” under House Rule X. • The Committee on Ways and Means has been investigating several universities since November 15, 2023, when the Committee held a hearing entitled From Ivory Towers to Dark Corners: Investigating the Nexus Between Antisemitism, Tax-Exempt Universities, and Terror Financing. The Committee followed the hearing with letters to those institutions on January 10, 202

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InKnowVision November 2013 HNW Technical PPT - Liquidity Planning

4.  Second generation company owners  Business thriving  FMV-$60M plus  Each partner’s net worth - $35M  Unfunded buy sell  No cash for estate tax www.InKnowVision.com All Content Copyright © 2013

5.  How much liquidity needed?  Determining value of business Appraisal?  Agreement?   Settling on terms  Single pay  Pay over time  Insurance choices  Term vs. permanent www.InKnowVision.com All Content Copyright © 2013

7.  Health underwriting  Tobacco  Lifestyle  Drug and Alcohol  Dangerous activity underwriting  Mountain climbing  Scuba  Car racing  Financial underwriting  Substantiating the need for insurance www.InKnowVision.com All Content Copyright © 2013

8.  Review of all  Corporate documents  Ownership interests  Shareholder agreements  Bank covenants  Estate planning documents  Buy sell agreement www.InKnowVision.com All Content Copyright © 2013

11. ASSETS VALUES CASH AND EQUIVALENTS 616,632 MARKETABLE SECURITIES - EQUITIES CLOSELY HELD BUSINESS 34,034,000 RESIDENTIAL REAL ESTATE 1,175,000 TOTAL Husband Wife 1,758,000 37,583,632 77 Years Old 78 Years Old www.InKnowVision.com Uninsurable Table B-D All Content Copyright © 2013

13.  Sell business interests to GDOT for a note  32 year note  Accruing interest/balloon note  Leave note to charity in event of death  No estate tax  Insure children to pay off the note  Children have the use of the property during their lives  Re-evaluate as farm sales occur  Look for new opportunities www.InKnowVision.com All Content Copyright © 2013

15.  Client owns  Business - $15M  Family Corporation Stock - $25M (public company)  Real Estate - $10M  Collectibles - $7M  Goals  Keep business  Keep family stock  Keep real estate www.InKnowVision.com All Content Copyright © 2013

16. $7 0,0 00,0 00 $6 0,0 00,0 00 $5 0,0 00,0 00 $4 0,0 00,0 00 After other planning techniques - $3 0,0 00,0 00 $2 0,0 00,0 00 $1 0,0 00,0 00 F am ily Stock F am ily Stock S o ld Th is ch art com p ares th e am ou n t o f you r Fam ily sto ck so ld to p ay e state taxe s un d er th e p rop o se d p lan . www.InKnowVision.com All Content Copyright © 2013 Esta te T a x 30 20 29 20 28 20 27 20 26 20 25 20 24 20 23 20 22 20 21 20 20 20 19 20 20 18 17 20 16 20 15 20 14 20 13 20 12 20 11 20 C ur re nt $-

22. 715 Enterprise Drive Oak Brook, IL 60523 (630) 596-5090 www.inknowvision.com Scott@ikvllc.com (630) 470-6480 @InKnowVision InKnowVision, LLC InKnowVision TheComplexEstate Google+ All Content Copyright © 2013

InKnowVision November 2013 HNW Technical PPT - Liquidity Planning

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