LIFE INSURANCE. Adequacy of Coverage. Cost Effectiveness. Older Policies with Higher Mortality Costs Tax Free Exchange.

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1 LIFE INSURANCE LIFE INSURANCE Goals Income f Surviv Beneficiaries to Meet Capital Lifetime Needs Fund Maj Liabilities at Death Adequacy of Lifestyle Continuation Appropriateness of Policy Term vs. Permanent Cost Effectiveness Older Policies with Higher Mtality Costs Adequacy of Estate Tax Liability Buy-Sell Agreement Appropriateness of Policy Cost Effectiveness Older Policies with Higher Mtality Costs Calculate Income Replacement and Present Value of Future Liabilities Adjust s Life Insurance Benefits Provide Assets Needed to Generate Income and Fund Specific Goals Buy Term and Invest Difference Term Can Be Targeted f Specific Goals Permanent Insurance Provide Tax- Advantaged Build Up of Cash Value 1035 Tax Free Exchange Lower Cost of Policy Reevaluate Needs Regularly Increase Life Insurance Benefits Provide Liquidity to Pay Estate Taxes and Meet Other Liabilities Permanent vs. Term Ownership by Irrevocable Life Insurance Trust Irrevocable Life Insurance Trust Removes Insurance Proceeds from Taxable Estate Permanent Insurance Provide Guarantee Premium Amount Second to Die Policy 1035 Tax-Free Exchange Lower Cost of Policy

2 DISABILITY / LONG TERM CARE INSURANCE DISABILITY LONG-TERM CARE INSURANCE Goals Provide Replacement Income In Case of Long-Term Disability Provide Benefit Amount to Pay Cost of Long-Term Care Adequacy of Benefit Amount Elimination Period Benefit Period Appropriateness of Policy Tax Treatment of Benefits Definition of Disability Cost Effectiveness Occupational Classification Policy Terms Adequacy of Daily Benefit Units Elimination Period Benefit Period Appropriateness of Policy When do Benefits Begin? Cost Effectiveness Age Driven Policy Terms Policy Definitions Increase to Maximum Benefit Use Appropriate Elimination Period and Benefit Period Adequate Amount Provides Cash Flow Required to Maintain Lifestyle Own Occupation Loss of Earnings Policy Pay Premiums With Post Tax Dollars Appropriate Policy Terms and Definitions Insure Benefit Amount Will Replace Actual Loss of Income And Premiums Paid With Post Tax Dollars Insure Benefits Are Tax-Free Use Appropriate Classification Adjust Elimination/ Benefit Period Reduced Cost Increases Cash Flow f Other Needs, Including Investments. Adjust Daily Benefit Units To Match Anticipated Cost of Desired Use Appropriate Elimination Period and Benefit Period Adequate Benefit Amount Reduces Need to Spend Current Income Deplete Assets Daily Activities Organic Brain Disders Required Pri Hospitalization COLA Appropriate Policy Terms and Definition Insure Benefits Will Be Paid When Needed Buy Policy Sooner Adjust Elimination and/ Benefit Period Reduced Cost Increase Cash Flow f Other Needs, Including Investments

3 LIABILITY INSURANCE LIABILITY INSURANCE Goal Protect Assets From Tt Action Related To Personal Liability Premises Liability Adequacy of Amount to Protect Net Wth and Future Potential Earnings Appropriateness of Policy Benefits Cap on Underlying Policies Terms & Definitions Attneys Fees Slander/Liable Cost Effectiveness Maximum on Underlying Policies are Expensive Increase Underlying 's to Maximum Amount and/ Purchase Excess Liability "Umbrella Policy" Assets and Future Earnings Protected Purchase "Umbrella Policy" "Umbrella Policy" Will Pay Benefits in Addition to in Lieu of Underlying Policies Excess Liability and "Umbrella" is Very Cost Effective Lower Cost of

4 LIABILITIES Liabilities Goals Cost Effectiveness Structure Codination With Wealth Management Plan Rates On Different Loans Lack of Tax Deductibility f Interest Terms of Different Loans Inappropriate Collateral Utilization Matching Cash Flows Debt Reduction Pay Down Debt Invest? Consolidate Debt Use Relationship with Lender to Find Alternatives, Lower Rates Use Derivatives to Change Rate, Risk Lower Rates Produce Lower Monthly Payment Lower Total Cost Residential Mtgage Home Equity Line of Credit Interest Is Usually Tax Deductible Minimize Restrictions on Other Assets Negotiate Favable Covenants, Terms Minimize Indirect Cost Minimize Aggravation Maximize Convenience Lower Recd Keeping Cost Increase Collateral Use Against Loan Substitute Collateral Additional Preferred Security Reduces Risk, Cost of Loan Utilize Loan Structures Offering Flexible Repayment Schedule Allows f Monthly Flexibility in Utilization of Cash Flow f Debt, Investment Protection Purposes Determine Desired Leverage Compare Projected Net Wth With and Without Debt Maximizes Wealth Creation

5 QUALIFIED RETIREMENT PLAN / IRA DISTRIBUTIONS Qualified Retirement Plan/IRA Distributions Timing During Life At Death Alternatives <59 1/2 59 1/2 to 70 1/2 >70 1/2 Spouse Family/Other Non-Spouse Charity Income Tax 10% Penalty -Substantial Equal Payments -IRA Rollover -Valuation Techniques *Single Premium Life Insurance *FLP *NUA -Lower Income Tax -Lower Gift Tax -Avoid Penalty Income Tax Valuation Techniques *Single Premium Life Insurance *FLP *NUA Lower Income Tax Income Tax Minimum Required Distribution 50% Penalty Take Minimum Required Distribution by Unifm Table -Lower Income Tax -Avoid Penalty Control -Substantial Equal Payments -IRA Rollover -QTIP Trust as Beneficiary -Defer Tax -Control Assets -Estate Tax -Control Irrevocable Trust, like Credit Shelter Control Control -Don Advised Fund -Private Foundation -Charitable Remainder Trust -Charitable Lead Trust -Reduce Eliminate Tax -Control Retirement Assets No Longer "Captive" In Plan, Subject to Plan Rules, Plan Spons, IRD

6 COMPENSATORY STOCK OPTIONS Compensaty Stock Options Types Incentive Stock Options Non-Qualified Stock Options Taxation Hold ISO F 24 Months From Grant Date And 12 Months After Exercise To Receive Long-Term Capital Gains Tax Treatment Holder Pays at A Rate Significantly Lower Than Their Ordinary Income Tax Rate Brow Funds Assuming Stock Value Grows at A Rate Above the Loan Rate, Client Achieves A Pure Leverage Play Exercise Plan Pyramid with Current Stock Holdings By Turning in Existing Shares of Owned Stock f Newly Exercised Shares, Holder Delays Recognition of Gain on Redeemed Shares and Completes an Exercise Without Using Cash Transferrability Opptunity Transfer Options to Trust Family Limited Partnership f The Benefit of Descendents Pri to Exercise Since The Value of An Option is Below the Value of An Actual Share, The Transfer Value Is Low Exercise Plan and Concentration Do A Cashless Exercise (Simultaneous Purchase and Sale of The Security) Since The Difference Between Exercise Price And Current Fair Market Value Would Be Taxed As Ordinary Income Regardless of Exercise Method, The Cash Generated Can Be Used to Diversify Positions

7 BUSINESS SUCCESSION Sale Transfer Timing Timing During Life of Owner At Death of Owner Alternatives Gift to Children/ Descendents Sell to Employees of Company Sell to Third Party Transfer to Children/ Descendents Sell to Employees of Company Sell to Third Party Gift Tax Valuation of Business Family Limited Partnerships / Grant Retained Annuity Trust Discounts Value f Transfer Tax Capital Gains Tax Employee Stock Ownership Plan Defers Capital Gains Tax Capital Gains Tax Charitable Remainder Trust / Tax Free Exchange/ Installment Sale Either Eliminates Defers Capital Gains Tax Estate Tax Bequest Step-Up in Basis Pricing and Funds f Employees to Use f Purchase Buy/Sell Agreement with Defined Price (fmula) and Life Insurance Proceeds to Fund Purchase Provide Liquidity f Take Out to Pay Estate Taxes - Maintain Lifetime Control Identifying the Purchaser, Pricing and Funds f Third Party to Use f Purchase Identify 3rd Party with Buy Sell Agreements with Defined Price (fmula) Life Insurance Proceeds to Fund Purchase Pre-Identified Buyer Provide f Quick Sale to Meet Estate Tax Liquidity Needs

8 DURABLE POWER OF ATTORNEY Durable Powers of Attney Goal Have Someone Make General Personal Financial Decisions Have Someone Make Specific Decisions in One Aspect of Personal Finance Have Someone Make Decision with Regards to Healthcare Principal Travels Constantly & is Unable To Execute Legal Documents Create a Standard General Power of Attney Allows Principal to Designate Another Party to Act on His Behalf Principal Anticipates Potential Mental/ Physical Incapacity Create a Durable General Power of Attney Allows f Designee to Transact Business f Principal Even if Principal is Incapacitated Principal Requires Only Specific/ Limited Decisions Made on Their Behalf Create a Limited Power of Attney Limits the Attneyin-Fact to Dealing Only With Specified in the Limited Power of Attney Determine Course of Medical Action When Principal is Incapable of Doing So Create a Healthcare Power of Attney Vests Decison F Health Decisions

9 GIFTING TO CHILDREN/DESCENDENTS/OTHERS Gifting to Descendents Goal Create A Pool of Funds To Control Provide an Education Plan Reduce Taxable Estate Current Control of Investments Unifm Transfer to Mins Account Account Taxed to Descendent and Gift is Completed f Estate Tax Purposes Control Past Age of Majity 2503(c) Trust Irrevocable Trust with Crummey Provisions Trustee Can Manage Funds f As Long As Grant Desires Income & Capital Gain Tax Efficiency & Control by Don Section 529 Education Plan Account Prepaid Tuition Credit Account Grows Tax- Free and Proceeds Used f Educational Purposes are Distributed Tax-Free $12,000 Annual Exclusion and Discounting Assets Create Family Limited Partnership & Gift Partnership Units to Irrevocable Trust f Descendents Allows Lower Value to be Placed on Assets and Allows f Long-Term Control of Assets

10 CHARITABLE GIFTING Charitable Gifting Timing During Life At Death Tax Deductibility and Efficiency Gift Appreciated Assets Rather than Cash Client Receives Charitable Deduction while Avoiding Capital Gains Tax on Appreciation of Gifted Property Need Current Income from Assets Charitable Remainder Trust Pooled Income Fund Client Receives Current Tax Deduction f a Ption of Asset while Retaining a Current Income Stream On-Going Control/ Influence of Charitable Recipient Private Foundation Don Advised Fund Client Receives Current Income Tax Deduction f Gifted Property, but Retains Flexibility in Directing Gifts in Future Years Tax Efficiency Designate QRP/IRA Assets Rather than Probate Capital Property Probate/Capital Property Receives a Step-Up in Basis, QRP/IRAs Do Not. By Transferring To Descendents, The Stepped-Up Property Provides Descendents Greater Value Passing On Values In Addition to Wealth to Descendents Create a Family Foundation Utilize a Don Advised Fund Future Generations Come Together at Least Annually to Decide on Charitable Distributions

11 TITLING OF ASSETS Titling Of Assets Timing Access During Lifetime/ Incapacity Transfer at Death Access By Power of Attney Incompetency of Owner Sole Ownership Tenants in Common Durable Prower of Attney Specific Legal Authity in Written Document, Can be Broad Limited Access by OtherTenant/ Spouse/Trustee JTWROS Tenancy by the Entirety Community Property (May Vary By State) No Additional Document Needed Incompetency Durable Power of Attney Revocable Living Trusts Court Appointed Guardian Continuity of Management of Assets Unimpeachable Approval to Authized Actions Will/State Law Sole Ownership Tenants in Common Community Property Subject to Probate Surviving Tenant(s) JTWROS Tenancy by the Entirety Avoids Probate Passes to Other Owners Named Beneficiary P.O.D. T.O.D. Life Insurance Employee Benefit Plans Totten Trust Revocable Living Trust Avoids Probate Passes to Named Beneficiaries

12 CHOICE OF EXECUTOR Choice of Execut Goal Have Member of Family Participate in Process Have Professional Independent Party Handle The Settlement Process Members of Family May Lack Expertise and Time Risk of Incapacity/ Mtality of Execut Permanence Amateur Loss Name a Member of Family as Co- Execut With Another Professional Allows Family Involvement, but Insures Knowledgeable Suppt Naming a Family Member as Execut May Create Animosity ` Objectivity of Execut Designate a Cpate Execut/ Disinterested Person Who Will Actively Involve/ Communicate With All Family Members Duty of Impartiality Minimize Potential Conflicts Ensuring That a Comftable, Knowledgeable Relationship is Established Between Execut and Family Establish Wking Relationship During Life and Involve Family in the Planning Process Comft With the Decision Process Experienced Administration Cost Balance Against Unbundled Expense Costs of Individual and Potential Loss By Amateur Comft with the Decision Process Practical Economies Financial Responsibility of Cpate Fiduciary

13 DISTRIBUTION PLAN AT DEATH Distribution of Wealth at Death Alternatives To Spouse To Family / Other Non- Spouse To Charity (See Charitable Gifing Chart) Outright Bequest POA Marital Simple Control QTIP QDoT -Marital Deduction -Contol of Spending -Control of Ultimate Disposition -Optimize GSTT Outright Bequest Simple Control Credit Shelter Irrevocable Trust Special Needs Trust -Control of Spending -Control of Ultimate Disposition -Protection from Credits