THE BUSINESS OWNERS

Clients, husband age 77 and wife age 66 co-founded a business enterprise valued at approximately $15MM and had additional assets of $11MM, including real estate and an art collection. The client had a revocable living trust in place but no additional planning with a current estate tax exposure of approximately $9MM. Client wished to pass the family business equally to their two daughters, one of whom was active in the management of the company. The client was also concerned about protecting these assets from potential lawsuits or other threats.

We recommended that the business interests be transferred to a Nevada Asset Protection Trust for their benefit and subsequently sold to Grantor Deemed Owned Trusts for the benefit of their daughters in exchange for a promissory note. We also recommended restating their existing revocable trust to include provisions for the art collection and the creation of testamentary charitable lead trusts. Additionally, life insurance was purchased by the Grantor Deemed Owned Trusts to provide liquidity for the estate. The client’s current estate tax exposure is $0. Our fee for professional services was $150,000.

THE CEO

Clients (ages 44 and 45) with two children ages 5 and 10 with a current estate of $15MM. He is CEO and founder of a financial services company which expects to go public in the near future. Client was interested in transferring a substantial amount of his founder’s stock to trusts for the benefit of his children, as well as guardianship planning for their young children in the event of the clients’ premature death. They had an estate tax exposure of over $7.8MM.

We recommended that they implement a fully funded revocable living trust which contained detailed instructions for potential guardians about their wishes with respect to their children’s education, religious training, and providing incentives to their children to achieve their own success. We also proposed several family limited partnerships; Grantor Retained Annuity Trusts; irrevocable trusts for their children which hold company stock and a testamentary charitable lead annuity trust. A total of 2,000,000 shares of company stock were transferred to the children’s trusts at a minimal gift tax cost. Their current estate tax exposure is $0. Our fee for professional services was $140,000.

THE RETAILER

Client, age 81 and widowed, is the founder of a chain of retail stores which bore his name. He has five children, two of whom are active in the family business and two of whom are not, and one deceased child. He has 11 grandchildren. He wished to pass along the value of the family business to his children in a way that rewarded the two in the business for their continued efforts, but to also treat his other children fairly, including the children of his deceased child. His estate was valued at approximately $15MM with an estate tax exposure of over $6.5MM.

Recommendations included a sale at fair market value of the family business to the children in exchange for a private annuity; creation of a family limited partnership to manage and control the rest of the client’s property, a sale of those limited partnership units to a defective grantor trust in exchange for a private annuity, a testamentary charitable lead annuity trust and a family foundation. The client’s estate tax exposure is $0. Our fee for professional services was $100,000.

THE FOUNDERS

Clients (ages 72 and 71 respectively) are the founders of a very successful business employing 700 people worth $54MM. Clients also have additional personal assets of $40M consisting of multiple residences, 2000 acres of pristine riverfront land and other investments. They have 5 adult children and 6 grandchildren.

Clients had an unfunded revocable living trust in place and $5MM second-to-die life insurance policy held in a defective Irrevocable Life Insurance Trust (ILIT). Their estate tax exposure under this plan was $40MM.

Our recommended strategies consisted of implementing a restated, fully funded, revocable living trust; a new ILIT holding a $10MM second-to-die policy using premium financing; formation of a family foundation; an Employee Stock Ownership Plan (ESOP); an employee scholarship program for deserving company employees and their children; a conservation easement on their riverfront acreage; a testamentary charitable lead annuity trust; and multiple irrevocable trusts to hold company stock for their children. We estimate their current estate tax exposure at $0. Our fee for professional services was $320,000.

THE COMMERCIAL LANDLORDS

Clients (ages 65 and 62 respectively) own commercial real estate in San Francisco and Oakland valued at $17MM with additional personal assets of $5MM consisting of personal residences and investments. Clients have 1 adult child and no grandchildren.

Clients had put in place a fully funded revocable living trust, leaving an estate tax exposure of $11MM.

We recommended a restated, fully funded revocable living trust, 2 family limited partnerships to hold their commercial real estate; zeroed-out Grantor Retained Annuity Trusts (GRATs); a family foundation; a second-to-die term life insurance policy held in an Irrevocable Life Insurance Trust (ILIT) for the term of the GRATs; refinancing of debt on the commercial properties which freed up $15K per month of cash flow; and a testamentary charitable lead annuity trust. Their estate tax exposure was reduced to $0. Our fee for professional services was $82,500.

THE RETIRING ENTREPRENEURS

Clients are long-time business owners, in their 70's with an estate of $3.4MM. They have three adult children and three grandchildren. They had a 10 year old living trust and life insurance not held in an ILIT. They wanted to start transferring the family business to their children so they could retire. Their estate tax exposure was $1.5MM.

We recommended they implement a family limited partnership, acquire a second-to-die life insurance policy to be held in an ILIT; a testamentary charitable lead trust and a family foundation. Their estate tax exposure is $0, with significantly more assets passing to their children and grandchildren than the current value of their estate. Our fee for professional services was $52,500.

THE SUCCESSFUL INVESTOR

Client, widowed at age 94 by the accidental death of her 95 year old husband had an estate of over $15MM, all in marketable securities. The couple had a revocable living trust in place, but had done no other planning.

Once her husband's credit shelter trust was funded, the remaining estate was held in her revocable living trust, exposing her to estate tax of $8.5MM.

We recommended 2 Family Limited Partnerships to hold a substantial portion of the investment securities; a Charitable Lead Annuity Trust to benefit her 67 year-old son; a Charitable Lead Unitrust to benefit other family members (nieces, nephews, cousins); a testamentary Charitable Lead Annuity Trust; and a family foundation. In this manner we were able to transfer nearly all of her estate to her son and other beneficiaries within 7 years, while she retained sufficient assets to provide for her care, at a gift tax cost of $1M. At her death, her estate tax exposure will be $0. Our fee for professional services was $97,500.

THE CHILDLESS WIDOW

Client, an 87 year-old widow, owned a 300 acre ranch that had been in the family for 3 generations plus additional assets for a total estate of $4.5MM, with an estate tax exposure of over $2MM. She had done no prior estate planning.

We recommended she implement a fully funded revocable living trust, a family limited partnership and a charitable lead annuity trust. She was able to transfer the bulk of her estate, including the family ranch, to her favorite nephew immediately at no tax cost, while holding sufficient assets to care for herself for the rest of her life. Her estate tax exposure is $500K, but will drop to $0 by 2004. Our fee for professional services was $82,500.