Morgan Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning

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ESTATE AND FINANCIAL PLAN DESIGN

PREPARED FOR:

BEN AND AMANDA MORGAN

January 17, 2012

PRESENTED BY

Scott Hamilton
InKnowVision, LLC
715 Enterprise Dr.
Oak Brook, IL 60523
scott@ikvllc.com
Phone: (630) 596-5090

Copyright 2012 InKnowVision, LLC - Family Wealth Goal Achiever™

YOUR GOALS AND OBJECTIVES

Maintain our customary lifestyle. This should take about $641,000 annually after taxes and gifts.

Provide for the financial security of the surviving spouse.

Explore options for a business succession plan that maximizes the after-tax proceeds from the sale of the
business.

Create sufficient funds for retirement.

We wish to continue giving charitably during our lives and wish to create a significant charitable gift upon
death in order to leave a family legacy.

We would like to leave our children and grandchildren an inheritance in an amount that leaves them
comfortable, but not in a manner that they become non-productive members of society.

Reduce income taxes if possible.

Implement an asset protection structure that protects our assets and the assets our children & grandchildren
will inherit.

Eliminate or reduce estate taxes.

Assure we have sufficient liquid assets available at our deaths to avoid a forced liquidation of our business and
real estate assets.

Page 2

FAMILY INFORMATION

CLIENTS
Ben Morgan Date of Birth February 24, 1949
Amanda Morgan Date of Birth April 8, 1952
123 Main St.

CHILDREN

CHILD'S NAME DATE OF BIRTH

Rena Morgan November 9, 1976
Beth Morgan August 17, 1978
Ann Morgan February 6, 1981
Gloria Morgan March 21, 1984

GRANDCHILDREN
NAME DATE OF BIRTH
Tim Morgan April 4, 2010
Amy Morgan September 6, 2007
Susan Morgan March 5, 2011

Page 3

PERIODIC TABLE OF ESTATE PLANNING ELEMENTS - POTENTIAL

The highlighted tools are the POTENTIAL strategies that were discussed during our initial comprehensive diagnositc report that could be
utilized by your family in order to enhance your wealth transfer and management planning.

Charitable
Family Limited Grantor Retained Charitable Lead
Remainder Uni- 412(e) Private Annuity SCIN
Partnership Annuity Trust Annuity Trust
Trust

Qualified Personal Sale for Installment Limited Liability
Family LLC TCLAT Flip CRT Life Insurance
Residence Trust Note Companies

Preferred Limited Corporate
Premium Finance Family Charity Plan 529 Plans Gifting ILIT
partnership Recapitalization

Annuity
Walton GRAT Family Foundation Charitable Life Estate NIMCRUT Asset Protection SPIA/Life Arbitrage
Withdrawal

Principal Protected Wills, DPAs and International
SPIA/Life in a CLAT Crummey Powers Dynasty Trust GDOT
Notes POAs VUL

Employee Stock International
Supporting Qualified Plan to
Gift Annuity Ownership Plan Life Estates Business Risk LLC/CRTs
Organizations Charity
(ESOP) Management

Charitable
Updated Buy/Sell Defined Benefit Qualified Plan
Bargain Sales Risk Management Remainder Annuity Management LLC
Agreements Plans Limited Partnership
Trust

Green equals a Blue equals a social Yellow equals an
planning tool for capital or existing planning
family charitable tool tool

PERIODIC TABLE OF ESTATE PLANNING ELEMENTS - RECOMMENDED

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
Partnership Annuity Trust Annuity Trust
Trust

Qualified Personal Sale for Installment Series Limited GDOT Owned Life
Family LLC TCLAT Flip CRT
Residence Trust Note Liability Company Insurance

Beneficiary
Preferred Limited Corporate
Premium Finance Defective Inheritor's 529 Plans Gifting ILIT
partnership Recapitalization
Trust (BDIT)

Annuity
Walton GRAT Family Foundation Charitable Life Estate NIMCRUT Asset Protection SPIA/Life Arbitrage
Withdrawal

Principal Protected Wills, DPAs and International
SPIA/Life in a CLAT Crummey Powers Dynasty Trust GDOT
Notes POAs VUL

Supporting Revocable Living Captive Insurance
IRA to Charity Gift Annuity Life Estates LLC/CRTs
Organizations Trusts Company

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 5

YOUR GOALS AND OBJECTIVES - ACCOMPLISHED

Cash Flow - The plan provides cash flow to maintain your lifestyle at $641,000 increasing annually at 3% after
taxes and gifts

Business Continuation - The plan lays a foundation for business succession, while leaving control with you.

Income tax deferral - Over the next 5 years income taxes could be reduced by as much as $2,600,000

Inheritance Planning - The proposed plan provides for an inheritance to your children and executive team of at
least 75% of your estate and manages your children's inheritance in a way that provides them with
opportunities, while limiting the dangers associated with receiving too much, too soon.

Charitable Giving - Your family foundation could expect future gifts of more than $35,000,000

Estate Tax Elimination - Under your current plan, assuming current law, your estate taxes would be in excess of
$392,696,058 at life expectancy. The plan eliminates those estate taxes entirely.

Liquidity - The continued investment of company profit back into the company creates a need for liquidity. The
plan helps this problem.

Page 6

PLAN ASSUMPTIONS

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 9%
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.

7520 Rates
Highest rate 3.0% March, 2011
Current rate 3.0% April, 2011
Lowest rate 2.8% January, 2011

Long Term AFR Rate 4.3% April, 2011

Annual increase in Ben's earned income 2%
Number of years Ben's income is expected to continue 4

Lifestyle Need Assumptions
Net annual outlay for Ben and Amanda's lifestyle needs, not including gifts or income taxes $641,000
Annual cost of living increase used in the plan 3%

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 7

INTRODUCTION TO THE PLAN STRATEGIES ROADMAP

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 8

CREATE AND FUND A FAMILY LIMITED PARTNERSHIP

Ben and Amanda create a limited partnership and a management LLC. They receive limited partnership
shares and LLC receives GP 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.

BEN & AMANDA FAMILY LIMITED PARTNERSHIP

LP & LLC interests are split between Ben &
Amanda

LLC GP SHARES LP SHARES

1% 99%

Planning Goals Accomplished:
- Sets up a vehicle for business transition, with the potential to pass management of these assets to professional trustees and have
the children benefit from their operation.
- Controls assets so inheritance provides opportunities while minimizing problems for children and grandchildren.
- Reduces estate taxes.
- Provides a vehicle to enhance asset protection.
- Helps to avoid liquidation of real estate and business assets at your death.

Financials found on pgs. 72, 73 Page 9

CREATE AND FUND A FAMILY LIMITED PARTNERSHIP

Ben and Amanda transfer $6,112,095 of assets to the limited partnership.

BEN & AMANDA FAMILY LIMITED PARTNERSHIP
$6,112,095

Detail of Assets Transferred
Morgan Enterprises, LLC
1 Main St. 500,000
Loan - Mortgage - 1 Main St. (172,928)
12 Main St. 5,000,000
Loan - Mortgage - 12 Main St. (3,850,000)
123 Main St. 825,000
54 Main St. LLC 12,500
55 Main St. Office Building 2,650,000
Loan - Mortgage - 55 Main St. (2,576,000)
Open Land, LLC 1,000,000
Loan - Mortgage - Open Land, LLC (339,627)
Community, LLC 60,000
Cash 138,150
Technology, LLC (100%) 1,000,000
Note from ABC Corp - 8.59% 1,865,000
Total Assets Contributed 6,112,095

NOTE: Transfer of assets may require approval of your lender.

HAVE THE LIMITED PARTNERSHIP SHARES APPRAISED

Ben and Amanda hire an appraiser to value the limited partnership shares that they own. The appraiser will value the shares taking
all of the following into account:
▪ Liquidity of the shares
▪ Transferability of the shares
▪ Degree of control that accompanies ownership of the shares
▪ The assets owned by the partnership

BEN & AMANDA Appraisal FAMILY LIMITED PARTNERSHIP

Valuation adjustment
Appraised value of LP shares is $3,972,862 assumed to be 35% Inside value of assets is $6,112,095

The appraisal value of the LP units is assumed for illustration purposes only.
Note: Business appraisal is not an exact science. The IRS does not like valuation adjustments.
A well regarded appraiser should be retained to value the interests being sold.

Page 11

BUSINESS PURPOSE
The Family entity must have a legitimate business purpose for being organized and these purposes should be well documented. Legitimate business purposes examples are as
follows:

a. To Make a Profit – The primary reason for creating this Entity is to make a profit.
b. To Increase Wealth – This Entity will provide an effective legal vehicle to increase the wealth of the Members and their families.
c. To Provide Centralized Management of Investments – This Entity is designed to hold investment assets and allow for centralized management of those assets.
d. To Manage and Develop Real Estate – This Entity will provide the legal vehicle to effectively manage and/or develop any real estate owned or acquired by the Company.
e. To Avoid Two Layers of Taxation on Profits – This Entity provides flexibility in business planning not available to the Members through trusts, corporations, or other business
entities.
f. To Make Gifts Without Fractionalizing Assets – This Entity establishes a method by which annual gifts may be made without fractionalizing family assets.
g. To Make Gifts Without Causing a Loss of Incentive – This Entity provides a method of ownership which allows gifts to be made to children and other beneficiaries without
causing a loss of productivity or the incentive to strive to do well.
h. To Control Cash Flow to Members – This Entity provides a structure by which the Manager can control the assets and the cash flow to Members to achieve the legitimate
purposes of the Company.
i. To Provide a Buy-Sell Arrangement – This Entity provides an orderly buy-sell arrangement between the members of the families that own membership interests to keep the
ownership of Company assets in those families.
j. To Resolve Disputes Privately – This Entity provides for mediation and binding arbitration in disputes by Members that is intended to prevent expensive and embarrassing public
litigation of private family business matters.
k. To Require the Losers of Disputes to Pay the Dispute Costs – This Entity requires the loser in any dispute to pay for the costs of the dispute.
l. To Restrict the Right of Non-Members to Acquire Interests – This Entity restricts the right of non-Members to acquire interests in Company assets.
m. To Prevent Transfers of Membership Interests Because of Failed Marriages – This Entity prevents the transfer of a family member’s interest in the Company because of a failed
marriage.
n. To Prevent Commingling of the Assets of Gift Recipients – This Entity creates a method of ownership that will prevent gifts made to family members from being commingled
with assets owned by others.
o. To Make it Difficult to Withdraw – The restrictions in this Operating Agreement make it difficult for any of the parties to withdraw from the Company once they become a
Member.
p. To Protect Members from the Company’s Creditor Claims – This Entity limits the liability of Members from the Company’s creditors and further limits the liability of Members
holding particular Series of the Company from liability associated with other Series of the Company.
q. To Provide Asset Protection for Members – This Entity protects the family resource base from the claims of future creditors of Members.

The entity may conduct any lawful business and investment activity permitted under the laws of the State and/or country of organization in which it may have a business or
investment interest.

The entity may own, acquire, manage, develop, operate, sell, exchange, finance, refinance, lease and otherwise deal with real estate, personal property and any type of business as
the Manager may from time to time deem to be in the best interest of the entity.
The entity may engage in any other activities that are related or incidental to the foregoing purposes.

Page 12

CORPORATE RE-CAPITALIZATION OF BEN, INC

Ben and Amanda recapitalize the existing corporate shares of Ben, Inc into voting and non-voting shares.

BEN AND AMANDA MORGAN BEN, INC

VOTING NON-VOTING

1% 99%

Business To Be Recapitalized
Ben, Inc (50% S Corp)
Sub-Division Assets 7,000,000
Loan - Mortgage - Sub-division (859,885)
55 Land St., LLC 900,000
55 Land St., LLC (775,434)
Total 6,264,681
NOTE: Transfer of assets with liabilities may require lender approval.

- Sets up a vehicle for business transition, with the potential to pass management of these assets to professional trustees and have the
children benefit from their operation.
- Controls assets so inheritance provides opportunities while minimizing problems for children and grandchildren.
- Reduces estate taxes.
- Provides a vehicle to enhance asset protection.
- Helps to avoid liquidation of real estate and business assets at your death.

Financials found on pg. 74 Page 13

HAVE THE NON-VOTING SHARES APPRAISED

Ben and Amanda hire an appraiser to value the non-voting shares. The appraiser will value the shares taking all of the following into
account:
▪ Liquidity of the shares
▪ Transferability of the shares
▪ Degree of control that accompanies ownership of the shares
▪ The assets owned by the corporation

BEN AND AMANDA MORGAN Appraisal BEN, INC

Adjusted value of non-voting shares is Valuation adjustment
assumed to be 35% Inside value of assets is $6,264,681
$4,072,043

The assumed value of the non-voting stock is for illustration purposes only.
Note: Business appraisal is not an exact science. The IRS does not like valuation adjustments.
A well regarded appraiser should be retained to value the interests being sold.

Page 14

CREATE GRANTOR DEEMED OWNER TRUSTS

Ben and Amanda create individual grantor deemed owner trusts (GDOT).
The GDOTs can be drafted to provide asset protection and long term estate tax savings through the use of dynasty trust provisions.

BEN BEN's GDOT

AMANDA AMANDA's GDOT

HEIRS

- Controls assets so inheritance provides opportunities while minimizing problems for children, grandchildren and future generations.
- Reduces estate taxes on appreciating assets
- Provides enhanced asset protection
- Helps to avoid forced liquidation of real estate and business assets
- Flexibility of the trusts allows for transfer of ABC Corp interests to key executives when the appropriate time is determined
- Heirs can have access to income generated from assets in the trust, while not being burdened with asset management decisions Page 15

GIFT TO GRANTOR DEEMED OWNER TRUST

Ben and Amanda each make a gift of $1,163,750 to their individual GDOT. This gift is designed to give each trust economic substance.

BEN BEN's GDOT
$1,163,750

AMANDA $1,163,750 AMANDA's GDOT

Illustration assumes that initial gifts to the GDOTs would represent 7% of your interests in ABC Corp.

Page 16

SELL PARTNERSHIP AND CORPORATE SHARES TO EACH GDOT

Ben and Amanda sell their family family limited partnership shares, non-voting shares of Ben, Inc and 43% of their shares of ABC
Corp to their individual GDOTs for an installment note.

Sell their combined family limited
partnership shares, non-voting
shares of Ben, Inc and 43% of
their shares of ABC Corp worth
BEN & AMANDA $22,342,404 GDOTs

Ben and Amanda own an installment note The GDOTs own LP shares worth $3,972,862,
after the sale Receive an installment note non-voting shares of Ben, Inc worth
worth $22,342,404 that $4,072,043 and shares in ABC Corp worth
provides annual interest $16,625,000 after the sale
payments of $949,552

The sale price is based on the assumed value of the assets
sold.

* The interest rate used in calculating note payments is the long term HEIRS
AFR for April 2011 of 4.25%. Note payments also consist of annual
principal payments which continue until the note is paid off in 2027. Receive assets in the future according to
We make the assumption that in 2019, grantor status is revoked. terms of the trust
Since it is no longer a grantor trust, the trust will be responsible for
paying it's own income tax at that point.

Further detailed information regarding Sales to Grantor Deemed Owner Trusts can be found behind the
appendix of this plan.


ACHIEVING INHERITANCE GOALS AND LIQUIDITY NEEDS

The GDOT Trustees purchase second-to-die life insurance with the assets of the two GDOTs. This policy will have minimum
premium payments to keep the policy in place for 15 years. At the end of 15 years, the policy is assumed to be surrendered, and the
total premiums paid over 15 years would be refunded. This policy will have the effect of maintaining your goal of passing 75% of
your estate as it's currently valued over the next 15 years to your children and executive team.

GDOTs LIFE INSURANCE

Own Life Insurance $30,000,000

Premium Payment Details
Premiums in the amount of $246,000 are paid for the first 5 years. Beginning in
year 6, premiums in the amount of $63,000 are paid for 10 years. At the end of
year 15, if the policy is surrended, all premium payments totaling $1,860,000
would be refunded.

The premium is based on certain assumptions. This is for illustration purposes only. Actual insurance numbers can only be
determined by applying for insurance.

Financials found on pg. 27, 75 Page 18

CREATE A CAPTIVE INSURANCE COMPANY

GDOT Trustees create a captive insurance company.
The captive is formed to insure currently insured and uninsured risks of ABC CORP.

ABC CORP Premium CAPTIVE INSURANCE COMPANY

Risk Coverage

GDOTs
The captive could be a pure captive and owned by a trust for your
benefit or for the benefit of your heirs (or both). The decision as to
which direction to follow can be made during the feasibility phase. Asset protected and tax favorable trusts could
Prior to forming a captive insurance company, there must be a own the non-voting shares of the captive and
feasibility study to determine insurable risks. receive underwriting profits

- Asset protection
- Creates a pool of liquidity in trust
- Effective tool for passing a tax advantaged inheritance
- Creates income tax deferral for the company


COMPANY INSURES RISKS

The Captive Insurance Company insures various risks of loss.

Pay maximum annual premiums
of $1,200,000 to cover risk of
loss. Premiums for insurance are
deductible if they're ordinary
ABC CORP CAPTIVE INSURANCE COMPANY
and necessary business expenses

Risk Coverage

UNDERWRITING PROFITS
Net premium of up to $1.2M is excludable from captive company
income if proper tax election is made.
Underwriting profits of the captive will
ultimately be distributed out to the owner of
the captive

Further detailed information regarding Captive Insurance Companies can be found behind the
appendix of this plan.

Page 20

POTENTIAL INSURABLE RISKS

The Captive Insurance Company must have legitimate business risks to insure and should be well documented.
Examples of legitimate insurable risks are as follows:

a. Employee Benefits
b. Legal expense reimbursement (plaintiff and defense)
c. Loss of key client/account
d. Administrative action
e. Business interruption
f. Intellectual property
g. Political risk
h. Patent infringement
i. Employment practices
j. Reputation
k. Supply chain risks
l. Service obligations
m. Long term liabilities

Page 21

LEAVE YOUR IRA TO CHARITY

At the 2nd death, leave your IRA and qualified plans to charity.

IRA $297,222
MORGAN FAMILY FOUNDATION

Advantages
No estate tax
No income in respect of a decedent tax
If you are interested in leaving money to charity, IRA's and Qualified Plans are the
best choice due to the heavy taxes on them when left to heirs

Page 22

TESTAM TESTAMENTARY CHARITABLE LEAD ANNUITY TRUST (Part I)

Include language in your trust or will that creates a testamentary charitable lead trust (TCLAT) at the second death.
Alternatively, you could make an outright bequest of your taxable estate to charity.

BEN & AMANDA TCLAT

At death $34,704,265 of the assets taxable
TCLAT owns assets with a value of
in your estate will pass to the TCLAT. This
$34,704,265 after your death.
should bring your estate tax to $0.

MORGAN FAMILY FOUNDATION

TCLAT Assumptions The charity will receive payments of
Asset growth rate 5.00% $1,948,846 each year for a period of 25 years
TCLAT payout rate 5.62% totaling $48,721,143.
Present value discount rate 5.00%
Assumed date of death 2012


TESTAMENTARY CHARITABLE LEAD ANNUITY TRUST (Part II)

At the end of the TCLAT term, your heirs will receive all of the assets remaining in the trust.

TCLAT HEIRS

Based on the plan assumptions, your heirs
could expect to inherit $7,237,342 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%.

Note: The amount passing to beneficiaries is entirely dependent on the rate of return of the assets in the trust. A
higher rate of return means more passing to heirs and a lower rate of return could mean that nothing passes to
heirs.


ESTATE PLAN OVERVIEW AND ESTATE DISTRIBUTION - 2012

Gift IRA to Charity at the 2nd death Gifts to existing ILIT
NET WORTH
Corporate Transfer Property
IRA TO CHARITY BEN, INC shares 42,477,862 FLP ILIT
Ownership Units
297,222 6,264,681 6,112,095 1,500,000

Receive voting and non- Sell FLP units, non-voting shares
voting shares back of Ben, Inc and shares of ABC GDOT purchases life insurance
Corp to GDOT
GDOT
Installment Note Owns FLP units and
corporate shares LIFE INSURANCE
Seed Gift
30,000,000
First Death

ADMIN
Amanda also owns
FAMILY TRUST / AMANDA MARITAL TRUST / AMANDA AMANDA
a note from her
3,836,250 179,253 GDOT worth
24,984,765 1,050,390
$11,171,202
Second Death

ADMIN
TCLAT HEIRS

34,704,265 417,553
56,480,890
Heirs From
TCLAT
Residual estate $3,836,250
Family trust $3,836,250
FAMILY CHARITY Excess FLP value $2,235,389
Excess S Corp value $2,255,493
35,001,488 Value of GDOT $4,180,167
Life insurance proceeds GDOT $30,000,000
Captive Insurance Company in Trust $1,400,000
Proceeds from ILIT $1,500,000
Potential Future Inheritances: Page25
NPV of TCLAT benefits to children $7,237,342


MEETING INHERITANCE
OBJECTIVES

Page 26

MEETING YOUR INHERITANCE GOALS

$300,000,000

$250,000,000

$200,000,000

$150,000,000
-

$100,000,000

$50,000,000

$-
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Inheritance Goal - 75% of Estate Proposed Plan Proposed Plan - No Insurance

This chart shows how the recommended strategies coupled with carefully managed amounts of life insurance will help you to meet your inheritance
goals.

Page 27

MEETING YOUR INHERITANCE AND CHARITABLE OBJECTIVES

Your Current Plan

GROSS ESTATE TODAY

$52,363,741

Existing plan distribution of estate to
charity, heirs and taxes.

MORGAN FAMILY
HEIRS TAXES
FOUNDATION
Children receive $39,043,892
$0 outright. No provision is made for $14,831,327
your senior execs.

EXECUTIVE TEAM

Inherit $0 under the existing plan.

Page 28

MEETING YOUR INHERITANCE AND CHARITABLE OBJECTIVES

Distribution Under the Proposed Plan

GROSS ESTATE TODAY

$52,363,741

Proposed plan distribution of estate to charity,
heirs, execs and taxes.

MORGAN FAMILY
HEIRS/EXECUTIVE TEAM TAXES
FOUNDATION
Executive team and children receive
$35,001,488 $49,243,549, which is approx. 94% $0,000
of today's gross estate

EXECUTIVE TEAM DYNASTY TRUST/FAMILY BANK

Inherits $16,414,516 under the proposed Inherits $32,829,032 under the proposed
plan, which is approx. 31% of today's gross plan, which is approx. 63% of today's gross
estate estate

Page 29

DYNASTY TRUST/FAMILY BANK TO HOLD INHERITANCES

The GDOTs should be set-up as Dynasty Trusts. These trusts would hold the inheritances for children, grandchildren and future
generations in asset protected and tax advantaged trusts, while protecting heirs from frivolous spending. Heirs would receive annual
income from the trust. The example on this page assumes annual distributions of 3% of the total. This payout could be higher or
lower. In addition, payments of principal could be made for health, education, maintenance, support or other items you feel would
be appropriate to allow.

DYNASTY TRUST/FAMILY BANK FOR CHILDREN

$32,829,032

Trust distributes 3% of
trust principal
annually

RENA BETH ANN GLORIA

$250,000 $250,000 $250,000 $250,000

Page 30


LIFETIME SPENDING
AND LIQUIDITY

Page 31

YOUR LIQUID ASSETS - CURRENT PLAN VS. PROPOSED PLAN

$1,000,000

$900,000

$800,000

$700,000

$600,000

$500,000 -

$400,000

$300,000

$200,000

$100,000

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Liquid Assets Proposed Liquid Assets Current

While your stated liquidity goal is at least $1,000,000 of cash/securities, your current business strategy of putting all of your excess cash flow back into
the business does not allow for a build up of liquid assets. We have illustrated your proposed and current liquid assets over time. You could increase
these by decreasing your reinvestments back into the company.

Page 32

SPENDING VS. INCOME - PROPOSED PLAN

$30,000,000

$25,000,000

$20,000,000
GDOT
promissory note
$15,000,000 ends -

$10,000,000

$5,000,000
GDOT ceases to be a grantor
trust and takes over income
tax obligations
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Annual Cash Flow Income Total Living Expenses

This chart compares cash flow income to cash flow expense under the proposed plan year by year to life expectancy.

Page 33


INCOME TAX PLANNING

Page 34

COMPARISON OF INCOME TAX RESULTS - PLAN YEAR 2012

Existing Plan Proposed Plan Income Tax Deferred

2012 Estimated Income Tax $ 2,700,000 $ 2,200,000 $ 500,000





5 Year Estimated Income Tax Deferred $ 2,600,000

Page 35


INCREASE INHERITANCE
AND REDUCE ESTATE TAX

Page 36

COMPARISON OF PLAN RESULTS - PLAN YEAR 2012

Existing Plan Proposed Plan Advantage

Estate Value $ 52,363,741 $ 42,477,862

Heirs/Execs Receive Immediately $ 39,043,892 $ 49,243,549 $ 10,199,656

Heirs Receive from Deferred Inheritance $ - $ 7,237,342 $ 7,237,342

Total Benefits to Family & Executives $ 39,043,892 $ 56,480,890 $ 17,436,998

Family Charity $ - $ 35,001,488 $ 35,001,488

Estate and Income Tax $ 14,831,327 $ - $ 14,831,327

This chart assumes that you both die this year and compares the results of the current plan with the proposed plan.
Deferred Inheritance is a general approximation based on the long term performance of the TCLAT.

Page 37

COMPARISON OF PLAN RESULTS - PLAN YEAR 2038

Existing Plan Proposed Plan Advantage

Estate Value $ 725,547,201 $ 312,684,622

Heirs/Execs Receive Immediately $ 324,425,502 $ 475,598,938 $ 151,173,436

Heirs Receive from Deferred Inheritance $ - $ 64,351,036 $ 64,351,036

Total Benefits to Family & Executives $ 324,425,502 $ 539,949,975 $ 215,524,472

Family Charity $ - $ 309,193,873 $ 309,193,873

Estate and Income Tax $ 392,696,058 $ - $ 392,696,058

Present Value of total to Heirs & Executives $91,241,667 $151,855,928

Discount rate for PV calculation 5.00%

This chart assumes that you both die at life expectancy and compares the results of the current plan with the proposed plan.
Deferred Inheritance is a general approximation based on the long term performance of the TCLAT.

Page 38

ASSETS PASSING TO YOUR FAMILY & EXECUTIVES- CURRENT VS. PROPOSED

$500,000,000

$450,000,000

$400,000,000

$350,000,000

$300,000,000

$250,000,000
-
$200,000,000

$150,000,000

$100,000,000

$50,000,000

$-
nt

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26

27

28

29

30

31

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35

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38
rre

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Cu

Current Plan Proposed Plan

This chart compares the amount of your assets that will pass to heirs and execs after estate taxes and costs of implementation in the current plan as
against the proposed plan. There may be additional funds available to heirs. We have not included them here because of the speculative nature of the
inheritance from a TCLAT remainder.

Page 39


INCREASE IN
CHARITABLE GIVING

Page 40

COMPARISON OF CHARITY RESULTS - PLAN YEAR 2012

Existing Plan Proposed Plan Increase in Charity

Charity Receives from TCLAT $ - $ 34,700,000 $ 34,700,000

Charitable gift of IRA assets $ - $ 300,000 $ 300,000

Family Charity $ - $ 35,000,000 $ 35,000,000

Note: An outright bequest to charity would yield a gift of $34,700,000, but your foundation would receive the money all at once.

Page 41

COMPARISON OF CHARITY RESULTS - PLAN YEAR 2038

Existing Plan Proposed Plan Increase in Charity

Charity Receives from TCLAT $ - $ 308,600,000 $ 308,600,000

Charitable gift of IRA assets $ - $ 600,000 $ 600,000

Family Charity $ - $ 309,200,000 $ 309,200,000

Present Value of total to Charity $0 $86,959,635

Discount rate for PV calculation 5.00%

Note: An outright bequest to charity would yield a gift of $308,600,000, but your foundation would receive the money all at once.

Page 42

COST BENEFIT ANALYSIS

All strategies have an element of risk; a chance that the program adopted does not work as planned. Estate planning strategies carry an element of
risk as well. Many advisors warn their clients of risk but do not make an effort to quantify those risks. We have taken the position in our planning
that if a risk is quantifiable, it should be identified as such and the cost of the risk should be disclosed to our client. When the risk is not
quantifiable, this should also be disclosed.
Any risk analysis begins with two questions:
What is the reward to be gained by taking the risk?
What is the cost of the potential loss if the plan fails totally?
If you are satisfied that the reward is worth the risk and that the risk of loss is acceptable, it would then make sense to pursue the strategy. If
the risk is such that you could not comfortably accept the loss, then the risk should not be taken.

Is the reward worth the risk?
The reward of the proposed plan results in an advantage to your heirs today of $17,436,998 over your existing plan.
The reward of the proposed plan results in an advantage to your heirs at life expectancy of $215,524,472 over your existing plan.

What if the Plan fails totally?
There are 4 basic areas of potential risk involved in this comprehensive plan. We assume total failure of all planning techniques in order to
provide a worst case analysis.

Transaction costs
Planning Fees -
Attorneys Fees -
Valuation Fees -
Total $ -

Annual Maintenance Fee $ -

Taxes
This represents the taxes that will have to be paid if the plan fails entirely. Note that this is the same amount that would be paid without the
planning.
Total additional tax over current plan = $0

Page 43

COST BENEFIT ANALYSIS (Continued)

Interest (cost of money)
Interest is charged on late tax payments by the IRS at the rate of the applicable federal rate plus 3%. You must invest at a rate less than this rate
to lose money. Assuming that assets earn in excess of that rate, there should be no risk of loss due to cost of money.
Nonetheless, we assume that assets actually earn 2% less than the IRS interest rates, and the risk of loss would be $262,551.
Penalties
Assuming the plan is implemented with the help of knowledgeable advisors, the only potential penalty is for substantial undervaluation. The
penalty comes into play in the case of a challenge to asset valuation. If the value reported for a transaction is less than 65% of the value as
finally determined for tax purposes (by the IRS or the courts) then there is a 25% substantial undervaluation penalty.

The valuation adjustment assumed in this plan is 35.00%. Therefore, an adjustment should not result in a substantial valuation
penalty.

Risk Analysis

$250,000,000

$200,000,000

$150,000,000

$100,000,000

$50,000,000

$-
Benefit to Heirs 2012 Benefit to Heirs 2038 Potential Loss (Total Failure)

Page 44

DETAILED FINANCIAL ANALYSIS

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 45


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 46

CURRENT NET WORTH STATEMENT

BEN AMANDA JOINT TOTAL YIELD GROWTH
CASH AND EQUIVALENTS
Cash - - 29,579 29,579 0.0% 0.0%
Savings 9,877 - - 9,877 0.0% 0.0%
MM 30,362 - - 30,362 0.0% 0.0%
Cash Value of Life Insurance 7,068 - 7,068 0.0% 0.0%
Total of Cash and Equivalents 47,307 - 29,579 76,886 0.0% 0.0%

MARKETABLE SECURITIES - EQUITIES
Securities Account - - 15,976 15,976 2.0% 5.0%
Total of Equities - - 15,976 15,976 2.0% 5.0%

Page 47

CURRENT NET WORTH STATEMENT (Page 2)
93,250 373,881 8,694,904 13,376,776
OTHER INVESTMENTS
Morgan Enterprises, LLC - - - - 0.0% 3.0%
1 Main St. 250,000 250,000 - 500,000 0.0% 3.0%
Loan - Mortgage - 1 Main St. (86,464) (86,464) - (172,928) 0.0% 3.0%
12 Main St. 2,500,000 2,500,000 - 5,000,000 0.0% 3.0%
Loan - Mortgage - 12 Main St. (1,925,000) (1,925,000) - (3,850,000) 0.0% 3.0%
123 Main St. 412,500 412,500 - 825,000 0.0% 3.0%
54 Main St. LLC 6,250 6,250 - 12,500 0.0% 3.0%
55 Main St. Office Building 1,325,000 1,325,000 - 2,650,000 0.0% 3.0%
Loan - Mortgage - 55 Main St. (1,288,000) (1,288,000) - (2,576,000) 0.0% 3.0%
Open Land, LLC 500,000 500,000 - 1,000,000 0.0% 3.0%
Loan - Mortgage - Open Land, LLC (174,786) (164,841) - (339,627) 0.0% 3.0%
Community, LLC 30,000 30,000 - 60,000 0.0% 3.0%
Cash 69,075 69,075 - 138,150 0.0% 3.0%
Technology, LLC (100%) 1,000,000 - - 1,000,000 0.0% 3.0%
Note from ABC Corp - 8.59% 1,865,000 - - 1,865,000 0.0% 8.6%
Sub-Division, LLC (100%) 1 - - 1 0.0% 3.0%
Total of Other Investments 4,483,576 1,628,520 - 6,112,096 0.0% 4.7%
3,247,095 (8,228,018)
CLOSELY HELD BUSINESS 6,264,681 (6,592,699)
Ben, Inc (50% S Corp) - - - - 0.0% 3.0%
Sub-Division Assets 7,000,000 - - 7,000,000 0.0% 3.0%
Loan - Mortgage - Sub-division (859,885) - - (859,885) 0.0% 3.0%
55 Land St., LLC 900,000 - - 900,000 0.0% 3.0%
55 Land St., LLC (775,434) - - (775,434) 0.0% 3.0%
ABC Corp, Inc (95% S Corp) 33,250,000 - - 33,250,000 19.4% 3.0%
Total Closely Held Business 39,514,681 - - 39,514,681 16.3% 3.0%

Page 48

CURRENT NET WORTH STATEMENT (Page 3)

RETIREMENT PLANS/IRAs
ABC Corp 401(k) 278,603 - 278,603 0.0% 7.0%
Total Retirement Plans 278,603 - 278,603 0.0% 7.0%

RESIDENTIAL REAL ESTATE
123 Main St. - - 1,200,000 1,200,000 0.0% 3.0%
Total of Personal Residences - - 1,200,000 1,200,000 0.0% 3.0%

PERSONAL PROPERTY
Autos - 25,000 - 25,000 0.0% 0.0%
Personal Property - - 200,000 200,000 0.0% 0.0%
Total of Personal Property - 25,000 200,000 225,000 0.0% 0.0%

TOTAL ASSETS 44,324,167 1,653,520 1,445,555 47,423,242

TOTAL LIABILITIES - - - -

NET WORTH 44,324,167 1,653,520 1,445,555 47,423,242

Page 49

SCHEDULE OF LIFE INSURANCE BENEFITS - CURRENT PLAN

COMPANY INSURED POLICY # BENEFICIARY PREMIUM CASH VALUE DEATH BENEFIT

Policies owned by Ben
UL Contract Ben # Amanda 7,398 7,068 800,000
Totals 7,398 7,068 800,000

Other Policies
ABC Corp Ben # Amanda - - 150,000
Totals - - 150,000

Policies owned by ILIT
Whole Contract 2nd to Die # ILIT 15,692 316,275 1,500,000
Totals 15,692 316,275 1,500,000

Page 50

FINANCIAL ANALYSIS - EXISTING PLAN ASSET VALUE PROJECTIONS - EXISTING PLAN

YEAR Current 2012 2013 2014 2015 2018 2019 2028 2038
Asset Values
Cash and cash equivalents 76,886 76,886 76,886 76,886 76,886 76,886 76,886 76,886 76,886
Marketable securities - Equities 15,976 16,739 17,576 18,455 19,377 22,432 23,553 36,539 59,518
Other investments 6,112,096 6,386,825 6,687,370 7,002,057 7,331,552 8,416,020 8,812,052 13,329,372 21,111,183
Closely held business 6,264,681 6,444,266 6,637,594 6,836,722 7,041,823 7,694,791 7,925,634 10,341,155 13,897,648
ABC Corp 33,250,000 37,682,403 44,054,582 53,775,403 67,635,023 127,350,089 148,412,985 367,617,412 686,894,999
Retirement plans/IRAs 278,603 297,222 318,028 340,290 364,110 446,051 477,274 601,175 619,873
Personal residences 1,200,000 1,234,400 1,271,432 1,309,574 1,348,862 1,473,938 1,518,156 1,980,849 2,662,095
Personal property 225,000 225,000 225,000 225,000 225,000 225,000 225,000 225,000 225,000
Total assets in estate 47,423,242 52,363,741 59,288,467 69,584,387 84,042,633 145,705,206 167,471,541 394,208,387 725,547,201
Combined net worth $ 47,423,242 $ 52,363,741 $ 59,288,467 $ 69,584,387 $ 84,042,633 $ 145,705,206 $ 167,471,541 $ 394,208,387 $ 725,547,201

In the event that there is a cash flow surplus, the surplus is added to the ABC Corp row by default.

Page 51

TAXABLE INCOME PROJECTIONS - EXISTING PLAN

YEAR Current 2012 2013 2014 2015 2018 2019 2028 2038
Sources of taxable income
Marketable securities - Equities 320 335 352 369 427 449 696 1,134
ABC Corp 6,435,676 10,580,435 16,477,791 23,658,328 33,738,429 33,738,429 33,738,429 33,738,429
Retirement plans/IRAs - - - - - - 30,263 52,354
Client earned income 582,832 582,832 594,489 606,378 618,506 - - - -
Gross income $ 7,018,828 $ 11,175,258 $ 17,084,521 $ 24,277,203 $ 33,738,856 $ 33,738,878 $ 33,769,388 $ 33,791,917

Page 52

INCOME TAX PROJECTIONS - EXISTING PLAN

YEAR Current 2012 2013 2014 2015 2018 2019 2028 2038
Income tax Estimation
Adjusted gross income:
Dividend income (marketable sec.) 320 335 352 369 427 449 696 1,134
Earned and other income 7,018,508 11,174,924 17,084,169 24,276,834 33,738,429 33,738,429 33,768,692 33,790,783
Adjusted gross income 7,018,828 11,175,258 17,084,521 24,277,203 33,738,856 33,738,878 33,769,388 33,791,917

Deductions
Real estate tax 9,579 9,579 9,866 10,162 10,467 11,438 11,781 15,371 20,658
State income taxes 630,291 1,003,538 1,534,190 2,180,093 3,029,749 3,029,751 3,032,491 3,034,514
Interest 7,129 7,129 7,343 7,563 7,790 8,512 8,768 11,440 15,374
Charitable gifts 75,000 75,000 77,250 79,568 81,955 89,554 92,241 120,353 161,744
Charitable gift of 5% of Corp Stock -carry forward 250,000 - - - - - - -
Charitable Deduction available 325,000 77,250 79,568 81,955 89,554 92,241 120,353 161,744
Charitable Deduction allowed 325,000 77,250 79,568 81,955 89,554 92,241 120,353 161,744
Total deductions 971,999 1,097,997 1,631,483 2,280,305 3,139,253 3,142,540 3,179,655 3,232,291
Reductions - (330,254) (507,532) (723,312) (1,007,162) (1,007,162) (1,008,078) (1,008,754)
Deductions allowed 971,999 767,744 1,123,951 1,556,993 2,132,092 2,135,378 2,171,578 2,223,537

Taxable income 6,046,829 10,407,515 15,960,570 22,720,211 31,606,765 31,603,499 31,597,810 31,568,380
Federal and State income tax $ 2,716,488 $ 5,088,981 $ 7,818,643 $ 11,141,363 $ 15,510,095 $ 15,508,804 $ 15,509,291 $ 15,499,660

Page 53

CASH FLOW PROJECTIONS - EXISTING PLAN

YEAR Current 2012 2013 2014 2015 2018 2019 2028 2038
Sources of income for Lifestyle
Distribution from Marketable Securities - - - - - - - -
Consumable income (taxable) 7,018,828 11,175,258 17,084,521 24,277,203 33,738,856 33,738,878 33,769,388 33,791,917
Total income available for lifestyle 7,018,828 11,175,258 17,084,521 24,277,203 33,738,856 33,738,878 33,769,388 33,791,917

Uses of Cash
Living expenses 1 641,000 660,230 680,037 700,438 765,388 788,349 1,028,617 1,382,375
Income tax 2,716,488 5,088,981 7,818,643 11,141,363 15,510,095 15,508,804 15,509,291 15,499,660
ME, LLC & Ben, Inc Expenses 1 84,000 84,000 84,000 84,000 84,000 84,000 84,000 84,000
Personally held insurance premiums 7,398 7,398 7,398 7,398 7,398 7,398 7,398 7,398
Cash gifts to ILIT 15,692 15,692 15,692 15,692 15,692 15,692 15,692 15,692
2
Surplus reinvested into ABC Corp 3,479,249 5,241,707 8,399,184 12,246,357 17,266,730 17,242,394 17,004,037 16,641,048
Cash gifts to charity 75,000 77,250 79,568 81,955 89,554 92,241 120,353 161,744
Total uses of cash 7,018,828 11,175,258 17,084,521 24,277,203 33,738,856 33,738,878 33,769,388 33,791,917

Surplus $ - $ - $ - $ - $ - $ - $ - $ -
1
Expenses/losses from the real estate in ME, LLC and Ben, Inc have been separated from all other living expenses for planning purposes in the proposed strategies cash flows.
2
In the event that there is a cash flow surplus, the surplus is added to the ABC Corp row on the "Asset Value Projections" 3 pages earlier.

Page 54

FIRST ESTATE TAX ESTIMATION AND DISTRIBUTION - EXISTING PLAN

YEAR Current 2012 2013 2014 2015 2018 2019 2028 2038
Tax calculation on Ben's death
Combined net worth 47,423,242 52,363,741 59,288,467 69,584,387 84,042,633 145,705,206 167,471,541 394,208,387 725,547,201
Ben's estimated estate 45,046,945 49,739,883 56,317,623 66,097,632 79,831,401 138,404,167 159,079,829 374,455,279 689,191,273
Death benefit exceeding CV 792,932 792,932 792,932 792,932 792,932 792,932 792,932 792,932 792,932
Total gross estate 45,839,877 50,532,815 57,110,555 66,890,564 80,624,333 139,197,099 159,872,761 375,248,211 689,984,205
Settlement expenses (254,199) (277,664) (310,553) (359,453) (428,122) (720,985) (824,364) (1,901,241) (3,474,921)
Joint, personal and IRA to Amanda (1,001,381) (1,095,298) (1,221,643) (1,400,825) (1,645,004) (2,666,743) (3,029,707) (6,609,304) (11,677,936)
Insurance passing to Amanda (800,000) (800,000) (800,000) (800,000) (800,000) (800,000) (800,000) (800,000) (800,000)
Outright or in trust to Amanda (38,784,297) (43,359,853) (53,778,359) (63,330,286) (76,751,207) (134,009,370) (154,218,689) (364,937,667) (673,031,348)
Taxable estate 5,000,000 5,000,000 1,000,000 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 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000
Federal Estate Tax - - - - - - - - -

Distribution of Ben's estate
Settlement expenses 254,199 277,664 310,553 359,453 428,122 720,985 824,364 1,901,241 3,474,921
To family trust 5,000,000 5,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000
Joint, personal and IRA to Amanda 1,001,381 1,095,298 1,221,643 1,400,825 1,645,004 2,666,743 3,029,707 6,609,304 11,677,936
Insurance passing to Amanda 800,000 800,000 800,000 800,000 800,000 800,000 800,000 800,000 800,000
Outright or in trust to Amanda 38,784,297 43,359,853 53,778,359 63,330,286 76,751,207 134,009,370 154,218,689 364,937,667 673,031,348
Total $ 45,839,877 $ 50,532,815 $ 57,110,555 $ 66,890,564 $ 80,624,333 $ 139,197,099 $ 159,872,761 $ 375,248,211 $ 689,984,205

Assumptions
We assume that Ben dies first, followed immediately by Amanda.
Taxes under "Distribution of First Estate" include estate and income taxes.

Page 55

SECOND ESTATE TAX ESTIMATION AND DISTRIBUTION - EXISTING PLAN

YEAR Current 2012 2013 2014 2015 2018 2019 2028 2038
Tax Calculation on Amanda's death
Amanda's assets 2,376,298 2,623,857 2,970,844 3,486,755 4,211,233 7,301,039 8,391,712 19,753,108 36,355,929
Plus assets from Ben's estate 40,585,677 45,255,151 55,800,003 65,531,111 79,196,211 137,476,114 158,048,397 372,346,970 685,509,284
Amanda's estimated estate 42,961,975 47,879,009 58,770,846 69,017,866 83,407,444 144,777,152 166,440,109 392,100,078 721,865,212
Settlement expenses (454,620) (503,790) (612,708) (715,179) (859,074) (1,472,772) (1,689,401) (3,946,001) (7,243,652)
Amanda's taxable estate 42,507,355 47,375,219 58,158,138 68,302,687 82,548,369 143,304,381 164,750,708 388,154,077 714,621,560
Tax base 42,507,355 47,375,219 58,158,138 68,302,687 82,548,369 143,304,381 164,750,708 388,154,077 714,621,560

Federal Estate Tax 13,127,574 14,831,327 31,641,176 37,220,678 45,055,803 78,471,609 90,267,090 213,138,942 392,696,058
Total Estate Tax Due 13,127,574 14,831,327 31,641,176 37,220,678 45,055,803 78,471,609 90,267,090 213,138,942 392,696,058

Distribution of Amanda's estate
Settlement expenses 454,620 503,790 612,708 715,179 859,074 1,472,772 1,689,401 3,946,001 7,243,652
Taxes 13,127,574 14,831,327 31,641,176 37,220,678 45,055,803 78,471,609 90,267,090 213,138,942 392,696,058
Qualified plan to heirs 278,603 297,222 318,028 340,290 364,110 446,051 477,274 601,175 619,873
Residual estate to heirs 29,101,178 32,246,670 26,198,934 30,741,719 37,128,456 64,386,721 74,006,345 174,413,960 321,305,629
Total $ 42,961,975 $ 47,879,009 $ 58,770,846 $ 69,017,866 $ 83,407,444 $ 144,777,152 $ 166,440,109 $ 392,100,078 $ 721,865,212

Assumptions
Taxes under "Distribution of Second Estate" include estate and income taxes.

Page 56

SUMMARY OF BENEFITS TO FAMILY - EXISTING PLAN

YEAR Current 2012 2013 2014 2015 2018 2019 2028 2038
Benefits to Family
Family trust 5,000,000 5,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000
Residual estate 29,101,178 32,246,670 26,198,934 30,741,719 37,128,456 64,386,721 74,006,345 174,413,960 321,305,629
Qualified plan assets 278,603 297,222 318,028 340,290 364,110 446,051 477,274 601,175 619,873
Proceeds from ILIT 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 assets to heirs $ 35,879,781 $ 39,043,892 $ 29,016,962 $ 33,582,009 $ 39,992,566 $ 67,332,771 $ 76,983,619 $ 177,515,135 $ 324,425,502

Page 57

DETAILS OF BEN'S QUALIFIED PLAN - EXISTING PLAN

YEAR Current 2012 2013 2014 2015 2018 2019 2028 2038
Ben's Qualified Plans
Ben's Age 63 64 65 66 69 70 79 89
Amanda's Age 60 61 62 63 66 67 76 86
Minimum distribution factor 33.9 33.0 32.0 31.1 28.3 27.4 19.5 12.0
Plan contributions - - - - - - - -
Plan balance 278,603 297,222 318,028 340,290 364,110 446,051 477,274 601,175 619,873
Minimum distribution - - - - - - 30,263 52,354
Preferred distribution - - - - - - - -
Actual distribution - - - - - - 30,263 52,354

Page 58


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 59

NET WORTH STATEMENT AFTER PLAN IMPLEMENTATION

CASH AND EQUIVALENTS
Cash - - 29,579 29,579 0.0% 0.0%
Savings 9,877 - - 9,877 0.0% 0.0%
MM 30,362 - - 30,362 0.0% 0.0%
Cash Value of Life Insurance 7,068 - - 7,068 0.0% 0.0%
Total of Cash and Equivalents 47,307 - 29,579 76,886 0.0% 0.0%

MARKETABLE SECURITIES - EQUITIES
Securities Account - - 15,976 15,976 2.0% 5.0%
Total of Equities - - 15,976 15,976 2.0% 5.0%

Page 60

REVISED NET WORTH STATEMENT (Page 2)

OTHER INVESTMENTS
Sub-Division, LLC (100%) 1 - - 1 0.0% 3.0%
Total of Other Investments 1 - - 1 0.0% 3.0%

CLOSELY HELD BUSINESS
ABC Corp, Inc (95% S Corp) 16,625,000 - - 16,625,000 19.4% 3.0%
Total Closely Held Business 16,625,000 - - 16,625,000 19.4% 3.0%

RETIREMENT PLANS/IRAs
ABC Corp 401(k) 278,603 - 278,603 0.0% 7.0%
Total Retirement Plans 278,603 - 278,603 0.0% 7.0%

Page 61

REVISED NET WORTH STATEMENT (Page 3)

RESIDENTIAL REAL ESTATE
123 Main St. - - 1,200,000 1,200,000 0.0% 3.0%
Total of Personal Residences - - 1,200,000 1,200,000 0.0% 3.0%

PERSONAL PROPERTY
Autos - 25,000 - 25,000 0.0% 0.0%
Personal Property - - 200,000 200,000 0.0% 0.0%
Total of Personal Property - 25,000 200,000 225,000 0.0% 0.0%

OTHER STRATEGY ASSETS
GDOT Note 11,171,202 11,171,202 - 22,342,404 4.25%
Total of Other Strategy Assets 11,171,202 11,171,202 - 22,342,404 4.25%

TOTAL ASSETS 28,122,113 11,196,202 1,445,555 40,763,870

TOTAL LIABILITIES - - - -

NET WORTH 28,122,113 11,196,202 1,445,555 40,763,870

Page 62

FINANCIAL ANALYSIS - PROPOSED PLAN ASSET VALUE PROJECTIONS - PROPOSED PLAN

688,831,180

YEAR Current 2012 2013 2014 2015 2018 2019 2028 2038
Asset Values
Cash and cash equivalents 76,886 76,886 76,886 76,886 76,886 76,886 76,886 76,886 76,886
Marketable securities - Equities 15,976 16,739 17,576 18,455 19,377 22,432 23,553 36,539 59,518
Other investments 1 1 1 1 1 1 1 2 2
ABC Corp 16,625,000 18,510,309 21,162,306 25,429,567 31,697,371 51,884,571 61,693,876 163,142,073 309,041,247
Retirement plans/IRAs 278,603 297,222 318,028 340,290 364,110 446,051 477,274 601,175 619,873
Personal residences 1,200,000 1,234,400 1,271,432 1,309,574 1,348,862 1,473,938 1,518,156 1,980,849 2,662,095
Personal property 225,000 225,000 225,000 225,000 225,000 225,000 225,000 225,000 225,000
1
Note from children's GDOT 22,342,404 22,117,304 20,950,067 18,406,317 14,138,837 - - - -
Total assets in estate 40,763,870 42,477,862 44,021,296 45,806,090 47,870,444 54,128,879 64,014,746 166,062,523 312,684,622
Combined net worth $ 40,763,870 $ 42,477,862 $ 44,021,296 $ 45,806,090 $ 47,870,444 $ 54,128,879 $ 64,014,746 $ 166,062,523 $ 312,684,622
1
Note paid off in 2018.

In the event that there is a cash flow surplus, the surplus is added to the ABC Corp row by default.

Page 63

TAXABLE INCOME PROJECTIONS - PROPOSED PLAN

3,217,838

YEAR Current 2012 2013 2014 2015 2018 2019 2028 2038
Marketable securities - Equities 320 335 352 369 427 449 696 1,134
ABC Corp 3,217,838 5,290,218 8,238,896 11,829,164 16,869,215 16,869,215 16,869,215 16,869,215
Captive Premium Deductions (607,500) (607,500) (607,500) (607,500) - - - -
Retirement plans/IRAs - - - - - - 30,263 52,354
Other taxable earnings - GDOT 1 2,610,338 4,682,718 7,631,396 11,221,664 16,869,215 - - -
Client earned income 582,832 582,832 594,489 606,378 618,506 - - - -
Gross income $ 5,803,828 $ 9,960,258 $ 15,869,521 $ 23,062,203 $ 33,738,856 $ 16,869,663 $ 16,900,173 $ 16,922,702
1
GDOT note is paid off in 2018 and grantor status is revoked. Beginning in 2019, the trust will pay it's own income taxes.

Page 64

INCOME TAX PROJECTIONS - PROPOSED PLAN

7,000,000 7,350,000 7,717,500 8,103,375 9,380,669 9,849,703 15,280,122
1,000,000 2,050,000 3,152,500 4,310,125
YEAR Current 2012 2013 2014 2015 2018 2019 2028 2038
Income Tax Estimation
Adjusted gross income:
Dividend income (Marketable Sec.) 320 335 352 369 427 449 696 1,134
Earned and other income 5,803,508 9,959,924 15,869,169 23,061,834 33,738,429 16,869,215 16,899,478 16,921,569
Adjusted gross income 5,803,828 9,960,258 15,869,521 23,062,203 33,738,856 16,869,663 16,900,173 16,922,702

Deductions
Real Estate Tax 9,579 9,866 10,162 10,467 11,438 11,781 15,371 20,658
State income taxes 521,184 894,431 1,425,083 2,070,986 3,029,749 1,514,896 1,517,636 1,519,659
Interest 7,129 7,343 7,563 7,790 8,512 8,768 11,440 15,374
Cash charitable gifts 75,000 77,250 79,568 81,955 89,554 92,241 120,353 161,744
Charitable gift of 5% of Corp Stock - carry forward 250,000 - - - - - - -
Charitable Deduction available 325,000 77,250 79,568 81,955 89,554 92,241 120,353 161,744
Charitable Deduction allowed 325,000 77,250 79,568 81,955 89,554 92,241 120,353 161,744
Total deductions 862,892 988,890 1,522,376 2,171,198 3,139,253 1,627,685 1,664,800 1,717,435
Reductions - (293,804) (471,082) (686,862) (1,007,162) (501,086) (502,001) (502,677)
Deductions allowed 862,892 695,087 1,051,294 1,484,336 2,132,092 1,126,599 1,162,799 1,214,758
Taxable income 4,940,936 9,265,172 14,818,227 21,577,868 31,606,765 15,743,064 15,737,375 15,707,944
Federal and State income tax $ 2,220,319 $ 4,527,506 $ 7,257,168 $ 10,579,888 $ 15,510,095 $ 7,713,216 $ 7,713,703 $ 7,704,072

Page 65

CASH FLOW PROJECTIONS - PROPOSED PLAN

YEAR Current 2012 2013 2014 2015 2018 2019 2028 2038
Sources of Income for Lifestyle
Consumable income (taxable) 3,193,490 5,277,541 8,238,125 11,840,539 16,869,642 16,869,663 16,900,173 16,922,702
Distribution from Marketable Securities - - 0 0 0 - - -
Interest Payment from GDOT 1 949,552 939,985 890,378 782,268 6,216 - - -
Principal Payments from GDOT 1 225,100 1,167,237 2,543,750 4,267,480 146,253 - - -
Total income available for lifestyle 4,368,142 7,384,764 11,672,253 16,890,288 17,022,110 16,869,663 16,900,173 16,922,702

Uses of Cash
Living expenses 641,000 660,230 680,037 700,438 765,388 788,349 1,028,617 1,382,375
Income tax 2,220,319 4,527,506 7,257,168 10,579,888 15,510,095 7,713,216 7,713,703 7,704,072
Personally held insurance premiums 7,398 7,398 7,398 7,398 7,398 7,398 7,398 7,398
Cash gifts to ILIT 15,692 15,692 15,692 15,692 15,692 15,692 15,692 15,692
2
Surplus reinvested into ABC Corp 1,408,733 2,096,687 3,632,391 5,504,917 633,984 8,252,767 8,014,411 7,651,421
Cash gifts to charity 75,000 77,250 79,568 81,955 89,554 92,241 120,353 161,744
Total uses of cash 4,368,142 7,384,764 11,672,253 16,890,288 17,022,110 16,869,663 16,900,173 16,922,702

Surplus $ - $ - $ - $ - $ - $ - $ - $ -
1
GDOT note is paid off in 2018 and grantor status is revoked. Beginning in 2019, the trust will pay it's own income taxes.
2
In the event that there is a cash flow surplus, the surplus is added to the ABC Corp row on the "Asset Value Projections" 3 pages earlier.

Page 66

FIRST ESTATE TAX ESTIMATION AND DISTRIBUTION - PROPOSED PLAN

YEAR Current 2012 2013 2014 2015 2018 2019 2028 2038
Tax calculation on Ben's death
Combined Net Worth 40,763,870 42,477,862 44,021,296 45,806,090 47,870,444 54,128,879 64,014,746 166,062,523 312,684,622
Ben's estimated estate 28,844,891 30,057,727 31,149,875 32,412,812 33,873,567 38,302,094 45,297,425 117,507,373 221,258,522
Death benefit exceeding CV 792,932 792,932 792,932 792,932 792,932 792,932 792,932 792,932 792,932
Total gross estate 29,637,823 30,850,659 31,942,807 33,205,744 34,666,499 39,095,026 46,090,357 118,300,305 222,051,454
Settlement expenses (173,189) (179,253) (184,714) (191,029) (198,332) (220,475) (255,452) (616,502) (1,135,257)
Joint, personal and IRA to Amanda (1,001,381) (1,050,390) (1,098,562) (1,152,470) (1,212,893) (1,405,801) (1,612,309) (3,545,602) (6,164,032)
Insurance passing to Amanda (800,000) (800,000) (800,000) (800,000) (800,000) (800,000) (800,000) (800,000) (800,000)
Outright or in trust to Amanda (23,827,003) (24,984,765) (29,859,531) (31,062,245) (32,455,274) (36,668,750) (43,422,596) (113,338,201) (213,952,165)
Taxable estate 3,836,250 3,836,250 - - - - - - -
Plus Ben's lifetime taxable gifts 1,163,750 1,163,750 1,000,000 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 1,000,000 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 173,189 179,253 184,714 191,029 198,332 220,475 255,452 616,502 1,135,257
To family trust 3,836,250 3,836,250 - - - - - - -
Joint, personal and IRA to Amanda 1,001,381 1,050,390 1,098,562 1,152,470 1,212,893 1,405,801 1,612,309 3,545,602 6,164,032
Insurance passing to Amanda 800,000 800,000 800,000 800,000 800,000 800,000 800,000 800,000 800,000
Outright or in trust to Amanda 23,827,003 24,984,765 29,859,531 31,062,245 32,455,274 36,668,750 43,422,596 113,338,201 213,952,165
Total $ 29,637,823 $ 30,850,659 $ 31,942,807 $ 33,205,744 $ 34,666,499 $ 39,095,026 $ 46,090,357 $ 118,300,305 $ 222,051,454

Assumptions
Taxes under "Distribution of First Estate" include estate and income taxes, if any.

Page 67

SECOND ESTATE TAX ESTIMATION AND DISTRIBUTION - PROPOSED PLAN

YEAR Current 2012 2013 2014 2015 2018 2019 2028 2038
Tax Calculation on Amanda's death
Amanda's assets 11,918,980 12,420,135 12,871,421 13,393,278 13,996,876 15,826,785 18,717,321 48,555,150 91,426,099
Plus assets from Ben's estate 25,628,384 26,835,156 31,758,093 33,014,715 34,468,167 38,874,551 45,834,905 117,683,804 220,916,197
Amanda's estimated estate 37,547,363 39,255,291 44,629,514 46,407,993 48,465,043 54,701,335 64,552,226 166,238,954 312,342,296
Settlement expenses (400,474) (417,553) (471,295) (489,080) (509,650) (572,013) (670,522) (1,687,390) (3,148,423)
Charitable gift of IRA assets (278,603) (297,222) (318,028) (340,290) (364,110) (446,051) (477,274) (601,175) (619,873)
Charitable deduction from TCLAT (33,032,037) (34,704,265) (43,840,191) (45,578,623) (47,591,282) (53,683,271) (63,404,430) (163,950,389) (308,574,001)
Taxable estate 3,836,250 3,836,250 - - - - - - -
Plus Amanda's lifetime taxable gifts 1,163,750 1,163,750 1,000,000 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 1,000,000 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 400,474 417,553 471,295 489,080 509,650 572,013 670,522 1,687,390 3,148,423
Taxes - - - - - - - - -
Other gifts to charity 278,603 297,222 318,028 340,290 364,110 446,051 477,274 601,175 619,873
Residual estate to heirs 3,836,250 3,836,250 - - - - - - -
Contribution to TCLAT 33,032,037 34,704,265 43,840,191 45,578,623 47,591,282 53,683,271 63,404,430 163,950,389 308,574,001
Total $ 37,547,363 $ 39,255,291 $ 44,629,514 $ 46,407,993 $ 48,465,043 $ 54,701,335 $ 64,552,226 $ 166,238,954 $ 312,342,296
Assumptions
Taxes under "Distribution of Second Estate" include estate and income taxes, if any.

Page 68

SUMMARY OF BENEFITS TO FAMILY - PROPOSED PLAN

YEAR Current 2012 2013 2014 2015 2018 2019 2028 2038
Benefits to Family
Residual estate 3,836,250 3,836,250 - - - - - - -
Family trust 3,836,250 3,836,250 - - - - - - -
Excess FLP value 2,139,233 2,235,389 2,340,579 2,450,719 2,566,043 2,945,607 3,084,218 4,665,279 7,388,913
Excess S Corp value 2,192,638 2,255,493 2,323,158 2,392,853 2,464,638 2,693,177 2,773,972 3,619,404 4,864,177
Value of GDOT 2,327,500 4,180,167 8,452,634 15,819,876 27,033,689 80,366,622 92,175,098 218,081,367 402,545,671
Life insurance proceeds GDOT 30,000,000 30,000,000 30,000,000 30,000,000 30,000,000 30,000,000 30,000,000 - -
Captive Insurance Company in Trust 250,000 1,400,000 2,668,000 4,062,800 5,597,080 8,814,593 9,696,053 22,862,785 59,300,177
Proceeds from ILIT 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
NPV of TCLAT benefits to children 6,888,609 7,237,342 9,142,577 9,505,116 9,924,842 11,195,286 13,222,568 34,190,753 64,351,036
Total assets to heirs $ 52,970,481 $ 56,480,890 $ 56,426,949 $ 65,731,364 $ 79,086,293 $ 137,515,285 $ 152,451,909 $ 284,919,590 $ 539,949,975

Page 69

CAPTIVE INSURANCE COMPANY DETAILS - PROPOSED PLAN

YEAR Current 2012 2013 2014 2015 2018 2019 2028 2038
Balance Sheet
Assets
Initial Capitalization (non-deductible) 250,000 275,000 302,500 332,750 366,025 487,179 535,897 1,263,618 3,277,499
Captive Insurance Company - 1,125,000 2,365,500 3,730,050 5,231,055 8,327,414 9,160,156 21,599,168 56,022,679
Total (Marketable Securities )* 250,000 1,400,000 2,668,000 4,062,800 5,597,080 8,814,593 9,696,053 22,862,785 59,300,177

These are gross numbers subject to potential claims against the captive insurance company.
* Assumes 10% annual growth on profits and reserves. This growth % was used to more accurately compare to the net after taxes growth of ABC Corp of roughly 10%.

Assets in Captive $ 250,000 $ 1,400,000 $ 2,668,000 $ 4,062,800 $ 5,597,080 $ 8,814,593 $ 9,696,053 $ 22,862,785 $ 59,300,177

Page 70

CAPTIVE INSURANCE COMPANY DETAILS - PROPOSED PLAN
(Continued)

CIC Cash Flow Current 2012 2013 2014 2015 2018 2019 2028 2038
Income
Premium Income (20 yrs) 1,200,000 1,200,000 1,200,000 1,200,000 - - - -
Total Income 1,200,000 1,200,000 1,200,000 1,200,000 - - - -

Initial Captive Capitalization 250,000 - - - - - - -

Expenses
Captive Management Fees - (72,000) (72,000) (72,000) - - - -
First Year Feasibility and Set Up (75,000) - - - - - - -
Net Income (Cash Flow) 1,125,000 1,128,000 1,128,000 1,128,000 - - - -

Taxable Income Current 2012 2013 2014 2015 2018 2019 2028 2038
Initial Captive Set up Fee (Amortized deduction) (15,000) (15,000) (15,000) (15,000) - - - -
831(b) Premium Exclusion (1,200,000) (1,200,000) (1,200,000) (1,200,000) - - - -
Taxable Income (1,215,000) (1,215,000) (1,215,000) (1,215,000) - - - -

Page 71

FAMILY LIMITED PARTNERSHIP DETAILS - PROPOSED PLAN

YEAR Current 2012 2013 2014 2015 2018 2019 2028 2038
Balance Sheet
LP Assets
Other Investments 6,112,095 6,386,824 6,687,369 7,002,056 7,331,551 8,416,019 8,812,051 13,329,370 21,111,181
Total 6,112,095 6,386,824 6,687,369 7,002,056 7,331,551 8,416,019 8,812,051 13,329,370 21,111,181
21,111,183

Assets in FLP $ 6,112,095 $ 6,386,824 $ 6,687,369 $ 7,002,056 $ 7,331,551 $ 8,416,019 $ 8,812,051 $ 13,329,370 $ 21,111,181

Discounted value of FLP interests 3,972,862 4,151,436 4,346,790 4,551,336 4,765,508 5,470,412 5,727,833 8,664,090 13,722,268
Difference between FLP asset value
and discounted LP value 2,139,233 2,235,389 2,340,579 2,450,719 2,566,043 2,945,607 3,084,218 4,665,279 7,388,913

Page 72

FAMILY LIMITED PARTNERSHIP DETAILS - PROPOSED PLAN
(Continued)

Partnership Cash Flow Current 2012 2013 2014 2015 2018 2019 2028 2038
Income
ME, LLC & Ben, Inc Expenses (84,000) (84,000) (84,000) (84,000) (84,000) (84,000) (84,000) (84,000)
Total Income (84,000) (84,000) (84,000) (84,000) (84,000) (84,000) (84,000) (84,000)

Expenses
Net Income to Distribute (84,000) (84,000) (84,000) (84,000) (84,000) (84,000) (84,000) (84,000)

Page 73

CORPORATION SUMMARY - PROPOSED PLAN

43%
50%
YEAR Current 2012 2013 2014 2015 2018 2019 2028 2038
Ben, Inc (S Corp)
Total Value before Re-capitalization 6,264,681 6,444,266 6,637,594 6,836,722 7,041,823 7,694,791 7,925,634 10,341,155 13,897,648
Total Value $ 6,264,681 $ 6,444,266 $ 6,637,594 $ 6,836,722 $ 7,041,823 $ 7,694,791 $ 7,925,634 $ 10,341,155 $ 13,897,648

Adjusted value of shares 4,072,043 4,188,773 4,314,436 4,443,869 4,577,185 5,001,614 5,151,662 6,721,751 9,033,471

Difference 2,192,638 2,255,493 2,323,158 2,392,853 2,464,638 2,693,177 2,773,972 3,619,404 4,864,177

ABC Corp (S Corp)
50% Interest in ABC Corp ** 16,625,000 17,957,263 20,741,476 25,230,988 31,829,832 69,894,595 81,295,602 202,695,526 379,789,933

** This includes both the seed gifts of 7% of ABC Corp and the 43% sold to the trust.

Balance Sheet
Ben, Inc (S Corp) 4,072,043 4,188,773 4,314,436 4,443,869 4,577,185 5,001,614 5,151,662 6,721,751 9,033,471
ABC Corp (S Corp) 16,625,000 17,957,263 20,741,476 25,230,988 31,829,832 69,894,595 81,295,602 202,695,526 379,789,933
Total Value Transferred to Trust $ 20,697,043 $ 22,146,036 $ 25,055,912 $ 29,674,857 $ 36,407,018 $ 74,896,209 $ 86,447,265 $ 209,417,277 $ 388,823,404

Taxable Income
ABC Corp Distributions 3,217,838 5,290,218 8,238,896 11,829,164 16,869,215 16,869,215 16,869,215 16,869,215
Taxable income 3,217,838 5,290,218 8,238,896 11,829,164 16,869,215 16,869,215 16,869,215 16,869,215

Total distribution to shareholders $ 3,217,838 $ 5,290,218 $ 8,238,896 $ 11,829,164 $ 16,869,215 $ 16,869,215 $ 16,869,215 $ 16,869,215

Page 74

GRANTOR DEEMED OWNER TRUST DETAILS - PROPOSED PLAN

YEAR Current 2012 2013 2014 2015 2018 2019 2028 2038
GDOT Balance Sheet
LP Units 3,972,862 4,151,436 4,346,790 4,551,336 4,765,508 5,470,412 5,727,833 8,664,090 13,722,268
Total Corporation Interests 20,697,043 22,146,036 25,055,912 29,674,857 36,407,018 74,896,209 86,447,265 209,417,277 388,823,404
Note payable to Ben and Amanda (22,342,404) (22,117,304) (20,950,067) (18,406,317) (14,138,837) - - - -
Net equity $ 2,327,500 $ 4,180,167 $ 8,452,634 $ 15,819,876 $ 27,033,689 $ 80,366,622 $ 92,175,098 $ 218,081,367 $ 402,545,671
GDOT Income Tax Estimation
Captive Company Premiums (607,500) (607,500) (607,500) (607,500) - - - -
Total earnings 2,610,338 4,682,718 7,631,396 11,221,664 16,869,215 16,869,215 16,869,215 16,869,215

GDOT Cash Flow
Initial Captive Capitalization (250,000) - - - - - - -
Insurance Surrender - Premium Return - - - - - - - -
State Income Taxes - - - - - (1,514,855) (1,514,855) (1,514,855)
Cash flow from LP units (84,000) (84,000) (84,000) (84,000) (84,000) (84,000) (84,000) (84,000)
Interest Note payments to Ben and Amanda (949,552) (939,985) (890,378) (782,268) (6,216) - - -
Add. Principal Payments for Income Taxes (225,100) (1,167,237) (2,543,750) (4,267,480) (146,253) - - -
Trust Income Taxes - - - - - (5,903,190) (5,903,190) (5,903,190)
Insurance Premium (246,000) (246,000) (246,000) (246,000) (63,000) (63,000) - -
Cash flow to reinvest 855,686 2,245,495 3,867,268 5,841,915 16,569,746 9,304,169 9,367,169 9,367,169
45%
** This illustration assumes that principal and interest payments are made annually (as noted on the GDOT flowchart page) until the note is paid off in 2018 and grantor status is revoked.
** Beginning in 2019, the trust will pay it's own income taxes.

GDOT Insurance
Net death benefit 30,000,000 30,000,000 30,000,000 30,000,000 30,000,000 30,000,000 30,000,000 - -
Premium (246,000) (246,000) (246,000) (246,000) (63,000) (63,000) - -

GDOT Note
Outstanding note balance 22,342,404 22,342,404 22,117,304 20,950,067 18,406,317 146,253 - - -
Interest payment 949,552 939,985 890,378 782,268 6,216 - - -

Page 75

IRREVOCABLE LIFE INSURANCE TRUST DETAILS - PROPOSED PLAN

YEAR Current 2012 2013 2014 2015 2018 2019 2028 2038
Cash gift to current ILIT 15,692 15,692 15,692 15,692 15,692 15,692 15,692 15,692 15,692
Total outlay to ILITs 15,692 15,692 15,692 15,692 15,692 15,692 15,692 15,692 15,692

Death benefit from current ILIT 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 potential death benefit $ 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

Page 76

TESTAMENTARY CHARITABLE LEAD TRUST DETAILS - PROPOSED PLAN

YEAR Current 2012 2013 2014 2015 2018 2019 2028 2038
Charitable Lead Annuity Trust
Balance Sheet
Tot. value of TCLAT assets 33,032,037 34,704,265 43,840,191 45,578,623 47,591,282 53,683,271 63,404,430 163,950,389 308,574,001

Annual payment to charity if death
occurs in the column year 1,854,940 1,948,846 2,461,881 2,559,504 2,672,526 3,014,627 3,560,526 9,206,765 17,328,219

Benefits to Charity
NPV of TCLAT income distributions** 33,032,037 34,704,265 43,840,191 45,578,623 47,591,282 53,683,271 63,404,430 163,950,389 308,574,001
Total of TCLAT distributions** 46,373,510 48,721,143 61,547,023 63,987,600 66,813,162 75,365,675 89,013,160 230,169,126 433,205,486

Benefits to Children
Future Benefits to Heirs from TCLAT** 23,327,277 24,508,207 30,960,012 32,187,696 33,609,039 37,911,212 44,776,309 115,782,026 217,915,450
NPV of benefits to children** 6,888,609 7,237,342 9,142,577 9,505,116 9,924,842 11,195,286 13,222,568 34,190,753 64,351,036

**The values shown passing to charity and to heirs vary from year to year based on the projected size of your estate, and the applicable tax law.
Note: NPV of benefits to heirs assumes a 5% linear growth of TCLAT assets. A higher actual rate of growth would mean more
money to the heirs while a lower actual rate of growth would mean less money to the heirs.

Page 77

BENEFITS TO MORGAN FAMILY FOUNDATION - PROPOSED PLAN

YEAR Current 2012 2013 2014 2015 2018 2019 2028 2038
Charitable gift of IRA assets 278,603 297,222 318,028 340,290 364,110 446,051 477,274 601,175 619,873
NPV of TCLAT income distributions 33,032,037 34,704,265 43,840,191 45,578,623 47,591,282 53,683,271 63,404,430 163,950,389 308,574,001
Total benefits to foundation $ 33,310,640 $ 35,001,488 $ 44,158,219 $ 45,918,913 $ 47,955,393 $ 54,129,322 $ 63,881,704 $ 164,551,564 $ 309,193,873

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DETAILS OF BEN'S QUALIFIED PLAN - PROPOSED PLAN

YEAR Current 2012 2013 2014 2015 2018 2019 2028 2038
Ben's Qualified Plans
Ben's age 63 64 65 66 69 70 79 89
Amanda's age 60 61 62 63 66 67 76 86
Minimum distribution factor 33.9 33.0 32.0 31.1 28.3 27.4 19.5 12.0
Securities in plans 278,603 297,222 318,028 340,290 364,110 446,051 477,274 601,175 619,873
Plan balance during life 278,603 297,222 318,028 340,290 364,110 446,051 477,274 601,175 619,873
Plan balance at death of survivor 278,603 297,222 318,028 340,290 364,110 446,051 477,274 601,175 619,873
Minimum distribution - - - - - - 30,263 52,354
Actual distribution - - - - - - 30,263 52,354

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DISCLAIMER AND DISCLOSURE

InKnowVision, LLC does not give accounting or investment 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.

You should consult with your other advisors on the accounting and investment implications of the proposed strategies before any strategy is
implemented.

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.

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APPENDIX

Many of our clients like to read about some of the strategies that we have recommended. Both as further education and as a
reminder of the main points involved in the strategies.

The appendix material that follows includes information about the planning strategies recommended. Not all strategies are
included. Only those that likely require additional explanation.

Naturally, we are always happy to answer your questions or review the details of a particular strategy with you at any time.

Charitable Remainder Unitrust (CRT) - This trust allows an individual or couple to make a gift, or a series of gifts, normally
of appreciated assets, receive a charitable income tax deduction for the present value of the gift and to receive an income
stream of a percentage that is based on the value of the trust assets. All types of CRTs have a minimum payout percentage of
5%. The trust is based on the life expectancy of the grantor or a term of years no greater than twenty. When the last income
beneficiary dies or at the end of the term, the remainder passes to the charitable beneficiary.

TCLAT - A testamentary charitable lead annuity trust is established at the death of the grantor. It pays a fixed annuity
percentage to charity for a period of time then the remaining assets are transferred to the grantor’s beneficiaries. Most
TCLATs are structured to create a “zero” transfer tax and are often used to eliminate any estate tax that would be due from
the grantor’s estate.

Charitable Life Estate - Client makes a gift to a charity of his residence and retains all rights and obligations of property
ownership for his life. Client receives an immediate charitable income tax deduction for the present value of the gift to
charity. At death, the house passes to the designated charity and is removed from the estate of the donor.

Private Foundations - A private foundation is a specific type of charity that is established and operated usually by one
family. The entity can be a trust or a corporation and the family may have 100% control of the board, make all of the
investment decisions and all charitable grants. Private foundations must distribute 5% of its assets annually. There are also
strict guidelines as to what type of investments may be owned and there are special limitations as to the amount of
charitable income tax deductions are available for contributions.

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Family Charity Plan - Client establishes a family limited partnership that is designed to minimize the typical discounting that
is normally associated with partnership planning. Client funds the partnership and then donates the limited partnership
interests to designated charities. Client receives a significant income tax deduction and maintains investment control over
partnership assets. Often client has a right to borrow from the partnership. Also, client generally makes an annual
distribution to the charities from the partnership, normally 1% of assets.

Supporting Organizations (SOs) - SOs are similar to private foundations but are actually public charities that can be
established by private families. Because they are technically public charities, the higher charitable income tax deduction
rules for public charities apply. Unlike private foundations, however, SOs require that a private family may not have
absolute control of the board. That is, if the board is to have 5 members, the family can only have a maximum of 2 of those
members. SOs are not required to pay excise taxes, nor are they required to distribute 5% of their assets annually. Instead,
they must distribute 85% of their income.

Bargain Sales - A bargain sale occurs when a donor transfers property to a charity for less than the full fair market value of
the property or when the charity pays some portion of the value for property it receives. The donor only receives a tax
deduction for the contributed portion of the property.

Charitable Remainder Annuity Trust (CRAT) - This trust allows an individual or couple to make a single gift, normally of
appreciated assets, receive a charitable income tax deduction for the present value of the gift and to receive an income
stream of a fixed percentage of the original value of the contribution of trust assets. The trust is based on the life expectancy
of the grantor or a term of years no greater than twenty. When the last income beneficiary dies or at the end of the term, the
remainder passes to the charitable beneficiary.

Gift Annuity - A gift annuity is a form of a bargain sale. A donor transfers property to a charity in exchange for a fixed
income stream that will last for the life expectancy of the donor. A charitable income tax deduction for the present value of
the gifted property is allowed. The charity is liable and responsible for the payment of the annuity income stream.

Net Income with Makeup Unitrust (NIMCRUT) - This is a special type of charitable remainder unitrust (see above)
wherein the trust distributes the “net income” that the trust assets earn within the trust. If the trust does not earn enough
income to pay the stated income percentage payout, the trust creates an “IOU” account that it can pay at a later date when
the assets earn more income. These trusts are often used when a donor has other income currently but would like income
later such as during their retirement. Trust assets can be managed to produce income or not.

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Flip Charitable Remainder Unitrust (Flip CRT) - This type of CRT operates like a NIMCRUT when it is originally
established, paying out only the income it earns at a set percentage. At some triggering event in the future, the FLIP CRT
changes character and operates like a standard CRT (SCRUT) whereby it pays out a fixed percentage of its annual valuation.
This type of CRT is often used when a gift that produces little current income (such as land) is transferred before it is sold.
Upon sale, the proceeds are reinvested and the CRT begins paying its regular percentage.

Charitable Lead Unitrust (CLUT) - This trust operates very much like the CLAT. However, while the percentage payout
remains fixed, the trust’s distribution amount varies depending on the value of the trusts assets which are computed
annually. Because of this, the CLUT cannot have a “zero” gift amount as there will always be some calculated remainder that
passes to the heirs. CLUTs are often used for gifts to grandchildren or other “skip generations” because the generation
skipping tax amount can be calculated when the trust is first established.

Charitable Lead Annuity Trust (CLAT) - This trust distributes income to charity over the life of the donor or for a period of
years. At the end of the trust term, the trust assets are either distributed back to the grantor or to heirs. These trusts are
used to either transfer assets to heirs with little or no gift tax or to create a different way to make gifts if the grantor has
already used significant charitable income tax deductions. CLATs have no minimum payout percentage.

Donor Advised Funds (DAF) - A DAF is a special account established at a Community Foundation. It allows a donor to
make a gift of property without specifying the final charitable purpose for the gift. Donors often are allowed to maintain
money management responsibility for the DAF and can also direct the Community Foundation as to where the charitable
funds are ultimately distributed. The Community Foundation is not technically bound to direct the funds to the donor’s
selection but as a practical matter most follow the donor’s wishes. DAFs have no annual minimum requirement for
distribution and are usually inexpensive to establish.

Limited Liability Company/Charitable Remainder Trust (LLC/CRT) - In this strategy a gift of appreciated property is made
to an LLC. The LLC then gifts the property to a CRT in exchange for the income interest. The LLC is then sold to a Grantor
Deemed Owned Trust (GDOT) in exchange for a note. Because of the fact that the LLC only owns the income stream due
from the CRT, and the LLC has restrictions on marketability and liquidity, the “discount” available for the sale to the GDOT
should be substantial.

Family Limited Partnership (FLP) - FLPs are a form of business entity that can be utilized to facilitate the transfer of assets.
Ownership interests are divided into General Partner (GP) and Limited Partner (LP) shares. GPs maintain control of the
entity even though they may own a small percentage of the total FLP. LP interests have ownership but no control. Because
the LPs have no control over their interests FLPs often receive significant valuation adjustments when valued by appraisers.
This allows the LP units to be transferred or sold at less than their full monetary value. FLPs also enjoy strong creditor
protection and are therefore effective for family asset protection purposes.

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Long Term Care Insurance (LTC) - This type of insurance is meant to protect families from the catastrophic costs of care
due to a prolonged illness. Coverage is usually provided as a “per day” cost and many policies feature various riders that
protect against inflation. Coverage applies not only for nursing home and rehabilitation facilities but for home health care
costs as well. Policies can be structured so that they are paid for over a lifetime or for a period of years. Some policies
refund the premiums that have been paid at the death of the insured. LTC is income tax deductible to C Corporations and
owners of those corporations may “discriminate” as to which employees are covered.

Walton Grantor Retained Annuity Trust (Walton GRAT) - In a typical GRAT assets are transferred to a trust and the
grantor of the trust receives an income stream for a period of years. What is left in the trust at the end of its term is
transferred to beneficiaries, normally the grantor’s heirs. The normal structure of a GRAT is meant to use “leverage” to
reduce or eliminate the taxable gift to the heirs form the GRAT. This type of normal GRAT causes all of the GRAT assets to
be included in the grantor’s estate if the grantor dies during the GRAT period. The Walton GRAT provides an exception to
this rule, thereby allowing GRAT payments to continue after death and the GRAT assets not reverting to the grantor.

Revocable Living Trust (RLT) - A foundational document of most estate plans, the RLT is a trust that is established by an
individual for the purpose of holding and managing the assets of the individual. The trust is a non-entity for income tax
purposes. That is, the grantor of the trust is still responsible to report and pay the income tax due on any trust assets. RLTs
are also effective in the event of a disability or incompetence of the grantor, in that they name a successor trustee who can
step in to the shoes of the grantor without a court proceeding. RLTs are often established in order for the grantor’s estate to
avoid probate. Further, a properly drafted RLT can be utilized to take advantage of the estate exemption in order to
minimize estate taxes.

Preferred Limited Partnership (LP) - This type of LP creates two different classes of limited partner. LP units are allocated
between “common” and “preferred” classes. The common interests are generally entitled to receive any of the growth
associated with the underlying assets of the LP. The preferred receive a stated percentage income return, e.g. 5%. Because
of the possible disparity of return between the two types of units often have different values when appraised. This allows
the General Partner of the LP to make different decisions as to the ultimate disposition of the two types of interests. This
type of LP can provide substantial planning leverage for the appropriate estate.

Life Insurance - While life insurance has been available for a very long time it is often dismissed. However, properly
structured life insurance can add an element of safety and certainty to most estate plans. Life insurance death benefits are
generally income tax free and policies that are properly owned outside of the estate can also be estate tax free. Many
policies have guarantees that will keep the policy in force as long as premiums are paid in a timely fashion, regardless of
interest rate or company mortality fluctuations.

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Rent to Own - This strategy couples a short term Qualified Personal Residence Trust (QPRT) with an Irrevocable Life
Insurance Trust (ILIT). The ILIT is a beneficiary of the QPRT and at the termination of the QPRT term receives premium
payments in the form of rental income. This allows the client to pay large insurance premiums without annual gifting,
Crummey notices or income tax consequences.

Life Settlements - This strategy involves the sale of a life insurance policy to an independent third party. There are many
reasons to consider this type of transaction. The client may no longer need the insurance; the policy may be in danger of
lapsing while the client is unwilling or unable to make the necessary premium payments; or there may be newer, more
appropriate and cost effective insurance needed for the clients’ current circumstances.

529 Plans - 529 Plans represent a special section of the tax code which has been enacted to encourage the funding of post
high school education. Each state has its own plan but individuals may choose the plan of any state they wish to use. 529
plans allow an individual to establish an investment account for themselves or for another person (normally children or
grandchildren). Investment returns grow on a tax free basis and, if utilized for post high school educational purposes,
remain tax free. While the funds are generally out of the estate of the grantor of the plan, the grantor may take them back at
any time. While they will have to pay income tax as well as a 10% penalty on the earnings, it is often reassuring to have the
knowledge that the funds are retrievable in the event of an economic emergency. The law further allows the grantor to
make five years of gifts to the 529 plan in one year. That is, $60,000 can be deposited currently in a plan for the benefit of
another, and then the grantor must wait until the sixth year to make any additional deposits.

Family Limited Liability Company (FLLC) - Much like the FLP, a FLLC is a type of business entity that provides for the
centralized pooling and management of family assets. Owners of FLLC units are considered “members” and there is usually a
single “managing member”. FLLCs are a relatively new for of entity and there is less case law regarding their uses and
nuances when compared to FLPs. However, many jurisdictions have passed favorable FLLC statutes and therefore the FLLC
should be carefully considered in the proper jurisdiction.

Crummey Powers - Most traditional life insurance trusts contain what are known as “Crummey Powers” which grant the
beneficiaries of the trust the right to withdraw money that has been contributed to the trust (normally to pay insurance
premiums), for a period of time. This allows the contribution to be a gift of a “present interest” and therefore qualify for the
application of the annual exclusion. The name “Crummey” power derives from the court case that originally challenged and
won on this principle.

Jurisdictional Trusts - These trusts are normally established because of the favorable laws of a specific jurisdiction. These
could be any type of trust, revocable or irrevocable, grantor or non-grantor. What’s important is that the specific legal
foundation of the jurisdiction is favorable for the application sought. These could be state specific, i. e. Delaware for asset
protection or Dynasty provision, or could even be international such as Cook Islands or Nevis for asset protection.

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Succession Planning - This is the process by which the owner of a closely held business determines who will take over the
business and how and when the transition will take place. While not necessarily a codified estate planning “technique” a
business without an organized succession plan will be more likely to fail and have to be sold or liquidated. The economic
result to the family may be different than planned for or anticipated.

Grantor Retained Annuity Trust (GRAT) - The GRAT transaction entails the transfer of assets to a trust whereby the
grantor retains an income from the trust for a period of years and the remainder transfers to beneficiaries at the end of the
trust term. The “remainder” is calculated using IRS tables and is considered a gift to the remainder beneficiaries. Therefore,
many GRATs are structured to produce a “zero” gift and hope to take advantage of the possible arbitrage of the return of the
assets in the GRAT compared to the IRS rates utilized to calculate the trust remainder. The disadvantage of the regular GRAT
transaction is that if the grantor dies during the trust period, all of the assets in the GRAT are included back in the grantors
estate.

Sale for Installment Note - This transaction is normally coupled with other techniques to improve the results. Often a
family will use an FLP or FLLP and sell interests that have been appraised at a reduced value because of lack of liquidity and
marketability. The buyer is often a trust for the beneficiaries, which purchases the discounted assets for the installment
note. While the note is in the estate of the seller, it is usually of less value than the assets that have been sold. The note can
be structured to be paid as “interest only” or it may be amortized.

Gifting - A simple way to transfer assets to beneficiaries. An individual may currently gift $11,000 of property to any other
individual, annually ($12,000 beginning in 2006). Further, every individual can currently give away up to $1 million of
assets during their lifetime without incurring gift taxes. Making gifts of property that is discounted in some way can be
advantageous in transferring more than the statutory amount.

Annuity Withdrawal - Often families ignore the funds that clients have in commercial annuities. Since funds are
accumulating on a tax-deferred basis, this is often a logical approach. However, since annuities remain in the estate of the
owner and are therefore subject to estate tax and income in respect of a decedent tax, it is often advisable to begin a
systematic program of annuity withdrawal. Frequently the after-tax proceeds of the withdrawal can be utilized to subsidize
lifestyle or to purchase life insurance to replace the dollars that would be lost to the double taxation of the annuity.

Dynasty Trust - This type of trust allows assets that are contributed to the trust to remain in the trust for multiple
generations. Because of this provision, the trust assets will pass outside of the estate tax system and will also be protected
from the claims of a trust beneficiary’s creditors. This type of irrevocable trust must be established in a jurisdiction that
allows multi-generational trusts.

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Premium Finance - When purchasing life insurance, many families face the possibility of making taxable gifts because the
amount of the premium exceeds the amount of annual gifting available to the insured. Using the option of premium
financing may alleviate this problem. Funds are provided by a third party lender who pays the premium. The insured usually
pays only the interest on the borrowed funds while the principal of the loan accumulates and is often repaid from the
insurance proceeds at the insured’s death. While complicated, premium financing can be an interesting solution for funding
large policies.

Buy-Sell Agreements - This type of contract is normally associated with the owners of a closely business to allow for the
disability, abandonment of the business, or untimely death of any of the owners. The agreements describe the provisions by
which an owner’s share of the business will be redeemed. Buy-sells can be funded with disability and life insurance or they
may be unfunded and, therefore, rely on the cash flow of the business to fund the buy out. Providing liquidity for the estate
of the business owner is often the reason for the formation and execution of a buy-sell.

Irrevocable Life Insurance Trust (ILIT) - In many estate plans, it is best to own life insurance outside of the taxable estate.
The ILIT is the most common and flexible form of trust to accomplish this function. The ILIT will be the owner and
beneficiary of one or more life insurance policies and will obligated to pay the premiums, collect the proceeds at death and
distribute the funds to beneficiaries per the provisions of the trust. This is a good way to engage professional management
in the management and oversight of the trust funds. ILITs may be established as Dynasty Trusts, if so desired.

Asset Protection - This is a broad category of planning which may involve one or more different strategies. Each of the
techniques seeks to provide insulate assets from the attack of creditors. Various trusts, FLPs, FLLCs and other entities may
be considered for asset protection. Further, there are choices of jurisdiction both domestic and foreign that may provide
favorable environments for asset protection. Those in high risk profession or those with high risk assets generally fit the
profile for implementing asset protection strategies.

Intra Family Loans - A simple solution that allows family members to make loans at the current Applicable Federal Rate
(AFR), this strategy allows for possible arbitrage gains when the AFR is low relative to long term investment results.
Furthermore, it is often possible for discounts to apply to the value of the notes in the event of the death of the lender.

Corporate Recapitalization - Many closely held companies only have one class of stock, known as common voting stock.
When considering options for estate planning, the closely held company stock often represents a major portion of the
estate. In order to facilitate transfer while retaining control of the company, it is possible to “recapitalize” the company by
redeeming the outstanding shares and issuing new shares which are divided between “voting” and “non-voting” shares. The
non-voting shares are then transferred by sale or gift and because of their non-voting status appraisals often reflect a greatly
reduced value for these shares. Recapitalizations are available to S corporations as well as C corporations.

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Self Canceling Installment Note (SCIN) - Like other installment notes, the SCIN originates when assets are sold. As the
name implies the SCIN obligation is cancelled when the obligation is fully paid or at the death of the seller. Because of the
self-canceling feature of the SCIN, the seller receives a “premium” amount that is higher than a normal installment
obligation. The premium is reflected in one of two ways; either more principal is added to the balance or a higher (than
current federal tables) interest rate is applied to the obligation. SCINs may be effective in circumstances where the seller is
not expected to live to their IRS computed life expectancy.

Grantor Deemed Owned Trust (GDOT) - This type of trust has several unique properties that make it a very powerful
estate planning tool. First, when assets are transferred to the trust either by gift or by sale, they are removed from the estate
of the grantor. Second, the assets in the GDOT remain income taxable to the grantor of the trust. While this may not seem
like a positive attribute, the grantor’s recognition and payment of the income taxes essentially allows the assets in the
GDOT to grow free of income taxes outside of the estate. This can greatly increase the ultimate value of the assets
transferred to the trust.

Captive Planning - Business owners often have risks that are either under-insured or are too expensive to insure. Those
who have excess taxable income may choose to establish their own insurance entity, know as a “Captive.” These are most
done in international jurisdictions since the tax laws favor this type of arrangement. These structures are very complex and
require specialized planning but can also provide very favorable income and estate tax benefits.

Qualified Personal Residence Trust (QPRT) - This technique involves transferring a residence by gift to a trust for a period
of years. Normally, a gift tax return is filed for the year that the QPRT is funded. At the end of the trust period, the residence
becomes the property of the beneficiaries of the trust. Because the gift is made currently and vests in the beneficiary at a
later date, there is a discount on the value of the transfer which is calculated utilizing IRS tables. One risk of the QPRT is if
the transferor dies during the QPRT term, the house reverts to the estate of the transferor. After the QPRT terminates, the
transferor should pay rent to the transferees as in any other commercial transaction.

Leveraged Roth Conversions - Under certain circumstances it is possible to convert a traditional IRA account to a Roth
IRA. This may be an effective strategy, though it requires the payment of income taxes on the converted amount. Use of
borrowed funds to pay taxes can make this a very strong strategy.

Employee Stock Ownership Plans (ESOP) - Closely held businesses often have no clear exit strategy. An ESOP can provide
a ready market since the ESOP effectively sells a portion of the company stock to a qualified plan which must include the
employees of the company. The owner may receive property which will allow a diversification of his assets that have been
concentrated in their own company. ESOPs take many forms and are often complex transactions.

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412(i) - This type of defined benefit pension plan is structured to allow the investments in the plan to be either life
insurance and/or commercial annuities. Normally these products are designed to produce a low guaranteed rate of return
which causes the annual contribution and, therefore, the income tax deduction to the participants in the plan, to be
relatively high. 412(i) may be appropriate for an older business owner who has few employees.

IRA Maximizer - This strategy is for those individuals who have significant balance in their IRA (or other qualified plan) and
who do not need the funds to live on. Normally, the IRA invests all or some of its assets in a newly formed family limited
partnership (flp) and the flp invests all or some of its assets in a restricted management account (rma). The result of the
transaction is that there will be a reduction in appraised value of the account because of the illiquid nature of the rma and
the flp. By structuring the transaction properly, the IRA owner may reduce income taxes on required minimum distributions
and estate taxes because of the reduction in apprised value.

Limited Partnership Owned Life Insurance - An alternative to owning life insurance in an irrevocable life insurance trust
(ILIT), families often use a Limited Partnership. This is normally done as one step in a transaction whereby the limited
partnership units will be sold or otherwise transferred out of the estate of the insured. Further, there are usually other assets
contributed to the partnership that will fund the insurance premiums. Done properly, the life insurance death benefit can
remain outside of the estate of the insured while some degree of control through the control granted by retaining the
General Partner interest.

Family Bank - a combination of strategies that may include an LLC and/or a multi-generational irrevocable trust. The
purpose of the family bank is to create an entity that will allow several generations of family members to have access to
wealth for various purposes but also with a great degree of monitoring and supervision. A family bank may lend money to an
heir to purchase a home or to start a business but will first assess the appropriateness of the transaction against a set of
guidelines that have been drafted into the formation documents.

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GRANTOR DEEMED OWNER TRUSTS

Overview of Advantages. The sale to defective trust technique is an estate freezing technique, to transfer future
appreciation above a very low stated interest rate. Furthermore, to the extent that the note is paid during the
grantors lifetime, the grantor will not have any recognition of income (as would ordinarily be the case with an
installment sale to family members.) In several respects, the sale to a defective trust is a preferable technique as
compared to the GRAT (see Section VII below). However, the grantor trust must be 'seeded' with some significant
equity before the sale should occur.

II. Description.

A. Step 1. Create and 'Seed" Grantor Trust. The individual should create a trust that is treated as a grantor trust for
federal income tax purposes (meaning that the grantor is the owner of the trust for income tax purposes). The trust
will be structured as a grantor trust for income tax purposes, but will be structured so that the grantor is not deemed
to own the trust for estate tax purposes. This type of trust (which is treated as owned by the grantor for income but
not estate tax purposes) is sometimes called a 'defective trust'.

The grantor trust should be 'seeded' with meaningful assets prior to a sale. (For example, the trust should hold
approximately 10% in value of the eventual trust assets after a purchase occurs in step 2.) The seed money can be
accomplished either through gifts to the trust, or through transfer's to the trust from other vehicles, such as a GRAT.

B. Step 2. Sale for Installment Note. The individual will sell property to the grantor trust in return for an
installment note for the full value of the property (taking into account appropriate valuation discounts). The note is
often structured to provide interest only annual payments with a balloon payment at the end of the note term. The
interest is typically structured to be equal to the §7872 rate (which is even lower than the §7520 rate which is used
for structuring GRATS).

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C. Step 3. Operation During Term of Note. Hopefully the trust will have sufficient cash to make the interest
payments on the note. If not, the trust could distribute in-kind assets of the trust in satisfaction of the interest
payments. Payment of the interest, whether in cash or with appreciated property, should not generate any gain to
the trust or to the grantor, because the grantor is deemed to be the owner of the trust for income tax purposes in any
event.

Because the trust is a grantor trust, the grantor will owe income taxes with respect to income earned by the trust. To
the extent that the entity owned by the trust is making distributions to assist the owners in making income tax
payments, the cash distributions to the trust could be used by the trust to make note payments to the grantor/seller,
so that the grantor/seller will have sufficient cash to make the income tax payments.

D. Step 4. Pay Note During Seller's Lifetime. Plan to repay the note entirely during the seller's lifetime. Income
tax effects may result if the note has not been paid fully by the time of the seller's death. See Section V.B. below.

Ill. Estate Tax Effects.

A. Note Includible In Estate. The installment note (including any accumulated interest) will be included in the
grantor/seller's estate.

B. Assets Sold To Trust Excluded From Estate. The asset that was sold to the trust will not be includible in the
grantor's estate, regardless how long the grantor/seller survives.

C. Grantor's Payment Of Income Taxes. The grantor's payment of income taxes on income of the grantor trust
further decreases the grantor's estate that remains at the grantor's death for estate tax purposes.

IV. Gift Tax Effects.

A. The grantor must "seed" the trust with approximately 1 0% of the overall value to be transferred to the trust by a
combination of gift and sale. This could be accomplished with an outright gift when the grantor trust is created.
Alternatively, the grantor trust could receive the remaining amount in a GRAT at the termination of a GRAT to
provide seeding for a further installment sale.

B. No Gift From Sale. The sale to the trust will not be treated as a gift (assuming the values are correct, and
assuming that there is sufficient equity in the trust to support valuing the note at its full face value.) There is no clear
authority for using a valuation adjustment clause as exists under the regulations for GRATS.
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V. Income Tax Effects.

A. Initial Sale. The initial sale to the trust does not cause immediate gain recognition, because the grantor is treated
as the owner of the trust for income tax purposes. Regulation §1.1001-2(c)Ex.5; Rev. Rul. 86-13,1985-1 C.B. 184.

B. Seller Dies Before Note Paid In Full. If the seller dies before the note is paid off, the IRS may argue that gain
recognition is triggered at the client's death. The better view would seem to be that gain recognition is deferred
under Section 453 until the obligation is satisfied after the seller's death. The recipient of installment payments
would treat the payments as income in respect of decedent. Presumably, the trustee would increase the trust's basis
in a portion of the business interest to reflect any gain actually recognized.

VI. Generation-Skipping Transfer Tax Effects. Once the trust has been seeded, and GST exception has been
allocated to cover that gift, no further GST exemption need be allocated to the trust with respect to the sale
(assuming that it is for full value).

VII. Advantages of Sale to Defective Trust Technique.

A. No Survival Requirement. The estate freeze is completed without the requirement for survival for a designated
period.

B. Low Interest Rate. The interest rate on the note can probably be based on the § 7872 rate, which is significantly
lower than the §7520 rate which must be used for structuring the annuity payments from GRATS. For example, in a
month in which the §7520 rate was 5.6%, the short term §7872 rate was 4.62%.)

C. GST Exempt. The sale can be made to a GST exempt trust, or a trust for grandchildren, so that all future
appreciation following the sale will be in an exempt trust with no need for further GST exemption allocation.

D. lnterst Only-Balloon Note. The installment note can be structured as an interest only-balloon note. With a
GRAT, the annuity payments cannot increase more than 120% in any year, requiring that substantial annuity payments
be paid in each year.

E. Gift Amount May Approximate GRAT Gift For Older Individuals. For older individuals and longer term GRATS,
the gift amount with a GRAT may approximate the 10% seed gift amount that would be needed with a sale to a
defective trust.
Page 92

VIII. Risks.

A. Treatment Of Note As Retained Equity Interest. Under extreme circumstances, it is possible that the IRS may
take the position is treated as a retained equity interest in the trust rather than as a mere note from the trust. If so,
this would raise potential questions of whether some of the trust assets should be included in the grantors estate
under §2036 and 2702. It would seem that §2036 (which generally causes estate inclusion where the grantor has
made a qift of an asset and retained the right to the income from that asset) should not apply to the extent that the
grantor has sold (rather than gifted) the asset for full market value. See Letter Rulings 9436006 (stock contributed to
grantor trust and other stock sold to trust for 25 year note; ruling holds §2702 does not apply); 9251004 (transfer of
$5.0 million of stock to trust in return for $1.5 million note in 'sale/gift" transaction; ruling held that §2036 applies to
retained right to payments under note, reasoning that note payments would constitute a major share, if not all, of the
trust income, thus causing inclusion of trust property in estate); 9535026 (property sold to grantor trust for note,
interest only at AFR rate for 20 years with a balloon payment at end of 20 years; held that the note is treated as debt
and 'debt instrument is not a retained interest" for purposes of §2702).

B. Potential Gain Recognition If Seller Dies Before Note Paid. There is potential gain recognition if the seller dies
before all of the note payments are made. The IRS may argue that the gain is accelerated to the moment of death. It
would seem more likely that the gain should not be recognized until payments are actually made on the note.

Page 93

CAPTIVE INSURANCE COMPANIES

CAPTIVE INSURANCE COMPANY DEFINED
A captive is a bona fide insurance or reinsurance company. Its business is primarily supplied by and controlled by its
owners, which are also normally the principal insureds. These owners/insureds participate in controlling the underwriting,
claims and investment decisions of the insurance company. A number of different
types of captives exist:
• Single parent or group
• Direct writing or fronted
• Onshore or offshore
• Agency captive
• Risk retention group
• Property/casualty only or life/benefits only (sometimes a mix of the two)
• Writers of related business or some unrelated business
• Primary or excess layer captive
• Stock, mutual or reciprocal
• Rent-a-captive, cell captive or sponsored captive.

REASONS TO FORM A CAPTIVE INSURANCE COMPANY
There are many reasons for starting or continuing to use a captive insurance company. These reasons tend to change in
priority over time as the needs of the owners evolve. For example, during hard insurance market cycles, cost and capacity
are key drivers for the use of a captive insurance company. Owners have started or continue to use a captive in order to:

Reduce or stabilize cost: Typically, financing risk in a captive lowers overall costs and helps an organization to stabilize
costs over the long-term because it is less susceptible to the vagaries of the insurance market. Cost savings include no profit
load, elimination or reduction of broker commissions, and lower administrative costs. The owners share in all earnings
through policyholder dividends or shareholder dividends. Another element of savings is the avoidance of costly insurance
regulations, including payments into residual market pools and state premium taxes. Loss-cost savings might also be
achievable where the captive serves to heighten risk management and cost awareness of senior management and operating
management. These savings often exceed the cost of setting up and running the captive.

Page 94

Increase capacity and provide access to reinsurance: Captives by themselves only offer limited capacity. Captives can,
however, access the capacity of the reinsurance markets and may be able to offer more limits of coverage than are available
in the retail market. For example, multiple reinsurers may participate on a “slip” to offer millions of dollars of additional
capacity that would not otherwise be available.

Exert control: Captives were originally formed by insurance buyers who were tired of the cycles of the insurance market.
They sought control of underwriting, rates and forms, as well as control of claim settlements and investments.

Provide coverage: Captives can provide coverage to subsidiaries and members that would not otherwise be available.
These include professional liability, punitive damages and business risks.

Provide freedom of rate and form: A direct-writing captive can offer specially tailored wordings, which reinsurers may
then follow.

Establish better-than-average claim experience: The claim history of the captive’s insureds may be better than the overall
class of business for a commercial insurer. If so, there is a good argument for retaining the risk in a captive rather than
subsidizing the poor claims experience of competitors.

Recapture investment income and accelerate/manage cash flow: Corporate treasurers like captives because the
investment income that usually stays with commercial insurers may be wholly or partially recaptured in a captive.

Take advantage of insurance accounting: Insurance companies get special tax treatment; they can accrue tax-deductible
reserves for unpaid claims, whether known or estimated, and in the case of life insurance reserves, pay no tax on inside
build-up of interest income. Furthermore, tax accounting for non-insurance companies with captives has been trending
toward a similar treatment.

Take advantage of tax deductibility: There are still tax advantages to be gained by using captives, especially those with
multiple owners or insureds and those where the insureds and the shareholders are not the same. Deductibility of premiums
and deferred taxation of insurance income are the two principal advantages.

Tax issues can be a major driver, but they should not be the only reason for forming a captive. If they are, the captive might
not stand up under scrutiny of tax authorities and regulations. Before considering a captive, a company should seek the
advice of qualified legal counsel.

Page 95

Offer perceived “safety” of formalized services: Captive books and records are audited; the reserve for claims is reviewed
by actuaries; their investments are managed by investment professionals, and their accounts are maintained by independent
managers. All of these services formalize the risk financing process. In many cases, formalized services are perceived by
captive owners to be superior to unformalized in-house services, unallocated funding or no funding whatsoever.

Take advantage of favorable regulations: Some captives are formed offshore to escape unnecessary insurance solvency
regulations. Offshore captive insurance solvency regulation, like onshore captive solvency regulation, is designed to protect
policyholders. Some believe captive regulation is weak. However, in well-regulated domiciles, such as Bermuda and
Vermont, regulation is not lax and permissive.

Provide administrative tool to fund retentions: Large organizations often create and maintain captive insurance
companies to fund the difference between their large corporate deductible or retention and the relatively small deductible
or retentions sought by the organization’s individual business units. By using a captive, the central organization can offer
fixed-cost insurance to the business units above modest deductible while retaining the potential variability for losses within
the overall organization’s risk-bearing capacity.

Support risk management: The financial “stick” provided by the captive can be combined with a reward “carrot” to
influence operational behavior. It also gives the risk manager more leverage in the organization than an annual cost
allocation process does by itself.

Increase access to innovative deals: A captive can help provide access to certain deals. Some of the more innovative
arrangements include loss portfolio transfers and relief derived from transferring liabilities from one balance sheet to
another.

Warehouse data: A captive can provide the organization with a tool for collecting more and better data to support its cost
management efforts. For example, a captive can serve as a central information repository for common disability cost
management purposes as an organization finances select employee benefit risks (e.g., short-term or long-term disability)
along with its workers compensation risks.

Support strategic partners: Organizations can make coverage available for their various business partners, such as key
suppliers or customers, independent contractors or attending physicians, when the traditional market’s price or terms are
unfavorable. This approach might also provide profit and tax management advantages to the captive’s parent.

Make a profit: Some captives are formed specifically to underwrite a customer’s risks or offer third-party insurance.
Although they should not be called captives, they sometimes are. These entities can add value to an organization by tying
customers to the owner and offering a stream of profits.

Page 96

EVALUATING IF A CAPTIVE MAKES SENSE FOR YOUR ORGANIZATION

To examine whether a captive makes financial and/or strategic sense, a feasibility study should be conducted. If the results
of the feasibility study are positive, a more formal business plan is then developed.

Feasibility Study
A feasibility study is a rigorous quantitative and qualitative assessment of the key aspects of a captive’s business in relation
to current operations and costs. The quantitative features of a feasibility study include coverage offering, premiums, capital
and surplus, claims projections, reserves, expenses, reinsurance, investment income and taxes. The qualitative features
include ownership, governance, domicile, structure of the transaction and management. The feasibility study has three main
components. The first is the design and structure of the coverage and the transactions for insurance and reinsurance. This
component also includes discussion of the domicile and governance. The second component is a determination of the
financial commitment required to support the design. Last is a comparison of the after tax cost between alternative
programs and an evaluation of qualitative issues.

The feasibility study should follow a methodical process and include the following major steps:
1. Collect and review relevant background information including descriptive background literature (e.g., marketing/service
brochures, annual reports, audited financial statements), schedule of insurance (e.g., coverage lines, premiums, limits,
retentions, insurers) and summary of historical annual risk financing costs.

2. Hold a strategy session with management and outside experts (e.g., actuarial, tax and regulatory) to review information,
confirm objectives/goals and discuss probable financial implications of captive formation. The agenda for this meeting
typically includes:
a. Background and goals: background information on history, ownership, organizational structure and governance; overall
mission and goals; financials; insurance program; risk financing issues
b. Actuarial or data issues: actuarial techniques to be used, additional loss data or exposure information needed, insurance
company expense loads, other issues and concerns
c. Reinsurance marketplace overview: review of market, future expectations, reinsurance options, issues and concerns
d.Tax and regulatory basics: federal income taxes, federal excise taxes, state premium and self-procurement taxes, state
income taxes, domicile taxes and fees, regulatory issues, insurance company structure options
e. Design: discussion of possible relevant options and targeting of best option
f. Summary and next steps.

3. Develop projections of expected loss experience for relevant exposures.

4. Estimate operational expenses associated with the captive and determine the captive premium.

Page 97

5. Advise on appropriate capital levels or margin for risk to support the written exposure.

6. Describe qualitative factors that need to be considered relative to the formation of a captive, including:
a. Comparison of domiciles and recommendation of location
b. Discussion of structural parameters of a captive, including ownership, governance and control
c. Review of ongoing management issues and required support services
d. Discussion of whether a captive addresses other issues.

7. Prepare pro forma financial statements presenting the balance sheets and income statements for a captive over a five-year
period on an “expected case” basis and under alternative scenarios.

8. Compare the proposed captive program versus the current program, based on financial and nonfinancial criteria.

9. Prepare and present findings. Once the decision to form a captive insurance company has been made, a company needs
to develop a business plan, visit the selected domicile to meet with regulators and interview service providers, and prepare
and submit an application. In addition, the company needs to secure reinsurance support and select service providers.
Finally, the company needs to capitalize and fund the captive.

The Business Plan

A well thought out business plan is the foundation of a successful company, and a captive is no exception. The components
of a captive’s business plan should be derived from its feasibility study, although the business plan may be organized and
presented in a different format. The business plan will serve as a basis against which the owners/insureds can measure the
performance of their insurance company annually. A modified version of the business plan will likely be provided to the
regulators of the chosen domicile and will also serve as their benchmark for measuring the operations and performance of
the company. A good business plan typically includes the following elements:

• Overview and purpose
• Program design and structure
• Structure of governance, including board representation, ownership and corporate form
• Coverage and limits offered, including underwriting policy
• Financial resources — premiums, capital and investments
• Reinsurance and risk management
• Claims management
• Safety and loss prevention programs
• Management and service providers
• Pro forma financial highlights, including “what if” alternative models showing the result of one or more bad loss years,
unfavorable investment outcomes and any other likely downside scenario Page 98

Morgan Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning

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