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The Jack and Faith Daniels Estate The Daniels Family Tree Cash & Checking Money Market Michigan Residence Florida Condo Traded Stocks Bonds Real Estate Auto Company Stock Pension Plan Daniels Manufacturing Total Assets Condo Mortgage Real Estate Mortgage Total Liabilities NET WORTH

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jack faith daniels estate
Cash & Checking

Money Market

Michigan Residence

Florida Condo

Traded Stocks

Bonds

Real Estate

Auto Company Stock

Pension Plan

Daniels Manufacturing

Total Assets

Condo Mortgage

Real Estate Mortgage

Total Liabilities

NET WORTH

25’000

300’000

600’000

400’000

500’000

400’000

1’500’000

500’000

2’000’000

8’000’000

14’225’000

200’000

150’000

350’000

13’875’000

Jack & Faith Daniels’ Estate
slide5

Jack’s Main Concerns

Business Related

  • Tax efficient transfer of company ownership to family members
  • Let Jane have the option of becoming a part owner of the family business

Personal Estate Planning for Jack and Faith:

  • Provide sufficient income to cover Jack’s & Faith’s retirement needs
  • Provide Faith with stable income in the case of Jack’s death
  • Provisions for disabled grandchild
  • Strong interest in charity gift
  • Tax efficient and fair distribution of wealth and without providing to too much “easy money” to beneficiaries
slide6

The Jack & Faith Daniels Estate Planning Proposal

Presented by:

The Bankers Trust Co.

And

Rych Associates

29th October, 1999

slide7

The Bankers Trust Co.:

  • Part of the Deutsche Bank Group
  • The largest bank in the world in terms of total assets
  • Large global network
  • Awarded the best Financial Planning outfit in the world, by MEC & Co.
  • Rych Associates.:
  • Partners Robert, Yves, Christoph & Heiko, experts in Trust Management + Estate Planning
  • Estate Planning boutique, highly respected in this business
slide9

Jack’s Main Concerns

Business Related

  • Tax efficient transfer of company ownership to family members
  • Let Jane have the option of becoming a part owner of the family business

Personal Estate Planning for Jack and Faith:

  • Provide sufficient income to cover Jack’s & Faith’s retirement needs
  • Provide Faith with stable income in the case of Jack’s death
  • Provisions for disabled grandchild
  • Strong interest in charity gift
  • Tax efficient and fair distribution of wealth and without providing to too much “easy money” to beneficiaries

Recommendation for Mrs.& Mr. Jack Daniels

BT Co. & Rych Associates

slide10

Transfer of Company Ownership

Recapitalization of Company

Family

Limited

Partnership

Jack’s 70%

stake

General

Partners

(Common Stock)

Limited

Partners

(Preferred Stock)

Convertible

Bonds

Recommendation for Mrs.& Mr. Jack Daniels

BT Co. & Rych Associates

who gets which stocks

Transfer of Company Ownership

Who Gets Which Stocks?
  • Common stock (voting rights) to Tim and Ted involved in business
  • Preferred stock (stable dividend) to Sam not involved in business
  • Bonds convertible into common stock to Jane

Management Concerns:

  • Appointment of an external (non-family member) Chief Operating Officer (COO)

Recommendation for Mrs.& Mr. Jack Daniels

BT Co. & Rych Associates

slide12

Jack & Faith Daniels’ Estate

Cash & Checking

Money Market

Michigan Residence

Florida Condo

Traded Stocks

Bonds

Real Estate

Auto Company Stock

Pension Plan

Daniels Manufacturing

Total Assets

Condo Mortgage

Real Estate Mortgage

Total Liabilities

NET WORTH

25’000

300’000

600’000

400’000

500’000

400’000

1’500’000

500’000

2’000’000

1’000’000

7’225’000

200’000

150’000

350’000

6’875’000

Recommendation for Mrs.& Mr. Jack Daniels

BT Co. & Rych Associates

slide13

Jack’s Main Concerns

Business Related

  • Tax efficient transfer of company ownership to family members
  • Let Jane have the option of becoming a part owner of the family business

Personal Estate Planning for Jack and Faith:

  • Provide sufficient income to cover Jack’s & Faith’s retirement needs
  • Provide Faith with stable income in the case of Jack’s death
  • Provisions for disabled grandchild
  • Strong interest in charity gift
  • Tax efficient and fair distribution of wealth and without providing to too much “easy money” to beneficiaries

Recommendation for Mrs.& Mr. Jack Daniels

BT Co. & Rych Associates

slide14

Coverage of Retirement Needs

Transfer of Residence:

Primary residence: Michigan

Secondary residence: Florida Condo

J&F

Children

After 15 years

Recommendation for Mrs.& Mr. Jack Daniels

BT Co. & Rych Associates

slide15

Coverage of Retirement Needs

  • Creation of a Qualified Personal Residence Trust (QPERT): Irrevocably transfer both residences for a term of 15 years.
  • Upon maturity of the term, the property is passed on to the children
  • If J&F die prior to the end of the trust term, the proceeds thereof are subject to estate tax.
  • During the period of the term, J&F have the right to occupy and use the residences.

Recommendation for Mrs.& Mr. Jack Daniels

BT Co. & Rych Associates

slide16

Coverage of Retirement Needs

Commercial Building owned by Jack & Faith

DMC

Lease of 10 Years

Rent of $200,000 p.a.

Gradual Payments via Notes Receivable ($200,000 p.a.)

Sale of Property to children for $2,000,000

Children

Lease of 10 Years

Rent of $200,000 p.a.

Recommendation for Mrs.& Mr. Jack Daniels

BT Co. & Rych Associates

sell real estate to children and have them lease it back to the company

Coverage of Retirement Needs

Sell Real Estate to children and have them lease it back to the company
  • With the collected rent paid by the company, the children gradually pay back the sum via notes receivable

Advantages:

  • The Real Estate exits the parent’s estate
  • The parents continue to receive fixed income
  • Only gift tax on the residual

Recommendation for Mrs.& Mr. Jack Daniels

BT Co. & Rych Associates

slide18

Jack & Faith Daniels’ Estate

Cash & Checking

Money Market

Michigan Residence

Florida Condo

Traded Stocks

Bonds

Real Estate

Auto Company Stock

Pension Plan

Daniels Manufacturing

Total Assets

Condo Mortgage

Real Estate Mortgage

Total Liabilities

NET WORTH

25’000

300’000

0

0

500’000

400’000

0

500’000

2’000’000

1’000’000

4’725’000

200’000

150’000

350’000

4’375’000

Recommendation for Mrs.& Mr. Jack Daniels

BT Co. & Rych Associates

slide19

Jack’s Main Concerns

Business Related

  • Tax efficient transfer of company ownership to family members
  • Let Jane have the option of becoming a part owner of the family business

Personal Estate Planning for Jack and Faith:

  • Provide sufficient income to cover Jack’s & Faith’s retirement needs
  • Provide Faith with stable income in the case of Jack’s death
  • Provisions for disabled grandchild
  • Strong interest in charity gift
  • Tax efficient and fair distribution of wealth and without providing to too much “easy money” to beneficiaries

Recommendation for Mrs.& Mr. Jack Daniels

BT Co. & Rych Associates

slide20

Coverage for Faith upon Jack’s Death

  • Faith’s 10% stake in the company will be changed into preferred stock in order to increase the stability of dividend income
  • Creation of a Delaware Trust* which will be funded by the defined contribution plan valued at 2’000’000 (Unified Credit Exemption). Amount in trust to be invested in a growth portfolio.

* The Delaware Trust is perpetual, therefore has an unlimited trust term.

Recommendation for Mrs.& Mr. Jack Daniels

BT Co. & Rych Associates

slide21

Jack & Faith Daniels’ Estate

Cash & Checking

Money Market

Michigan Residence

Florida Condo

Traded Stocks

Bonds

Real Estate

Auto Company Stock

Pension Plan

Daniels Manufacturing

Total Assets

Condo Mortgage

Real Estate Mortgage

Total Liabilities

NET WORTH

25’000

300’000

0

0

500’000

400’000

0

500’000

0

1’000’000

2’725’000

200’000

150’000

350’000

2’375’000

Recommendation for Mrs.& Mr. Jack Daniels

BT Co. & Rych Associates

slide22

Jack’s Main Concerns

Business Related

  • Tax efficient transfer of company ownership to family members
  • Let Jane have the option of becoming a part owner of the family business

Personal Estate Planning for Jack and Faith:

  • Provide sufficient income to cover Jack’s & Faith’s retirement needs
  • Provide Faith with stable income in the case of Jack’s death
  • Provisions for disabled grandchild
  • Strong interest in charity gift
  • Tax efficient and fair distribution of wealth and without providing to too much “easy money” to beneficiaries

Recommendation for Mrs.& Mr. Jack Daniels

BT Co. & Rych Associates

charitable remainder trust

Provisions for Disabled Child & Charity

Charitable Remainder Trust

Auto

Company

Stocks

$500’000

Non charitable income

beneficiary

(Jack & Faith)

Charitable

Remainder

Trust

Bonds

$400’000

Charitable Remainder

Recommendation for Mrs.& Mr. Jack Daniels

BT Co. & Rych Associates

irrevocable life insurance trust 2nd to die policy

Provisions for Disabled Child & Charity

Irrevocable Life Insurance Trust“2nd to Die Policy”

Purpose:

Replace the principle of the C.R.T. at Jack’s and Faith’s death in order to provide further income to the disabled child* + other grandchildren which will be managed by trustee for children’s benefit.

* The Public Benefits Programme for disabled individuals should be considered before determining the distribution to the disabled child.

Recommendation for Mrs.& Mr. Jack Daniels

BT Co. & Rych Associates

slide25

Jack & Faith Daniels’ Estate

Cash & Checking

Money Market

Michigan Residence

Florida Condo

Traded Stocks

Bonds

Real Estate

Auto Company Stock

Pension Plan

Daniels Manufacturing

Total Assets

Condo Mortgage

Real Estate Mortgage

Total Liabilities

NET WORTH

25’000

300’000

0

0

500’000

0

0

0

0

1’000’000

1’825’000

200’000

150’000

350’000

1’475’000

Recommendation for Mrs.& Mr. Jack Daniels

BT Co. & Rych Associates

slide26

Jack’s Main Concerns

Business Related

  • Tax efficient transfer of company ownership to family members
  • Let Jane have the option of becoming a part owner of the family business

Personal Estate Planning for Jack and Faith:

  • Provide sufficient income to cover Jack’s & Faith’s retirement needs
  • Provide Faith with stable income in the case of Jack’s death
  • Provisions for disabled grandchild
  • Strong interest in charity gift
  • Tax efficient and fair distribution of wealth and without providing to too much “easy money” to beneficiaries

Recommendation for Mrs.& Mr. Jack Daniels

BT Co. & Rych Associates

slide27

Tax Efficient Distribution of Personal Wealth

DMC buys back stock from J & F’s estate

DMC Stock still in J & F’s Estate

DMC Corp.

Upon J & F’s death, the proceeds from the insurance go to the company

DMC buys Insurance for J & F

Money received from the sale of stocks to DMC is used to cover estate costs

Life Insurance on Jack & Faith

Estate Costs

Recommendation for Mrs.& Mr. Jack Daniels

BT Co. & Rych Associates

liquidity provision for payment of estate tax

Tax Efficient Distribution of Personal Wealth

Liquidity Provision for Payment of Estate Tax
  • Company buys life insurance for Jack and Faith Daniels with “second to die” clause.
  • Establishment of contract between Jack and company obliging company (upon the death of both Jack and Faith) to buy back enough stock from the estate in order to cover the estate tax and administrative costs.
  • Company pays for stock with proceeds of life insurance.

Advantages:

  • Enough funds to cover estate and administration costs
  • Estate does not need to be liquidated
  • Insurance proceeds to cover costs are not taxed if the value of stock redeemed does not exceed the estate tax and administration espense costs (Section 303)

Recommendation for Mrs.& Mr. Jack Daniels

BT Co. & Rych Associates

slide29

The Story of Yvette Daniels:

Present Status Study and Recommended Solutions for

Mrs. Yvette Daniels (wife of Tim Daniels), a French citizen

Recommendation for Mrs.& Mr. Jack Daniels

BT Co. & Rych Associates

slide30

The Story of Yvette Daniels:

  • Considerations:
  • Transfer of wealth upon Tim’s death would result in US Estate Taxes
  • Gifts of upto $100,000 per year during the lifetime of Tim are not subject to US Estate Taxes

Recommendation for Mrs.& Mr. Jack Daniels

BT Co. & Rych Associates

slide31

The Story of Yvette Daniels:

  • Proposed Structure:
  • Tim creates a Limited Partnership with Yvette and gifts her with limited partnership interest with value $100,000 p.a.
  • Advantages:
  • More value (of stock) can be transferred due to permitted discount for lack of control and marketability.
  • Yvette cannot cash in or transfer her limited partnership interests without Tim’s consent, i.e. she cannot spend it while Tim is alive.

Recommendation for Mrs.& Mr. Jack Daniels

BT Co. & Rych Associates

slide32

Conclusion

Recommendation for Mrs.& Mr. Jack Daniels

BT Co. & Rych Associates

slide33

Jack & Faith Daniels’ Estate

Cash & Checking

Money Market

Michigan Residence

Florida Condo

Traded Stocks

Bonds

Real Estate

Auto Company Stock

Pension Plan

Daniels Manufacturing

Total Assets

Condo Mortgage

Real Estate Mortgage

Total Liabilities

NET WORTH

25’000

300’000

0

0

500’000

0

0

0

0

1’000’000

1’825’000

200’000

150’000

350’000

1’475’000

Net Taxable worth of the estate has reduced dramatically therefore cutting down the estate tax to a great extent

Recommendation for Mrs.& Mr. Jack Daniels

BT Co. & Rych Associates

slide34

Benefits of the Proposed Financial Plan:

Actual tax and wealth transfer expenses on the estate of $ 13,875,000

Taxes and Expenses with the proposed plan:

43% estate and wealth transfer tax on an amount of $1,475,000.

15% Gift Tax on the QPERT ($1,000,000) payable by the beneficiaries upon maturity of the QPERT.

8% Consultation and Management Fee on total present net worth

60% *

14% (+/- 3%)

* 5% Surcharge applicable over the standard 55% for amounts between 10,000,000 - 24,000,000

Recommendation for Mrs.& Mr. Jack Daniels

BT Co. & Rych Associates

slide35

BT Co.

Erika Belloni

+1 212 454 8697

erika.belloni@bt.com

Melissa Dolan

+1 212 454 8456

melissa.dolan@bt.com

Chetana Munot

+1 212 454 3453

chetana.munot@bt.com

Rych Associates

Heiko Jungmann

+1 210 739 0234

heiko.jungmann@bt.com

Robert Sorio

+1 210 739 0405

robert.sorio@rych.com

Yves Windey

+1 210 739 0343

yves.windey@rych.com

Christoph De Wilde

+1 210 739 3533

christoph.dewilde@rych.com